As filed with the Securities and Exchange Commission on August 15, 2000
File Nos. ________ and __________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.______ [ ]
Post-Effective Amendment No.______ [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No._______
EVEREST SERIES FUNDS TRUST
--------------------------
(Exact Name of Registrant as Specified in Charter)
5711 S. 86th Circle
Omaha, Nebraska 68127
(Address of Principal Executive Offices) (Zip Code)
(402) 593-4513
(Registrant's Telephone Numbers, Including Area Code)
Vinod Gupta
5711 S. 86th Circle
Omaha, Nebraska 68127
(Name and Address of Agent for Service)
Copies to:
Elaine Richards, Esq.
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
As soon as practicable after this Registration Statement is declared effective.
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b).
[ ] on (date) pursuant to paragraph (b).
[ ] 60 days after filing pursuant to paragraph (a)(1).
[ ] on (date) pursuant to paragraph (a)(1).
[ ] 75 days after filing pursuant to paragraph (a)(2).
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
THE 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
The information in this Prospectus is not complete and may be changed. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. We may not sell these securities until that
registration statement becomes effective. This Prospectus is not an offer to
sell these securities and is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
PROSPECTUS
__________________, 2000
Subject to completion, dated August 14, 2000
EVEREST INDEX3 FUND
A Series of the Everest Series Funds Trust
The Everest Index3 Fund seeks to match or exceed the investment return
of the overall stock market by investing in exchange traded index shares
designed to closely track the price and yield performance of Standard & Poor's
500(R) Index, the Dow Jones Industrial AverageSM and the Nasdaq-100 Index(R).
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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TABLE OF CONTENTS
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FUND RISK/RETURN SUMMARY.......................................................1
INVESTMENT OBJECTIVES..........................................................3
PRINCIPAL INVESTMENT STRATEGIES................................................3
INVESTMENT RISKS...............................................................4
INVESTMENT ADVISOR.............................................................5
VALUING FUND SHARES--NET ASSET VALUE...........................................6
PURCHASING FUND SHARES.........................................................7
SELLING (REDEEMING) FUND SHARES................................................8
DISTRIBUTIONS.................................................................10
TAXATION OF THE FUND AND ITS SHAREHOLDERS.....................................11
FINANCIAL HIGHLIGHTS..........................................................11
GENERAL INFORMATION...........................................................11
Standard & Poor's 500(R) Index and Standard & Poor's Depositary Receipts(R) are
registered trademarks of McGraw Hill Companies, Inc. Dow Jones Industrial
AverageSM and the DiamondsSM Trust, Series 1 are service marks of Dow Jones &
Company, Inc. Nasdaq-100 Index(R) is a registered trademark, and Nasdaq-100
TrustSM is a service mark of Nasdaq. Neither Everest Series Funds Trust nor
Everest Index3 Fund is sponsored, endorsed, sold or promoted by McGraw Hill
Companies, Inc., Dow Jones & Company, Inc. or Nasdaq.
FUND RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
Everest Index3 Fund (the "Fund") seeks to match or exceed the
investment return of the overall stock market by investing in exchange traded
index shares designed to closely track the price and yield performance of
Standard & Poor's 500(R) Index, the Dow Jones Industrial AverageSM and the
Nasdaq-100 Index(R).
PRINCIPAL INVESTMENT STRATEGIES
The principal investment strategies of Everest Funds Management, LLC,
the investment advisor of the Fund, include:
o Using an asset allocation strategy designed to obtain a broadly diversified,
index-based investment.
o Investing Fund assets in exchange traded index shares that track the
performance of the Dow Jones Industrial AverageSM, Standard & Poor's 500(R)
Index and the Nasdaq-100(R) Index. The Fund will invest at least 20% of
its assets in shares of each of the three indexes and not more than 60% of the
assets in shares representing any one index.
PRINCIPAL INVESTMENT RISKS
By investing in the Fund, you are subject to several investment risks.
The principal risks include the following:
o You can lose money on your investment.
