As filed with the Securities and Exchange Commission on October 29, 1999.
1933 ACT REGISTRATION NO. 333-83871
1940 ACT REGISTRATION NO. 811-09495
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 .................................... X
PRE-EFFECTIVE AMENDMENT NO. .................................. 1
POST-EFFECTIVE AMENDMENT NO. .................................
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY OF 1940 ................................ X
AMENDMENT NO. ................................................ 1
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THE LEGACY FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
61 BROADWAY
NEW YORK, NEW YORK 10006-2802
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 269-7862
JAMES H. BLUCK
HUGHES HUBBARD & REED LLP
ONE BATTERY PARK PLAZA
NEW YORK, NEW YORK 10004
(NAME AND ADDRESS OF AGENT FOR SERVICE)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of the Registration Statement.
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
TITLE OF SECURITIES BEING REGISTERED: SHARES OF BENEFICIAL INTEREST, PAR
VALUE $.001 PER SHARE
================================================================================
<PAGE>
THE LEGACY FUNDS, INC.
-----------
CROSS REFERENCE SHEET
<TABLE>
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N-1A ITEM NO. LOCATION
- ------------- --------
PART A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Front and Back Cover Pages....................................... Front and Back Cover Pages of the
Prospectus
Item 2. Risk/Return Summary: Investments, Risks, and Performance........ Investment Objective and Philosophy;
Investment Process; Principal risk
Item 3. Risk/Return Summary: Fee Table.................................. Fees and Expenses
Item 4. Investment Objectives, Principal Strategies, and Related Risks... Additional Information about the
Fund's Investments; Additional
Risk Information
Item 5. Management's Discussion of Fund Performance...................... Not Applicable
Item 6. Management, Organization, and Capital Structure.................. Investment Adviser; Portfolio Manager;
Investment Performance of the
Portfolio Manager
Item 7. Shareholder Information.......................................... Share Price--Net Asset Value;
Purchasing Shares; Redeeming
Shares; Retirement Investing;
Account Instructions;
Distributions and Taxation
Item 8. Distribution Arrangements........................................ Marketing, Distribution and
Administration
Item 9. Financial Highlights Information................................. Not Applicable
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page and Table of Contents................................. Cover Page and Table of Contents of
the Statement of Additional
Information
Item 11. Fund History.................................................... General Information
Item 12. Description of the Fund and Its Investments and Risks............ Additional Information About the
Fund's Investments; Investment
Restrictions; Portfolio
Transactions and Turnover
Item 13. Management of the Fund........................................... Management of the Trust
Item 14. Control Persons and Principal Holders of Securities.............. Management of the Trust
Item 15. Investment Advisory and Other Services........................... Management of the Trust; Service
Agreements
Item 16. Brokerage Allocation and Other Practices......................... Service Agreements; Portfolio
Transactions and Turnover
<PAGE>
Item 17. Capital Stock and Other Securities............................... Shares of Beneficial Interest
Item 18. Purchase, Redemption and Pricing of Shares....................... Additional Information About Purchases
and Sales
Item 19. Taxation of the Fund............................................. Dividends
Item 20. Underwriters..................................................... Service Agreements
Item 21. Calculation of Performance Data.................................. Investment Performance
Item 22. Financial Statements............................................. Financial Statements
</TABLE>
PART C OTHER INFORMATION
INFORMATION REQUIRED TO BE INCLUDED IN PART C IS SET FORTH UNDER THE
APPROPRIATE ITEM, SO NUMBERED, IN PART C TO THIS REGISTRATION STATEMENT.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 29, 1999
LEGACY GROWTH FUND
A diversified fund of
growth-oriented equities having the
objective of long term growth in value
PROSPECTUS
[_______________], 1999
-----------------------
THE LEGACY FUNDS, INC.
61 Broadway
New York, NY 10006
31st Floor
(800) 221-2598
Shares of the Legacy Growth Fund are sold on a no-load basis through the Fund's
Distributor, Ingalls & Snyder LLC. Shares are available for IRAs and retirement
plans. The Fund is not available in all states; please call the Fund or your
investment professional for details. This prospectus does not constitute an
offer to sell or the solicitation of an offer to sell securities in any
jurisdiction where the offer or sale is not permitted.
THIS PROSPECTUS CONTAINS INFORMATION YOU SHOULD KNOW BEFORE INVESTING, INCLUDING
INFORMATION ABOUT RISKS. PLEASE READ IT BEFORE YOU INVEST AND KEEP IT FOR FUTURE
REFERENCE.
AS WITH ALL MUTUAL FUNDS, THE U.S. SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
<TABLE>
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<S> <C>
Investment Objective 3
Investment Process and Strategy 3
Tax-efficient Strategy 3
Principal Risks 4
Performance Summary 4
Fees and Expenses 5
Investment Adviser 5
Portfolio Manager 6
Advisory Board 6
Additional Information about the Fund's Investments 7
Additional Risk Information 8
Share Price -- Net Asset Value 9
Purchasing Shares 10
Redeeming Shares 10
Retirement Investing 11
<PAGE>
Account Instructions 13
Marketing, Distribution and Administration 14
Distributions and Taxation 14
Inquiries 16
Additional Information 17
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE
The objective of the Fund is to achieve long-term growth of capital
for its shareholders.
INVESTMENT PROCESS AND STRATEGY
The Fund's investment adviser, Ingalls & Snyder LLC, was founded in
1924. The investment adviser regularly monitors the financial and investment
outlook in the United States and abroad in an effort to anticipate and
understand changing business, economic and political trends that may affect the
Fund's investments. The investment adviser performs comprehensive research
designed to identify companies with strong financial underpinnings and
attractive growth prospects.
In particular, the Fund seeks to invest primarily in a diversified
portfolio of common stocks of companies having strong balance sheets, highly
capable managements, unique aspects to their businesses (such as unique
products, franchises or unique services), positive and growing cash flows, high
returns on equity and superior rates of growth of earnings over an extended
period. The companies in which the Fund invests consist primarily of U.S.
domestic companies with significant foreign sales or operations. The
growth-oriented companies in which the Fund invests ordinarily pay low or no
dividends.
The majority of the holdings in the Fund will be in large
capitalization common stocks (over $1.0 billion market capitalization). The Fund
also may invest in foreign securities and securities of medium and small sized
companies. Holdings of medium and small sized companies normally would not
represent over fifteen percent of the net assets of the Fund. Holdings of
foreign securities normally would not represent over ten percent of the Fund's
net assets.
Under normal market conditions, it is the Fund's policy to invest
substantially all of its assets in equity securities. However, if the Fund's
investment adviser deems it beneficial for defensive purposes during adverse
market, economic or other conditions, the Fund may invest up to 100% of its
assets temporarily in short-term non-equity securities, such as investment grade
corporate bonds, commercial paper and government securities.
See "Additional Information about the Fund's Investments" on page 7.
TAX-EFFICIENT STRATEGY
In the management of the Fund's investments the investment adviser
employs a long term, limited turnover investment approach. The Fund seeks to
achieve its long term growth objective primarily by purchasing and holding
common stocks over an extended period. This limited turnover approach tends to
reduce transaction costs and reduce the realization of short term capital gains
which, when distributed to U.S. shareholders, would be taxable to them as
ordinary income.
In keeping with its goal of maximizing the long term investment
return of the Fund, the investment adviser seeks to minimize adverse tax
consequences to shareholders by minimizing the requirement for taxable
distributions. For example, when selling securities the investment adviser
generally will select those shares purchased at the highest price in order to
minimize or offset the realization of capital gains. When this approach would
produce short-term gains, however, the Fund may endeavor to convert those gains
to long-term status by selling the highest cost shares having a long term
holding period.
This investment approach, however, could result in the accumulation
over time of a substantial amount of unrealized capital gains. If the Fund sells
an investment with substantial unrealized gains, those gains, when distributed
to the shareholders of the Fund will be taxable to U.S. shareholders owning
shares at that time, even though the shareholder may not have been a shareholder
of the Fund during all or a portion of the period during which the unrealized
gains were accumulated.
<PAGE>
PRINCIPAL RISKS
All investments involve some level of risk. Simply defined, risk is
the possibility that you will lose money or not make money. The principal risk
factors for the Fund are discussed below. Before you invest, please make sure
you understand the risks that apply to your investment.
MARKET AND INVESTMENT RISKS. The principal risk of investing in the
Fund is that common stock prices are subject to market, economic and business
risks that will cause their prices to fluctuate over time. While common stocks
have historically been a leading choice of long-term growth-oriented investors,
stock prices may decline over short or even extended periods. Therefore, the
value of your investment in the Fund may go up and down and you could lose
money.
PORTFOLIO STRATEGY RISKS. The Fund's investment success depends on
the skill of the investment adviser in evaluating, selecting and monitoring the
Fund's assets. If the investment adviser's conclusions about growth rates or
stock values are incorrect, the Fund may not perform as anticipated.
RISKS ASSOCIATED WITH FOREIGN OPERATIONS OF PORTFOLIO COMPANIES. To
the extent the Fund invests in companies with significant foreign sales or
operations, the Fund's investments are subject to certain risks of foreign
markets. These risks include, the risk of currency fluctuations,
nationalization, expropriation, confiscatory taxation, political changes and
diplomatic developments that could adversely affect the foreign operations of
companies in which the Fund invests and the value of the Fund's investments.
RISKS OF LEVERAGE. The Fund may use investment techniques involving
leverage, which could have the effect of magnifying the Fund's gains or losses
or could result in increased volatility of the Fund's share price. In order to
limit such risks, the Fund normally limits borrowings for leverage purposes to a
maximum of ten percent of the net assets of the Fund.
YEAR 2000 RISKS. The Fund could be adversely affected if the computer
systems used by the Fund or its service providers do not function properly when
processing date-related information on or after January 1, 2000. This is
commonly known as the "Year 2000 Issue." The Fund has taken steps it believes
are reasonably designed to address the Year 2000 Issue with respect to the
computer systems it uses, and has received representations from its software and
service providers that they have adapted their mission critical customer
applications for a successful conversion to the millennium change date. However,
there can be no assurance that the operations of and services provided to the
Fund and its shareholders will not be adversely affected.
The Year 2000 Issue affects practically all companies, organizations
and markets, including companies in which the Fund invests and the markets in
which they trade. At this time, no one knows precisely what the degree of impact
of the Year 2000 Issue will be. To the extent impact of the Year 2000 Issue on
investments made by the Fund or on the securities markets or the economy is
negative, it could seriously affect the Fund's investment performance.
Businesses in foreign countries generally may have undertaken less extensive
efforts than U.S. companies to identify and correct Year 2000 problems affecting
them. Accordingly, there may be a greater risk that the Year 2000 Issue will
result in adverse consequences in foreign economies and markets, which could
adversely affect companies, such as the ones in which the Fund invests, that
have significant foreign sales or operations.
PERFORMANCE SUMMARY
The bar chart customarily contained in mutual fund prospectuses is
not included because the Fund is new and does not have a full fiscal year of
operating history.
<PAGE>
FEES AND EXPENSES
The following tables describe the fees and estimated expenses that
you may pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)..... None+
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)
Management Fees................................ 1.00%
Distribution and Service (12b-1) Fees.......... 0.25%
Other Expenses................................. 0.90%
-------
Total Annual Fund Operating Expenses........... 2.15%*
Less fee waiver and expense reimbursement......(0.45%)**
-------
Net Expenses................................... 1.70%
+ Currently there is a $25.00 wire redemption fee assessed by the Fund, which
is subject to change.
There is no fee for redemptions where proceeds are sent by check.
* The Fund is new. Therefore, the amount of "Other Expenses" and "Total
Annual Operating Expenses" are based on estimated amounts for the first
year of operations and do not reflect any fee waiver or expense limitation.
** Ingalls & Snyder has contractually agreed to waive its advisory fee or
reimburse the Fund's expenses to the extent necessary to ensure that Total
Annual Fund Operating Expenses on an annualized basis do not exceed 1.70%
of the Fund's average net assets for the first year of operations, which
ends October 31, 2000. This contractual fee waiver may not be discontinued
or modified by Ingalls & Snyder during the stated period.
EXAMPLE
The following example is intended to help you to compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS
$173 $630*
* This example assumes that Ingalls & Snyder's agreement to waive fees and
reimburse the Fund's expenses is not extended beyond its initial period. If
this agreement is extended and net expenses therefore are reduced, the
amount paid for the three-year period would be $536.
INVESTMENT ADVISER
Ingalls & Snyder LLC, 61 Broadway, New York, NY 10006-2802, serves as
the investment adviser for the Fund and is responsible for managing the Fund's
portfolio of securities. As investment adviser, Ingalls & Snyder identifies
companies for investment, determines when securities should be purchased or sold
by the Fund and selects brokers or dealers, which may include Ingalls & Snyder,
to execute transactions for the Fund's portfolio. For its services the
investment adviser receives an annual fee equal to 1.00% of the Fund's average
net assets. Ingalls & Snyder has contractually agreed to waive its advisory fee
or reimburse the Fund's expenses to the extent necessary to ensure that Total
<PAGE>
Annual Fund Operating Expenses on an annualized basis do not exceed 1.70% of the
Fund's average net assets for the first year of operations, which ends October
31, 2000. This contractual fee waiver may not be discontinued or modified by
Ingalls & Snyder during the stated period.
Ingalls & Snyder was founded in 1924. Registered as an investment
adviser with the U.S. Securities and Exchange Commission under the Investment
Advisors Act of 1940, the firm provides investment services to clients of
substance, including retirement plans, IRAs, corporations, individuals, trusts,
estates, and charitable organizations located in the United States and abroad.
Ingalls & Snyder also is a registered broker-dealer and a member of the New York
and American Stock Exchanges and the National Association of Securities Dealers.
Almost 6,000 client accounts, valued at $3 billion, are entrusted to
Ingalls & Snyder for investment management, research, or the execution of
transactions. Of that amount, approximately $2 billion is managed on a
discretionary or investment advisory basis. Ingalls & Snyder is wholly owned by
its directors, who are actively involved in all phases of the firm's operations.
PORTFOLIO MANAGER
The Portfolio Manager of the Fund is Robert E. Belknap, a Senior
Director of Ingalls & Snyder LLC. As Portfolio Manager, Mr. Belknap has primary
responsibility for managing the Fund's investment portfolio. Mr. Belknap
graduated from the University of Virginia in 1961, served as a line officer in
the U.S. Navy and specialized in finance and investments at the New York
University Graduate School of Business.
Mr. Belknap has over thirty four years experience as an investment
adviser to individuals, charitable organizations, corporations, trusts and
retirement accounts in the United States and abroad. He is a Senior Security
Analyst of the New York Society of Security Analysts, a North American Member of
the International Society of Financial Analysts, and a Fellow Member of the
Financial Analysts Federation and of the Association of Investment Management
and Research. Prior to joining Ingalls & Snyder as a Principal in 1993, Mr.
Belknap was a Senior Vice President of Seligman Securities, Inc. and
concurrently Principal of Robert E.
Belknap & Co.
ADVISORY BOARD
The Advisory Board exists to assist the Portfolio Manager in the
assessment of economic, political and social developments as they may affect the
investment strategy of the Fund. The members of the Advisory Board do not give
investment advice to the Fund, and are as follows:
<TABLE>
<CAPTION>
<S> <C>
Thomas H. Belknap, Esq.* Mr. C. P. T. Vaughan-Johnson
Member Deputy Chairman
Hill & Barlow, A Professional Corporation Duncan Lawrie Limited
Boston London
Mr. David G. Booth Mr. Wynant D. Vanderpoel
Managing Director, Ret. Private Investor
Morgan Stanley Dean Witter, Inc. New York
New York
Mr. W. Neville Conyers Mr. Lewis M. Weston
Chairman Retired Partner
Bermuda Aviation Services Goldman Sachs & Co.
Hamilton, Bermuda New York
Mr. Christopher Wetherhill Mr. Marc Declerck
Managing Director Havaux & Cie Ltd.
- --------------------
* Thomas H. Belknap is the brother of Robert E. Belknap, who is a trustee
and the Portfolio Manager of the Fund.
<PAGE>
Hemisphere Management Brussels
Hamilton, Bermuda
Mr. Christopher Finn Mr. Edward Wheeler
Managing Director-International Senior Vice President
The Carlyle Group Inc. The Buckingham Research Group,
New York London
Mr. Jolmer D. Gerritse Mr. Robert D. White
Managing Director Chief Operating Officer
SNS Securities N.V. Investor Select Advisors, Inc.
Amsterdam Dublin
Mr. John G. Hunter Roger T. Wickers, Esq.
Managing Director Senior Vice President and General Counsel, Ret.
The Management Exchange Inc. The Keystone Group
New York Boston
Mr. William J. Loschert Mr. Henry K. Wingate
Chairman Educational Consultant
ACE UK Limited Sandisfield, Mass.
London
Mr. William J. McDonough, Jr. Mr. John S. Wadsworth, Jr.
Executive Vice President Chairman
Foote, Cohn & Belding Morgan Stanley Dean Witter Asia Limited
New York
</TABLE>
Members of the Advisory Board do not receive any compensation from
the Fund for service in that capacity.
