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VILLERE BALANCED FUND
PROSPECTUS
DECEMBER 29, 2000
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VILLERE BALANCED FUND
A SERIES OF TRUST FOR INVESTMENT MANAGERS
The Villere Balance Fund seeks long term capital growth consistent with
preservation of capital and balanced by current income. The Fund will pursue
this objective by investing in a combination of equity securities and high
quality fixed income obligations. The Fund's investment adviser is St. Denis J.
Villere & Co.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is December 29, 2000
TABLE OF CONTENTS
Summary of Investment Goal, Strategies and Risks............................ 3
Performance Information..................................................... 4
Fees and Expenses of the Fund............................................... 4
Investment Objective and Principal Investment Strategies.................... 5
Principal Risks of Investing in the Fund.................................... 7
Investment Adviser.......................................................... 7
Shareholder Information..................................................... 10
Pricing of Fund Shares...................................................... 14
Dividends and Distributions................................................. 15
Tax Consequences............................................................ 15
Financial Highlights........................................................ 16
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SUMMARY OF INVESTMENT GOAL, STRATEGIES AND RISKS
WHAT IS THE FUND'S INVESTMENT GOAL?
The Villere Balanced Fund seeks long term capital growth consistent with
preservation of capital and balanced by current income.
WHAT ARE THE FUND'S PRIMARY INVESTMENT STRATEGIES?
The Fund will pursue its investment goal by investing in a combination of common
stocks of domestic companies with a minimum market capitalization of $150
million and high quality fixed income obligations (U.S. Government and corporate
bonds, notes and bills). The Fund invests 60% to 70% of its assets in equity
securities selected primarily for their growth potential and 30% to 40% of its
assets in equity and fixed income securities selected primarily for their income
potential.
In selecting investments, the Fund's investment adviser, St. Denis J. Villere &
Co. ("Adviser"), places a greater emphasis on the income component of the Fund's
portfolio than might be the case for a traditional equity fund. Under normal
market conditions, the Fund will invest at least 25% of its assets in fixed
income securities. Fixed income securities will primarily be investment grade,
with maturities from three to ten years, with an average maturity of
approximately seven years.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
As with all mutual funds, there is the risk that you could lose money on your
investment in the Fund. For example, the following risks could affect the value
of your investment: Market Risk - Either the stock market as a whole, or the
value of an individual company, goes down resulting in a decrease in the value
of the Fund.
INTEREST RATE RISK - Interest rates go up resulting in a decrease in the value
of the fixed income securities held by the Fund. Fixed income securities with
longer maturities generally entail greater risk than those with shorter
maturities.
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CREDIT RISK - Issuers of fixed income securities held by the Fund may be unable
to make principal and interest payment when due.
WHO MAY WANT TO INVEST IN THE FUND?
The Fund may be appropriate for long term investors who can accept the risks of
investing in a portfolio with significant common stock holdings. The Fund may
NOT be appropriate for investors who need regular income or stability of
principal or are pursuing a short-term goal.
PERFORMANCE INFORMATION
Because the Fund has been in operation for less than a full calendar year, its
total return bar chart and performance table have not been included.
FEES AND EXPENSES OF THE FUND
The following tables describe the fees and expenses that a shareholder in the
Fund will pay.
SHAREHOLDER TRANSACTION EXPENSES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases...................... none
Maximum deferred sales charge (load).................................. none
ANNUAL FUND OPERATING EXPENSES*
(expenses that are deducted from fund assets)
Management Fees....................................................... 0.75%
Other Expenses........................................................ 4.20%
-----
Total Annual Fund Operating Expenses.................................. 4.95%
Fee Reduction and/or Expense Reimbursement............................ (3.45%)
-----
Net Expenses.......................................................... 1.50%
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* The Adviser has contractually agreed to reduce its fees and/or pay expenses
of the Fund for an indefinite period to insure that Total Fund Operating
Expenses will not exceed the net expense amount shown. The Adviser reserves
the right to be reimbursed for any waiver of its fees or expenses paid on
behalf of the Fund if the Fund's expenses are
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less than the limit. The Trustees may terminate this expense reimbursement
arrangement at any time.
EXAMPLE
This example is intended to help you compare the costs of investing in the Fund
to those of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year, that all
dividends and distributions are reinvested and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
under the assumptions, your costs would be:
One Year..................................... $ 153
Three Years.................................. $ 474
Five Years................................... $ 818
Ten Years.................................... $ 1,791
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks long term capital growth consistent with preservation of capital
and balanced by current income. There can be, of course, no guarantee that the
Fund will achieve its objective. This investment objective may be changed only
by approval of the Fund's shareholders. You will be notified of any changes in
the Fund's policies that are material and, if such changes are made, you should
consider whether the Fund remains an appropriate investment for you.
As a balanced fund, the Fund invests 60% to 70% of its assets in equities
selected primarily for their growth potential; in the case of the Fund, this
component is likely to consist primarily of common stocks.
Stocks are selected based on earnings potential, low debt to total
capitalization, strong cash flow, low price to earnings ratios, and the ability
of management to enrich characteristics unique to its industry. Such
characteristics include being the low cost producer in an industry, holding
patents, or research and development efforts that have put a company ahead of
its competition. Also important are undervalued assets and growth potential
unrecognized by the investment community, which occurs in companies that are out
of favor due to economic cycles, trade at a perceived discount to their peer
group, or are
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otherwise undervalued based on the issuer's current operations. The Adviser
looks for significant potential for future earnings growth and some catalyst for
that growth, such as a new product, improving industry trends or economic
conditions.
A stock will be considered for sale by the Fund when its price/earnings ratio
substantially exceeds its growth rate, or when other factors indicate to the
Adviser that its competitive advantage is lost. Sales will also be made when
consecutive quarterly disappointments occur in which management does not meet
the Adviser's goals in revenue, earnings or cash flow.
The Fund's income component -- 30% to 40% of the Fund's assets -- will consist
of securities selected primarily for their income potential. Under normal market
conditions, at least 25% of the Fund's assets will be invested in fixed income
securities. Fixed income securities are securities that pay a specified rate of
return and generally include bonds, notes and bills issued by the U.S.
Government, its agencies and instrumentalities, corporate bonds, as well as
preferred and convertible securities that pay fixed income. Dividend-paying
common stocks also will be considered in pursuing income as part of the Fund's
objective.
The Adviser makes its fixed income purchase decisions by analyzing interest
coverage ratios, total liabilities, debt to equity ratios and earnings quality.
These factors are continually reviewed, and if not met consistently, a fixed
income holding will be considered for sale. It is expected that the fixed income
portion of the Fund will have an average maturity of approximately seven years.
It is expected that approximately 90% of the fixed income securities held by the
Fund will be rated at least "investment grade" by one or more nationally
recognized statistical ratings organizations (each an "NRSRO"), such as Standard
& Poor's Ratings Group and Moody's Investors Service, Inc. The Adviser may also
purchase fixed income securities that are unrated but are believed by the
Adviser to be comparable to investment grade. Up to 10% of the Fund's assets,
however, may be invested in fixed income securities rated "BB" or lower or, if
unrated, of comparable quality. Such lower rated securities, often referred to
as "junk bonds," may be considered speculative. The Fund anticipates that it
will have a portfolio turnover rate of about 30%. This means that the Adviser
will not, under normal circumstances, purchase and sell securities held in the
portfolio in order to realize short term gains. It also means that the Fund is
likely to have lower transaction costs.
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Under normal market conditions, the Fund will stay fully invested in a balanced
mix of equity and fixed income issues. The Fund may temporarily, however, depart
from its balanced strategy by making short-term investments in cash equivalents
in response to adverse market, economic, or political conditions. This may
result in the Fund not achieving its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
MARKET RISK. The value of a share of the Fund--its "net asset value" or
"NAV"--depends on the market value of all of the Fund's investments. The
principal risk of investing in the Fund is that the market value of securities
held by the Fund will move up and down. These fluctuations, which can occur
rapidly and unpredictably, may cause the Fund's investments to be worth less
than the price originally paid, or less than it was worth at an earlier time;
this in turn will affect the Fund's net asset value per share. Market risk may
affect a single issue, industry, sector of the economy or the market as a whole.
INTEREST AND CREDIT RISK OF FIXED INCOME SECURITIES. A fundamental risk to the
income component of the Fund's investments is that the value of fixed income
securities will fall if interest rates rise. Generally, the value of a fixed
income portfolio will decrease when interest rates rise. Under these
circumstances, the Fund's NAV may also decrease. Also, fixed income securities
with longer maturities generally entail greater risk than those with shorter
maturities. In addition to interest rate risk, changes in the creditworthiness
of an issuer of fixed income securities and the market's perception of that
issuer's ability to repay principal and interest when due can also affect the
value of fixed income securities held by the Fund. The value of securities that
are considered below investment grade, sometimes known as junk bonds, may be
more volatile than the value of fixed income securities that carry ratings
higher than "BB." For example, the market price of junk bonds may be more
susceptible to real or perceived economic, interest rate or market changes,
political changes or adverse developments specific to the issuer. It is not
expected that the Fund will hold more than 10% of its assets in fixed income
securities rated below investment grade.