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Different segments of the market can react differently to these developments.
Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices.
o The value of an individual index can be more volatile than the market as a
whole and can perform differently than the value of the market as a whole.
BAR CHART AND PERFORMANCE TABLE
Because the Fund has no operating history, there is no performance
information available for the Fund at this time.
FEE TABLE
The following table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund. The annual Fund operating expenses are
based on estimated expenses.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) on Purchases None
(AS A PERCENTAGE OF OFFERING PRICE)
Maximum Deferred Sales Charge (Load) on Redemptions None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
(AS A PERCENTAGE OF OFFERING PRICE)
Redemption Fee or Shares 0.50%(1)
(AS A PERCENTAGE OF AMOUNT REDEEMED)
Maximum Account Fee None(2)
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 0.50%
Distribution and/or Service (12b-1) Fees None
Other Expenses(3) 1.86%
-------------
Total Annual Fund Operating Expenses 2.36%
Less Expense Reimbursement -1.86%(4)
-------------
Net Annual Fund Operating Expense 0.50%
=============
(1) The Fund charges a redemption fee of 0.50% on shares of the Fund that you
have held for less than 90 days.
(2) IRA accounts are charged a maximum account fee of $12.50 per year.
(3) Other expenses are based on estimates for the current fiscal year and
include, among other things, the fees, if any, the Fund is charged when it
invests in exchange traded index shares.
(4) Pursuant to the investment advisor agreement between the Fund and Everest
Funds Management, LLC, the investment advisor of the Fund, the investment
advisor will reimburse the Fund all other expenses above management fees of the
Fund's average annual net assets.
EXAMPLE
This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the Fund for the time periods indicated and the fee
is the same whether or not you redeem all of your shares of the Fund at the end
of those periods. (As mentioned above, if you redeem shares within 90 days of
the time you purchased the shares, you will be charged a redemption fee on the
shares you redeem.) 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
------------ ------------
$51 $160
------------ ------------
INVESTMENT OBJECTIVES
The objective of the Fund is to match or exceed the investment return
of the overall stock market by investing in exchange traded index shares
designed to closely track the price and yield performance of Standard & Poor's
500(R) Index, the Dow Jones Industrial AverageSM and the Nasdaq-100 Index(R).
PRINCIPAL INVESTMENT STRATEGIES
Everest Funds Management, LLC, the investment advisor of the Fund, (the
"investment advisor") invests the assets of the Fund using an asset allocation
strategy designed to obtain a broadly diversified, index-based investment.
The investment advisor will allocate assets of the Fund among exchange
traded index shares that are unaffiliated with the Fund according to the
following target asset allocation: (a) between 20% and 60% in exchange traded
index shares that track the Standard & Poor's 500(R) Index; (b) between 20% and
60% in exchange traded index shares that track the Nasdaq-100 Index(R); and (c)
between 20% and 60% in exchange traded index shares that track the Dow Jones
Industrial Averages(TM).
To track the target indexes, the Fund will attempt to remain fully
invested as described in the preceding paragraph. The Fund may temporarily have
assets in cash and other cash equivalents such as money market funds. The
investment advisor may also, from time to time, select alternate exchange traded
index shares to replace any that are currently invested in. In every such
instance that a substitute trade index share is utilized, the securities
invested in will measure the same general market as the trade of index that is
replaced. The Fund will only invest in exchange traded index shares in which the
investment advisor believes that the issuer of such shares is a "regulated
investment company" under the Internal Revenue Code of 1986, as amended. See
"Taxation of the Fund and its Shareholders."
The investment advisor intends to manage the Fund to remain within its
target asset allocation by adjusting the asset allocation of the Fund on a
quarterly basis, and does not intend to trade actively among the exchange traded
index shares or intend to attempt to capture short-term market opportunities.