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
This section contains more detailed information about the Fund's
investments and its investment process. The Fund's investment objective is
long-term capital appreciation. This objective may be changed or modified in the
future by action of the Fund's Board. Shareholder approval is not required to
modify the investment objective; however, shareholders would receive advanced
written notice of any such change.
TYPES OF INVESTMENTS. The Fund invests primarily in companies having
sound underlying financial characteristics and growing at above-average rates.
Specifically, the Fund normally requires that such companies have a strong
balance sheet, a highly capable management, a unique aspect to its business
(such as unique products, franchises or unique services), a positive and growing
cash flow, a high return on equity and a superior rate of growth of earnings
over an extended period. The companies in which the Fund invests consist
primarily of U.S. domestic companies with significant foreign sales or
operations. The growth-oriented companies in which the Fund invests ordinarily
pay low or no dividends.
Under normal market conditions, it is the Fund's policy to invest
substantially all of its assets in common stocks and other equity securities.
However, the Fund may invest in money market instruments during times when
excess cash is generated or when cash is held pending investment in suitable
securities or in anticipation of redemptions. Such money market investments
include short-term obligations of the U.S. government, investment grade
corporate bonds, commercial paper or money market mutual funds. If the Fund's
investment adviser deems it beneficial for defensive purposes during adverse
market, economic or other conditions, the Fund may invest up to 100% of its
assets temporarily in non-equity securities, such as investment grade corporate
bonds, commercial paper and government securities.
<PAGE>
STOCK SELECTION PROCESS. The investment adviser identifies stocks for
investment using its own research and analysis and the research and analysis of
major U.S. investment and brokerage firms. When analyzing a company's outlook,
the adviser considers the company's financial underpinnings, including its debt
burden, and evaluates its ability to generate sustained above-average growth of
its business and earnings.
Once the Fund identifies a company meeting its criteria, it seeks to
acquire the company's stock at reasonable prices. In attempting to determine
reasonable price levels, the investment adviser utilizes a variety of
measurement methods, including a comparison of a company's price-to-earnings
ratio with its growth rate and an evaluation of its ratio of sales to market
capitalization and evaluates the price of the stock relative to its future
prospects. The Fund may from time to time purchase stocks having minimal or no
current earnings or with high price-to-earnings ratios relative to their growth
rates. The Fund normally seeks to reduce its exposure to risk by concentrating
in larger companies (generally companies with a market capitalization in excess
of $1 billion), but also may invest up to 15% of its assets in medium and
smaller sized companies which in the opinion of the adviser offer good prospects
for future growth.
The Fund employs a long-term investment strategy under which stocks
are normally held for extended periods of time. However, if the price of a stock
owned in the Fund moves up significantly, particularly if this movement occurs
in a short period of time, the investment adviser may sell shares to reduce
exposure to the stock. Likewise if the price of a stock owned in the Fund moves
down, the adviser may take advantage of the decline to purchase additional
shares. In addition, the Fund may sell a particular investment if it no longer
meets the Fund's investment criteria.
ADDITIONAL RISK INFORMATION
The principal risk of investing in the Fund is that common stock
prices are subject to market, economic and business risks that will cause their
prices to fluctuate over time. While common stocks have historically been a
leading choice of long-term growth-oriented investors, stock prices may decline
over short or even extended periods. Therefore, the value of your investment in
the Fund may go up and down and you could lose money. In addition, the Fund's
investment success depends on the skill of the investment adviser in evaluating,
selecting and monitoring the Fund's assets. If the Adviser's conclusions about
growth rates or stock values are incorrect, the Fund may not perform as
anticipated.
If the adviser determines that the condition of the financial markets
calls for a temporary defensive position, the Fund may invest a substantial
portion (up to 100%) of its assets in fixed income securities. These defensive
actions would reduce the benefit from any upswing in the equity markets and, if
the investment adviser does not correctly anticipate fluctuations in the equity
and debt securities markets, may not contribute to achieving the Fund's
investment objective.
To the extent that the Fund invests in foreign companies or companies
with substantial foreign sales or operations, its investments may involve
political, economic or currency risks not ordinarily associated with U.S.
securities or the securities of companies with purely domestic operations.
Foreign securities may experience greater and more rapid change in value than
investments in U.S. securities. Foreign securities generally are more volatile
and less liquid than U.S. securities, in part because of greater political and
economic risks and because there is less public information available about
foreign companies. Issuers of foreign securities generally are not subject to
the same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards. Some foreign countries have or may experience in the future
economic and political problems. Certain countries may impose limitations on the
ability of foreigners to invest in or withdraw assets from their securities
markets, and additional political, economic or financial restrictions may be
imposed under emergency conditions. To the extent the Fund invests in foreign
securities that are denominated in foreign currencies, the Fund also may be
subject to currency risk. This is the risk of losses that could result from a
decline in the value of foreign currencies relative to the U.S. dollar, which
would reduce the value of the Fund's portfolio securities denominated in those
currencies. In addition, nationalization, expropriation or confiscatory
taxation, or political changes or diplomatic developments could adversely affect
the Fund's investments in a foreign company or the foreign operations of
companies in which the Fund invests. In the event of nationalization,
<PAGE>
expropriation, or other confiscation of the Fund's investment, the Fund could
lose its entire investment.
The Fund may use investment techniques involving leverage, which
could have the effect of magnifying the Fund's gains or losses or could result
in increased volatility of the Fund's share price. In order to limit such risks,
the Fund normally limits borrowings for leverage purposes to a maximum of ten
percent of the total assets of the Fund.
The Fund could be adversely affected if the computer systems used by
the Fund or its service providers do not function properly when processing
date-related information on or after January 1, 2000. This is commonly known as
the "Year 2000 Issue." The Fund has taken steps it believes are reasonably
designed to address the Year 2000 Issue with respect to the computer systems it
uses, and has received representations from its software and service providers
that they have adapted their mission critical customer applications for a
successful conversion to the millennium change date. However, there can be no
assurance that the operations of and services provided to the Fund and its
shareholders will not be adversely affected.
The Year 2000 Issue affects practically all companies, organizations
and markets, including companies in which the Fund invests and the markets in
which they trade. At this time, no one knows precisely what the degree of impact
of the Year 2000 Issue will be. To the extent impact of the Year 2000 Issue on
investments made by the Fund or on the securities markets or the economy, it
could seriously affect the Fund's investment performance.
The introduction of a new single European currency, the "euro," may
result in uncertainties for European companies, domestic companies with
substantial sales or operations in Europe and European markets. The euro was
introduced on January 1, 1999, by 11 European Union member countries who are
participating in the European Monetary Union ("EMU"). The introduction of the
euro results in the redenomination of certain European debt and equity
securities and may result in differences in various accounting, tax and/or legal
treatments that would not otherwise occur. The euro creates the risk that (i)
European markets may become more volatile, which could adversely affect the
value of any securities held by the Fund which are traded on European securities
markets, and (ii) that companies in which the Fund invests may be adversely
affected by their failure (or the failure of other companies with which they do
business) to adequately address the operational aspects of the conversion to the
euro. At this early stage, no one knows what the degree of impact of the
introduction of the euro will be. To the extent that the market impact or effect
on a portfolio holding is negative, the Fund's investment performance could be
hurt.
SHARE PRICE -- NET ASSET VALUE
The price of the Fund's shares is their net asset value per share.
The Fund's net asset value per share is determined by computing the total value
of the Fund's securities, cash and other assets, subtracting all of its expenses
and liabilities, and then dividing by the total number of shares of the Fund
outstanding. The Fund's net asset value is calculated as of the close of the New
York Stock Exchange (usually 4:00 PM eastern time) every day the exchange is
open. Shares will not be priced on days the New York Stock Exchange is closed.
The Fund's securities are valued at their market value, which usually means the
last quoted sale price on the security's principal exchange on that day. If
market quotations are not readily available, securities will be priced at their
fair value as determined in good faith by, or under procedures adopted by, the
Board of Trustees. The Fund may use independent pricing services to assist in
calculating the Fund's net asset value.
Because the Fund may invest up to 10% of the Fund's net assets in
foreign securities, which may be traded primarily on foreign securities
exchanges that trade on weekends or other days when the Fund does not price its
shares, the net asset value of the Fund's shares may change on days when
shareholders will not be able to purchase or redeem the Fund's shares.
PURCHASING SHARES
One may purchase shares of the Fund without any sales charge through
Ingalls & Snyder LLC, the Fund's principal underwriter and distributor, by
submitting a completed application along with payment of the purchase price by
check or wire. Please note that purchase instructions, mailing addresses and
<PAGE>
telephone numbers are set forth in the Account Instructions chart included on
page 13 of this Prospectus as well as in the Fund's Shareholder Application.
Please call Ingalls & Snyder at 800-221-2598 with any questions.
Shares of the Fund also may be purchased through an investment
adviser, financial planner, broker, dealer or other investment professional or
through a fund supermarket, retirement plan or other intermediary. These parties
may charge transaction fees and may set different minimum investments or
limitations on buying, selling or redeeming shares. The intermediaries are
responsible for transmitting purchase orders and funds and for crediting their
customers' accounts following redemptions made in accordance with their customer
agreements and the Fund's Prospectus. Other persons may receive compensation for
the marketing and shareholder servicing activities in the form of 12b-1 fees
payable by the Fund under its Distribution Plan adopted under Rule 12b-1 under
the 1940 Act.
MINIMUM INVESTMENTS. The minimum initial investment is $5,000 and
additional investments must total at least $1,000. The minimum initial
investment for qualified retirement accounts is $1,000 ($500 for Education IRAs)
and there is no minimum for subsequent investments. The Fund may also change or
waive its policies concerning minimum investment amounts at any time.
PURCHASE PRICE. One may purchase shares of the Fund at the Fund's net
asset value per share. Your order will be priced at the net asset value per
share next calculated after receipt of your completed purchase order. Orders are
complete when a purchase order accompanied by payment is received and, in the
case of new accounts, is accompanied by a completed and signed Shareholder
Application. If you make a purchase with a check that does not clear, the
purchase will be cancelled, and you will be responsible for any losses or fees
incurred in that transaction.
IN-KIND PURCHASES. In connection with the initial subscriptions for
shares of the Fund at the time the Fund commences operations, the Fund may
permit investors to purchase shares by transferring to the Fund securities which
satisfy certain diversification requirements imposed by the Internal Revenue
Code. Under current IRS rules, transfers meeting such requirements will be
tax-free to the transferring investors. The Fund will not accept in-kind
transfers of portfolios that do not meet the IRS diversification requirements.
The tax cost of the shares being so purchased in kind will be the tax cost of
the securities being transferred, and the tax cost to the Fund of said
securities being transferred to the Fund will be the same as that of the
shareholder. Securities transferred to the Fund will be valued in the same way
that securities in the Fund's portfolio are valued for purposes of calculating
its net asset value.
PLEASE BE SURE TO CONSULT YOUR TAX PROFESSIONAL REGARDING THE
FEDERAL, STATE AND LOCAL TAX TREATMENT OF TRANSFERRING SECURITIES IN KIND TO THE
FUND.
GENERAL POLICIES. Shares of the Fund may not be available in all
states. Please ask your investment professional or a Fund representative if
shares are available in your state. If a check or draft submitted for the
purchase of shares is returned unpaid to the Fund, the Fund may impose a $10
charge for each returned item. The Fund reserves the right to reject any
purchase order or to suspend the offering of its shares.
REDEEMING SHARES
HOW TO REDEEM: You may redeem your shares of the Fund on any business
day that the Fund calculates its net asset value per share. Redemption requests
should be made through Ingalls & Snyder by telephone by calling 800-221-2598 or
by mail. Redemption requests in excess of $50,000 must be made in writing and
may require a signature guarantee. (See "Signature Guarantees" below.)
Your shares will be redeemed at the net asset value per share next
calculated after your order is accepted by Ingalls & Snyder. If your redemption
request is in good order, the Fund will normally send you your redemption
proceeds no later than seven calendar days after receipt of the redemption
request. The Fund can send payments by wire to any bank previously designated by
<PAGE>
you in the Shareholder Application. A $25.00 fee is charged for each wire
redemption.
If you purchase shares by check and request a redemption of those
shares soon after the purchase, the Fund will honor the redemption request, but
will not mail the proceeds until your purchase check has cleared (usually within
10 days). If you make a purchase with a check that does not clear, the purchase
will be cancelled and you will be responsible for any losses or fees incurred in
that transaction.
Checks will be made payable to you and will be sent to your address
of record. If the proceeds of the redemption are requested to be sent to an
address other than the address of record or if the address of record has been
changed within 30 days of the redemption request, the request must be in writing
with your signature(s) guaranteed. The Fund is not responsible for interest on
redemption amounts due to lost or misdirected mail.
SIGNATURE GUARANTEES: Signature guarantees are needed for:
o Redemption requests over $50,000
o Redemption requests to be sent to an address other than the
address of record
o Any redemption request if the address of record has been changed
within 30 days prior to receipt of the redemption request
o Obtaining or changing telephone redemption privileges.
Signature guarantees can be obtained from banks and securities
dealers, but not from a notary public. Ingalls & Snyder may require additional
supporting documents for redemptions made by corporations, executors,
administrators, trustees and guardians.
GENERAL POLICIES. If the amount you are redeeming is large enough to
affect the Fund operations or if the redemption would otherwise disrupt the
Fund, the Fund reserves the right to make a "redemption in kind." The Fund may
redeem shares in kind if the amount represents more than the lesser of $250,000
or 1% of the Fund's net assets. When the Fund makes a redemption in kind it pays
the seller in portfolio securities rather than in cash. In addition, if your
account balance falls below $1,000, the Fund may request that you increase your
balance. If it is still below $1,000 after 60 days, the Fund may close your
account and send you the proceeds.
RETIREMENT INVESTING
Shares of the Fund may be purchased in all types of tax-deferred
qualified plans such as Individual Retirement Accounts ("IRAs"),
employer-sponsored retirement plans (including 401(k) Plans), and tax sheltered
custodial accounts described in Section 403(b) of the Internal Revenue Code.
Distribution of net investment income and capital gains on shares held in these
accounts will be automatically re-invested. Special applications are required
for certain of these plans or accounts, which can be obtained by calling the
Fund. The following is a brief description of the retirement investing options.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): If you are not an active
participant (and, if a joint return is filed, your spouse is not an active
participant) in an employer-sponsored retirement plan, or if you have an
adjusted gross income within certain specific limits, you are eligible to make a
tax-deductible contribution to an IRA account. If you are not eligible for
deductible contributions, you may still make non-deductible IRA contributions.
Distributions from qualified retirement plans may be rolled into an IRA account
holding Fund shares. You can continue to defer federal income taxes on your IRA
account, on your rollover contribution and on any income that is earned on that
contribution.
TRADITIONAL IRA: In a traditional IRA, amounts contributed to the IRA
may be tax deductible at the time of contribution depending on your income and
whether you are an "active participant" in an employer-sponsored retirement
plan. Amounts invested are permitted to grow tax-free until they are
<PAGE>
distributed, and then distributions will be taxed except to the extent that the
distribution represents a return of your own contributions for which you did not
claim a deduction. If you take distributions before age 59 1/2 or fail to begin
taking distributions after age 70 1/2, you may experience adverse tax
consequences and/or penalties.
ROTH IRA: In a Roth IRA, amounts contributed to the IRA are not tax
deductible at the time of contribution. Amounts invested are permitted to grow
tax-free and distributions from the IRA are not subject to tax if you have held
the IRA for certain minimum periods of time (generally, until age 59 1/2).
EDUCATION IRA: In an Education IRA, nondeductible contributions of up
to $500 per year per child are permitted to grow tax-free. Distributions used to
pay for secondary education expenses are not subject to tax.
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP): A special IRA program is
available for employers under which the employers may establish IRA accounts for
their employees in lieu of establishing tax qualified retirement plans. Known as
SEP-IRA's, they free the employer of many of the record keeping requirements of
establishing and maintaining a tax qualified retirement plan trust.
SIMPLE IRA: An IRA may also be used in connection with a SIMPLE Plan
established by employers or by a self-employed individual. Under a SIMPLE Plan,
you may elect to have your employer make salary reduction contributions or as a
non-elective contribution to all eligible participants whether or not making
salary reduction contributions. A number of special rules apply to SIMPLE Plans,
including: (1) a SIMPLE Plan generally is available only to employees with fewer
than 100 employees; (2) contributions must be made on behalf of all employees of
the employer, other than bargaining unit employees, who satisfy certain minimum
participation requirements; (3) contributions are made to a special SIMPLE IRA
that is separate and apart from the other IRAs of employees; (4) the
distribution excise tax (if otherwise applicable) is increased to 25% on
withdrawals during the first two years of participation in a SIMPLE IRA; and (5)
amounts withdrawn during the first two years of participation may be rolled over
tax-free only into another SIMPLE IRA and not to a traditional IRA or to a Roth
IRA.