INVESTMENT ADVISER
St. Denis J. Villere & Co. is the investment adviser to the Fund. The Adviser's
address is 210 Baronne Street, Suite 808, New Orleans, LA. 70112-7152. The
Adviser was founded in 1911 and is controlled by its partners, Messrs. St. Denis
J. Villere, George G. Villere and George V. Young.
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The Adviser provides investment advisory services to individual and
institutional clients and investment companies with assets under management of
approximately $1 billion. The Adviser provides the Fund with advice on buying
and selling securities. The Adviser also furnishes the Fund with office space
and certain administrative services and provides most of the personnel needed by
the Fund. For its services, the Fund pays the Adviser a monthly management fee
which is calculated at the annual rate of 0.75% of the Fund's average daily net
assets.
EXPENSE LIMITATION AGREEMENT
The Fund is responsible for its own operating expenses. The Adviser has
contractually agreed to reduce its fees and/or pay expenses of the Fund for an
indefinite period to insure that Total Fund Operating Expenses will not exceed
1.50% of average daily net assets annually. Any reduction in advisory fees or
payment of expenses made by the Adviser are subject to reimbursement by the Fund
if requested by the Adviser in subsequent fiscal years. Under the expense
limitation agreement, the Adviser may recoup reimbursements made in the Fund's
first fiscal year in any of the five succeeding fiscal years, reimbursements
made in the Fund's second fiscal year in any of the four succeeding fiscal years
and any reimbursement in years subsequent to fiscal year two, over the
subsequent three fiscal years after the reimbursement made. Any such
reimbursement will be reviewed by the Trustees, who may terminate the
reimbursement arrangement at any time. The Fund must pay its current ordinary
operating expenses before the Adviser is entitled to any reimbursement of fees
and/or expenses.
PORTFOLIO MANAGER
Mr. George V. Young, a partner of the Adviser, is responsible for the management
of the Fund's portfolio. Mr. Young graduated from the University of Virginia
with a B.A.in English in 1980 and has managed investment advisory accounts for
the Adviser since 1986. He is the nephew of George Villere and St. Denis
Villere.
ADVISER'S PRIOR INVESTMENT RETURNS
Set forth in the table below are certain performance data provided by the
Adviser relating to its individually managed balanced accounts. These accounts
had substantially the same investment objective as the Fund, had the same
portfolio manager, and were managed using substantially similar investment
strategies and techniques as those used
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in managing the Fund. This performance data is not that of the Fund and is not
indicative of the Fund's future performance.
The results shown will differ from those of the Fund because of differences in
brokerage commissions paid, account expenses, including investment advisory fees
(which expenses and fees may be higher for the Fund than for the accounts), the
size of positions taken in relation to account size, diversification of
securities, timing of purchases and sales, timing of cash additions and
withdrawals, the private character of the composite accounts compared with the
public character of the Fund, and the tax-exempt status of account holders
compared with shareholders in the Fund.
These accounts also are not subject to certain investment limitations,
diversification requirements and other restrictions imposed by the Investment
Company Act of 1940 and the Internal Revenue Code, which, if they applied, may
have adversely affected the results shown.
Investors should be aware that the use of different methods of determining
performance could result in different performance results. Investors should not
rely on the following performance data as an indication of future performance of
the Adviser or of the Fund.
AVERAGE ANNUAL TOTAL RETURNS
(for period ended September 30, 2000)
ONE YEAR FIVE YEARS TEN YEARS
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Adviser's Balanced Account 17.61% 16.21% 15.88%
S&P 500 Index* 13.28% 21.69% 19.44%
Blended Index** 14.01% 15.69% 15.30%
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* The S&P 500 Index is an unmanaged index generally representative of the
market for the stocks of large-sized U.S. companies.
** This Index is a blend of both the performance of the Lehman Brothers
Government/Corporate Bond Index (35%) and the Russell 3000 Index (65%). The
Lehman Brothers Index is an unmanaged index generally representative of the
U.S. fixed-income securities markets, and the Russell 3000 Index measures
the performance of the 3,000 largest U.S. companies based on total market
capitalization. This blended index reflects the expected asset allocation
between equity and fixed-income securities.
1. Results were calculated in accordance with recommended standards of the
Association for Investment Management and Research ("AIMR")
on a total return basis. Returns are presented after the deduction of investment
advisory fees, brokerage commissions and expenses applicable to the Adviser's
Balanced Accounts. Use of the Fund's expense structure would have lowered the
performance results in the Average Annual Total Returns in the table above.
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2. Investors should note that the Fund will compute and disclose its average
annual total return using the standard formula set forth in SEC rules, which is
different from the AIMR method noted above. Unlike the AIMR performance
presentation standards that link quarterly rates of return, the SEC total return
calculation method calls for computation and disclosure of an average annual
compounded rate of return for one, five and ten year periods or shorter periods
from inception. The calculation provides a rate of return that equates a
hypothetical initial investment of $1,000 to an ending redeemable value.
3. The Balanced Account Composite shown includes all accounts managed by the
Adviser that meet the criteria for inclusion in the composite for each period
presented.
SHAREHOLDER INFORMATION
HOW TO BUY SHARES
You may open a Fund account with $2,000 and add to your account at any time with
$500 or more. After you have opened a Fund account, you also may make automatic
subsequent monthly investments with $100 or more through the Automatic
Investment Plan. The minimum investment requirements may be waived from time to
time by the Fund.
You may purchase shares of the Fund by check or wire. All purchases by check
must be in U.S. dollars. Third party checks and cash will not be accepted. A
charge may be imposed if your check does not clear. The Fund is not required to
issue share certificates. The Fund reserves the right to reject any purchase in
whole or in part.
BY CHECK
If you are making an initial investment in the Fund, simply complete the Account
Application included with this Prospectus and mail or overnight deliver (such as
FedEx) it with a check (made payable to "Villere Balanced Fund") to:
Villere Balanced Fund
c/o ICA Fund Services Corp.
4455 East Camelback Rd., Ste. 261E
Phoenix, AZ 85018
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If you are making a subsequent purchase, a stub is attached to the account
statement you will receive after each transaction. Detach the stub from the
statement and mail it together with a check made payable to "Villere Balanced
Fund" to the Fund in the envelope provided with your statement or to the address
noted above. Your account number should be written on the check.
BY WIRE
If you are making an initial investment in the Fund, before you wire funds, the
Transfer Agent must have a completed Account Application. You can mail or
overnight deliver your Account Application to the Transfer Agent at the above
address. You may also fax the Account Application to the Transfer Agent at (602)
522-8172. Upon receipt of your completed Account Application, the Transfer Agent
will establish an account for you. Once you have faxed your new Account
Application, you may instruct your bank to send the wire. Your bank must include
both the name of the Fund you are purchasing and your name so that monies can be
correctly applied. Your bank should transmit immediately available funds by wire
to:
Firstar Bank, N.A.
ABA #0420-0001-3
Attn: Villere Balanced Fund
DDA #821602927
Account name (shareholder name), for further credit to
[Shareholder account number]
If you are making a subsequent purchase, your bank should wire funds as
indicated above. IT IS ESSENTIAL THAT YOUR BANK INCLUDE COMPLETE INFORMATION
ABOUT YOUR ACCOUNT IN ALL WIRE INSTRUCTIONS. If you have questions about how to
invest by wire, you may call the Transfer Agent at (800) 576-8229. Your bank may
charge you a fee for sending a wire to the Fund.
You may buy and sell shares of the Fund through certain brokers (and their
agents) that have made arrangements with the Fund to sell its shares. When you
place your order with such a broker or its authorized agent, your order is
treated as if you had placed it directly with the Fund's Transfer Agent, and you
will pay or receive the next price
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calculated by the Fund. The broker (or agent) holds your shares in an omnibus
account in the broker's (or agent's) name, and the broker (or agent) maintains
your individual ownership records. The Adviser may pay the broker (or its agent)
for maintaining these records as well as providing other shareholder services.
The broker (or its agent) may charge you a fee for handling your order. The
broker (or agent) is responsible for processing your order correctly and
promptly, keeping you advised regarding the status of your individual account,
confirming your transactions and ensuring that you receive copies of the Fund's
prospectus.
AUTOMATIC INVESTMENT PLAN
For your convenience, the Fund offers an Automatic Investment Plan. Under this
Plan, after your initial investment, you authorize the Fund to withdraw from
your personal checking account each month an amount that you wish to invest,
which must be at least $100. If you wish to enroll in this Plan, complete the
appropriate section in the Account Application. The Fund may terminate or modify
this privilege at any time. You may terminate your participation in the Plan at
any time by notifying the Transfer Agent in writing.
RETIREMENT PLANS
The Fund offers Individual Retirement Account ("IRA") plans. You may obtain
information about opening an IRA account by calling (800) 576-8229. If you wish
to open a Keogh, Section 403(b) or other retirement plan, please contact your
securities dealer.
HOW TO SELL SHARES
You may sell (redeem) your Fund shares on any day the Fund and the New York
Stock Exchange ("NYSE") are open for business either directly to the Fund or
through your investment representative.
You may redeem your shares by simply sending a written request to the Transfer
Agent. You should give your account number and state whether you want all or
some of your shares redeemed. The letter should be signed by all of the
shareholders whose names appear on the account registration. Certain redemptions
require a signature guarantee. Call the Transfer Agent for details. You should
send your redemption request to:
Villere Balanced Fund
c/o ICA Fund Services Corp.