Generally, the Fund will sell securities only to respond to redemption requests
or to adjust the number of shares held to maintain the Fund's target asset
allocation or to adjust the asset allocation as described above. The turnover
rate of the portfolio in which the Fund invests could affect the Fund's future
returns. Generally, the greater the portfolio turnover (the volume of buying and
selling by the Fund), the greater the impact that brokerage commissions and
other transaction costs have on the Fund's return. High turnover rates are more
likely to generate capital gains that must be distributed to shareholders as
income subject to taxes.
The Fund may hold uninvested cash or can invest it in cash equivalents
such as money market securities, repurchase agreements or shares of money market
funds temporarily for defensive purposes or to assist in meeting shareholder
redemptions.
DESCRIPTION OF EXCHANGE TRADED INDEX SHARES
The exchange traded index shares to be invested in by the Fund
currently consist of shares in a unit investment trust. Each such trust acquires
and holds either:
(a) shares of all of the companies that are represented by the applicable index
in the same proportion that is represented in the indexes themselves or
(b) shares of a sampling of the companies that are represented by the applicable
index in a proportion that is meant to track the performance of the entire
index.
The stock holdings of the trust representing each index share are held
by a trustee and units in that trust that are issued to investors trade at a
fraction of the price of the applicable index.
The purpose of these unit investment trusts is to track as closely as
possible the performance of the designated index by tracking the overall
performance of the companies comprising the applicable index. As a result, these
trusts are passively managed to reduce transaction costs associated with the
frequent purchase and sale of securities. As an investor in the trusts, the Fund
purchases an index share or shares that is comprised of all or a representative
sample of the companies that are in the index. An index trust has operating
expenses and transaction costs, while a market index does not. Therefore, an
index trust, while expected to track its target index closely, typically will be
unable to match the performance of the index exactly.
Generally, the trusts will only issue exchange traded index shares in
specified large-sized minimum numbers. However, the purchase and sale of index
traded shares occurs most frequently in the secondary trading market on the
securities exchange in lots of any size. Unlike a share in a mutual fund that is
repriced at net asset value once a day, the shares of these unit investment
trusts are listed for trading on a stock exchange and are bought and sold in the
secondary market like ordinary shares of stock at any time during the trading
day.
See "Valuing Fund Shares--Net Asset Value."
For example, the American Stock Exchange has multiple exchange traded
index shares listed that are actively traded. Standard & Poor's Depositary
Receipts(R) trade under the symbol "SPY" and track the Standard & Poor's 500(R)
Index. Nasdaq-100 TrustSM trades under the symbol "QQQ" and tracks the
performance of the Nasdaq-100(R) Index. Finally, the DiamondsSM Trust, Series 1
trades under the symbol "DIA" and tracks the performance of the Dow Jones
Industrial AverageSM. Other similar exchange traded index shares are now
exchange listed and more may be listed in the future.
In connection with its investment in exchange traded index shares, the
Fund will incur various costs that you will ultimately bear. The Fund may
realize capital gains when index shares are sold and the purchase and sale of
the exchange traded index shares include a brokerage commission. In addition,
the Fund is subject to the other fees as an investor in a unit investment trust.
Generally, those fees include the fees of investing in a mutual fund, including
but not limited to trustees fees, operating expenses, licensing fees,
registration fees and marketing expenses, each of which will be reflected in the
net asset value of the unit trust and, the exchange traded index shares
representing a beneficial interest therein.
INVESTMENT RISKS
Many factors affect the Fund's performance. The share price of the Fund
changes daily based on the performance of the exchange traded index shares in
which it invests. The ability of the Fund to meet its investment objective is
directly related to its target asset allocation among the three indexes and the
ability of indexes to meet the investment objectives of the Fund.
The Fund is also subject to the following principal risks:
o LOSS OF MONEY: You can lose money on your investment.
o STOCK MARKET RISK: Stock markets are volatile and can decline significantly in
response to adverse issuer, political, regulatory, market or economic
developments. Different segments of the market can react differently to these
developments. Issuer, political, or economic developments can affect a single
issuer, issuers within an industry or economic sector or geographic region, or
the market as a whole. Stock markets tend to move in cycles, with periods of
rising prices and periods of falling prices.
o INDIVIDUAL SECURITIES RISK: The value of an individual security or particular
type of security can be more volatile than the market as a whole and can
perform differently than the value of the market as a whole.
o CONCENTRATION RISK: An investment in certain index traded shares may be more
heavily weighted in the technology sector such as the Nasdaq-100 Index(R).