403(B) PLANS: The Fund's shares are also available for use by
schools, hospitals, and certain other tax-exempt organizations or associations
which wish to use shares of the Fund as a funding medium for a retirement plan
for their employees. Contributions are made to the 403(b) Plan as a reduction to
the employee's regular compensation. Such contributions, to the extent they do
not exceed applicable limitations (including a generally applicable limitation
of $9,500 per year), are excludable from the gross income of the employee for
federal income tax purposes.
401(K) PLANS AND OTHER QUALIFIED PENSION OR PROFIT-SHARING PLANS: The
Fund's shares may be used for investment in various employer-sponsored
retirement plans by both self-employed individuals (sole proprietorships and
partnerships) and corporations who wish to use shares of the Fund as a funding
medium for a retirement plan qualified under the Internal Revenue Code. Such
plans typically allow investors to make annual deductible contributions, which
may be matched by their employers up to certain percentages based on the
investor's pre-contribution earned income. Fund shares may be purchased by
investors who wish to contribute to a 401(k) or similar Plan already established
through their employer or otherwise. Please contact the Fund for information
about establishing a 401(k) Plan for your company using The Legacy Funds.
<PAGE>
<TABLE>
<CAPTION>
ACCOUNT INSTRUCTIONS
<S> <C> <C>
- ----------------------------------------------- --------------------------------------------- --------------------------------------
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT TO REDEEM SHARES
- ----------------------------------------------- --------------------------------------------- --------------------------------------
Regular Account Minimum: $5,000 Regular Account Minimum: $1,000 All requests to redeem shares from IRA
Retirement Account Minimum: Retirement Account Minimum: None accounts must be in writing
$1,000 ($500 for Education IRAs)
- ----------------------------------------------- --------------------------------------------- --------------------------------------
IN WRITING IN WRITING IN WRITING
---------- ---------- ----------
Complete the application. Send a letter of instruction that Send a letter of instruction that
includes: includes:
Make your check* payable to: - your name(s) and signature(s)
"Legacy Growth Fund" - your account number - your name(s) and signature(s)
- the Fund name - your account number
- the dollar amount you want to buy. - the Fund name
- the dollar amount you want to redeem
- a signature guarantee, if
applicable.
- ----------------------------------------------- --------------------------------------------- --------------------------------------
Mail your application and check to: Mail your letter, along with your Proceeds will be sent to the address
check made payable to "Legacy of record unless specified in the
Growth Fund" to: letter and accompanied by a signature
Ingalls & Snyder LLC. guarantee.
61 Broadway Ingalls & Snyder LLC
New York, NY 10006 61 Broadway Mail your letter to:
Attn: Legacy Growth Fund New York, NY 10006
Attn: Legacy Growth Fund Ingalls & Snyder LLC
61 Broadway
New York, NY 10006
Attn: Legacy Growth Fund
- ----------------------------------------------- --------------------------------------------- --------------------------------------
BY WIRE BY WIRE BY WIRE
------- ------- -------
To obtain instructions for wire purchases, To obtain instructions for wire purchases, Be sure the Fund has your bank
please call Ingalls & Snyder LLC at please call Ingalls & Snyder LLC at account information on file.
800-221-2598. 800-221-2598. Proceeds will be wired to your bank.
There is a $25.00 wire fee
charged for this service.
- ----------------------------------------------- --------------------------------------------- --------------------------------------
BY TELEPHONE
------------
For accounts redeeming shares (other
than IRA accounts), please call
Ingalls & Snyder at 800-221-2598 and
select how you would like to receive
the proceeds:
- Mail check to address of record
- Wire funds to a designated
institution ($25 wire fee)
- Mail check to a previously
designated alternative address.
- ------------------------------------------------------------------------------------------------------------------------------------
* All checks should be in U.S. dollars and drawn on U.S. banks. If your check is returned for any reason, you may be charged for
any resulting fees or losses. Third party checks will not be accepted.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MARKETING, DISTRIBUTION AND ADMINISTRATION
Shares of the Fund are offered through Ingalls & Snyder LLC, the
Fund's principal underwriter and distributor. The shares are offered and sold
without any sales charges imposed by the Fund or its distributor. Investment
professionals who offer the Fund's shares generally are paid separately by their
individual clients. If you invest through a third party, the fees may be
different than those described in this Prospectus. For example, third parties
may charge transaction fees or set different minimum investment amounts.
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940. Under this plan, the Fund may reimburse the
distributor or others for amounts spent, or to compensate the distributor or
others for their activities, in connection with the sale and distribution of its
shares or for shareholder servicing activities. Distribution activities include
the preparation, printing and mailing of prospectuses, shareholder reports and
sales material for marketing purposes, marketing activities, advertising and
payments to brokers or others who sell shares of the Fund. Shareholder servicing
activities include ongoing maintenance and service of shareholder accounts for
the Fund, responding to inquiries regarding shareholder accounts and acting as
agent or intermediary between shareholders and the Fund or its service
providers. The maximum amount that the Fund may pay for these services is 0.25%
per year of the average net assets of the Fund. Because these fees are paid out
of the Fund's assets on an ongoing basis, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges. The Fund currently expects that the fees of the Plan will be used
primarily to compensate mutual fund marketers or retirement plan record keepers
for their activities on behalf of the Fund and its shareholders.
Firstar Mutual Fund Services, LLC serves as the administrator,
transfer agent, and dividend disbursing agent for the Fund. The Fund may also
compensate other parties who provide transfer agency services in addition to
those provided by Firstar Mutual Fund Services, LLC. Firstar Bank Milwaukee,
N.A. serves as the custodian for the Fund.
DISTRIBUTIONS AND TAXATION
The Fund will distribute substantially all of the net investment
income and net capital gains that it has realized on the sale of securities.
These income and gains distributions will generally be paid once each year, on
or before December 31, beginning in December, 2000. Distributions will
automatically be reinvested in additional shares of the Fund unless you elect to
have the distributions paid to you in cash. There are no sales charges or
transaction fees for reinvested dividends, and all shares will be purchased at
the Fund's net asset value per share.
THE FOLLOWING DISCUSSION OF SELECTED FEDERAL INCOME TAX
CONSIDERATIONS THAT MAY AFFECT THE FUND AND ITS SHAREHOLDERS IS BASED UPON THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, TREASURY REGULATIONS, COURT DECISIONS
AND IRS RULINGS NOW IN EFFECT, ALL OF WHICH ARE SUBJECT TO CHANGE. IT DOES NOT
PURPORT TO DEAL WITH ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO THE FUND AND ITS SHAREHOLDERS. BECAUSE EVERYONE'S TAX SITUATION IS
UNIQUE, PLEASE BE SURE TO CONSULT YOUR TAX PROFESSIONAL REGARDING FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO U.S. INVESTORS.
Distributions made by the Fund are taxable to most U.S. shareholders whether
received in cash or additional shares. Dividends and short-term capital gains
are taxed to most U.S. shareholders as ordinary income while long-term capital
gains are taxed as such, regardless of how long you own your shares of the Fund.
The tax status of distributions made to you, whether ordinary income or
long-term capital gain, will be detailed in your annual tax statement from the
Fund. If the Fund distributes unrealized gains soon after you purchase shares, a
portion of your investment may be returned as a taxable distribution. In
addition, if the Fund permits investors to purchase shares by transferring
securities to the Fund in connection with the initial subscription for shares of
<PAGE>
the Fund, the tax cost to the Fund of such securities will be the same as that
of the transferors. Such securities may come with built-in unrealized gains that
would be taxed to all U.S. shareholders if the Fund sells such securities and
distributes the gains.
A sale or exchange of Fund shares is a taxable event for most U.S.
shareholders and may result in a capital gain or loss to you if you are subject
to tax. In addition, distributions from the Fund or gains from the sale or
exchange of Fund shares may be subject to state or local taxes. By law, the Fund
must withhold 31% of your taxable distributions and proceeds if (i) you do not
provide a correct taxpayer identification number ("TIN"), (ii) you fail to
certify that your TIN is correct or to provide other required certifications or
(iii) the IRS instructs the Fund to do so. The Fund will make annual reports to
the Internal Revenue Service and the Fund's shareholders regarding the amount of
distributions.
Redemptions and exchanges of Fund shares of U.S. shareholders are
taxable transactions for federal and state income tax purposes which cause such
shareholders to recognize a gain or loss. If shares are held as a capital asset,
the gain or loss realized will be a capital gain or loss. Any loss incurred on
the redemption or exchange of shares held for six months or less will be treated
as a long-term capital loss to U.S. shareholders to the extent of any long-term
capital gains distributed to such shareholders by the Fund on those shares.
All or a portion of any loss realized upon the redemption of Fund
shares by U.S. shareholders will be disallowed to the extent that such
shareholders purchase other shares in the Fund (through reinvestment of
dividends or otherwise) within 30 days before or after said share redemption.
Any loss disallowed under these rules will be added to the tax basis of the new
shares purchased.
Any dividends paid by the Fund will generally qualify in part for the
70% dividends-received deduction for U.S. corporations, but the portion of the
dividends so qualifying depends on the aggregate taxable qualifying dividend
income received by the Fund from domestic (U.S.) sources. The Fund will send to
shareholders a statement each year reporting the amount designated by the Fund
as eligible for such treatment. All dividends (including the deducted portion)
must be included in any alternative minimum taxable income calculation.
FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO FOREIGN INVESTORS.
For purposes of this discussion a "Non-U.S. Investor" is an investor who is not
a United States Person where the term "United States Person" means (i) an
individual who is a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any state thereof, (iii) an estate the income of
which is subject to federal income taxation regardless of its source or (iv) a
trust whose administration is subject to the primary supervision of a United
States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust.
Non-U.S. Investors may be subject to U.S. withholding tax on
dividends received from the Fund at the rate of 30% unless the dividends are
effectively connected with the conduct of a trade or business within the United
States by the Non-U.S. Investor, in which case these amounts will be subject to
U.S. federal income tax on a net income basis at rates that apply to United
States Persons generally. Applicable income tax treaties may provide for a lower
rate of withholding. Distributions of capital gain will not be subject to U.S.
withholding tax. A Non-U.S. Investor generally will not be subject to U.S.
federal income tax on capital gain distributions or gain recognized on the sale
or exchange of Fund shares unless the distributions or gain is effectively
connected with the conduct of a trade or business within the United States or,
in the case of a Non-U.S. Investor who is a nonresident alien individual and
holds the Fund shares as a capital asset, such investor is present in the United
States for 183 or more days in the taxable year of the distribution or sale or
exchange and either has a "tax home" (as defined for U.S. federal income tax
purposes) in the United States or an office or other fixed place of business in
the United States to which its investment activities or the sale or exchange is
attributable.
The Fund will make annual reports to the Internal Revenue Service and
the Fund's shareholders regarding the amount of distributions. A U.S. backup
withholding tax of 31% will not generally apply to dividends distributed to
Non-U.S. Investors outside the United States that are subject to the 30%
withholding discussed above or that are not be subject to backup withholding
because a tax treaty applies that reduces or eliminates such withholding. Backup
<PAGE>
withholding may apply to capital gain distributions unless certification of
foreign residency requirements are met. In addition, information reporting and
backup withholding requirements may apply to gross proceeds paid to a Non-U.S.
Investor upon the sale or exchange of Fund shares by or through a U.S. or
foreign office of a U.S. or foreign broker, unless certain documentary evidence
or certification requirements are met or the investor otherwise establishes an
exemption.
INQUIRIES
Please contact the Fund's investment adviser, Ingalls & Snyder LLC,
regarding monthly portfolio updates and new prospectus/shareholder report
information as soon as it is available. You may wish to check with Ingalls &
Snyder for the latest information regarding The Legacy Funds.
<PAGE>
LEGACY GROWTH FUND
61 Broadway
New York, NY 10006
800-221-2598
INVESTMENT ADVISER CUSTODIAN
INGALLS & SNYDER LLC FIRSTAR BANK MILWAUKEE, N.A.
61 Broadway 615 East Michigan Street
New York, NY 10006 Milwaukee, WI 53202
DISTRIBUTOR LEGAL COUNSEL
INGALLS & SNYDER LLC HUGHES HUBBARD & REED LLP
61 Broadway One Battery Park Plaza
New York, NY 10006 New York, NY 10004
ADMINISTRATOR, FUND AUDITORS
ACCOUNTANT ARTHUR ANDERSEN LLP
& TRANSFER AGENT 100 East Wisconsin Avenue
FIRSTAR MUTUAL FUND SERVICES, LLC Milwaukee, WI 53202
615 East Michigan Street
Milwaukee, WI 53202
ADDITIONAL INFORMATION
The Statement of Additional Information ("SAI") of the Fund contains
additional information about the Fund and is incorporated by reference into this
Prospectus. The Fund's annual and semi-annual reports to shareholders will
contain additional information about the Fund's investments. In the Fund's
annual report you will find a discussion of the market conditions and investment
strategies that impacted on the Fund's performance during the fiscal year.
You may obtain a free copy of these documents by calling or writing
the Fund as shown above. You may also call the telephone number shown above to
request other information about the Fund and to make shareholder inquiries.
You may review and copy the SAI and other information about the Fund
by visiting the Securities and Exchange Commission's Public Reference Room in
Washington, DC or by visiting the Commission's Internet site at
http://www.sec.gov. Copies of this information may also be obtained, upon
Spayment of a duplicating fee, by writing to the Public Reference Section of the
Commission, Washington, DC 20549-6009. You may call the Commission at
1-800-SEC-0330 for information about the operation of the public reference room.
Investment Company Act File No. 811-09495
<PAGE>
THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND
IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 29, 1999
LEGACY GROWTH FUND
A diversified fund of growth-oriented equities
having the objective of long term growth in value
STATEMENT OF ADDITIONAL INFORMATION
[_________], 1999
THE LEGACY FUNDS, INC.
61 Broadway
New York, NY 10006
(800) 221-2598
This Statement of Additional Information relates to the Legacy Growth Fund which
is a series of The Legacy Funds, Inc., a registered open-end management
investment company commonly known as a mutual fund. This Statement of Additional
Information is not a prospectus and should be read in conjunction with the
Prospectus for the Fund dated [_________], 1999. The Prospectus may be obtained
by writing or calling the Fund at the address and number shown above.
<PAGE>
TABLE OF CONTENTS
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS 3
CONVERTIBLE SECURITIES 3
WARRANTS AND RIGHTS 4
ILLIQUID SECURITIES 4
RULE 144A SECURITIES 5
WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD
COMMITMENTS 5
AMERICAN DEPOSITORY RECEIPTS 5
U.S. GOVERNMENT SECURITIES 6
BANK OBLIGATIONS 6
LOANS OF PORTFOLIO SECURITIES 6
REPURCHASE AGREEMENTS 7
REVERSE REPURCHASE AGREEMENTS 8
BORROWING 8
FUTURES 9
OPTIONS 10
OTHER INVESTMENTS 14
INVESTMENT RESTRICTIONS 14
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS 14
NON-FUNDAMENTAL POLICIES AND RESTRICTIONS 15
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES 16
PURCHASING SHARES 16
REDEEMING SHARES 18
MANAGEMENT OF THE TRUST 20
TRUSTEES AND OFFICERS 20
COMPENSATION OF TRUSTEES; SHAREHOLDINGS 21
ADVISORY BOARD 22
INVESTMENT ADVISER AND ADVISORY AGREEMENT 26
CODE OF ETHICS 27
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 28
SERVICE AGREEMENTS 28
ADMINISTRATOR 28
FUND ACCOUNTING 28
TRANSFER AGENT 29
CUSTODIAN 29
DISTRIBUTOR 29
DISTRIBUTION PLAN 29
INDEPENDENT ACCOUNTANTS 31
PORTFOLIO TRANSACTIONS AND TURNOVER 31
SHARES OF BENEFICIAL INTEREST 33
DIVIDENDS 34
ADDITIONAL INFORMATION CONCERNING DISTRIBUTIONS
AND TAXES 34
DISTRIBUTIONS 34
TAXES 34
INVESTMENT PERFORMANCE 35
TOTAL RETURN INFORMATION 35
YIELD INFORMATION 36
PERFORMANCE RANKINGS 37
FINANCIAL STATEMENTS 38
INDEPENDENT ACCOUNTANTS'REPORT 41
<PAGE>
GENERAL INFORMATION
The Legacy Growth Fund (the "Fund") is a series of The Legacy Funds,
Inc., a business trust organized in the state of Delaware on July 15, 1999 (the
"Trust"). The Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), which is
authorized to issue multiple series and classes of shares. Each series
represents interests in a separate portfolio of investments. The Trust is
authorized to issue an unlimited number of shares of beneficial interest, par
value $0.001. The Legacy Growth Fund is the first series of the Trust and is
classified as a "diversified" series as that term is defined in the 1940 Act.
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
The Fund's investment objective is long-term growth of capital. The
Fund seeks to achieve its objective by investing primarily in a diversified
portfolio of common stocks of companies having sound underlying financial
characteristics and growing at above-average rates. The Fund's investment
objective is not fundamental and therefore may be changed in the future by
action of the Board of Trustees of the Trust without the approval of
shareholders. Shareholders would receive written notice in advance of any such
change.