4455 East Camelback Rd., Ste. 261E
Phoenix, AZ 85018
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If you complete the Redemption by Telephone portion of the Account Application,
you may redeem all or some of your shares by calling the Transfer Agent at (800)
576-8229 before the close of trading on the NYSE. This is normally 4:00 p.m.,
Eastern time. Redemption proceeds will be mailed on the next business day to the
address that appears on the Transfer Agent's records. If you request, redemption
proceeds will be wired on the next business day to the bank account you
designated on the Account Application. The minimum amount that may be wired is
$1,000. Wire charges, if any, will be deducted from your redemption proceeds.
Telephone redemptions cannot be made if you notify the Transfer Agent of a
change of address within 30 days before the redemption request. If you have a
retirement account, you may not redeem shares by telephone.
When you establish telephone privileges, you are authorizing the Fund and its
Transfer Agent to act upon the telephone instructions of the person or persons
you have designated on your Account Application. Redemption proceeds will be
transferred to the bank account you have designated on your Account Application.
Before acting upon an instruction received by telephone, the Fund and the
Transfer Agent will use procedures to confirm that the telephone instructions
are genuine. These procedures may include recording the telephone call and
asking the caller for a form of personal identification. If the Fund and the
Transfer Agent follow these procedures, they will not be liable for any loss,
expense, or cost arising out of any telephone redemption request that is
reasonably believed to be genuine. This includes any fraudulent or unauthorized
request. The Fund may change, modify or terminate these privileges at any time
upon at least 60 days' notice to shareholders.
You may request telephone redemption privileges after your account is opened by
calling the Transfer Agent at (800) 576-8229 for instructions. You may have
difficulties in making a telephone redemption during periods of abnormal market
activity. If this occurs, you may make your redemption request in writing.
Payment of your redemption proceeds will be made promptly, but not later than
seven days after the receipt of your written request in proper
form. If you made your initial investment by wire, payment of your redemption
proceeds for those shares will not be made until one business day after your
completed Account Application is received by the Fund. If you did not purchase
your shares with a certified check or wire, the Fund may delay payment of your
redemption proceeds for up to 15 days from date of purchase or until your check
has cleared, whichever occurs first.
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The Fund may redeem the shares in your account if the value of your account is
less than $5,000 as a result of redemptions you have made. This does not apply
to retirement plan or Uniform Gifts or Transfers to Minors Act accounts. You
will be notified that the value of your account is less than $5,000 before the
Fund makes an involuntary redemption. You will then have 30 days in which to
make an additional investment to bring the value of your account to at least
$5,000 before the Fund takes any action.
The Fund has the right to pay redemption proceeds to you in whole or in part by
a distribution of securities from the Fund's portfolio. It is not expected that
the Fund would do so except in unusual circumstances.
SYSTEMATIC WITHDRAWAL PROGRAM
As another convenience, you may redeem your Fund shares through the Systematic
Withdrawal Program. If you elect this method of redemption, the Fund will send
you a check in a minimum amount of $100. You may choose to receive a check each
month or calendar quarter. Your Fund account must have a value of at least
$10,000 in order to participate in this Program. This Program may be terminated
at any time by the Fund. You may also elect to terminate your participation in
this Program at any time by writing to the Transfer Agent.
A withdrawal under the Program involves a redemption of shares and may result in
a gain or loss for federal income tax purposes. In addition, if the amount
withdrawn exceeds the dividends credited to your account, the account ultimately
may be depleted.
PRICING OF FUND SHARES
The price of the Fund's shares is based on the Fund's net asset value. This is
calculated by dividing the Fund's assets, minus its liabilities, by the number
of shares outstanding. The Fund's assets are the market value of securities held
in its portfolio, plus any cash and other assets.
The Fund's liabilities are fees and expenses owed by the Fund. The number of
Fund shares outstanding is the amount of shares which have been issued to
shareholders. The price you will pay to buy Fund shares or the amount you will
receive when you sell your Fund shares is based on the net asset value next
calculated after your order is received by the Transfer Agent with complete
information and meeting all the requirements discussed in this Prospectus.
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The net asset value of the Fund's shares is determined as of the close of the
regular daily trading session on the NYSE. This is normally 4:00 p.m., Eastern
time. Fund shares will not be priced on days that the NYSE is closed for trading
(including certain U.S. holidays).
DIVIDENDS AND DISTRIBUTIONS
The Fund will make distributions of dividends and capital gains, if any, at
least annually, typically after year end. The Fund will make another
distribution of any additional undistributed capital gains earned during the
12-month period ended October 31 on or about December 31. All distributions will
be reinvested in Fund shares unless you choose one of the following options: (1)
receive dividends in cash, while reinvesting capital gain distributions in
additional Fund shares; or (2) receive all distributions in cash. If you wish to
change your distribution option, write to the Transfer Agent in advance of the
payment date of the distribution.
TAX CONSEQUENCES
The Fund intends to make distributions of dividends and capital gains. Dividends
are taxable to you as ordinary income. The rate you pay on capital gain
distributions will depend on how long the Fund held the securities that
generated the gains, not on how long you owned your Fund shares. You will be
taxed in the same manner whether you receive your dividends and capital gain
distributions in cash or reinvest them in additional Fund shares.
If you sell your Fund shares, it is considered a taxable event for you.
Depending on the purchase price and the sale price of the shares you sell, you
may have a gain or a loss on the transaction. You are responsible for any tax
liabilities generated by your transaction.
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FINANCIAL HIGHLIGHTS
This table shows the Fund's financial performance for the period shown. Certain
information reflects financial results for a single Fund share. "Total return"
shows how much your investment in the Fund would have increased or decreased
during the period, assuming you had reinvested all dividends and distributions.
This information has been audited by Tait, Weller & Baker, independent accounts.
Their report and the Fund's financial statements are included in the Annual
Report, which is available upon request.
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
September 30, 1999*
through
August 31, 2000
---------------
Net asset value, beginning of period .......................... $10.00
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Income from investment operations:
Net investment income ....................................... 0.13
Net realized and unrealized gain on investments ............. 3.28
------
Total from investment operations .............................. 3.41
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Less distributions:
From net investment income .................................. (0.04)
From net realized gain ...................................... (0.43)
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Total distributions ........................................... (0.47)
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Net asset value, end of period ................................ $12.94
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Total return .................................................. 34.70%#
Ratios/supplemental data:
Net assets, end of period (millions)......................... $ 4.3
Ratio of expenses to average net assets:
Before fees waived and expenses absorbed .................... 4.95%+
After fees waived and expenses absorbed ..................... 1.50%+
Ratio of net investment income/(loss) to average net assets:
Before fees waived and expenses absorbed .................... (1.99%)+
After fees waived and expenses absorbed ..................... 1.40%+
Portfolio turnover rate ....................................... 18.35%#
* Commencement of operations.
+ Annualized.
# Not Annualized.
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VILLERE BALANCED FUND
A SERIES OF TRUST FOR
INVESTMENT MANAGERS (THE "TRUST")
WWW.VILLERE.COM
For investors who want more information about the Fund, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: 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 market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
Prospectus.
You can discuss your questions about the Fund by contacting the Fund at
877-VILLERE (877-845-5373). You can get free copies of reports and the SAI,
request other information and discuss your questions about the Fund by calling
(800) 576-8229 or writing to the Fund at:
Villere Balanced Fund
c/o ICA Fund Services Corp.
4455 E. Camelback Rd., Ste. 261E
Phoenix, AZ 85018
You can review and copy information including the Fund's reports and SAI at the
Public Reference Room of the Securities and Exchange Commission in Washington,
D.C. You can obtain information on the operation of the Public Reference Room by
calling 1-202-942-8090. Reports and other information about the Fund are also
available
* Free of charge from the Commission's EDGAR database on the Commission's
Internet website at http://www.sec.gov., or
* For a fee, by writing to the Public Reference Room of the Commission,
Washington, DC 20549-0102, or
* For a fee, by electronic request at the following e-mail address:
[email protected].
(The Trust's SEC Investment Company Act
file number is 811-09393)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 29, 2000
VILLERE BALANCED FUND,
A SERIES OF TRUST FOR INVESTMENT MANAGERS
210 BARONNE STREET, SUITE 808
NEW ORLEANS, LA
(800) 576-8229
This Statement of Additional Information ("SAI") is not a prospectus and it
should be read in conjunction with the Prospectus dated December 29, 2000, as
may be revised, of the Villere Balanced Fund (the "Fund"), a series of Trust for
Investment Managers (the "Trust"). St. Denis J. Villere & Co. (the "Adviser") is
the adviser to the Fund. A copy of the Fund's Prospectus is available by calling
the telephone number listed above.
TABLE OF CONTENTS
The Trust ................................................................ B-2
Investment Objective and Policies ........................................ B-2
Investment Restrictions .................................................. B-9
Distributions and Tax Information ........................................ B-10
Trustees and Executive Officers .......................................... B-12
The Fund's Investment Adviser ............................................ B-13
The Fund's Administrator ................................................. B-14
The Fund's Distributor ................................................... B-15
Execution of Portfolio Transactions ...................................... B-15
Portfolio Turnover ....................................................... B-17
Additional Purchase and Redemption Information ........................... B-18
Determination of Share Price ............................................. B-20
Performance Information .................................................. B-21
General Information ...................................................... B-22
Financial Statements ..................................................... B-22
Appendix A ............................................................... B-23
Appendix B ............................................................... B-25
B-1
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THE TRUST
The Trust for Investment Managers (the "Trust") is an open-end management
investment company organized as a Delaware business trust. The Trust may consist
of various series which represent separate investment portfolios.