Rapid changes in technology stocks may translate into increased volatility of
the Fund's shares.
o EXCHANGE TRADED INDEX SHARES RISK: The Fund may not be able to sell exchange
traded index shares during any period in which the applicable exchange halts
trading in such shares. The applicable exchange may halt trading as the result
of the activation of market-wide "circuit-breakers" or whatever officials of
the applicable exchange determine is appropriate in the interest of a fair and
orderly market or to protect investors. The exchange traded index shares may
fail to meet new listing requirements and may be delisted.
o NON-DIVERSIFICATION RISK: The Fund is a non-diversified fund, because the Fund
may invest up to all of its assets in the index traded shares of as few as
three unit investment trusts. A decline in the value of any of these trusts as
a result of a decline in the related indexes would have a greater effect on
the Fund than if the Fund invested its assets in a greater number of indexes
or issuers.
In response to market, economic, political or other conditions, the
investment advisor of the Fund may temporarily use a different investment
strategy for defensive purposes. If the investment advisor does so, different
factors could affect the Fund's performance and the Fund may not achieve its
investment objective.
INVESTMENT ADVISOR
INVESTMENT ADVISOR
The investment advisor to the Fund, Everest Funds Management, LLC is
located at 5711 S. 86th Circle, Omaha, Nebraska 68127. The investment advisor, a
Delaware limited liability company, serves as investment advisor to the Fund and
is responsible for handling the business and the day-to-day operations of the
Fund. As of the date of this prospectus, the only discretionary assets under
management of the investment advisor are the assets of the Fund.
In exchange for its services, the investment advisor is entitled to
receive a management fee from the Fund, calculated daily and payable monthly,
equal to 0.50% of the average daily net assets of the Fund. No sales charges or
commissions are payable in connection with the sale of the Fund's shares. The
expenses incurred in the sale of Fund shares, including advertising and
promotion, are included among the organizational expenses which will be paid by
the investment advisor of the Fund.
SUB-ADVISOR
Pursuant to a sub-advisory agreement (the "sub-advisory agreement")
between the investment advisor and Pflug Investment Management, Inc. (the
"sub-advisor"), the sub-advisor will provide certain advisory services to the
Fund.
Pursuant to the sub-advisory agreement with the sub-advisor, the
sub-advisor will be paid directly by the investment advisor and, while the
ultimate responsibility for the day-to-day operations of the Fund remains with
the investment advisor, the sub-advisor will develop and maintain an investment
program for the Fund and will make investment decisions for all of the assets of
the Fund and will place all orders for the purchase and sale of securities, all
on behalf of the Fund.
In exchange for its services to the investment advisor, the sub-advisor
is entitled to receive a management fee from the investment advisor, calculated
daily and payable monthly, equal to 0.15% of the average daily net assets of the
Fund.
PORTFOLIO MANAGER
The portfolio manager of the Fund is Douglas M. Larson, the Chief
Investment Officer of the investment advisor. The portfolio manager is primarily
responsible for the day-to-day management of the Fund's portfolio. From June
1999 through April 2000, Mr. Larson served as a Vice President and Senior Trust
Officer of Commercial Federal Bank in Omaha, Nebraska, before which he served as
Senior Vice President and Senior Trust Officer at Marquette Bank from April 1996
through June 1999. Prior to that, Mr. Larson served as a Trust Department
Manager and Trust Officer in two community banks in central Iowa.