The following discussion of investment techniques and instruments
supplements, and should be read in conjunction with, the investment information
set forth in the Fund's Prospectus. The investment practices described below,
except for the discussion of certain investment restrictions, are not
fundamental and may be changed by the Board of Trustees without the approval of
the shareholders. In seeking to meet its investment objective the Fund invests
primarily in common stocks but also may invest in any type of security whose
characteristics are consistent with the Fund's investment program.
Under normal market conditions, it is the Fund's policy to invest
substantially all of its assets in common stocks and other equity securities.
However, the Fund may invest in money market instruments during times when
excess cash is generated or when cash is held pending investment in suitable
securities or in anticipation of redemptions. Such money market investments
include short-term obligations of the U.S. Government, investment grade
corporate bonds, commercial paper or money market mutual funds. If the Fund's
investment adviser deems it beneficial for defensive purposes during adverse
market, economic or other conditions, the Fund may invest up to 100% of its
assets temporarily in short-term non-equity securities, such as investment grade
corporate bonds, commercial paper and U.S. Government securities.
The Fund also may invest in the following:
CONVERTIBLE SECURITIES
Traditional convertible securities include corporate bonds, notes and
preferred stocks that may be converted into or exchanged for common stock, and
other securities that also provide an opportunity for equity participation.
These securities are generally convertible either at a stated price or a stated
<PAGE>
rate (that is, for a specific number of shares of common stock or other
security). As with other fixed income securities, the price of a convertible
security to some extent varies inversely with interest rates. While providing a
fixed-income stream (generally higher in yield than the income derivable from a
common stock but lower than that afforded by a comparably rated nonconvertible
debt security), a convertible security also affords the investor an opportunity,
through its conversion feature, to participate in the capital appreciation of
the common stock into which it is convertible. As the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis and so may not experience market value declines to
the same extent as the underlying common stock. When the market price of the
underlying common stock increases, the price of a convertible security tends to
rise as a reflection of the value of the underlying common stock. To obtain such
a higher yield, the Fund may be required to pay for a convertible security an
amount in excess of the value of the underlying common stock. Common stock
acquired by the Fund upon conversion of a convertible security will generally be
held for so long as the Investment Adviser anticipates such stock will provide
the Fund with opportunities that are consistent with the Fund's investment
objective and policies.
WARRANTS AND RIGHTS
The Fund may invest in warrants. However, not more than 5% of the
Fund's total assets (at the time of purchase) will be invested in warrants other
than warrants acquired in units or attached to other securities. Warrants are
pure speculation in that they have no voting rights, pay no dividends and have
no rights with respect to the assets of the corporation issuing them. Warrants
basically are options to purchase equity securities at a specific price valid
for a specific period of time. They do not represent ownership of the
securities, but only the right to buy them. Warrants differ from call options in
that warrants are issued by the issuer of the security which may be purchased on
their exercise, whereas call options may be written or issued by anyone. The
prices of warrants do not necessarily move in parallel with the prices of the
underlying securities. Rights represent a preemptive right to purchase
additional shares of stock at the time of new issuance, before stock is offered
to the general public, so that the stockholder can retain the same ownership
percentage after the offering.
ILLIQUID SECURITIES
The Fund may invest up to 5% of its net assets in illiquid
securities. The term "illiquid securities" for this purpose means securities
that cannot be disposed of within seven days in the ordinary course of business
at approximately the amount at which the Fund has valued the securities.
Illiquid securities are considered to include generally, among other things,
certain over-the-counter options, securities or other liquid assets being used
as cover for such options, repurchase agreements with maturities in excess of
seven days, certain loan participation interests and other securities whose
disposition is restricted under the federal securities laws. The Fund's illiquid
investments may include privately placed securities which are not registered for
sale under the Securities Act of 1933, as amended (the "1933 Act").
<PAGE>
RULE 144A SECURITIES
The Fund may invest in securities that are restricted as to resale,
but which are regularly traded among qualified institutional buyers because they
are exempt under Rule 144A from the registration requirements of the 1933 Act.
The Board of Trustees of the Trust has instructed the Investment Adviser to
consider the following factors in determining the liquidity of a security
purchased under Rule 144A: (i) the frequency of trades and trading volume for
the security; (ii) whether at least three dealers are willing to purchase or
sell the security and the number of potential purchasers; (iii) whether at least
two dealers are making a market in the security, the method of soliciting offers
and the mechanics of transfer). Although having delegated the day to-day
functions, the Board of Trustees will monitor and periodically review the
Investment Adviser's selection of Rule 144A securities, as well as the
Investment Adviser's determinations as to their liquidity. Investing in
securities under Rule 144A could affect the Fund's illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities. After the purchase of a security under Rule 144A,
the Board of Trustees and the Investment Adviser will continue to monitor the
liquidity of that security to ensure that the Fund has no more than 5% of its
net assets in illiquid securities.
WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
The Fund may enter into forward commitments for the purchase or sale
of securities, including on a "when issued" or "delayed delivery" basis in
excess of customary settlement periods for the type of security involved. In
some cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a "when, as and if issued" security.
When such transactions are negotiated, the price is fixed at the time of the
commitment, with payment and delivery taking place in the future, generally a
month or more after the date of the commitment. While the Fund will only enter
into a forward commitment with the intention of actually acquiring the security,
the Fund may sell the security before the settlement date if it is deemed
advisable.
Securities purchased under a forward commitment are subject to market
fluctuations, and no interest or dividends accrue to the Fund prior to the
settlement date. The Fund will segregate with its custodian cash or liquid
high-grade debt securities in an aggregate amount at least equal to the amount
of its outstanding forward commitments.
AMERICAN DEPOSITORY RECEIPTS
The Fund may make foreign investments through the purchase and sale
of sponsored or unsponsored American Depository Receipts ("ADRs"). ADR's are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. The Fund may
purchase ADRs whether they are "sponsored" or "unsponsored." "Sponsored" ADRs
are issued under an agreement between the issuer of the underlying security and
a depository, whereas "unsponsored" ADRs are issued without participation of the
issuer of the deposited security. Holders of unsponsored ADR'S generally bear
<PAGE>
all the costs of such facilities, and the depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Therefore, there may not be a correlation between information concerning the
issuer of the security and the market value of an unsponsored ADR. Ownership of
ADRS may result in a withholding tax by the foreign country of source which will
have the effect of reducing the income distributable to shareholders.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed by, the
U.S. Government, its agencies or instrumentalities. The U.S. Government does not
guarantee the net asset value of the Fund's shares. Some U.S. Government
securities, such as Treasury bills, notes and bonds, and securities guaranteed
by the Government National Mortgage Association ("GMNA"), are supported by the
full faith and credit of the United States. Others, such as those of the Federal
Home Loan Banks, are supported by the right of the issuer to borrow from the
U.S. Treasury. Securities of the Federal National Mortgage Association ("FNMA")
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations. Other U.S. Government securities, such as those of the
Student Loan marketing Association, are supported only by the credit of the
instrument. U.S. Government securities include securities that have no coupons,
or have been stripped of their unmatured interest coupons, individual interest
coupons from such securities that trade separately, and evidences of receipt of
such securities. Such securities may pay no cash income, and are purchased at a
deep discount from their value at maturity. Because interest on zero coupon
securities is not distributed on a current basis but is, in effect, compounded,
zero coupon securities tend to be subject to greater market risk than
interest-payment securities, such as CATS and TIGRs, which are not issued or
guaranteed by the U.S. Government, its agents or institutions, and are therefore
not U.S. Government securities even though the underlying bond represented by
such an instrument is a debt obligation of the U.S. Treasury. Other zero coupon
Treasury securities (STRIPs and CUBEs) are direct obligations of the U.S.
Government.
BANK OBLIGATIONS
Certificates of deposit are short-term obligations of commercial
banks. A banker's acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with international commercial transactions.
Certificates of deposit may have fixed or variable rates.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend its investment securities to approved borrowers who
need to borrow securities in order to complete certain transactions, such as
covering short sales, avoiding failures to deliver securities or completing
arbitrage operations. By lending its investment securities, the Fund attempts to
increase its income through the receipt of interest on the loan. Any gain or
loss in the market price of the securities loaned that might occur during the
term of the loan would be for the account of the Fund. The Fund may lend its
<PAGE>
investment securities to qualified brokers, dealers, domestic and foreign banks
or other financial institutions, so long as the terms, the structure and the
aggregate amount of such loans are not inconsistent with the 1940 Act or the
rules and regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that: (a) the
borrower pledge and maintain with a Fund collateral consisting of cash, an
irrevocable letter of credit issued by a bank or securities issued or guaranteed
by the United States Government having a value at all times not less than 100%
of the value of the securities loaned; (b) the borrower add to such collateral
whenever the price of the securities loaned rises (i.e., the borrower "marks to
the market" on a daily basis); the loan be made subject to termination by a Fund
at any time; and (d) the Fund receives reasonable interest on the loan (which
may include the Fund investing any cash collateral in interest bearing
short-term investments). All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review by
the Board of Trustees.
At the present time, the staff of the SEC does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities so long as such fees are set forth in a written contract and approved
by the investment company's Board of Trustees. In addition, voting rights may
pass with the loaned securities, but if a material event occurs affecting an
investment on a loan, the loan must be called and the securities voted.
REPURCHASE AGREEMENTS
When the Fund enters into a repurchase agreement, it purchases
securities from a bank or broker-dealer which simultaneously agrees to
repurchase the securities at a mutually agreed upon time and price, thereby
determining the yield during the term of the agreement. As a result, a
repurchase agreement provides a fixed rate of return insulated from market
fluctuations during the term of the agreement. The term of a repurchase
agreement generally is short, possibly overnight or for a few days, although it
may extend over a number of months (up to one year) from the date of delivery.
Repurchase agreements will be fully collateralized and the collateral will be
marked-to-market daily. The Fund may not enter into a repurchase agreement
having more than seven days remaining to maturity, if as a result, such
agreement, together with any other illiquid securities held by the Fund, would
exceed 5% of the value of the net assets of the Fund.
In the event of bankruptcy or other default by the seller of the
security under a repurchase agreement, the Fund may suffer time delays and incur
costs or possible losses in connections with the disposition of the collateral.
In such event, instead of the contractual fixed rate of return, the rate of
return to the Fund would be dependent upon intervening fluctuations of the
market value of the underlying security and the accrued interest on the
security. Although the Fund would have rights against the seller for breach of
contract with respect to any losses arising from market fluctuations following
the failure of the seller to perform, the ability of the Fund to recover damages
from a seller in bankruptcy or otherwise in default would be reduced.
Repurchase agreements are securities for purposes of the tax
diversification requirements that must be met for pass-through treatment under
<PAGE>
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, the Fund will limit the value of its repurchase agreements, if any,
on each of the quarterly testing dates to ensure compliance with Subchapter M of
the Code.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements involve sales of portfolio securities
of the Fund to member banks of the Federal Reserve System or securities dealers
believed creditworthy, concurrently with an agreement by the Fund to repurchase
the same securities at a later date at a fixed price which is generally equal to
the original sales price plus interest. The Fund retains record ownership and
the right to receive interest and principal payments on the portfolio securities
involved. In connection with each reverse repurchase transaction, the Fund will
direct its custodian bank to place cash, U.S. Government securities, equity
securities and/or investment and non-investment grade debt securities in a
segregated account of the Fund in an amount equal to the repurchase price. Any
assets held in any segregated securities, options, futures, forward contracts or
other derivative transactions will be liquid, unencumbered and marked-to-market
daily (any such assets held in a segregated account are referred to in this
Statement of Additional Information as "Segregated Assets").
A reverse repurchase agreement involves the risk that the market
value of the securities retained by the Fund may decline below the price of the
securities the Fund has sold but is obligated to repurchase under the agreement.
In the event the buyer of securities under a reverse repurchase agreement files
for the bankruptcy or becomes insolvent, the Fund's use of the proceeds of the
agreement may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Fund's obligation to repurchase the
securities. Reverse repurchase agreements are considered borrowings and as such
are subject to the Fund's limitations on borrowing.
BORROWING
The Fund may borrow money up to 15% of the value of its total assets
(calculated at the time of the borrowing) from banks for temporary,
extraordinary or emergency purposes, for the clearance of transactions or for
investment purposes. The Fund may pledge up to 15% of its total assets to secure
these borrowings. If the Fund's asset coverage for borrowings falls below 300%,
the Fund will take prompt action to reduce its borrowings. If the 300% asset
coverage should decline as a result of market fluctuations or other reasons, the
Fund may be required to sell portfolio securities to reduce the debt and restore
the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time.
Borrowing for investment purposes is generally known as "leveraging."
Leveraging exaggerates the effect on net asset value of any increase or decrease
in the market value of the Fund's portfolio. Money borrowed for leveraging will
be subject to interest costs which may or may not be recovered by appreciation
of the securities purchased and may exceed the income from the securities
purchased. In addition, the Fund may be required to maintain minimum average
balances in connection with such borrowing or pay a commitment fee to maintain a
<PAGE>
line of credit, which would increase the cost of borrowing over the stated
interest rate. On an ongoing basis the Fund's borrowing for investment purposes
will not typically exceed 10% of the value of the Fund's total assets.
FUTURES
The Fund may enter into contracts for the purchase or sale for future
delivery of securities. A purchase of a futures contract means the acquisition
of a contractual right to obtain delivery to the Fund of the securities or
foreign currency called for by the contract at a specified price and future
date. When the Fund enters into a futures transaction, it must deliver to the
futures commission merchant selected by the Fund an amount referred to as
"initial margin." This amount is maintained by the futures commission merchant
in a segregated account at the custodian bank. Thereafter, a "variation margin"
may be paid by the Fund to, or drawn by the Fund from, such account in
accordance with controls set for such accounts, depending upon changes in the
price of the underlying securities subject to the futures contract.
The Fund may enter into futures contracts and engage in options on
futures to the extent that no more than 5% of the Fund's total assets are
required as futures contract margin deposits and premiums on options, and may
engage in such transactions to the extent that obligations relating to such
futures and related options on futures transactions represent not more than 10%
of the Fund's total assets.
The Fund may enter into futures transactions on domestic exchanges
and, to the extent such transactions have been approved by the Commodity Futures
Trading Commission for sale to customers in the United States, on foreign
exchanges. In addition, the Fund may sell stock index futures in anticipation of
or during a market decline to attempt to offset the decrease in market value of
its common stocks that might otherwise result, and it may purchase such
contracts in order to offset increases in the cost of common stocks that it
intends to purchase. Unlike other futures contracts, a stock index futures
contract specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the termination of
the contract. While futures contracts (other than stock under futures contracts)
provide for the delivery of securities, deliveries usually do not occur.
Contracts generally are terminated by entering into offsetting transactions.
The Fund may enter into futures contracts to protect against the
adverse effects of fluctuations in security prices, interest rates or foreign
exchange rates without actually buying or selling the securities or foreign
currency. For example, if interest rates are expected to increase, the Fund
might enter into futures contracts for the sale of debt securities. Such a sale
would have much the same effect as selling an equivalent value of the debt
securities owned by the Fund. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of the futures
contracts to the Fund would increase at approximately the same rate thereby
keeping the net asset value of the Fund from declining as much as it otherwise
would have. Similarly, when it is expected that interest rates will decline,
futures contracts may be purchased to hedge in anticipation of subsequent
purchases of securities at higher prices. Since the fluctuations in the value of
futures contracts should be similar to those of debt securities, the Fund could
take advantage of the anticipated rise in value of debt securities without
<PAGE>
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Fund could then buy debt securities on the
cash market.
To the extent that market prices move in an unexpected direction, the
Fund may not achieve the anticipated benefits of futures contracts or may
realize a loss. For example, if the Fund is hedged against the possibility of an
increase in interest rates which would adversely affect the price of securities
held in its portfolio and interest rates decrease instead, the Fund would lose
part or all of the benefit of the increased value which it has because it would
have offsetting losses in its futures position. In addition, in such situations,
if the Fund had insufficient cash, it may be required to sell securities from
its portfolio to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which reflect
the rising market. The Fund may be required to sell securities at a time when it
may be disadvantageous to do so.
OPTIONS
The Fund may invest in options that are listed on U.S. exchanges or
traded over-the-counter. Certain over-the-counter options may be illiquid. Thus,
it may not be possible to close options positions, and this may have an adverse
impact on the Fund's ability to effectively hedge its securities. The Fund
considers over-the-counter options to be illiquid. Accordingly, the Fund will
only invest in such options to the extent consistent with its 5% limit on
investments in illiquid securities. The Fund may purchase and write call or put
options on securities but will only engage in option strategies for
non-speculative purposes. In addition, the Fund will only engage in option
transactions (other than index options) to the extent that no more than 10% of
its total assets are subject to obligations relating to such options.
PURCHASING CALL OPTIONS. The Fund may purchase call options on
securities. When the Fund purchases a call option, in return for a premium paid
by the Fund to the writer of the option, the Fund obtains the right to buy the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option has the obligation to
deliver the underlying security against payment of the exercise price. The
advantage of purchasing call options is that the Fund may alter portfolio
characteristics and modify portfolio maturities without incurring the cost
associated with transactions.