This SAI relates only to the Fund. The Fund is diversified, which under the
Investment Company Act of 1940 ("1940 Act") means that as to 75% of its total
assets, no more than 5% may be invested in the securities of a single issuer and
that it may hold no more than 10% of the voting securities of a single issuer.
The Trust is registered with the SEC as a management investment company. Such a
registration does not involve supervision of the management or policies of the
Fund. The Prospectus of the Fund and this SAI omit certain of the information
contained in the Registration Statement filed with the SEC. Copies of such
information may be obtained from the SEC upon payment of the prescribed fee.
INVESTMENT OBJECTIVE AND POLICIES
The Villere Balanced Fund is a mutual fund with the investment objective of
seeking long term capital growth, consistent with preservation of capital,
balanced by current income. The Fund seeks to achieve this objective by
investing in a mix of common stocks and fixed income securities, including
short-term fixed income securities known as "money market instruments." It is
expected that at least 25% of the Fund's assets will be invested in fixed income
securities under normal market conditions. The following discussion supplements
the discussion of the Fund's investment objective and policies as set forth in
the Prospectus. There can be no assurance the objective of the Fund will be
attained.
FIXED INCOME SECURITIES. Fixed-income securities include traditional debt
securities issued by corporations, such as bonds and debentures and debt
securities that are convertible into common stock and interests.
Fixed income securities that will be eligible for purchase by the Fund include
investment grade corporate debt securities, those rated BBB or better by
Standard & Poor's Ratings Group ("S&P") or Baa or better by Moody's Investors
Service, Inc. ("Moody's). Securities rated BBB by S&P are considered investment
grade, but Moody's considers securities rated Baa to have speculative
characteristics.
The Fund reserves the right to invest up to 10% of its assets in securities
rated lower than BB by S&P or lower than Baa by Moody's. Lower-rated securities
generally offer a higher current yield than that available for higher grade
issues. However, lower-rated securities involve higher risks, in that they are
especially subject to adverse changes in general economic conditions and in the
industries in which the issuers are engaged, to changes in the financial
condition of the issuers and to price fluctuations in response to changes in
interest rates. During periods of economic downturn or rising interest rates,
highly leveraged issuers may experience financial stress which could adversely
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affect their ability to make payments of interest and principal and increase the
possibility of default. In addition, the market for lower-rated debt securities
has expanded rapidly in recent years, and its growth paralleled a long economic
expansion. At times in recent years, the prices of many lower-rated debt
securities declined substantially, reflecting an expectation that many issuers
of such securities might experience financial difficulties. As a result, the
yields on lower-rated debt securities rose dramatically, but such higher yields
did not reflect the value of the income stream that holders of such securities
expected, but rather, the risk that holders of such securities could lose a
substantial portion of their value as a result of the issuers' financial
restructuring or default. There can be no assurance that such declines will not
recur. The market for lower-rated debt issues generally is thinner and less
active than that for higher quality securities, which may limit the Fund's
ability to sell such securities at fair value in response to changes in the
economy or financial markets. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may also decrease the values and
liquidity of lower-rated securities, especially in a thinly traded market.
Lower-rated debt obligations also present risks based on payment expectations.
If an issuer calls the obligation for redemption, a Fund may have to replace the
security with a lower-yielding security, resulting in a decreased return for
investors. Also, as the principal value of bonds moves inversely with movements
in interest rates, in the event of rising interest rates the value of the
securities held by a Fund may decline proportionately more than a Fund
consisting of higher-rated securities. If a Fund experiences unexpected net
redemptions, it may be forced to sell its higher-rated bonds, resulting in a
decline in the overall credit quality of the securities held by the Fund and
increasing the exposure of the Fund to the risks of lower-rated securities.
Ratings of debt securities represent the rating agencies' opinions regarding
their quality, are not a guarantee of quality and may be reduced after the Fund
has acquired the security. If a security's rating is reduced while it is held by
the Fund, the Adviser will consider whether the Fund should continue to hold the
security but is not required to dispose of it. Credit ratings attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial conditions may be better or worse than the rating
indicates. The ratings for debt securities are described in Appendix A.
Fixed-income securities with longer maturities generally entail greater risk
than those with shorter maturities.
U. S. GOVERNMENT SECURITIES. U.S. Government securities in which the Fund may
invest include direct obligations issued by the U.S. Treasury, such as Treasury
bills, certificates of indebtedness, notes and bonds. U.S. Government agencies
and instrumentalities that issue or guarantee securities include, but are not
limited to, the Federal Housing Administration, Federal National Mortgage
Association, Federal Home Loan Banks, Government National Mortgage Association,
International Bank for Reconstruction and Development and Student Loan Marketing
Association.
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All Treasury securities are backed by the full faith and credit of the United
States. Obligations of U.S. Government agencies and instrumentalities may or may
not be supported by the full faith and credit of the United States. Some, such
as the Federal Home Loan Banks, are backed by the right of the agency or
instrumentality to borrow from the Treasury. Others, such as securities issued
by the Federal National Mortgage Association, are supported only by the credit
of the instrumentality and not by the Treasury. If the securities are not backed
by the full faith and credit of the United States, the owner of the securities
must look principally to the agency issuing the obligation for repayment and may
not be able to assert a claim against United States in the event that the agency
or instrumentality does not meet its commitment.
CONVERTIBLE SECURITIES. Among the fixed income securities in which the Fund may
invest are convertible securities. A convertible security is a fixed-income
security (a debt instrument or a preferred stock) which may be converted at a
stated price within a specified period of time into a certain quantity of the
common stock of the same or a different issuer. Convertible securities are
senior to common stocks in an issuer's capital structure, but are usually
subordinated to similar non-convertible securities. While providing a fixed
income stream (generally higher in yield than the income derivable from common
stock but lower than that afforded by a similar nonconvertible security), a
convertible security also affords an investor the opportunity, through its
conversion feature, to participate in the capital appreciation attendant upon a
market price advance in the convertible security's underlying common stock.
PREFERRED STOCK. The Fund may invest in preferred stocks. A preferred stock is a
blend of the characteristics of a bond and common stock. It can offer the higher
yield of a bond and has priority over common stock in equity ownership, but does
not have the seniority of a bond and, unlike common stock, its participation in
the issuer's growth may be limited. Preferred stock has preference over common
stock in the receipt of dividends and in any residual assets after payment to
creditors should the issuer be dissolved. Although the dividend is set at a
fixed annual rate, in some circumstances it can be changed or omitted by the
issuer.
WHEN-ISSUED SECURITIES. The Fund may from time to time purchase securities on a
"when-issued" basis. The price of such securities, which may be expressed in
yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for them take place at a later date. Normally, the
settlement date occurs within one month of the purchase; during the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. To the extent that assets of the Fund are
held in cash pending the settlement of a purchase of securities, the Fund would
earn no income; however, it is the Fund's intention to be fully invested to the
extent practicable and subject to the policies stated above. While when-issued
securities may be sold prior to the settlement date, the Fund intends to
purchase them with the purpose of actually acquiring them unless a sale appears
desirable for investment reasons. At the time the Fund makes the commitment to
purchase a security on a when-issued basis, it will record the transaction and
reflect the value of the security in determining its net asset value. The market
value of the when-issued securities may be more or less than the purchase price.
The Fund does not believe that its net asset value or income will be adversely
affected by its purchase of securities on a when-issued basis. The Fund's
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Custodian will segregate liquid assets equal in value to commitments for
when-issued securities. Such segregated assets either will mature or, if
necessary, be sold on or before the settlement date.
MONEY MARKET INSTRUMENTS. The Fund may invest in any of the following securities
and instruments:
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS. The Fund may
hold certificates of deposit, bankers' acceptances and time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Fund will be
dollar-denominated obligations of domestic banks, savings and loan associations
or financial institutions which, at the time of purchase, have capital, surplus
and undivided profits in excess of $100 million (including assets of both
domestic and foreign branches), based on latest published reports, or less than
$100 million if the principal amount of such bank obligations are fully insured
by the U.S. Government.
In addition to buying certificates of deposit and bankers' acceptances, the Fund
also may make interest-bearing time or other interest-bearing deposits in
commercial or savings banks. Time deposits are non-negotiable deposits
maintained at a banking institution for a specified period of time at a
specified interest rate.
COMMERCIAL PAPER AND SHORT-TERM NOTES. The Fund may invest a portion of its
assets in commercial paper and short-term notes. Commercial paper consists of
unsecured promissory notes issued by corporations. Commercial paper and
short-term notes will normally have maturities of less than nine months and
fixed rates of return, although such instruments may have maturities of up to
one year.
Commercial paper and short-term notes will consist of issues rated at the time
of purchase "A-2" or higher by S&P, "Prime-1" or "Prime-2" by Moody's, or
similarly rated by another nationally recognized statistical rating organization
or, if unrated, will be determined by the Adviser to be of comparable quality.
These rating symbols are described in Appendix B.