While the portfolio manager has the ultimate discretion over the
day-to-day administration of the Fund, pursuant to the sub-advisory agreement,
the sub-advisor will develop and maintain an investment program for the Fund
and will make investment decisions for all of the assets of the Fund and
will place all orders for the purchase and sale of securities, all on
behalf of the Fund. The portfolio manager of the sub-advisor is Thomas
F. Pflug. Mr. Pflug has acted as the president of the sub-advisor since its
incorporation in Nebraska in 1992 and was a vice-president with Wallace R.
Weitz & Co., an investment advisor in Nebraska, from 1989 through 1992.
VALUING FUND SHARES--NET ASSET VALUE
The Fund is open for business each day the New York Stock Exchange is
open. The value of a single share of the Fund is the net asset value per share
(the Fund's "net asset value"), that is calculated by dividing the net assets of
the Fund by the total number of outstanding shares of the Fund. The Fund
normally calculates the Fund's net asset value as of the close of business of
the New York Stock Exchange (usually 4:00 p.m. Eastern time) on each day when
the New York Stock Exchange is open. However, the net asset value may be
calculated earlier if trading on the New York Stock Exchange is restricted or as
permitted by the Securities and Exchange Commission. The Fund's assets are
valued as of this time for purposes of computing the Fund's net asset value.
To the extent that the Fund's assets are traded in other markets on
days in which the New York Stock Exchange is closed, the value of the Fund's
assets may be affected on days when the Fund is not open for business. In
addition, trading in some of the Fund's assets may not occur on days in which
the Fund is open for business.
The assets of the Fund consist primarily of exchange traded index
shares which are all traded on a stock exchange. Unlike shares of the Fund that
are only valued once a day, these exchange traded index shares are valued on an
ongoing basis on the basis of market quotations.
To the extent the Fund obtains securities for which market quotations
are not readily available, those securities are valued on the basis of
information furnished by a pricing service or services, approved by the Fund's
board of trustees, which furnishes the investment advisor with valuations based
in each case upon information concerning market transactions and quotations from
recognized securities broker-dealers. The methods used by such pricing service
and the valuations so established are reviewed regularly by officers of the Fund
under the general supervision of its board of trustees. The use of such service
by the Fund is the method selected by the Fund's board of trustees for obtaining
a fair determination of the value of securities for which quotations are not
readily available.
If market quotations or information furnished by a pricing service is
not available for an exchange traded index share or if the value of a security
held by an exchange traded index share has been materially affected by events
occurring after the close of the exchange or market on which the security is
principally traded (for example, a foreign exchange or market), that security
may be valued by another method that the Fund's board of trustees believes
accurately reflects fair value. A securities valuation may differ depending on
the method used for determining value.
PURCHASING FUND SHARES
Shares of the Fund may be purchased by check, by wire transfer of funds
through a bank or through one or more brokers authorized by the Fund to receive
purchase orders. The minimum initial investment is $10,000. Investments may be
made in any amount in excess of the minimum and subsequent investments may be in
any amount.
The Fund's shares are sold on a continuous basis without a sales charge
at a price which is the Fund's net asset value calculated after a purchase order
is received in proper form. For a complete explanation of how Fund's net asset
value is calculated, see "VALUING FUND SHARES--NET ASSET VALUE."
Short-term or excessive trading into and out of the Fund may harm
performance by disrupting management strategies and by increasing expenses.
Accordingly, the Fund may reject any purchase orders from investors who, in the
investment advisor's opinion, have a pattern of short-term or excessive trading
or whose trading has been or may be disruptive to the Fund.
The Fund may stop offering shares completely or may offer shares only
on a limited basis, for a period of time or permanently. The Fund has the right
to limit the amount of purchases and to refuse to sell shares to any person.
PURCHASES BY CHECK
You may purchase initial shares by mailing a completed account
application form together with a check payable to "Everest Series Funds Trust"
for the amount you wish to invest in the Fund or for subsequent purchases in the
Fund. The mailing address is as follows:
REGULAR MAIL OVERNIGHT MAIL
Everest Series Funds Trust Everest Series Funds Trust
Everest Index3 Fund Everest Index3 Fund
c/o Firstar Mutual Funds Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
For subsequent purchases, you should write your account number on the
check, and enclose the stub portion of the most recent confirmation statement
received from the Fund. If your check does not clear, your purchase will be
canceled and you will be charged a fee of $25 by Firstar Mutual Fund Services,
LLC, the Fund's transfer agent.