The Fund may, following the purchase of a call option, liquidate its
option position by effecting a closing sale transaction. This is accomplished by
selling an option of the same series as the option previously purchased. The
Fund will realize a profit from a closing sale transaction if the price received
on the transaction is more than the premium paid to purchase the original call
option; the Fund will realize a loss from a closing sale transaction if the
price received on the transaction is less than the premium paid to purchase the
original call option.
Although the Fund would generally purchase only those call options
for which there appears to be an active secondary market, there is no assurance
that a liquid secondary market on an exchange would exist for any particular
option, or at any particular time; and for some options no secondary market on
<PAGE>
an exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that the Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Fund may expire without any value
to the Fund, in which event it would realize a capital loss which will be
short-term unless the option were held for more than one year.
COVERED CALL WRITING. The Fund may write covered call options from
time to time on such portions of its portfolio as the Investment Adviser
determines is appropriate in seeking to achieve the Fund's investment objective.
The advantage to the Fund of writing covered calls is that it receives a premium
which is additional income. However, if the security rises in value and the
option is exercised, the Fund will forego any market appreciation over the
option exercise price.
During the option period for a covered call option, the writer may be
assigned an exercise notice by the broker-dealer through whom such call option
was sold, requiring the writer to deliver the underlying security against
payment of the exercise price. This obligation is terminated upon the expiration
of the option or upon entering a closing purchase transaction. A closing
purchase transaction, in which the Fund, as writer of an option, terminates its
obligation by purchasing an option of the same kind as the option previously
written, cannot be effected with respect to an option once the option writer has
received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize
a profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Fund may realize a net
gain or loss from a closing purchase transaction depending upon whether the net
amount of the original premium received on the call option is more or less than
the cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirely offset by the premium
received from a sale of a different call option on the same underlying security.
Such a loss may also be wholly or partially offset by unrealized appreciation in
the market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, the Fund will realize a
short-term capital gain in the amount of the premium on the option less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security and the proceeds of the sale of the security plus the amount of the
premium on the option less the commission paid.
<PAGE>
The Fund may write call options only on a covered basis, which means
that the Fund would own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected. The Fund would be required to continue to hold a security which it
might otherwise wish to sell or deliver a security it would want to hold. The
exercise price of a call option may be below, equal to or above the current
market value of the underlying security at the time the option is written.
PURCHASING PUT OPTIONS. The Fund may purchase put options on
securities owned by the Fund.
A put option purchased by the Fund would give it the right to sell
one of its securities for an agreed price up to an agreed date. The Fund may
purchase put options in order to protect against a decline in the market value
of the underlying security below the exercise price of the option ("protective
puts"). The ability to purchase put options would allow the Fund to protect
unrealized gains in an appreciated security in its portfolio without actually
selling the security. If the security does not drop in value, the Fund would
lose the value of the premium paid. The premium paid for a put option and any
transactions costs would reduce any profit from the sale of the security. The
Fund may sell a put option which it has previously purchased prior to the sale
of the securities underlying such option. Such sale would result in a net gain
or loss depending on whether the amount received on the sale is more or less
than the premium and other transaction costs paid on the put option which is
sold.
The Fund may sell a put option purchased on individual portfolio
securities. Additionally, the Fund may enter into closing sale transactions. A
closing sale transaction is one in which the Fund, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.
WRITING PUT OPTIONS. The Fund may also write put options on a secured
basis which means that the Fund will maintain in a segregated account with its
custodian segregated assets in an amount not less than the exercise price of the
option at all times during the option period. The amount of segregated assets
held in the segregated account will be adjusted on a daily basis to reflect
changes in the market value of the securities covered by the put option written
by the Fund. Secured put options would generally be written in circumstances
where the Fund wishes to purchase the underlying security for the Fund's
portfolio at a price lower than the current market price of the security. In
such event, the Fund would write a secured put option at an exercise price
which, reduced by the premium received on the option, reflects the lower price
it is willing to pay.
Following the writing of a put option, the Fund may wish to terminate
the obligation to buy the security underlying the option by effecting a closing
purchase transaction. This would be accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.
<PAGE>
STRADDLES. The Fund may write covered straddles consisting of a
combination of a call and a put written on the same underlying security. A
straddle would be covered when sufficient assets are deposited to meet the
Fund's immediate obligations. The Fund may use the same liquid assets to cover
both the call and put options where the exercise price of the call and put are
the same, or the exercise price of the call is higher than that of the put. In
such cases, the Fund would also segregate liquid assets equivalent to the
amount, if any, by which the put is "in the money."
INDEX OPTIONS. The Fund may purchase exchange-listed put and call
options on stock indices and sell such options in closing sale transactions for
hedging purposes. The Fund may purchase call options on broad market indices to
temporarily achieve market exposure when the Fund is not fully invested. The
Fund may also purchase exchange-listed call options on particular market segment
indices to achieve temporary exposure to a specific industry. The Fund may
purchase put options on broad market indices in order to protect its fully
invested portfolio from a general market decline. Put options on market segments
may be bought to protect the Fund from a decline in value of heavily weighted
industries in the Fund's portfolio. Put options on stock indices may be used to
protect the Fund's investments in the case of a an unusually large redemption.
While the option is open, the Fund would maintain a segregated account with its
custodian in an amount equal to the market value of the option.
Options on indices are similar to regular options except that an
option on an index gives the holder the right, upon exercise, to receive an
amount of cash if the closing level of the index upon which the option is based
is greater than (in the case of a call) or lesser than (in the case of a put)
the exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option
expressed in dollars times a specified multiple (the "multiplier").
RISKS OF OPTIONS. The purchase and writing of options involves
certain risks. During the option period, the writer of a covered call has, in
return for the premium on the option, given up the opportunity to profit from a
price increase in the underlying securities above the exercise price, but, as
long as its obligation as a writer continues, has retained the risk of loss
should the price of the underlying security decline. The writer of an option has
no control over the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying securities at the
exercise price. If a put or call option purchased by the Fund is not sold when
it has remaining value, and if the market price of the underlying security, in
the case of a put, remains equal to or greater than the exercise price or, in
the case of a call, remains less than or equal to the exercise price, the Fund
will lose its entire investment in the option. Also where a put or call option
on a particular security is purchased to hedge against price movements in a
related security, the price of the put or call option may move more or less than
the price of the related security. There can be no assurance that a liquid
market will exist when a Fund seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on the options
markets, the Fund may be unable to close out a position.
<PAGE>
The Fund's purchases of options on indices may subject it to the
risks described below:
First, because the value of an index option depends upon movements in
the level of the index rather than the price of a particular security, whether
the Fund will realize a gain or loss on the purchase of an option on an index
depends upon movements in the level of prices in the market generally or in an
industry or market segment rather than movements in the price of a particular
security. Accordingly, successful use by the Fund of options on indices is
subject to the Fund's ability to predict correctly the direction of movements in
the market generally or in a particular industry. This requires different skills
and techniques than predicting changes in the prices of individual securities.
Second, index prices may be distorted if trading of a substantial
number of securities included in the index is interrupted causing the trading of
options on that index to be halted. If a trading halt were to occur, the Fund
would not be able to close put options which it had purchased and the Fund may
incur losses if the underlying index moved adversely before trading resumed. If
a trading halt were to occur and restrictions prohibiting the exercise of
options were imposed through the close of trading on the last day before
expiration, exercises on that day would be settled on the basis of a closing
index value that may not reflect current price information for securities
representing a substantial portion of the value of the index.
Third, if the Fund were to hold an index option and were to exercise
it before final determination of the closing index value for that day, it would
run the risk that the level of the underlying index may change before closing.
If such a change were to cause the exercised option to fall "out-of-the-money,"
the Fund would be required to pay the difference between the closing index value
and the exercise price of the option (times the applicable multiplier) to the
assigned writer. Though the Fund may be able to minimize this risk by
withholding exercise instructions until just before the daily cutoff time or by
selling rather than exercising the option when the index level is close to the
exercise price, it may not be possible to eliminate this risk entirely because
the cutoff times for index options may be earlier than those fixed for other
types of options and may occur before definitive closing index values are
announced.
OTHER INVESTMENTS
The Board of Trustees may, in the future, authorize the Fund to invest in
securities other than those listed in this Statement of Additional Information
and in the Prospectus, provided such investment would be consistent with the
Fund's investment objective and that it would not violate any fundamental
investment policies or restrictions.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
The Fund has adopted the following fundamental investment
restrictions which cannot be cannot be changed without the approval of a
"majority of the outstanding voting securities" of the Fund. Under the 1940 Act,
a "majority of the outstanding voting securities of a fund means the vote of:
<PAGE>
(i) more than 50% of the outstanding voting securities of the fund; or (ii) 67%
or more of the voting securities of the fund present at a meeting, if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy, which ever is less.
CONCENTRATION. The Fund will not make investments that will result in
the concentration (as that term any be defined in the 1940 Act, any rule or
order thereunder or any SEC staff interpretation thereof) of its investments in
the securities of issuers primarily engaged in the same industry, provided that
this restriction does not limit the Fund from investing in obligations issued or
guaranteed by the U.S. Government, or its agencies or instrumentalities. The SEC
staff currently takes the position that a fund concentrates its investments in a
particular industry if more than 25% of its net assets is invested in issuers
within the industry.
SENIOR SECURITIES. The Fund may not issue senior securities, except
as the 1940 Act, any rule or order thereunder, or SEC staff interpretation
thereof, may permit.
UNDERWRITING. The Fund may not underwrite the securities of other
issuers, except that the Fund may engage in transactions involving the
acquisition, disposition or resale of its portfolio securities, under
circumstances where it may be considered to be an underwriter under the
Securities Act of 1933.
REAL ESTATE. The Fund may not purchase or sell real estate, unless
acquired as a result of ownership of securities or other instruments and
provided that this restriction does not prevent the Fund from investing in
issuers which invest, deal or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real estate or
interests therein.
COMMODITIES. The Fund may not purchase or sell physical commodities,
unless acquired as a result of ownership of securities or other instruments and
provided that this restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing in
securities that are secured by physical commodities.
BORROWING. The Fund may use investment techniques involving leverage,
which could result in increased volatility of the Fund's net asset value. In
order to limit such risk, the Fund is required to limit the percentage of its
assets that can be exposed to such leveraging techniques to 15% of the asset
value of the Fund.
LENDING. The Fund may not make loans, provided that this restriction
does not prevent the Fund from purchasing debt obligations, entering into
repurchase agreements, loaning its assets to broker/dealers or institutional
investors and investing in loans, including assignments and participation
interests.
NON-FUNDAMENTAL POLICIES AND RESTRICTIONS
In addition to the fundamental policies and investment restrictions
described above, and the various general investment policies described in the
Prospectus, the Fund will be subject to the following investment restrictions,
<PAGE>
which are considered non-fundamental and may be changed by the Board of Trustees
without shareholder approval.
OTHER INVESTMENT COMPANIES. The Fund is permitted to invest in other
investment companies, including open-end, closed-end or unregistered investment
companies, either within the percentage limits set forth in the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, or without regard
to percentage limits in connection with a merger, reorganization, consolidation
or other similar transaction. However, the Fund may not operate as a "fund of
funds" which invests primarily in the shares of other investment companies as
permitted by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are
utilized as investments by such a "fund of funds."
ILLIQUID SECURITIES. The Fund may not invest more than 5% of its net
assets in securities which it cannot sell or dispose of in the ordinary course
of business within seven days at approximately the value at which the Fund has
valued the investment.
In applying the Fund's fundamental policy concerning concentration
that is described above, it is a matter of non-fundamental policy that
investments in certain categories of companies will not be considered to be
investments in a particular industry. For example: (i) financial service
companies will be classified according to the end users of their services, for
example, automobile finance, bank finance and diversified finance will each be
considered a separate industry; (ii) technology companies will be divided
according to their products and services, for example, hardware, software,
information services and outsourcing, or telecommunications will each be a
separate industry; (iii) asset-backed securities will be classified according to
the underlying assets securing such securities; and (iv) utility companies will
be divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry.
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
PURCHASING SHARES
Shares are sold by the Fund without any sales charge and are offered
on a continuous basis by the distributor.
Shares of the Fund also may be purchased through an investment
adviser, financial planner, broker, dealer or other investment professional or
through a fund supermarket, retirement plan or other intermediary. These parties
may charge transaction fees and may set different minimum investments or
limitations on buying, selling or redeeming shares. The intermediaries are
responsible for transmitting purchase orders and funds and for crediting their
customers' accounts following redemptions made in accordance with their customer
agreements and the Fund's Prospectus. Other persons may receive compensation for
the marketing and shareholder servicing activities in the form of 12b-1 fees
payable by the Fund under its Distribution and Shareholders Servicing Plan
adopted under Rule 12b-1 under the 1940 Act.
<PAGE>
The Fund reserves the right to reject any purchase order and to
suspend the offering of shares of the Fund. The minimum initial investment is
$5,000 and additional investments must total at least $1,000. The minimum
initial investment for qualified retirement accounts is $1,000 ($500 for
Education IRAs) and there is no minimum for subsequent investments in retirement
accounts or Education IRAs. The Fund may change or waive its policies concerning
minimum investment amounts at any time. The Fund's Transfer Agent maintains all
shareholder and shareholder transaction(s) records for the Fund.
The Fund does not intend to issue certificates representing shares
purchased. Shareholders will have the same rights of ownership with respect to
such shares as if certificates had been issued.
Shares of the Fund may be purchased at the Fund's net asset value per
share next computed after receipt of the purchase order. Net Asset Value is
calculated as of the close of the New York Stock Exchange ("NYSE") (usually 4:00
P.M. eastern time) every day the exchange is open.
The Fund's net asset value per share is determined by dividing the
total value of the Fund's securities, cash and other assets, subtracting all of
its expenses and liabilities, and then dividing by the total number of shares
outstanding. Expenses and fees of the Fund, including management, distribution
and shareholder servicing fees, are accrued daily and taken into account for the
purpose of determining the net asset value.
Shares will not be priced on days the New York Stock Exchange is
closed.
Cash and any receivables are valued at their realizable amounts.
Interest is recorded as accrued and dividends are recorded on the ex-dividend
date. The Fund's securities are valued at their market value, which usually
means the last quoted sale price on the security's principal exchange on that
day. Portfolio securities listed on a securities exchange or on the NASDAQ
National Market System for which market quotations are readily available are
valued at the last quoted sale price of the day or, if there is no such reported
sale, within the range of the most recent quoted bid and ask prices. The current
market value of any option held by the Fund is its last sale price on the
relevant exchange before the time when assets are valued. Lacking any sales that
day or if the last sale price is outside the bid and ask prices, options are
valued within the range of the current closing bid and ask prices if the
valuation is believed to reflect the contract's market value. The value of a
foreign security is determined as of the close of trading on the foreign
exchange on which it is traded or as of the scheduled close of trading on the
NYSE, if that is earlier. Generally, trading in corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times before the scheduled close of the NYSE. The value of these
securities used in computing net asset value is determined as of such time. If
market quotations are not readily available, securities will be priced at their
fair value as determined in good faith by, or under procedures adopted by, the
Board of Trustees. The Fund may use independent pricing services to assist in
calculating the Fund's net asset value.
<PAGE>
Upon purchasing shares of the Fund, if a check or draft is returned
unpaid to the Fund the Fund may impose a $10 charge for each returned item. All
checks, drafts, wires and other payment mediums used to buy or sell shares of
the Fund must be denominated in U.S. dollars. The Fund may, in its sole
discretion, either (a) reject any order to buy or sell shares denominated in any
other currency or (b) honor the transaction or make adjustments to a
shareholder's account for the transaction as of a date and with a foreign
currency exchange factor determined by the drawee bank.
REDEEMING SHARES
Shares of the Fund may be redeemed on any business day that the Fund
calculates its net asset value. Shares will not be priced on days the New York
Stock Exchange is closed. The redemption price will be the next net asset value
per share calculated after the redemption order is accepted by the Fund's
transfer agent. No fees are imposed by the Fund when shares are redeemed.
Shares of the Fund may be redeemed by giving instructions to the
Fund's transfer agent by mail or by telephone. The Fund will use reasonable
procedures to confirm that instructions communicated by telephone are genuine
and, if such procedures are followed, will not be liable for any losses due to
unauthorized or fraudulent telephone transactions. During times of drastic
economic or market changes, the telephone redemption privilege may be difficult
to implement and the Fund reserves the right to suspend this privilege.
Certain written requests to redeem or transfer shares require a
signature guarantee. For example, a signature guarantee may be required if
shares are sold worth $50,000 or more if your address of record on the account
application has been changed within the last 30 days, or if you ask that the
proceeds be sent to a different person or address. A signature guarantee is used
to help protect you and the Fund from fraud. You can obtain a signature
guarantee from most banks and securities dealers, but not from a notary public.