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Under such
agreements, the seller of the security agrees to repurchase it at a mutually
agreed upon time and price. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Fund together
with the repurchase price on repurchase. In either case, the income to the Fund
is unrelated to the interest rate on the U.S. Government security itself. Such
repurchase agreements will be made only with banks with assets of $500 million
or more that are insured by the Federal Deposit Insurance Corporation or with
Government securities dealers recognized by the Federal Reserve Board and
registered as broker-dealers with the Securities and Exchange Commission ("SEC")
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<PAGE>
or exempt from such registration. The Fund will generally enter into repurchase
agreements of short durations, from overnight to one week, although the
underlying securities generally have longer maturities. The Fund may not enter
into a repurchase agreement with more than seven days to maturity if, as a
result, more than 15% of the value of its net assets would be invested in
illiquid securities including such repurchase agreements.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
the Fund to the seller of the U.S. Government security subject to the repurchase
agreement. It is not clear whether a court would consider the U.S. Government
security acquired by the Fund subject to a repurchase agreement as being owned
by the Fund or as being collateral for a loan by the Fund to the seller. In the
event of the commencement of bankruptcy or insolvency proceedings with respect
to the seller of the U.S. Government security before its repurchase under a
repurchase agreement, the Fund may encounter delays and incur costs before being
able to sell the security. Delays may involve loss of interest or a decline in
price of the U.S. Government security. If a court characterizes the transaction
as a loan and the Fund has not perfected a security interest in the U.S.
Government security, the Fund may be required to return the security to the
seller's estate and be treated as an unsecured creditor of the seller. As an
unsecured creditor, the Fund would be at the risk of losing some or all of the
principal and income involved in the transaction. As with any unsecured debt
instrument purchased for the Fund, the Adviser seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
other party, in this case the seller of the U.S. Government security.
Apart from the risk of bankruptcy or insolvency proceedings, there is also the
risk that the seller may fail to repurchase the security. However, the Fund will
always receive as collateral for any repurchase agreement to which it is a party
securities acceptable to it, the market value of which is equal to at least 100%
of the amount invested by the Fund plus accrued interest, and the Fund will make
payment against such securities only upon physical delivery or evidence of book
entry transfer to the account of its Custodian. If the market value of the U.S.
Government security subject to the repurchase agreement becomes less than the
repurchase price (including interest), the Fund will direct the seller of the
U.S. Government security to deliver additional securities so that the market
value of all securities subject to the repurchase agreement will equal or exceed
the repurchase price. It is possible that the Fund will be unsuccessful in
seeking to impose on the seller a contractual obligation to deliver additional
securities.
ILLIQUID SECURITIES. The Fund may not invest more than 15% of the value of its
net assets in securities that at the time of purchase have legal or contractual
restrictions on resale or are otherwise illiquid. The Adviser will monitor the
amount of illiquid securities in the Fund's portfolio, under the supervision of
the Trust's Board of Trustees, to ensure compliance with the Fund's investment
restrictions.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 (the "Securities Act"), securities
which are otherwise not readily marketable and repurchase agreements having a
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maturity of longer than seven days. Securities which have not been registered
under the Securities Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Fund might be unable
to sell restricted or other illiquid securities promptly or at reasonable prices
and might thereby experience difficulty satisfying redemption requests within
seven days. The Fund might also have to register such restricted securities in
order to sell them, resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not reflect the actual liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the SEC under the Securities Act,
the Trust's Board of Trustees may determine that such securities are not
illiquid securities despite their legal or contractual restrictions on resale.
In all other cases, however, securities subject to restrictions on resale will
be deemed illiquid.
FOREIGN SECURITIES. The Fund may invest up to 5% of its total assets in US
Dollar denominated securities issued by foreign companies. The Fund may also
invest without limit in securities of foreign issuers which are listed and
traded on a U.S. national securities exchange, including American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs").
Generally, ADRs, in registered form, are denominated in U.S. dollars and are
designed for use in the U.S. securities markets, while EDRs, in bearer form, may
be denominated in other currencies and are designed for use in European
securities markets. ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities. EDRs are European
receipts evidencing a similar arrangement. For purposes of the Fund's investment
policies, ADRs and EDRs are deemed to have the same classification as the
underlying securities they represent. Thus, an ADR or EDR representing ownership
of common stock will be treated as common stock.
Unsponsored ADRs and EDRs differ from sponsored ADRs and EDRs in that the
establishment of unsponsored ADRs and EDRs is not approved by the issuer of the
underlying securities. As a result, with unsponsored ADRs and EDRs, available
information concerning the issuer may not be as current or reliable and their
price may be more volatile.
RISKS OF INVESTING IN FOREIGN SECURITIES. Investments in foreign securities
involve certain inherent risks, including the following:
POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
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reinvestment, resource self-sufficiency, and diversification and balance of
payments position. The internal politics of some foreign countries may not be as
stable as those of the United States. Governments in some foreign countries also
continue to participate to a significant degree, through ownership interest or
regulation, in their respective economies. Action by these governments could
include restrictions on foreign investment, nationalization, expropriation of
goods or imposition of taxes, and could have a significant effect on market
prices of securities and payment of interest. The economies of many foreign
countries are heavily dependent upon international trade and are affected by the
trade policies and economic conditions of their trading partners. If these
trading partners enacted protectionist trade legislation, it could have a
significant adverse effect upon the securities markets of such countries.
CURRENCY FLUCTUATIONS. The Fund will invest only in securities denominated in
U.S. dollars. For this reason, the value of the Fund's assets may not be subject
to risks associated with variations in the value of foreign currencies relative
to the U.S. dollar to the same extent as might otherwise be the case. Changes in
the value of foreign currencies against the U.S. dollar may, however, affect the
value of the assets and/or income of foreign companies whose U.S. dollar
denominated securities are held by the Fund. Such companies may also be affected
significantly by currency restrictions and exchange control regulations enacted
from time to time.
EURO CONVERSION. Several European countries adopted a single uniform currency
known as the "euro," effective January 1, 1999. The euro conversion, that will
take place over a several-year period, could have potential adverse effects on
the Fund's ability to value its portfolio holdings in foreign securities, and
could increase the costs associated with the Fund's operations. The Fund and the
Adviser are working with providers of services to the Fund in the areas of
clearance and settlement of trade to avoid any material impact on the Fund due
to the euro conversion; there can be no assurance, however, that the steps taken
will be sufficient to avoid any adverse impact on the Fund.
MARKET CHARACTERISTICS. The Adviser expects that many foreign securities in
which the Fund invests will be purchased in over-the-counter markets or on
exchanges located in the countries in which the principal offices of the issuers
of the various securities are located, if that is the best available market.
Foreign exchanges and markets may be more volatile than those in the United
States. While growing, they usually have substantially less volume than U.S.
markets, and the Fund's foreign securities may be less liquid and more volatile
than U.S. securities. Also, settlement practices for transactions in foreign
markets may differ from those in United States markets, and may include delays
beyond periods customary in the United States. Foreign security trading
practices, including those involving securities settlement where Fund assets may
be released prior to receipt of payment or securities, may expose the Fund to
increased risk in the event of a failed trade or the insolvency of a foreign
broker-dealer. Securities listed primarily on foreign exchanges may trade on
weekends or other days when the Fund does not price its shares. In such cases,
the net asset value of the Fund's shares could change on days when shareholders
would not be able to purchase or redeem shares.
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LEGAL AND REGULATORY MATTERS. Certain foreign countries may have less
supervision of securities markets, brokers and issuers of securities, and less
financial information available to issuers, than is available in the United
States.
TAXES. The interest and dividends payable on some of the Fund's foreign
portfolio securities may be subject to foreign withholding taxes, thus reducing
the net amount of income available for distribution to Fund shareholders.
COSTS. To the extent that the Fund invests in foreign securities, its expense
ratio is likely to be higher than those of investment companies investing only
in domestic securities, since the cost of maintaining the custody of foreign
securities is higher.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by the Fund
and (unless otherwise noted) are fundamental and cannot be changed without the
affirmative vote of a majority of the Fund's outstanding voting securities as
defined in the 1940 Act. The Fund may not:
1. Make loans to others, except (a) through the purchase of debt securities in
accordance with its investment objectives and policies, (b) to the extent the
entry into a repurchase agreement is deemed to be a loan.
2. (a) Borrow money, except as stated in the Prospectus and this Statement of
Additional Information. Any such borrowing will be made only if immediately
thereafter there is an asset coverage of at least 300% of all borrowings.
(b) Mortgage, pledge or hypothecate any of its assets except in connection
with any such borrowings.
3. Purchase securities on margin, participate on a joint or joint and several
basis in any securities trading account, or underwrite securities. (Does not
preclude the Fund from obtaining such short-term credit as may be necessary for
the clearance of purchases and sales of its portfolio securities).
4. Purchase or sell real estate, commodities or commodity contracts (other than
futures transactions for the purposes and under the conditions described in the
prospectus and in this Statement of Additional Information).
5. Invest 25% or more of the market value of its assets in the securities of
companies engaged in any one industry. (Does not apply to investment in the
securities of the U.S. Government, its agencies or instrumentalities.)
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6. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (a) making any
permitted borrowings, mortgages or pledges, or (b) entering into options,
futures, forward or repurchase transactions.
7. Purchase the securities of any issuer, if as a result more than 5% of the
total assets of the Fund would be invested in the securities of that issuer,
other than obligations of the U.S. Government, its agencies or
instrumentalities, provided that up to 25% of the value of the Fund's assets may
be invested without regard to this limitation.
The Fund observes the following policies, which are not deemed fundamental and
which may be changed without shareholder vote. The Fund may not:
8. Purchase any security if as a result the Fund would then hold more than 10%
of any class of securities of an issuer (taking all common stock issues of an
issuer as a single class, all preferred stock issues as a single class, and all
debt issues as a single class) or more than 10% of the outstanding voting
securities of an issuer.