PURCHASES BY WIRE
You may purchase shares by wiring federal funds to Firstar Mutual Funds
Services, LLC, the Fund's transfer agent (the "transfer agent"). Prior to an
initial investment, you should call toll free (___) ____-_____ to obtain a
shareholder account number and instructions.
You should then instruct your bank to wire transfer the intended
investment amount in federal funds to:
Firstar Bank, N.A.
Milwaukee, WI 53202
ABA # 042000013
Credit: Firstar Mutual Fund Services, LLC
Account # 112-952-137
Further Credit: Everest Series Funds Trust, Everest Index3 Fund.
(your name or the title on the account)
(your account #)
You should send a completed account application form to the Fund's
transfer agent before withdrawals can be handled.
PURCHASES THROUGH AN AUTHORIZED BROKER
The Fund has authorized one or more brokers to receive on its behalf
purchase and redemption orders. Such brokers are further authorized to designate
other intermediaries to receive purchase and redemption orders on the Fund's
behalf. A purchase order will be deemed to be received by the Fund when an
authorized broker, or, if applicable, a broker's authorized designee, receives
such order.
AUTOMATIC INVESTMENT PLAN
Under the Fund's automatic investment plan ("automatic investment
plan"), you may purchase additional shares automatically on a periodic basis by
electronic funds transfer from a checking account, if the bank which maintains
the account is a member of the Automated Clearing House, or by preauthorized
checks drawn on your bank account. You may, of course, terminate the program at
any time. The automatic investment plan application contains the requirements
applicable to this program. In addition, you may obtain more information
concerning this program from their broker-dealers or from the distributors.
The market value of the Fund's shares is subject to fluctuation. Before
undertaking any plan for systematic investment, the investors should keep in
mind that such a program does not assure a profit or protect against a loss.
SELLING (REDEEMING) FUND SHARES
You may redeem the Fund's shares at a price equal to the next
determined net asset value after the Fund's transfer agent receives your
redemption request in proper form minus, if applicable, the short-term trading
fee discussed in the next paragraph.
The Fund will deduct a short-term trading fee of 0.50% from the
redemption amount if you sell your shares after holding them less than 90 days.
The short-term trading fees are designed to offset the brokerage commissions,
market impact, and other costs associated with fluctuations in the Fund asset
levels and cash flow caused by short-term shareholder trading. If you purchased
shares on different days, the shares you held longest will be redeemed first for
purposes of determining whether the short-term trading fee applies. The
short-term trading fee does not apply to shares that were acquired through
reinvestment of distributions.
REDEMPTION BY MAIL
You may redeem Fund shares by sending a written redemption request to
the Fund's transfer agent. The redemption request should state the name of the
Fund, the name(s) on your account, your account number and the dollar amount or
number of shares to be redeemed. The signature, whether on the written request
or on a stock power, must either be signed exactly as the shareholder name(s)
appears on the account statement, including fiduciary capacity (e.g., Trustee,
Guardian) or, in the case of a change of address or if the name is different
from the account statement, must be guaranteed by an authorized person of a
commercial bank or a member firm of the New York Stock Exchange. The Fund's
transfer agent may require additional supporting documents for redemptions made
by corporations, executors, administrators, personal representatives, trustees,
guardians and other fiduciaries. The Fund does not consider the U.S. Postal
Service or other independent delivery services to be its agents. Therefore, when
you deposit your account application form, additional purchase requests, or
redemption request in the mail or use other delivery services, or if your
documents are simply in the transfer agent's post office box, that does not mean
that the transfer agent or the Fund actually received those documents.