Signature guarantees must appear together with the signature(s) of the
registered owner(s), on: (1) a written request for redemption; or (2) a separate
instrument of assignment, which should specify the total number of shares to be
redeemed (this "stock power" may be obtained from the Fund or from most banks or
stock brokers).
If shares are sold through a securities dealer or investment
professional, it is such person's responsibility to transmit the order to the
Fund in a timely fashion. Any loss to you resulting from failure to do so must
be settled between you and such person.
Delivery of the proceeds of a redemption of shares purchased and paid
for by check shortly before the receipt of the request may be delayed until the
Fund determines that the custodian has completed collection of the purchase
check, which may take up to 10 days. The Board of Trustees may suspend the right
of redemption or postpone the date of payment during any period when (a) trading
on the New York Stock Exchange is restricted as determined by the SEC or such
exchange is closed for other than weekends and holidays, (b) the SEC has by
order permitted such suspension, or (c) an emergency, as defined by rules of the
<PAGE>
SEC, exists during which time the sale of Fund shares or valuation of securities
held by the Fund are not reasonably practicable.
If dividend checks are returned to the Fund as undeliverable or
marked "unable to forward" by the postal service, the Fund will consider this a
request by the shareholder to change the dividend option to reinvest all
contributions. The proceeds will be reinvested in additional shares at their net
asset value until the Fund receives new instructions.
If mail is returned as undeliverable or the Fund is unable to locate
you or verify your current mailing address, it may deduct the costs of any
efforts to find you from your account. These costs may include a percentage of
the account when a search company charges a percentage fee in exchange for its
location services.
Distribution or redemption checks sent to a shareholder do not earn
interest or any other income during the time the checks remain uncashed. Neither
the Fund nor its affiliates will be liable for any loss caused by a
shareholder's failure to cash such checks.
The Fund also reserves the right to make a "redemption in-kind" if
the amount you are redeeming is large enough to affect Fund operations or if the
redemption would otherwise disrupt the Fund. For example, the Fund may redeem
shares in-kind if the amount represents more than the lesser of $250,000 or 1%
of the Fund's net assets. When the Fund makes a "redemption in-kind" it pays the
Seller in portfolio securities rather than cash. If shares are redeemed in kind,
the redeeming shareholder may incur brokerage costs in converting the assets to
cash. The method of valuing securities used to make redemptions in kind will be
the same as the method of valuing portfolio securities is described above. Such
valuation will be made as of the same time the redemption price is determined.
In addition, if a shareholder's account balance falls below $1,000,
the Fund may request the balance be increased. If it is still below $1,000 after
60 days, the Fund may automatically close the account and forward the proceeds
to the shareholder.
<PAGE>
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The Trust is governed by a Board of Trustees, which has overall
responsibility for management of the Trust. The Trustees are experienced
business persons who meet periodically throughout the year to oversee the
Trust's activities, review contractual arrangements with companies that provide
services to the Fund and review the performance of the Fund. The names and
business addresses of the Trustees and officers of the Trust, together with
information as to their principal occupations during the past five years, are
listed below. The Trustees who are considered "interested persons" of the
investment adviser or of the Trust, as defined in Section 2(a)(19) of the 1940
Act, are noted with an asterisk (*).
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE REGISTRANT DURING THE PAST 5 YEARS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Theodore F. Ells, Esq. Chairman of the Board Partner of the Law Firm of
28 West 44th Street of Trustees Craig & Ells
New York, NY 10036
Age 59
Robert E. Belknap*<F1> Trustee and portfolio manager Senior Director of Ingalls &
61 Broadway Snyder LLC
New York, NY 10006
Age 61
D. Roger B. Liddell* Trustee Managing Director of Ingalls &
61 Broadway Snyder LLC
New York, NY 10006
Age 54
<FN>
- --------------------
<F1> Mr. Belknap is the brother of Thomas H. Belknap, who serves on the Fund's
Advisory Committee.
</FN>
<PAGE>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE REGISTRANT DURING THE PAST 5 YEARS
- ---------------------------------------------------------------------------------------------------
Barnabas B. B. Breed, Esq. Trustee, Treasurer, Secretary Principal of the Law Firm of
Tower Suite 3500 Breed & Associates
The French Building
551 Fifth Avenue
New York, NY 10017
Age 55
The following individuals have agreed to serve as Trustees or officers of the Fund upon the
effectiveness of the Registration Statement:
Steven L. Wood Trustee Managing Director of the Real
2250 Century Square Estate Development Firm of
1501 Fourth Avenue Century Pacific, L.P.
Seattle, WA 98101
Age 52
Joseph Neuberger Treasurer Senior Vice President of
Firstar Mutual Fund Services,
LLC, Administrator of the Fund
Erin Probst Secretary Compliance Administrator of
Firstar Mutual Fund Services,
LLC, Administrator of the Fund
</TABLE>
COMPENSATION OF TRUSTEES; SHAREHOLDINGS
The Trust does not compensate the Trustees who are officers or
employees of the Investment Adviser or its affiliates. The "independent"
Trustees receive a fee of $250 for each meeting of the Trustees which they
attend in person or by telephone. Trustees are reimbursed for travel and other
out-of-pocket expenses. The Board of Trustees is expected to hold regular
quarterly meetings, and would receive the annual compensation shown below from
<PAGE>
the Trust for serving on the Board and attending all such meetings. The Trust
does not offer any retirement benefits for Trustees.
<TABLE>
<CAPTION>
COMPENSATION
NAME OF TRUSTEE TITLE FROM TRUST
- ------------------------------------- ----------------------------------- -----------------------
<S> <C> <C>
Theodore F. Ells, Esq. Chairman of the Trustees $1,000
Steven L. Wood Trustee $1,000
D. Roger B. Liddell Trustee None
Barbabas B. B. Breed Trustee $1,000
Robert E. Belknap Trustee None
</TABLE>
As of the date of this Statement of Additional Information, all the
outstanding shares of the Fund are owned by Ingalls & Snyder, and none are owned
individually by the officers and Trustees of the Fund.
ADVISORY BOARD
The Fund has an Advisory Board whose members are experienced in many
different types of business and who assist the Fund's portfolio manager in the
ongoing assessment of economic, political and social developments as they may
effect the investment strategy of the Fund. The members of the Advisory Board
are not compensated, do not give investment advice to the Fund, and are as
follows:
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE DURING THE PAST 5 YEARS
- --------------------------------------------------------------------------------
<S> <C>
Thomas H. Belknap, Esq.<F1> Partner of the Law firm of
One International Place Hill & Barlow
Boston, MA 02110-2607
Age 59
Mr. David G. Booth Managing Director, Ret., of the
15 Garden Place investment firm Morgan Stanley Dean
Brooklyn, NY 11201 Witter, Inc.
Age 45
Mr. W. Neville Conyers Chairman of Bermuda Aviation Services
PO Box HM 1554 Limited/Aircraft Services Bermuda
Hamilton HM FX Limited
Bermuda
Age 70
Mr. Marc Declerck Agent Delegue of the investment firm of
Place du Champs de Mars Havaux & Cie
2 Marsveldplain
Brussels 1050, Belgium
Age 41
Mr. Christopher Finn Managing Director - International
20 Berkeley Square of the merchant banking firm The
London W1X 6NB Carlyle Group
United Kingdom
Age 42
<FN>
- --------------------
<F1> Mr. Belknap is the brother of Thomas H. Belknap, who serves on the Fund's
Advisory Committee.
</FN>
<PAGE>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE DURING THE PAST 5 YEARS
- --------------------------------------------------------------------------------
Mr. Jolmer D. Gerritse Managing Director of the
Nieuwezijds Voorburgwal 162 investment firm SNS Securities N.V.
1012 SJ Amsterdam
The Netherlands
Age 48
Mr. John G. Hunter Managing Director of the conference
123 East 54th Street management company The Management
New York, NY 10022 Exchange, Inc.
Age 62
Mr. William J. Loschert Chairman of the insurance company
Crosby Court ACE UK Limited
38 Bishopsgate
London EC2N 4DL
United Kingdom
Age 60
Mr. Wynant D. Vanderpoel President of private investment company
79 East 79th Street The Vanderpoel Group
New York, N.Y. 10021
Age 60
Mr. C. P. T. Vaughan-Johnson Deputy Chairman of the private bank
1 Hobart Place Duncan Lawrie Limited
London SW1W 0HU
England
Age 65
<PAGE>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE DURING THE PAST 5 YEARS
- --------------------------------------------------------------------------------
Mr. John S. Wadsworth, Jr. Chairman of Morgan Stanley Dean Witter
[_______________________] Asia Limited
Mr. Lewis M. Weston Retired Partner of the investment
85 Broad Street banking firm Goldman, Sachs & Co.
New York, NY 10004
Age 73
Mr. Christopher Wetherhill Managing Director of the mutual fund
P. O. Box HM 951 services firm Hemisphere Management Ltd.
Hamilton HM DX
Bermuda
Age 51
Mr. Edward W. Wheeler Senior Vice President of the investment
630 3rd Avenue research firm The Buckingham Research
New York, NY 10017 Group, Inc.
Age 56
Mr. Robert D. White Chief Operating Officer of the
414 East 75th Street investment firm Investor Select
New York, NY 10021 Advisors, Inc.
Age 30
Roger T. Wickers, Esq. Senior Vice President and General
99 Springfield Point Counsel, Ret., of the mutual fund
Wolfeboro, NH 03894 management company
Age 64 The Keystone Group
<PAGE>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE DURING THE PAST 5 YEARS
- --------------------------------------------------------------------------------
Mr. Henry K. Wingate Independent Educational Consultant
P.O. Box 197
Sandisfield, MA 01255
Age 61
</TABLE>
INVESTMENT ADVISER AND ADVISORY AGREEMENT
Ingalls & Snyder LLC ("Ingalls & Snyder" or the "Investment Adviser")
having its principal offices located at 61 Broadway, New York, NY 10006, is the
Fund's investment adviser. Ingalls & Snyder is registered as an investment
adviser under the Investment Advisers Act of 1940 (as amended, the "Advisers
Act"). Ingalls & Snyder also is a registered broker-dealer and a member of the
New York and American Stock Exchanges and the National Association of Securities
Dealers. Ingalls & Snyder serves as investment adviser to the Fund pursuant to
an Investment Advisory Agreement with the Trust dated as of [________] (the
"Advisory Agreement"). The Advisory Agreement was approved by the sole
shareholder of the Fund on [________], 1999.
Under the Advisory Agreement, the Investment Adviser, subject to the
supervision of the Trustees, provides a continuous investment program for the
Fund, including investment research and management with respect to securities,
investments and cash equivalents, in accordance with the Fund's investment
objective, policies and restrictions as set forth in its Prospectus, this
Statement of Additional Information and the resolutions of the Trustees. The
Investment Adviser is responsible for effecting all security transactions on
behalf of the Fund, including the allocation of principal business and portfolio
brokerage and the negotiation of commissions. The Investment Adviser also
maintains books and records with respect to the securities transactions of the
Fund and furnishes to the Trustees such periodic or other reports as the
Trustees may request.
The Fund is obligated to pay the Investment Adviser a monthly fee
equal to an annual rate of 1.00% of the Fund's average daily net assets. The
Investment Adviser has contractually agreed to waive its advisory fee or
reimburse the Fund's expenses to the extent necessary to ensure that the total
operating expenses of the Fund on an annualized basis do not exceed 1.70% of
average daily net assets during the Fund's first year of operations, which ends
on October 31, 2000, on an annualized basis. This contractual arrangement may
not be terminated by the Investment Adviser during the stated period.
During the term of the Advisory Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities
thereunder except the cost of securities (including brokerage commissions, if
any) purchased for the Fund. The services furnished by the Investment Adviser
<PAGE>
under the Advisory Agreement are not exclusive, and the Investment Adviser is
free to perform similar services for others.
Ingalls & Snyder is an independent, privately owned firm. Its
shareholders consist of twenty-five directors, none of whom owns more than 25%
of its outstanding stock.
Unless sooner terminated in accordance with its terms, the Advisory
Agreement is initially effective for a period of two years and may be continued
from year to year, provided that such continuance is approved at least annually
by a vote of the holders of a "majority" (as defined in the 1940 Act) of the
outstanding voting securities of the Fund, or by the Trustees, and in either
event by vote of a majority of the Trustees who are not parties to the Advisory
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
The Advisory Agreement will automatically terminate in the event of
its "assignment" as that term is defined in the 1940 Act, and may be terminated
without penalty at any time upon 60 days' written notice to the other party: (i)
by the majority vote of all the Trustees or by majority vote of the outstanding
voting securities of the Fund; or (ii) by the Investment Adviser.
The Advisory Agreement may be amended by the parties, provided, in
most cases, that any such amendment is specifically approved by the vote of a
majority of the outstanding voting securities of the Fund and by the vote of a
majority of the Trustees who are not interested persons of the Fund or of the
Investment Adviser, cast in person at a meeting called for the purpose of voting
upon such approval.
Under the terms of the Advisory Agreement, the Investment Adviser
will be liable to the Fund only for losses resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services, willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
The Investment Adviser and the Trust have agreed that the Fund will
use the name "Legacy," and that other funds with differing investment objectives
may also be formed under the Legacy name.
CODE OF ETHICS
Both the Fund and the Investment Adviser have adopted a Code of
Ethics that governs the conduct of employees of the Fund and the Investment
Adviser who may have access to information about the Fund's securities
transactions. The Code recognizes that such persons owe a fiduciary duty to the
Fund's shareholders and must place the interests of shareholders ahead of their
own interests. Among other things, the Code requires pre-clearance of personal
securities transactions; certain blackout periods for personal trading of
securities which may be considered for purchase or sale by the Fund or other
clients of the adviser; and prohibitions against personal trading of initial
public offerings. Violations of the code are subject to review by the Trustees
and could result in severe penalties.
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Ingalls & Snyder provided the initial capital for the Fund by
purchasing 10,000 shares for $100,000. These shares were acquired for investment
and can be disposed of only by redemption. As of the date of this Statement of
Additional Information Ingalls & Snyder owned 100% of the outstanding shares of
the Fund. So long as Ingalls & Snyder owns more than 25% of the outstanding
shares of the Fund, it will be deemed to control the Fund. As a controlling
shareholder, Ingalls & Snyder would be able to exercise a controlling or
substantial influence over the outcome of each matter submitted to a vote of the
shareholders of the Fund, including the election of Trustees.
SERVICE AGREEMENTS
As more fully described below, the Trust has entered into a number of
agreements with Firstar Mutual Funds Services, LLC ("Firstar"), a Wisconsin
limited liability company, pursuant to which Firstar performs management-related
and other services for the Fund. Firstar serves as the Administrator, Transfer
Agent, Dividend Disbursing Agent and Fund Accountant. Firstar Bank Milwaukee,
N.A. ("Firstar Bank"), which is an affiliate of Firstar, serves as the Fund's
custodian. The principal offices of Firstar and Firstar Bank are located at 615
East Michigan Street, Milwaukee, WI 53202.
ADMINISTRATOR
Pursuant to a Fund Administration Servicing Agreement with the Trust
(the "Administration Agreement"), Firstar serves as Administrator of the Fund
and subject to the direction and control of the Trustees, supervises all aspects
of the operation of the Fund except those performed by the Fund's Investment
Adviser. As Administrator, Firstar receives asset-based fees at the annual rate
of [0.06%] of the first $200 million of average daily net assets, [0.05%] of the
next $500 million of average daily net assets and [0.03%] of average daily net
assets above $700 million, subject to a minimum annual fee of [$30,000].
Under the Administration Agreement, Firstar provides certain
administrative services and facilities for the Fund. These services include
preparing and maintaining books, records, tax and financial reports, and
monitoring compliance with state and federal regulatory requirements.
FUND ACCOUNTING
Pursuant to a Fund Accounting Servicing Agreement with the Trust,
Firstar is responsible for accounting relating to the Fund and its investment
transactions, maintaining certain books and records of the Fund, determining
daily the net asset value per share of the Fund, calculating yield, dividends
and capital gain distributions and providing certain tax accounting services.
Under the Fund Accounting Servicing Agreement, Firstar receives
asset-based fees at the annual rate of [$22,000] for the first $40 million of
<PAGE>
average daily net assets, [0.01%] of the next $200 million of average daily net
assets and [0.005%] of average daily net assets above $240 million.
TRANSFER AGENT
Pursuant to a Transfer Agent Servicing Agreement with the Trust (the
"Transfer Agent Agreement"), Firstar acts as the Trust's transfer agent and
dividend disbursing agent. In that capacity, Firstar is responsible for
processing orders for Fund shares and for performing certain shareholder
services for the Fund, including maintenance of shareholder records. Firstar is
compensated based on an annual fee of [$16] per shareholder account (subject to
a minimum annual fee of $[________]).
CUSTODIAN
Pursuant to a Custodian Servicing Agreement with the Trust, Firstar
Bank acts as the custodian of the Fund's securities and cash and in that
capacity delivers and receives payment for portfolio securities sold, receives
and pays for portfolio securities purchased, collects income from investments.