9. Invest in any issuer for purposes of exercising control or management.
10. Invest in securities of other investment companies except as permitted under
the 1940 Act.
11. Invest, in the aggregate, more than 15% of its net assets in securities with
legal or contractual restrictions on resale, securities which are not readily
marketable and repurchase agreements with more than seven days to maturity.
12. With respect to fundamental investment restriction 2(a) above, the Fund will
not purchase portfolio securities while outstanding borrowings exceed 5% of its
assets.
Except with respect to borrowing, if a percentage restriction described in the
Prospectus or in this SAI is adhered to at the time of investment, a subsequent
increase or decrease in a percentage resulting from a change in the values of
assets will not constitute a violation of that restriction.
DISTRIBUTIONS AND TAX INFORMATION
DISTRIBUTIONS. Dividends from net investment income and distributions from net
profits from the sale of securities are generally made annually. Also, the Fund
expects to distribute any undistributed net investment income on or about
December 31 of each year. Any net capital gains realized through the period
ended October 31 of each year will also be distributed by December 31 of each
year.
Each distribution by the Fund is accompanied by a brief explanation of the form
and character of the distribution. In January of each year the Fund will issue
to each shareholder a statement of the federal income tax status of all
distributions.
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TAX INFORMATION. Each series of the Trust is treated as a separate entity for
federal income tax purposes. The Fund intends to continue to qualify and elect
to be treated as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986 (the "Code"), provided that it complies with all
applicable requirements regarding the source of its income, diversification of
its assets and timing of distributions. It is the Fund's policy to distribute to
its shareholders all of its investment company taxable income and any net
realized capital gains for each fiscal year in a manner that complies with the
distribution requirements of the Code, so that the Fund will not be subject to
any federal income tax or excise taxes based on net income. To avoid the excise
tax, the Fund must also distribute (or be deemed to have distributed) by
December 31 of each calendar year (i) at least 98% of its ordinary income for
such year, (ii) at least 98% of the excess of its realized capital gains over
its realized capital losses for the one-year period ending on October 31 during
such year and (iii) any amounts from the prior calendar year that were not
distributed and on which the Fund paid no federal excise tax.
The Fund's ordinary income generally consists of interest and dividend income,
less expenses. Net realized capital gains for a fiscal period are computed by
taking into account any capital loss carryforward of the Fund. Distributions of
net investment income and net short-term capital gains are taxable to
shareholders as ordinary income. In the case of corporate shareholders, a
portion of the distributions may qualify for the intercorporate
dividends-received deduction to the extent the Portfolio designates the amount
distributed as a qualifying dividend. This designated amount cannot, however,
exceed the aggregate amount of qualifying dividends received by the Portfolio
for its taxable year. The deduction, if any, may be reduced or eliminated if
Portfolio shares held by a corporate investor are treated as debt-financed or
are held for fewer than 46 days.
Any long-term capital gain distributions are taxable to shareholders as
long-term capital gains regardless of the length of time they have held their
shares. Capital gains distributions are not eligible for the dividends-received
deduction referred to in the previous paragraph. Distributions of any ordinary
income and net realized capital gains will be taxable as described above,
whether received in shares or in cash. Shareholders who choose to receive
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share so received equal to the net asset
value of a share on the reinvestment date. Distributions are generally taxable
when received. However, distributions declared in October, November or December
to shareholders of record on a date in such a month and paid the following
January are taxable as if received on December 31. Distributions are includable
in alternative minimum taxable income in computing a shareholder's liability for
the alternative minimum tax.
Under the Code, the Fund will be required to report to the Internal Revenue
Service all distributions of ordinary income and capital gains as well as gross
proceeds from the redemption of Portfolio shares, except in the case of exempt
shareholders, which includes most corporations. Pursuant to the backup
withholding provisions of the Code, distributions of any taxable income and
capital gains and proceeds from the redemption of Fund shares may be subject to
withholding of federal income tax at the current maximum federal tax rate of 31
percent in the case of non-exempt shareholders who fail to furnish the Fund with
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their taxpayer identification numbers and with required certifications regarding
their status under the federal income tax law. If the backup withholding
provisions are applicable, any such distributions and proceeds, whether taken in
cash or reinvested in additional shares, will be reduced by the amounts required
to be withheld. Corporate and other exempt shareholders should provide the Fund
with their taxpayer identification numbers or certify their exempt status in
order to avoid possible erroneous application of backup withholding. The Fund
reserves the right to refuse to open an account for any person failing to
certify the person's taxpayer identification number.
The Fund will not be subject to corporate income tax in the State of Delaware as
long as it qualifies as a regulated investment company for federal income tax
purposes. Distributions and the transactions referred to in the preceding
paragraphs may be subject to state and local income taxes, and the tax treatment
thereof may differ from the federal income tax treatment.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income.
In addition, the foregoing discussion of tax law is based on existing provisions
of the Code, existing and proposed regulations thereunder, and current
administrative rulings and court decisions, all of which are subject to change.
Any such charges could affect the validity of this discussion. The discussion
also represents only a general summary of tax law and practice currently
applicable to the Fund and certain shareholders therein, and, as such, is
subject to change. In particular, the consequences of an investment in shares of
the Fund under the laws of any state, local or foreign taxing jurisdictions are
not discussed herein. Each prospective investor should consult his or her own
tax advisor to determine the application of the tax law and practice in his or
her own particular circumstances.
TRUSTEES AND EXECUTIVE OFFICERS
The Trustees of the Trust, who were elected for an indefinite term by the
initial shareholders of the Trust, are responsible for the overall management of
the Trust, including general supervision and review of the investment activities
of the Fund. The Trustees, in turn, elect the officers of the Trust, who are
responsible for administering the day-to-day operations of the Trust and its
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separate series. The current Trustees and officers, their affiliations, ages and
principal occupations for the past five years are set forth below. Unless noted
otherwise, each person has held the position listed for a minimum of five years.
George J. Rebhan (66) Trustee
1920 Mission St., South Pasadena, CA 91030. Retired. Formerly President,
Hotchkis and Wiley Funds. (mutual funds), 1985-93.
Ashley T. Rabun (48) Trustee
2161 India St., San Diego, CA 92101. Founder and Chief Executive Officer,
InvestorReach, Inc., (financial services marketing and distribution consulting).
Formerly Partner and Director, Nicholas-Applegate Capital Management, 1992-96
(investment management).
James Clayburn LaForce (73) Trustee
Dean Emeritus, John E. Anderson Graduate School of Management, University of
California, Los Angeles.
Robert H. Wadsworth* (60) Trustee and President
4455 E. Camelback Rd., Suite 261E, Phoenix, AZ 85018. President of the Wadsworth
Group (consulting); President of Investment Company Administration, LLC
("ICA")(mutual fund administrator and the Trust's Administrator) and First Fund
Distributors, Inc.("FFD")(registered broker-dealer and the Trust's Distributor).
Thomas W. Marschel* (30) Treasurer
4455E. Camelback Rd., Suite 261E, Phoenix, Arizona 85018. Employed by Investment
Company Administration LLC (since July, 1996); Secretary, Advisors Series Trust;
formerly employed by Bank One, N.A. (From August, 1995 until July, 1996)
Chris O. Moser* (51) Secretary
4455 E. Camelback Rd. Suite 261-E, Phoenix, AZ 85018. Employed by Investment
Company Administration, LLC (since July 1996); Formerly employed by Bank One,
N.A. (From August 1995 until July 1996.
----------
* Indicates an "interested person" of the Trust as defined in the 1940 Act.
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Set forth below is the rate of compensation received by the following Trustees
from all portfolios of the Trust. This total amount is allocated among the
portfolios. Disinterested Trustees receive an annual retainer of $5,000 plus
$1,500 for each meeting attended and are reimbursed for expenses. No other
compensation or retirement benefits were received by any Trustee or officer from
the portfolios of the Trust.
Name of Trustee Total Annual Compensation
--------------- -------------------------
George J. Rebhan $7,500
Ashley T. Rabun $7,500
James Clayburn LaForce $7,500
For the period September 30, 1999 (commencement of operations) through August
31, 2000, trustees' fees and expenses in the amount of $3,999 were allocated to
the Fund. As of the date of this SAI, the Trustees and officers of the Trust as
a group did not own more than 1% of the outstanding shares of the Fund.
THE FUNDS INVESTMENT ADVISER
As stated in the Prospectus, investment advisory services are provided to the
Fund by St. Denis J. Villere & Co. (the "Adviser"), pursuant to an Investment
Advisory Agreement. (the "Advisory Agreement"). As compensation, the Fund pays
the Adviser a monthly management fee (accrued daily) based upon the average
daily net assets of the Fund at the annual rate of 0.75%.
The Advisory Agreement continues in effect for successive annual periods so long
as such continuation is approved at least annually by the vote of (1) the Board
of Trustees of the Trust (or a majority of the outstanding shares of the Fund,
and (2) a majority of the Trustees who are not interested persons of any party
to the Advisory Agreement, in each case cast in person at a meeting called for
the purpose of voting on such approval. The Advisory Agreement may be terminated
at any time, without penalty, by either party to the Advisory Agreement upon
sixty days' written notice and is automatically terminated in the event of its
"assignment," as defined in the 1940 Act.
For the period September 30, 1999 through August 31, 2000, the Advisor accrued
$17,334 in advisory fees, all of which were waived by the Advisor. For the same
period, the Advisor reimbursed the Fund an additional $63,024 in expenses.