Send your redemption requests to:
REGULAR MAIL OVERNIGHT MAIL
Everest Series Funds Trust Everest Series Funds Trust
Everest Index3 Fund Everest Index3 Fund
c/o Firstar Mutual Funds Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
Redemption proceeds are normally mailed on the next business day
following receipt of a redemption request in proper form but in no event later
than seven days following receipt of such requests.
REDEMPTION BY TELEPHONE
You may redeem Fund shares by telephone if the appropriate section on
the account application form has been completed. You may request redemptions by
telephoning the Fund's transfer agent at (___) ___-____ and arranging for the
proceeds to be wire transferred to a previously designated bank account if all
of the following conditions are met:
(a) A telephone redemption authorization included in the account application
form is on file with the Fund before the redemption request is placed. See
the appropriate section on the account application form. This authorization
requires designation of a bank account to which the redemption payment is
to be wired. The proceeds will not be wired to other than the designated
bank account.
(b If you did not establish the telephone redemption privilege or wishes to
change the bank account to which the redemption payment is to be wired, you
must provide the Fund with a signed, signature guarantee request designating
the change.
(c) No shares to be redeemed by telephone may be represented by certificates.
Redemption is consummated at the net asset value in effect at the close
of business of the day the redemption request is received if received prior to
1:00 p.m. New York time. Shares purchased by a personal check cannot be redeemed
by telephone until the check has cleared the bank, which may take up to 15 days.
Accordingly, if this restriction is of concern to you, consider making your
purchases by wire transfer.
If transfer is requested by telephone in accordance with the procedures
described above, payment will be by wire transfer to the bank account designated
on the account application form. The telephone redemption procedure may be
modified or terminated at any time by the Fund or the transfer agent.
The transfer agent's charges for each such wire transfer, currently
$12.00, will be deducted from the proceeds of the redemption. Apart from the
charge imposed by the Fund's transfer agent for effecting a redemption payment
by a bank wire transfer and, if applicable, the short-term trading fee described
previously in this section, neither the Fund nor the transfer agent imposes a
redemption fee. If you use the services of a broker-dealer to process your
redemption requests, the broker-dealer may charge a fee for such services.
DISTRIBUTIONS
Generally, the Fund will declare dividends of net investment income
annually. If such day falls on a weekend or holiday on which the New York Stock
Exchange is closed, the dividend will be distributed on the next succeeding
business day. Payments vary in amount depending on income received from
portfolio securities and expenses of operation of the Fund.
Shares will begin earning dividends on the day after which the Fund
receives payment and shares are issued. Shares or cash continue to earn
dividends through the date they are redeemed or delivered subsequent to
reinstatement.
The Fund intends to qualify as a regulated investment company for
federal income tax purposes and intends to make additional distributions to the
minimum extent necessary to distribute the entire annual investment company
taxable income of the Fund, plus any net capital gains and to avoid imposition
of the excise tax imposed by the Internal Revenue Code of 1986, as amended. The
additional distributions, if needed, would consist of the following:
(a) an increase in distribution scheduled for January to include any amount by
which the estimated Fund investment company taxable income and net capital
gains for a fiscal year exceeds the amount of Fund taxable income previously
distributed with respect to such year, or, if greater, the minimum amount
required to avoid imposition of such excise tax;
(b) a distribution soon after actual annual investment company taxable income
and net capital gains of the Fund have been computed of the amount, if any,
by which such actual income exceeds the distributions already made; or
(c) if, in the reasonable discretion of the investment advisor, such action is
necessary or advisable to preserve the status of the Fund as a regulated
investment company or to avoid imposition of income or excise taxes on
undistributed income.
Shareholders will be notified annually as to the U.S. Federal tax
status of distributions and shareholders receiving distributions in the form of
newly issued shares will receive a report as to the net asset value of the
shares received.
TAXATION OF THE FUND AND ITS SHAREHOLDERS
As with any investment, your investment in the Fund could have tax
consequences for you.
TAXES ON DISTRIBUTIONS
Distributions that you receive from the Fund are subject to federal
income tax, and may also be subject to state or local taxes. For federal tax
purposes, the Fund's dividends and distributions of short-term capital gains are
taxable to you as ordinary income, while the Fund's distributions of long-term
capital gains are taxable to you generally as capital gains.