Firstar Bank is compensated on the basis of an annual fee based on the market
value of the assets of the Fund and on fees for certain transactions. Firstar
Bank receives asset-based fees at the annual rate of [0.02%] of the average net
assets of the Fund plus specified charges for portfolio transactions.
DISTRIBUTOR
Ingalls & Snyder LLC (the "Distributor"), located at 61 Broadway, New
York, NY 10006, serves as the principal underwriter and distributor for the
shares of the Fund pursuant to a Distribution Agreement with the Trust dated as
of [__________], 1999 (the "Distribution Agreement"). The distributor is
registered as a broker-dealer under the Securities Exchange Act of 1934, as
amended, and each state's securities laws and is a member of the National
Association of Securities Dealers ("NASD"). The offering of the Fund's shares is
continuous. The Distribution Agreement provides that the Distributor, as agent
in connection with the distribution of Fund shares, will use appropriate efforts
to solicit orders for the sale of Fund shares and undertake such advertising and
promotion as it deems reasonable, including, but not limited to, advertising,
compensation to underwriters, dealers and sales personnel, printing and mailing
prospectuses to persons other than current Fund shareholders, and printing and
mailing sales literature.
DISTRIBUTION PLAN
The Board of Trustees has adopted a Distribution Plan ("the Plan") on
behalf of the Fund, in accordance with Rule 12b-1 (the "Rule") under the 1940
Act. The Fund is authorized under the Plan to use the assets of the Fund to
compensate the Distributor or others for certain activities relating to the
distribution of shares of the Fund to investors and the provision of shareholder
services. The maximum amount payable under the Plan is 0.25% of the Fund's
<PAGE>
average net assets on an annual basis. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time these fees will increase the cost
of an investor's investment.
The NASD's maximum sales charge rule relating to mutual fund shares
establishes limits on all types of sales charges, whether front-end, deferred or
asset-based. This rule may operate to limit the aggregate distribution fees to
which shareholders may be subject under the terms of the Plan.
The Plan authorizes the use of distribution fees to pay, or reimburse
expenses incurred by, banks, broker/dealers and other institutions which provide
distribution assistance and/or shareholder services including, but not limited
to, printing and distributing prospectuses to persons other than Fund
shareholders, printing and distributing advertising and sales literature and
reports to shareholders used in connection with selling shares of the Fund,
furnishing personnel and communications equipment to service shareholder
accounts and prospective shareholder inquiries. Such services may be performed
by the Distributor, the Investment Adviser or others.
The Plan requires that any person authorized to direct the
disposition of monies paid or payable by the Fund pursuant to the Plan or any
related agreement prepare and furnish to the Trustees for their review, at least
quarterly, written reports complying with the requirements of the Rule and
setting out the amounts expended under the Plan and the purposes for which those
expenditures were made. The Plan provides that so long as it is in effect the
selection and nomination of Trustees who are not interested persons of the Trust
will be committed to the discretion of the Trustees then in office who are not
interested persons of the Trust.
Neither the Plan nor any related agreements can take effect until
approved by a majority vote of both all the Trustees and those Trustees who are
not interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan
cast in person at a meeting called for the purpose of voting on the Plan and the
related agreements. The Trustees approved the Plan on [________], 1999.
The Plan will continue in effect only so long as its continuance is
specifically approved at least annually by the Trustees in the manner described
above for Trustee approval of the Plan. The Plan may be terminated at any time
by a majority vote of the Trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreement related to the Plan or by vote of a majority of the
outstanding voting securities of the Fund.
The Plan may not be amended so as to materially increase the amount
of the distribution fees for the Fund unless the amendment is approved by a vote
of at least a majority of the outstanding voting securities of the Fund. In
addition, no material amendment may be made unless approved by the Trustees in
the manner described above for Trustee approval of the Plan.
<PAGE>
INDEPENDENT ACCOUNTANTS
The Fund's independent accountants, Arthur Andersen LLP, will audit
the Fund's annual financial statements and review the Fund's tax returns. Arthur
Andersen LLP is located at 100 East Wisconsin Avenue, Milwaukee, WI 53202.
PORTFOLIO TRANSACTIONS AND TURNOVER
The Investment Adviser is responsible for decisions to buy and sell
securities and other investments for the Fund, the selection of brokers, dealers
and futures commission merchants to effect the transactions and the negotiation
of brokerage commissions, if any.
Broker-dealers may receive brokerage commissions on portfolio
transactions, including options and the purchase and sale of underlying
securities upon the exercise of options. On foreign securities exchanges,
commissions may be fixed. Orders may be directed to any broker or futures
commission merchant including, to the extent and in the manner permitted by
applicable law, Ingalls & Snyder. Brokerage commissions on United States
securities, options and futures exchanges or boards of trade are subject to
negotiation between the Investment Adviser and the broker or futures commission
merchant. In the over-the-counter markets, securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a profit
to the dealer. In underwritten offerings, securities are purchased at a fixed
price which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. On occasion, certain
money market instruments and U.S. Government agency securities may be purchased
directly from the issuer, in which case no commissions or discounts are paid.
The Fund will not deal with Ingalls & Snyder in any transaction in which Ingalls
& Snyder (or any affiliate) acts as principal, except in accordance with rules
of the SEC. Thus, it will not deal in the over-the-counter market with Ingalls &
Snyder acting as market maker, and it will not execute a negotiated trade with
Ingalls & Snyder if execution involves Ingalls & Snyder acting as principal with
respect to any part of the Fund's order.
In placing orders for portfolio securities of the Fund, the
Investment Adviser's primary objective is to obtain the best combination of
favorable price and efficient execution consistent with obtaining investment
research and research related services at reasonable cost. There is no
pre-existing commitment to place orders with any broker, dealer or futures
commission merchant. In selecting a particular broker, dealer or futures
commission merchant, the Investment Adviser considers a number of factors,
including: the broker's, dealer's or futures commission merchant's commission
rate and other transaction costs; the nature of the portfolio transaction; the
size of the transaction; the desired timing of the trade; trading patterns and
activity expected in the market for the particular transaction; confidentiality;
the execution, clearance and settlement capabilities of the firms; the firm's
ability to handle difficult trades; the availability of research and research
related services through such firms; the Investment Adviser's knowledge of the
financial stability of the firms; the Investment Adviser's knowledge of actual
or apparent operational problems of firms; and prior performance in servicing
the Investment Adviser and its clients. In consideration of these factors, the
Fund may pay transaction costs in excess of that which another broker, dealer or
<PAGE>
futures commission merchant might have charged for effecting the same
transaction.
In transactions with respect to equity securities and U.S. Government
securities executed in the over-the-counter market, purchases and sales are
transacted directly with principal market-makers except in those circumstances
where, in the opinion of the Adviser, better prices and executions are available
elsewhere.
The allocation of orders among firms and the commission rates paid
will be reviewed periodically by the Fund's Trustees.
The research and research related services considered by the
Investment Adviser in selecting brokers, dealers and futures commission
merchants include, among other things, information as to the availability of
securities for purchase or sale, statistical or factual information or opinions
pertaining to investments, research reports, research compilations, economic
data, and investment related periodicals and seminars. The Investment Adviser
may use research and research related services provided by brokers and dealers
in servicing all its clients, including the Fund, and not all such services will
be used by the Investment Adviser in connection with the Fund. Brokerage may
also be allocated to dealers in consideration of the Fund's share distribution
but only when execution and price are comparable to that offered by other
brokers.
Subject to the above considerations, Ingalls & Snyder may act as
securities broker for the Fund, and there is no limit on the percentage of the
Fund's orders that may be directed to Ingalls & Snyder. In order for Ingalls &
Snyder (or any affiliate) to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by Ingalls & Snyder (or any
affiliate) must be reasonable and fair compared to the commissions, fees or
other remuneration paid to other firms in connection with comparable
transactions involving similar securities being purchased or sold on an exchange
or board of trade during a comparable period of time. This standard would allow
Ingalls & Snyder (or any affiliate) to receive no more than the remuneration
which would be expected to be received by an unaffiliated firm in a commensurate
arm's-length transaction. Furthermore, the Trustees of the Fund, including a
majority of the non-interested Trustees, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to Ingalls & Snyder (or any affiliate) are consistent with the foregoing
standard. In accordance with Section 11(a) of the Securities Exchange Act of
1934, as amended, Ingalls & Snyder may not retain compensation for effecting
transactions on a national securities exchange for the Fund unless the Fund has
expressly authorized the retention of such compensation. Ingalls & Snyder must
furnish to the Fund at least annually a statement setting forth the total amount
of all compensation retained by Ingalls & Snyder from transactions effected for
the Fund during the applicable period. Brokerage and futures transactions with
Ingalls & Snyder (or any affiliate) also are subject to such fiduciary standards
as may be imposed upon Ingalls & Snyder (or such affiliate) by applicable law.
The Investment Adviser provides investment advisory services to
individuals and other institutional clients, including corporate pension plans,
<PAGE>
profit-sharing and other employee benefit trusts, and other investment pools.
There may be occasions when other investment advisory clients advised by the
Investment Adviser may also invest in the same securities as the Fund. When
these clients buy or sell the same securities at substantially the same time,
the Investment Adviser may average the transactions as to price and allocate the
amount of available investments in a manner which it believes to be equitable to
each client, including the Fund. As well, to the extent permitted by law, the
Investment Adviser may aggregate the securities to be sold or purchased for the
Fund with those to be sold or purchased for other clients managed by it in order
to obtain lower brokerage commissions.
The Fund does not normally engage in frequent trading activities for
short-term gains; however, the Investment Adviser will effect portfolio
transactions without regard to holding period if, in its judgment, such
transactions are advisable in light of a change in circumstances of a particular
company or within a particular industry or in general market, economic or
financial conditions. While the Fund anticipates that its annual portfolio
turnover rate should not exceed 50% under normal conditions, it is impossible to
predict portfolio turnover rates. The portfolio turnover rate is calculated by
dividing the lesser of the Fund's annual sales or purchases of portfolio
securities (exclusive of purchases or sales of securities whose maturities at
the time of acquisition were one year or less) by the monthly average value of
the securities in the portfolio during the year.
SHARES OF BENEFICIAL INTEREST
The Trust is a series business trust that currently offers one series
of shares. The beneficial interest of the Trust is divided into an unlimited
number of shares, with a par value of $0.001 each. Each share has equal
dividend, voting, liquidation and redemption rights. There are no conversion or
preemptive rights. Shares, when issued, will be fully paid and nonassessable.
Fractional shares have proportional voting rights. Shares of the Fund do not
have cumulative voting rights, which means that the holders of a majority of the
shares voting for the election of trustees can elect all of the trustees if they
choose to do so and, in such event, the holders of the remaining shares will not
be able to elect any person to the Board of Trustees. Shares will be maintained
in open accounts on the books of the Transfer Agent, and stock certificates
representing shares of the Fund will not be issued.
If they deem it advisable and in the best interests of shareholders,
the Trustees may create additional funds, each of which represents interests in
a separate portfolio of investments and is subject to separate liabilities, and
may create multiple classes of shares of such funds, which may differ from each
other as to expenses and dividends. If additional funds are created, shares of
each fund will be entitled to vote only to the extent required by the 1940 Act
or as permitted by the Trustees. Upon the Trust's liquidation, all shareholders
of a fund would share pro-rata in the net assets of such fund available for
distribution to shareholders of that fund, but, as shareholders of such a fund,
would not be entitled to share in the distribution of assets belonging to any
other fund.
<PAGE>
DIVIDENDS
A shareholder will automatically receive all dividend and capital
gain distributions in additional full and fractional shares of the Fund unless
the shareholder elects to receive such dividends or distributions in cash.
Shareholders will receive a confirmation of each new transaction in their
account. The Fund will confirm all account activity, including the payment of
dividend and capital gain distributions and all Fund share transactions.
Shareholders may rely on these statements in lieu of stock certificates.
ADDITIONAL INFORMATION CONCERNING DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
DISTRIBUTIONS OF NET INVESTMENT INCOME. The Fund receives income
generally in the form of dividends and interest on its investments. This income,
less expenses incurred in the operation of the Fund, constitute its net
investment income from which dividends may be paid to shareholders. Any
distributions by the Fund from such income will be taxable to most U.S.
shareholders as ordinary income, whether such income is taken in cash or in
additional shares.
DISTRIBUTIONS OF CAPITAL GAINS. The Fund may derive capital gains and
losses in connection with sales or other dispositions of its portfolio
securities. Distributions derived from the excess of net short-term capital gain
over net long-term capital loss will be taxable to most U.S. shareholders as
ordinary income. Distributions paid from long-term capital gains realized by the
Fund will be taxable to most U.S. shareholders as long-term capital gain,
regardless of how long the shares have been held. Any net short-term or
long-term capital gains realized by the Fund (net of any capital loss
carryovers) generally will be distributed once each year, and may be distributed
more frequently, if necessary, in order to reduce or eliminate federal excise or
income taxes on the Fund.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS. The Fund will
inform all shareholders of the amount and character of all distributions at the
time they are paid, and will advise shareholders of the tax status for federal
income tax purposes of such distributions shortly after the close of each
calendar year. If shareholders have not held Fund shares for a year, said
shareholders may have designated and distributed to them as ordinary income or
capital gain a percentage of income that is not equal to the actual amount of
such income earned during the period of their investment in the Fund.
TAXES
THE FOLLOWING IS A SUMMARY OF SELECTED FEDERAL INCOME TAX CONSIDERATIONS THAT
MAY AFFECT THE FUND AND ITS SHAREHOLDERS AND IS BASED UPON THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE"), TREASURY REGULATIONS, COURT DECISIONS AND
IRS RULINGS NOW IN EFFECT, ALL OF WHICH ARE SUBJECT TO CHANGE. IT DOES NOT
PURPORT TO DEAL WITH ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO THE FUND AND ITS SHAREHOLDERS. BECAUSE EVERYONE'S TAX SITUATION IS
<PAGE>
UNIQUE, PLEASE BE SURE TO CONSULT YOUR TAX PROFESSIONAL REGARDING FEDERAL,
STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES.
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY. The Fund
intends to be treated as a regulated investment company under Subchapter M of
the Code and intends to so qualify during the current fiscal year. As a
regulated investment company, the Fund generally pays no federal income tax on
the income and gains it distributes to shareholders. The Board of Trustees
reserves THE right not to maintain the qualification of the Fund as a regulated
investment company if it determines such course of action to be beneficial to
the shareholders. In such case, the Fund would be subject to federal, and
possibly state, corporate taxes on its taxable income and gains, and
distributions to shareholders would be taxed as ordinary dividend income to the
extent of the Fund's available earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS. The Code requires the Fund to
distribute at least 98% of its taxable ordinary income earned during the
calendar year and 98% of its capital gain net income earned during the twelve
month period ending October 31 (in addition to undistributed amounts from the
prior year) to shareholders by December 31 of each year in order to avoid
federal excise taxes. The Fund intends to declare and pay sufficient dividends
in December (or in January that are treated by shareholders as received in
December) but does not guarantee and can give no assurances that such
distributions will be sufficient to eliminate all such taxes.
INVESTMENT PERFORMANCE
For purposes of quoting and comparing the performance of the Fund to
other mutual funds and to relevant indices in advertisements or in reports to
shareholders, performance will be stated in terms of total return or yield. Both
"total return" and "yield" figures will be based on the historical performance
of the Fund.
TOTAL RETURN INFORMATION
The Fund may from time to time provide or advertise performance
information, including its total return and average annual total return. Total
return shows the percentage change in the value of an investment in the Fund
over a specified period, assuming (i) a hypothetical investment of $1,000 at the
beginning of the period, (ii) reinvestment of all dividends and distributions
and (iii) deduction of all applicable charges and expenses, including sales
charges, if any. Average annual total return represents the annual compounded
growth rate that would produce the total return achieved over the applicable
period. Under rules of the SEC, the performance information presented by the
Fund must include the Fund's average annual total return. Under the rules of the
SEC, the Fund's total return information must be calculated according to the
following formula:
<PAGE>
P (1 + T)N = ERV
In advertising its total return and average annual total
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the applicable
periods.
When the period covered by the performance information is less than
one year, the return quoted will be the total return rather than average annual
total return. The performance information provided or advertised by the Fund
would not reflect any deduction or adjustment for sales or other charges that
may be imposed by any investment adviser, financial planner, broker, dealer or
other investment professional or through a fund supermarket, retirement plan or
other intermediary other than the Distributor.
The Fund also may compare its total return and average annual total
return to the performance of various indices including, but not limited to, the
Dow Jones Industrial Average, the Standard & Poor's 500 Stock Index, Russell
Indices, and the Value Line Composite Index.
YIELD INFORMATION
From time to time, the Fund also may advertise a yield figure. A
portfolio's yield is a way of showing the rate of income the portfolio earns on
its investments as a percentage of the portfolio's share price. Under the rules
of the SEC, yield must be calculated according to the following formula:
a - b 6
YIELD = 2x [(----- + 1) - 1]
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.