THE FUNDS ADMINISTRATOR
The Fund has an Administration Agreement with Investment Company Administration,
LLC (the "Administrator"), a corporation owned and controlled in part by Mr.
Wadsworth with offices at 4455 E. Camelback Rd., Ste. 261-E, Phoenix, AZ 85018.
The Administration Agreement provides that the Administrator will prepare and
coordinate reports and other materials supplied to the Trustees; prepare and/or
supervise the preparation and filing of all securities filings, periodic
financial reports, prospectuses, statements of additional information, marketing
materials, tax returns, shareholder reports and other regulatory reports or
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filings required of the Fund; prepare all required notice filings necessary to
maintain the Fund's ability to sell shares in all states where the Fund
currently does, or intends to do business; coordinate the preparation, printing
and mailing of all materials (e.g., Annual Reports) required to be sent to
shareholders; coordinate the preparation and payment of Fund related expenses;
monitor and oversee the activities of the Fund's servicing agents (i.e.,
transfer agent, custodian, fund accountants, etc.); review and adjust as
necessary the Fund's daily expense accruals; and perform such additional
services as may be agreed upon by the Fund and the Administrator. For its
services, the Administrator receives a monthly fee at the following annual rate:
Average Net Assets Fee or Fee Rate
------------------ ---------------
Under $15 million $30,000
$15 to $50 million 0.20%
$50 to $100 million 0.15%
$100 to $150 million 0.10%
Over $150 million 0.05%
For the period September 30, 1999 through August 31, 2000, the Administrator
received fees of $27,616 from the Fund.
THE FUNDS DISTRIBUTOR
First Fund Distributors, Inc. (the "Distributor"), a corporation owned in part
by Mr. Wadsworth, acts as the Fund's principal underwriter in a continuous
public offering of the Fund's shares. The Distribution Agreement between the
Fund and the Distributor continues in effect from year to year if approved at
least annually by (i) the Board of Trustees or the vote of a majority of the
outstanding shares of the Fund (as defined in the 1940 Act) and (ii) a majority
of the Trustees who are not interested persons of any such party, in each case
cast in person at a meeting called for the purpose of voting on such approval.
The Distribution Agreement may be terminated without penalty by the parties
thereto upon sixty days' written notice, and is automatically terminated in the
event of its assignment as defined in the 1940 Act.
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Agreement, the Adviser determines which securities are
to be purchased and sold by the Fund and which broker-dealers are eligible to
execute the Fund's portfolio transactions. Purchases and sales of securities in
the over-the-counter market will generally be executed directly with a
"market-maker" unless, in the opinion of the Adviser, a better price and
execution can otherwise be obtained by using a broker for the transaction.
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<PAGE>
Purchases of portfolio securities for the Fund also may be made directly from
issuers or from underwriters. Where possible, purchase and sale transactions
will be effected through dealers (including banks) which specialize in the types
of securities which the Fund will be holding, unless better executions are
available elsewhere. Dealers and underwriters usually act as principal for their
own accounts. Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the spread
between the bid and the asked price. If the execution and price offered by more
than one dealer or underwriter are comparable, the order may be allocated to a
dealer or underwriter that has provided research or other services as discussed
below.
In placing portfolio transactions, the Adviser will use its reasonable efforts
to choose broker-dealers capable of providing the services necessary to obtain
the most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm's risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that more
than one broker-dealer can offer the services needed to obtain the most
favorable price and execution available, consideration may be given to those
broker-dealers which furnish or supply research and statistical information to
the Adviser that it may lawfully and appropriately use in its investment
advisory capacities, as well as provide other services in addition to execution
services. The Adviser considers such information, which is in addition to and
not in lieu of the services required to be performed by it under its Agreement
with the Fund, to be useful in varying degrees, but of indeterminable value.
Portfolio transactions may be placed with broker-dealers who sell shares of the
Fund subject to rules adopted by the National Association of Securities Dealers,
Inc.
While it is the Fund's general policy to seek first to obtain the most favorable
price and execution available in selecting a broker-dealer to execute portfolio
transactions for the Fund, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services to the Fund or to the
Adviser, even if the specific services are not directly useful to the Fund and
may be useful to the Adviser in advising other clients. In negotiating
commissions with a broker or evaluating the spread to be paid to a dealer, the
Fund may therefore pay a higher commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services, provided
that the amount of such commission or spread has been determined in good faith
by the Adviser to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. The standard of reasonableness
is to be measured in light of the Adviser's overall responsibilities to the
Fund.
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<PAGE>
Investment decisions for the Fund are made independently from those of other
client accounts or mutual funds ("Funds") managed or advised by the Adviser.
Nevertheless, it is possible that at times identical securities will be
acceptable for both the Fund and one or more of such client accounts or Funds.
In such event, the position of the Fund and such client account(s) or Funds in
the same issuer may vary and the length of time that each may choose to hold its
investment in the same issuer may likewise vary. However, to the extent any of
these client accounts or Funds seeks to acquire the same security as the Fund at
the same time, the Fund may not be able to acquire as large a portion of such
security as it desires, or it may have to pay a higher price or obtain a lower
yield for such security. Similarly, the Fund may not be able to obtain as high a
price for, or as large an execution of, an order to sell any particular security
at the same time. If one or more of such client accounts or Funds simultaneously
purchases or sells the same security that the Fund is purchasing or selling,
each day's transactions in such security will be allocated between the Fund and
all such client accounts or Funds in a manner deemed equitable by the Adviser,
taking into account the respective sizes of the accounts and the amount being
purchased or sold. It is recognized that in some cases this system could have a
detrimental effect on the price or value of the security insofar as the Fund is
concerned. In other cases, however, it is believed that the ability of the Fund
to participate in volume transactions may produce better executions for the
Fund.
The Fund does not effect securities transactions through brokers in accordance
with any formula, nor does it effect securities transactions through brokers
solely for selling shares of the Fund, although the Fund may consider the sale
of shares as a factor in allocating brokerage. However, as stated above,
broker-dealers who execute brokerage transactions may effect purchase of shares
of the Fund for their customers.
For the period September 30, 1999 through August 31, 2000, the Fund paid $2,600
in brokerage commissions with respect to portfolio transactions.
PORTFOLIO TURNOVER
Although the Fund generally will not invest for short-term trading purposes,
portfolio securities may be sold without regard to the length of time they have
been held when, in the opinion of the Adviser, investment considerations warrant
such action. Portfolio turnover rate is calculated by dividing (1) the lesser of
purchases or sales of portfolio securities for the fiscal year by (2) the
monthly average of the value of portfolio securities owned during the fiscal
year. A 100% turnover rate would occur if all the securities in the Fund's
portfolio, with the exception of securities whose maturities at the time of
acquisition were one year or less, were sold and either repurchased or replaced
within one year. A high rate of portfolio turnover (100% or more) generally
leads to transaction costs and may result in a greater number of taxable
transactions. See "Execution of Portfolio Transactions." For the period
September 30, 1999 through August 31, 2000 the Fund had a portfolio turnover
rate of 18.35%.
B-17
<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The information provided below supplements the information contained in the
Fund's Prospectus regarding the purchase and redemption of Fund shares.
HOW TO BUY SHARES. The public offering price of Fund shares is the net asset
value. Each Fund receives the net asset value. Shares are purchased at the
public offering price next determined after the Transfer Agent receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Transfer Agent must receive your order in proper form before
the close of regular trading on the New York Stock Exchange ("NYSE"), normally
4:00 p.m., Eastern time.
The NYSE annually announces the days on which it will not be open for trading.
The most recent announcement indicates that it will not be open on the following
days: New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
However, the NYSE may close on days not included in that announcement.
The Trust reserves the right in its sole discretion (i) to suspend the continued
offering of the Fund's shares, (ii) to reject purchase orders in whole or in
part when in the judgment of the Adviser or the Distributor such rejection is in
the best interest of the Fund, and (iii) to reduce or waive the minimum for
initial and subsequent investments for certain fiduciary accounts or under
circumstances where certain economies can be achieved in sales of the Fund's
shares.
Shareholders who purchase Fund shares by payment-in-kind in the form of shares
of stock, bonds or other securities will be charged the brokerage commissions on
the sale of any security so tendered it if is sold by the Fund within 90 days of
acquisition.
HOW TO SELL SHARES. You can sell your Fund shares any day the NYSE is open for
regular trading. The Fund may require documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Transfer Agent at 1-800-576-8229 for details.
SIGNATURE GUARANTEES. To protect the Fund and its shareholders, a signature
guarantee is required for all written redemption requests over $100,000.
Signature(s) on the redemption request must be guaranteed by an "eligible
guarantor institution." These include banks, broker-dealers, credit unions and
savings institutions. A broker-dealer guaranteeing signatures must be a member
of clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees. Signature guarantees
will be accepted from any eligible guarantor institution which participates in a
signature guarantee program. A notary public cannot provide a signature
guarantee. Certain other transactions also require a signature guarantee.
DELIVERY OF REDEMPTION PROCEEDS. Payments to shareholders for shares of the Fund
redeemed directly from the Fund will be made as promptly as possible but no
later than seven days after receipt by the Fund's Transfer Agent of the written
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<PAGE>
request in proper form, with the appropriate documentation as stated in the
Prospectus, except that the Fund may suspend the right of redemption or postpone
the date of payment during any period when (a) trading on the NYSE is restricted
as determined by the SEC or the NYSE is closed for other than weekends and
holidays; (b) an emergency exists as determined by the SEC making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable; or (c) for such other period as the SEC may permit for the
protection of the Fund's shareholders. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, but only as
authorized by SEC rules.
The value of shares on redemption or repurchase may be more or less than the
investor's cost, depending upon the market value of the Fund's portfolio
securities at the time of redemption or repurchase.
TELEPHONE REDEMPTIONS. Shareholders must have selected telephone transactions
privileges on the Account Application when opening a Fund account. Upon receipt
of any instructions or inquiries by telephone from a shareholder or, if held in
a joint account, from either party, or from any person claiming to be the
shareholder, the Fund or its agent is authorized, without notifying the
shareholder or joint account parties, to carry out the instructions or to
respond to the inquiries, consistent with the service options chosen by the
shareholder or joint shareholders in his or their latest Account Application or
other written request for services, including purchasing or redeeming shares of
the Fund and depositing and withdrawing monies from the bank account specified
in the Bank Account Registration section of the shareholder's latest Account
Application or as otherwise properly specified to the Fund in writing.
The Transfer Agent will employ these and other reasonable procedures to confirm
that instructions communicated by telephone are genuine; if it fails to employ
reasonable procedures, the Fund and the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. If these procedures are
followed, an investor agrees, however, that to the extent permitted by
applicable law, neither the Fund nor its agents will be liable for any loss,
liability, cost or expense arising out of any redemption request, including any
fraudulent or unauthorized request. For information, consult the Transfer Agent.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Transfer Agent by telephone. In this event,
you may wish to submit a written redemption request, as described in the
Prospectus. The Telephone Redemption Privilege may be modified or terminated
without notice.
REDEMPTIONS-IN-KIND. The Fund has reserved the right to pay the redemption price
of its shares, either totally or partially, by a distribution in kind of
portfolio securities (instead of cash). The securities so distributed would be
valued at the same amount as that assigned to them in calculating the net asset
value for the shares being sold. If a shareholder receives a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash. The Trust has filed an election under SEC Rule 18f-1
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<PAGE>
committing to pay in cash all redemptions by a shareholder of record up to
amounts specified by the rule (approximately $250,000).
AUTOMATIC INVESTMENT PLAN. As discussed in the Prospectus, the Fund provides an
Automatic Investment Plan for the convenience of investors who wish to purchase
shares of the Fund on a regular basis. All record keeping and custodial costs of
the Automatic Investment Plan are paid by the Fund. The market value of the
Fund's shares is subject to fluctuation, so before undertaking any plan for
systematic investment, the investor should keep in mind that this plan does not
assure a profit nor protect against depreciation in declining markets.
DETERMINATION OF SHARE PRICE
The net asset value of the Fund's shares will fluctuate and is determined as of
the close of trading on the New York Stock Exchange (the "NYSE") (generally 4:00
p.m. Eastern time) each business day. The NYSE annually announces the days on
which it will not be open for trading. The most recent announcement indicates
that it will not be open for the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. However, the NYSE may close
on days not included in that announcement.
The net asset value per share is computed by dividing the value of the
securities held by the Fund plus any cash or other assets (including interest
and dividends accrued but not yet received) minus all liabilities (including
accrued expenses) by the total number of shares in the Fund outstanding at such
time.
Generally, the Fund's investments are valued at market value or, in the absence
of a market value, at fair value as determined in good faith by the Advisor and
the Trust's Valuation Committee pursuant to procedures approved by or under the
direction of the Board.
The Fund's securities, including ADRs and EDRs, which are traded on securities
exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any reported sales, at the mean between the last
available bid and asked price. Securities that are traded on more than one
exchange are valued on the exchange determined by the Advisor to be the primary
market. Securities primarily traded in the NASDAQ National Market System for
which market quotations are readily available shall be valued at the last sale
price on the day of valuation, or if there has been no sale on such day, at the
mean between the bid and asked prices. Over-the-counter ("OTC") securities which
are not traded in the NASDAQ National Market System shall be valued at the most
recent trade price. Securities and assets for which market quotations are not
readily available (including restricted securities which are subject to
limitations as to their sale) are valued at fair value as determined in good
faith by or under the direction of the Board.
Short-term debt obligations with remaining maturities in excess of 60 days are
valued at current market prices, as discussed above. Short-term securities with
60 days or less remaining to maturity are, unless conditions indicate otherwise,
amortized to maturity based on their cost to the Fund if acquired within 60 days
of maturity or, if already held by the Fund on the 60th day, based on the value
determined on the 61st day.
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Corporate debt securities are valued on the basis of valuations provided by
dealers in those instruments, by an independent pricing service, approved by the
Board, or at fair value as determined in good faith by procedures approved by
the Board. Any such pricing service, in determining value, will use information
with respect to transactions in the securities being valued, quotations from
dealers, market transactions in comparable securities, analyses and evaluations
of various relationships between securities and yield to maturity information.
All other assets of the Fund are valued in such manner as the Board in good
faith deems appropriate to reflect their fair value.
PERFORMANCE INFORMATION
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
will be accompanied by information on the Fund's average annual compounded rate
of return for the most recent one, five and ten year periods, or shorter periods
from inception, through the most recent calendar quarter. The Fund may also
advertise aggregate and average total return information over different periods
of time.
The Fund's total return may be compared to relevant indices, including Standard
& Poor's 500 Composite Stock Index and indices published by Lipper Analytical
Services, Inc. From time to time, evaluations of the Fund's performance by
independent sources may also be used in advertisements and in information
furnished to present or prospective investors in the Fund.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any period should
not be considered as a representation of what an investment may earn or what an
investor's total return may be in any future period.
The Fund's average annual compounded rate of return is determined by reference
to a hypothetical $1,000 investment that includes capital appreciation and
depreciation for the stated period, according to the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at
the end of the period
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.
For the period September 30, 1999 through August 31, 2000, the Fund's total
return was 34.70%. During this period, certain fees and expenses of the Fund
have been waived or reimbursed. Accordingly, the total return is higher than it
would have been had such fees and expenses not been waived or reimbursed.
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<PAGE>
GENERAL INFORMATION
Investors in the Fund will be informed of the Fund's progress through periodic
reports. Financial statements certified by independent public accountants will
be submitted to shareholders at least annually.
Firstar Institutional Custody Services, located at 425 Walnut St., Cincinnati,
Ohio 45201 acts as Custodian of the securities and other assets of the Fund. ICA
Fund Services Corp., 4455 East Camelback Rd., Ste. 261-E, Phoenix, AZ 85018,
acts as the Fund's transfer and shareholder service agent. The Custodian and
Transfer Agent do not participate in decisions relating to the purchase and sale
of securities by the Fund.
Tait, Weller & Baker, Eight Penn Center Plaza, Philadelphia, PA 19103, are the
independent auditors for the Fund.
Paul, Hastings, Janofsky & Walker LLP, 345 California Street, 29th Floor, San
Francisco, California 94104, are legal counsel to the Fund.
The Trust was organized as a Delaware business trust on April 27, 1999. The
Agreement and Declaration of Trust permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, without
par value, which may be issued in any number of series. The Board of Trustees
may from time to time issue other series, the assets and liabilities of which
will be separate and distinct from any other series.
Shares issued by the Fund have no preemptive, conversion, or subscription
rights. Shareholders have equal and exclusive rights as to dividends and
distributions as declared by the Fund and to the net assets of the Fund upon
liquidation or dissolution. The Fund, as a separate series of the Trust, votes
separately on matters affecting only the Fund (e.g., approval of the Advisory
Agreement); all series of the Trust vote as a single class on matters affecting
all series jointly or the Trust as a whole (e.g., election or removal of
Trustees). Voting rights are not cumulative, so that the holders of more than
50% of the shares voting in any election of Trustees can, if they so choose,
elect all of the Trustees. While the Trust is not required and does not intend
to hold annual meetings of shareholders, such meetings may be called by the
Trustees in their discretion, or upon demand by the holders of 10% or more of
the outstanding shares of the Trust, for the purpose of electing or removing
Trustees.
The Boards of the Trust, the Adviser and the Distributor have adopted Codes of
Ethics under Rule 17j-1 of the 1940 Act. These Codes permit, subject to certain
conditions, personnel of the Adviser and Distributor to invest in securities
that may be purchased or held by the Fund.
FINANCIAL STATEMENTS
The Fund's annual report to shareholders for its fiscal year ended August 31,
2000 is a separate document supplied with this SAI and the financial statements,
accompanying notes and report of independent auditors appearing therein are
incorporated by reference in this SAI.
B-22
<PAGE>
APPENDIX A
CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are 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
edge." 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 which are 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 fluctuations or protective elements
may be of greater amplitude or there may be other elements present which make
long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are 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 sometime in the future.
Baa: Bonds which are 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 which are 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 which are 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 which are 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 which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
STANDARD & POOR'S RATINGS GROUP
AAA: Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay principal and interest.
AA: Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
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A: Bonds rated A have a strong capacity to pay principal and interest, although
they are more susceptible to the adverse effects of changes in circumstances and
economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
*Ratings are generally given to securities at the time of issuance. While the
rating agencies may from time to time revise such ratings, they undertake no
obligation to do so.
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APPENDIX B
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
Prime-1: Issuers (or related supporting institutions) rated "Prime-1" 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 structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2: Issuers (or related supporting institutions) rated "Prime-2" 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, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
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