Yields for the Fund used in advertising are computed by dividing the
Fund's interest and dividend income for a given 30-day period, net of expenses,
by the average number of shares entitled to receive distributions during the
period, dividing this figure by a Fund's offering price at the end of the period
and annualizing the result (assuming compounding of income) in order to arrive
at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock and
<PAGE>
bond mutual funds. Dividends from equity investments are treated as if they were
accrued on a daily basis, solely for the purposes of yield calculations. In
general, interest income is reduced with respect to bonds trading at a premium
over their par value by subtracting a portion of the premium from income on a
daily basis, and is increased with respect to bonds trading at a discount by
adding a portion of the discount to daily income. Capital gains and losses
generally are excluded from the calculation. Income calculated for the purpose
of calculating a Fund's yield differs from income as determined for other
accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yield quoted for a
Fund may differ from the rate of distributions paid by the Fund over the same
period or the rate of income reported in the Fund's financial statements.
PERFORMANCE RANKINGS
The Fund may also advertise the performance rankings assigned by
various publications and statistical services, including but not limited to SEI,
Lipper Mutual Fund Performance Analysis, Intersect Research Survey of Non-U.S.
Equity Fund Returns, Frank Russell International Universe, and any other data
which may be presented from time to time by such analysts as Dow Jones,
Morningstar, Inc., Chase Investment Performance, Wilson Associates, Stanger, CDA
Investment Technologies, Inc., the Consumer Price Index ("CPI"), The Bank Rate
Monitor National Index, IBC/Donaghue's Average/U.S. Government and Agency, or as
they appear in various publications including but not limited to THE WALL STREET
JOURNAL, FORBES, BARRON'S, FORTUNE, MONEY MAGAZINE, THE NEW YORK TIMES,
FINANCIAL WORLD, FINANCIAL SERVICES WEEK, USA TODAY and other regional
publications.
<PAGE>
FINANCIAL STATEMENTS
LEGACY GROWTH FUND
Statement of Assets and Liabilities
ASSETS
Cash $( - )
Receivable from sponsor
Prepaid initial registration fees
Prepaid insurance __________________
Total Assets $( - )
LIABILITIES
Payable to sponsor $_________________
Total Liabilities $( - )
NET ASSETS $( - )
Capital Shares, $0.001 par value, ( - )
unlimited shares authorized
Net asset value offering and redemption price $( - )
per share (net assets/shares outstanding)
LEGACY GROWTH FUND
Statement of Operations
For the Period July 15, 1999 (inception) through [________]
EXPENSES
Organization $
Less: Accrued expenses to be paid by sponsor ($ - )
__________________
Net Income (loss) $0
<PAGE>
LEGACY GROWTH FUND
Notes to the Financial Statements
For the Period July 15, 1999 (inception) through [________]
I. Organization
The Legacy Growth Fund (the "Fund") is a series of The Legacy Funds (the
"Trust"), a business trust organized on July 15, 1999, in the state of Delaware
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end diversified management investment company. The
Legacy Growth Fund is currently the only series of the Trust. The Fund has had
no operations other than those relating to organizational matters, including the
sale of 10,000 shares for cash in the amount of $100,000, which were sold to
Ingalls & Snyder LLC (the "Investment Adviser"), on [________], 1999.
2. Significant Accounting Policies
(a) Organization and Prepaid Initial Registration Expenses
Expenses incurred by the Trust in connection with the organization
and the initial public offering of shares are expended as incurred.
These expenses were advanced by the Investment Adviser, which
voluntarily agreed to reimburse the Fund for such expenses, subject
to potential recovery (see Note 3). Prepaid initial registration
expenses are deferred and amortized over the period of benefit.
(b) Federal Income Taxes
The Fund intends to comply with those requirements of the Internal
Revenue Code necessary to qualify as a regulated investment company
and to make the requisite distributions of income and capital gains
to its shareholders sufficient to relieve it from all or
substantially all Federal income taxes.
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the making of estimates and
use of assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
3. Investment Adviser
The Trust has an Investment Advisory Agreement (the "Agreement") with
the Investment Adviser, with whom certain officers and Trustees of
the Trust are affiliated, to furnish advisory services to the Fund.
Under the terms of the Agreement, the Trust, on behalf of the Fund,
<PAGE>
compensates the Investment Adviser for its management services at the
annual rate of 1% of the Fund's average daily assets.
The Investment Adviser has agreed to voluntarily waive its management
fee and/or reimburse the Fund's other expenses, including
organization expenses, to the extent necessary to ensure that the
Fund's operating expenses do not exceed 1.70% of its average daily
net assets. Any such waiver or reimbursement is subject to later
adjustment to allow the Investment Adviser to recoup amounts waived
or reimbursed to the extent actual fees and expenses for a period are
less than the expense limitation caps, provided, however, that the
Investment Adviser shall only be entitled to recoup such amounts for
a period of three years from the date such amount was waived or
reimbursed.
4. Distribution Plan
The Trust, on behalf of the Fund, has adopted a distribution plan
pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plan"), which
provides that the Fund may reimburse the Fund's distributor or others
at an annual rate of up to 0.25% of the average daily net assets
attributable to its shares. Payments under the 12b-1 Plan shall be
used to compensate or reimburse the Fund's distributor for services
provided and expenses incurred in connection with the sale of shares
and are tied to the amounts of actual expenses incurred.
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Shareholder and Board of Trustees of the Legacy Growth Fund:
We have audited the accompanying statement of assets and liabilities
of the Legacy Growth Fund (the "Fund"), as of [_____] and the related statement
of operations for the period [_____] (inception) through [_____]. These
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based upon
our audit.
We have conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Fund as of
[_____] and the results of its operations for the period July 15, 1999
(inception) through [_____], in conformity with generally accepted accounting
principles.
<PAGE>
PART C. OTHER INFORMATION
-------------------------
Item 23. Exhibits
(a) Certificate of Trust of the Registrant
(1) Agreement and Declaration of Trust of Registrant dated July
14, 1999. To be filed by Pre-Effective Amendment.
(2) Certificate of Trust of Registrant dated July 14, 1999.
(Previously filed as Exhibit 23(a)(2) to the Registration
Statement on Form N-1A on July 27, 1999.)
(b) By-Laws of the Registrant. (Previously filed as Exhibit 23(b) to the
Registration Statement on Form N-1A on July 27, 1999.)
(c) Instruments Defining Rights of Security Holders
(1) Agreement and Declaration of Trust (See Exhibit 23(a)(1).)
(2) Certificate of Trust. (See Exhibit 23(a)(2).)
(3) By-Laws of Registrant. (See Exhibit 23(b).)
(d) Investment Advisory Agreement dated as of __________, 1999 between
the Registrant and Ingalls & Snyder, LLC. (Previously filed as
Exhibit 23(d) to the Registration Statement on Form N-1A on July 27,
1999.)
(e) Distribution Agreement dated as of __________, 1999 between the
Registrant and Ingalls & Snyder, LLC. (Previously filed as Exhibit
23(e) to the Registration Statement on Form N-1A on July 27, 1999.)
(f) Not Applicable
(g) Custodian Servicing Agreement dated as of ________, 1999 between the
Registrant and Firstar Bank Milwaukee, N.A. (Previously filed as
Exhibit 23(g)(1) to the Registration Statement on Form N-1A on July
27, 1999.)
(h) Other Material Contracts
(1) Fund Administration Servicing Agreement dated as of ________,
1999 between the Registrant and Firstar Mutual Fund Services,
LLC. (Previously filed as Exhibit 23(h)(1) to the Registration
Statement on Form N-1A on July 27, 1999.)
<PAGE>
(2) Fund Accounting Servicing Agreement dated as of ________, 1999
between the Registrant and Firstar Mutual Fund Services, LLC.
(Previously filed as Exhibit 23(h)(2) to the Registration
Statement on Form N-1A on July 27, 1999.)
(3) Transfer Agency Servicing Agreement dated as of ________, 1999
between the Registrant and Firstar Mutual Fund Services, LLC.
(Previously filed as Exhibit 23(h)(3) to the Registration
Statement on Form N-1A on July 27, 1999.)
(i) Legal Opinion and Consent of Hughes Hubbard & Reed LLP to be filed
by Pre-Effective Amendment.
(j) Consent of independent auditors to be filed by Pre-Effective
Amendment.
(k) Omitted Financial Statements, if any, to be filed by Pre-Effective
Amendment.
(l) Initial Capital Agreements to be filed by Pre-Effective Amendment.
(m) Distribution Plan. (Previously filed as Exhibit 23(m) to the
Registration Statement on Form N-1A on July 27, 1999.)
(n) Not Applicable
Item 24. Persons Controlled by or under Common Control with Fund
Prior to the commencement of the public offering of the shares of the Fund
all of the outstanding shares of the Trust will be owned by Ingalls & Snyder,
LLC.
Thomas O. Boucher, Jr. and Robert L. Gipson, who are a Managing Director
and a Senior Director, respectively, of Ingalls & Snyder are general partners of
Ingalls & Snyder Value Partners, L.P. ("Value Partners"). Value Partners is a
private investment fund organized as a New York limited partnership for which
Ingalls & Snyder acts as investment adviser.
Item 25. Indemnification
Reference is made to Section 7.02 of the Registrant's Agreement and
Declaration of Trust, which provides that, subject to the provisions of the
Fund's Bylaws, the Trust out of its assets may indemnify and hold harmless each
and every Trustee and officer of the Trust from and against any and all claims,
demands, costs, losses, expenses, and damages whatsoever arising out of or
related to such Trustee's performance of his or her duties as a Trustee or
officer of the Trust, except that the Trust is not obligated to indemnify, hold
harmless or protect any Trustee or officer from or against any liability to the
Trust or any shareholder to which he or she would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
<PAGE>
Article VI of the Fund's Bylaws provide that the Trust is obligated to
indemnify the Trustees and officers of the Trust if the Trustee or officer was
or is a party or is threatened to be made a party to any proceeding (other than
an action by or in the right of the Trust) by reason of the fact that such the
Trustee or officer is or was a Trustee or officer of the Trust, against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding, if it is determined that
the Trustee or officer acted in good faith and reasonably believed: (a) in the
case of conduct in his official capacity, that his conduct was in the Trust's
best interests and (b) in all other cases, that his conduct was at least not
opposed to the Trust's best interests and (c) in the case of a criminal
proceeding, that he had no reasonable cause to believe the conduct of that
person was unlawful.
In the case of actions by or in the right of the Trust, the Trust is
obligated to indemnify any Trustee or officers who was or is a party or is
threatened to be made a party to any such proceeding by or in the right of the
Trust to procure a judgment in its favor by reason of the fact that that person
is or was a Trustee or officer of the Trust, against expenses actually and
reasonably incurred by that person in connection with the defense or settlement
of that action if the Trustee or officer acted in good faith, in a manner that
he believed to be in the best interests of the Trust and with such care,
including reasonable inquiry, as an ordinarily prudent person in a like position
would use under similar circumstances.
There is no right to indemnification for any liability arising by reason
of willful misfeasance, bad faith, gross negligence, or the reckless disregard
of the duties involved in the conduct of the Trustee's or officer's office with
the Trust. Indemnification may not be made:
(i) In respect of any proceeding as to which the Trustee or officer
shall have been adjudged to be liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted from an action
taken in the person's official capacity; or
(ii) In respect of any proceeding as to which that person shall have
been adjudged to be liable in the performance of that person's duty to the
Trust, unless and only to the extent that the court in which that action was
brought shall determine upon application that in view of all the relevant
circumstances of the case, that person is fairly and reasonably entitled to
indemnity for the expenses which the court shall determine; however, in such
case, indemnification with respect to any proceeding by or in the right of the
Trust or in which liability shall have been adjudged by reason of the disabling
conduct set forth in the preceding paragraph shall be limited to expenses; or
(iii) Of amounts paid in settling or otherwise disposing of a
proceeding, with or without court approval, of expenses incurred in defending a
proceeding which is settled or otherwise disposed of without court approval,
unless the indemnification is approved based on a determination that
indemnification of the Trustee or officer is proper in the circumstances because
the Trustee or officer has met the applicable standard of conduct and is not
prohibited from indemnification because of the disabling conduct described
above, by:
<PAGE>
(A) a majority vote of a quorum consisting of Trustees who are
not parties to the proceeding and are not interested persons of the
Trust;
(B) a written opinion by an independent legal counsel; or
(C) the shareholders.
To the extent that a Trustee or officer has been successful, on the merits
or otherwise, in the defense of any proceeding before the court or other body
before whom the proceeding was brought, the Trustee or officer shall be
indemnified against expenses actually and reasonably incurred by the Trustee or
officer in connection therewith, provided that the Board of Trustees, including
a majority who are disinterested, non-party Trustees, also determines that based
upon a review of the facts, the Trustee or officer was not liable by reason of
the disabling conduct described above.
Expenses incurred in defending any proceeding may be advanced by the
Trust before the final disposition of the proceeding if (a) receipt of a written
affirmation by the Trustee or officer of his good faith belief that he has met
the standard of conduct necessary for indemnification and a written undertaking
by or on behalf of the Trustee or officer to repay the amount of the advance if
it is ultimately determined that he has not met those requirements, and (b) a
determination that the facts then known to those making the determination would
not preclude indemnification.
The Trust intends to purchase and maintain insurance which will insure
Trustees and officers of the Trust against any liability asserted against or
incurred by the Trustee or officer in such capacity or arising out of the
Trustee's or officer's status as such to the fullest extent permitted by law.
Pursuant to Rule 484 under the Securities Act of 1933, as amended, the
Registrant furnishes the following undertaking:
Insofar as indemnification for liability arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
Item 26. Business and Other Connections of Investment Adviser
The name and address of each director, officer and partner of Ingalls &
Snyder, LLC, together with their positions with Ingalls & Snyder, their
positions, if any, with the Fund and their other business connections for the
past two years are set forth below.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES BUSINESS AND
BUSINESS ADDRESS INGALLS & SNYDER, LLC WITH FUND OTHER CONNECTIONS
<S> <C> <C> <C>
Roscoe Cuningham Ingalls Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Lawton Storrs Lamb Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
William Reed Simmons Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Edward H. Oberst Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
<PAGE>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES BUSINESS AND
BUSINESS ADDRESS INGALLS & SNYDER, LLC WITH FUND OTHER CONNECTIONS
D. Roger B. Liddell Managing Director Trustee None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Thomas O. Boucher, Jr. Managing Director None General Partner of Ingalls & Snyder Value
Ingalls & Snyder, LLC Partners, L.P.
61 Broadway 61 Broadway
New York, New York 10006 New York, New York 10006
John Joseph Dougherty Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Steven Michael Foote Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Robert E. Belknap Senior Director Trustee and None
Ingalls & Snyder, LLC portfolio manager
61 Broadway
New York, New York 10006
<PAGE>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES BUSINESS AND
BUSINESS ADDRESS INGALLS & SNYDER, LLC WITH FUND OTHER CONNECTIONS
Alexander M. Blanton Senior Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Horace S. Boone Senior Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Robert Livingston Gipson Senior Director None General Partner of Ingalls & Snyder Value
Ingalls & Snyder, LLC Partners, L.P.
61 Broadway 61 Broadway
New York, New York 10006 New York, New York 10006
</TABLE>
<PAGE>
Item 27. Principal Underwriters
(a) Not Applicable.
(b) Please see Item 26.
(c) Not applicable.
Item 28. Location of Accounts and Records
The books and other documents required to be maintained pursuant to Rule
31a-1(b) (4) and (b) (10) are in the physical possession of the Fund's
Investment Adviser, Ingalls & Snyder LLC, 61 Broadway, New York, New York,
10006; accounts, books and other documents required by Rule 31a-1(b) (5) through
(7) and (b) (11) and Rule 31a-1(f) are in the physical possession of Ingalls &
Snyder LLC, 61 Broadway, New York, New York, 10006; all other books, accounts
and other documents required to be maintained under Section 31(a) of the
Investment Company Act of 1940 and the Rules promulgated thereunder are in the
physical possession of Firstar Mutual Fund Services, LLC and Firstar Bank
Milwaukee, N.A., 615 East Michigan Street, P.O. Box 701, Milwaukee, Wisconsin,
53201-0701.
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
See Item 25.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement or amendment to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York, and State of New York, on October 28,
1999.
THE LEGACY FUNDS, INC.
By: /S/ THEODORE F. ELLS
----------------------------------
Theodore F. Ells, Esq.
Chairman of the Board of Trustees
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment has been signed below by the following
persons in the capacities and on the dates indicated:
/S/ THEODORE F. ELLS Chairman of the Board of October 28, 1999
- -------------------------------- Trustees and Trustee
(Theodore F. Ells, Esq.) (Principal Executive Officer)
/S/ BARNABAS B. B. BREED Treasurer (Principal October 29, 1999
- -------------------------------- Financial Officer)
(Barnabas B. B. Breed, Esq.) and Trustee
/S/ ROBERT E. BELKNAP Trustee October 28, 1999
- --------------------------------
(Robert E. Belknap)
/S/ D. ROGER B. LIDDELL Trustee October 28, 1999
- --------------------------------
(D. Roger B. Liddell)