If you buy shares when a Fund has realized but not yet distributed
income or capital gains, you will be "buying a dividend" by paying the full
price for the shares and then receiving a portion of the price back in the form
of a taxable distribution.
Any taxable distributions you receive from the Fund will normally be
taxable to you when you receive them, regardless of your distributions.
TAXES ON TRANSACTIONS
Your redemptions may result in a capital gain or loss for federal
income tax purposes. A capital gain or loss on your investment in the Fund
generally is the difference between the cost of your shares and the price you
receive when you sell them.
FINANCIAL HIGHLIGHTS
Because the Fund has no operating history, there are no financial
highlights available at this time.
GENERAL INFORMATION
No person has been authorized to give any information or to make any
representations other than those which may be contained in this prospectus and
in the Fund's official sales literature made in connection with the offering of
the Fund's shares and, if given or made, such other information or
representations must not be relied upon as having been authorized by the Fund.
This prospectus does not constitute an offer in any State in which, or to any
person to whom, such offer may not lawfully be made.
EVEREST INDEX3 FUND
A series of Everest Series Funds Trust
5711 S. 86th Circle
Omaha, NE 68127
This prospectus is intended to set forth in a clear and concise manner
information about the Fund that you should know before investing and should be
retained for future reference.
A Statement of Additional Information dated __________, 2000, provides
a further discussion of certain matters covered by this prospectus and other
information about the Fund has been filed with the Securities and Exchange
Commission (the "Commission") and is incorporated herein by reference. The Fund
will also file an annual report and a semi-annual report with the Commission
that include a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
A copy of the Statement of Additional Information is available without
charge from the Fund at the address and telephone number shown below. All
shareholder inquiries and requests for other information about the Fund can also
be made to the following address and telephone number:
Everest Series Funds Trust
Everest Index3 Fund
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53202-0701
Information about the Fund, including the Statement of Additional
Information can be reviewed and copied at the Commission's Public Reference Room
in Washington, D.C. Information on the operation of the public reference room
may be obtained by calling the Commission at (202) 942-8090. Reports and other
information about the Fund are available on the EDGAR Database on the
Commission's Internet site at http://www.sec.gov. Copies of this information may
be obtained, upon payment of a duplicating fee, by electronic request at the
following E-mail address: [email protected], or by writing the Commission's
Public Reference Section, Washington, D.C. 20549-0102.
Investment Company Act File No. __________________
The information in this Statement of Additional Information is not complete and
may be changed. A registration statement relating to these securities has been
filed with the Securities and Exchange Commission. We may not sell these
securities until that registration statement becomes effective. This Statement
of Additional Information is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
STATEMENT OF ADDITIONAL INFORMATION
Dated ___, 2000
Subject to completion, dated August 14, 2000
EVEREST INDEX3 FUND
A Series of the Everest Series Funds Trust
This Statement of Additional Information ("SAI") relates to Everest
Index3 Fund, which is a series of Everest Series Funds Trust, a registered
open-end management investment company, or mutual fund. This SAI is not a
prospectus and is intended to supplement the information provided to investors
in the prospectus dated ___________, 2000 (the "Prospectus") of the Everest
Index3 Fund (the "Fund"). Copies of the Fund's Prospectus may be obtained by
writing the Fund at Firstar Mutual Fund Services, LLC, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701, or calling the Fund at (800) ___-____.
---------------------------------
TABLE OF CONTENTS
---------------------------------
PAGE
Organization of the Trust and the Fund.........................................1
Investment Strategies and Risks................................................1
Management of the Trust........................................................6
Investment Advisor.............................................................8
Underwriter....................................................................9
Service Providers..............................................................9
Portfolio Transactions........................................................10
Purchasing Fund Shares........................................................11
Valuing Fund Shares--Net Asset Value..........................................12
Selling (Redeeming) Fund Shares...............................................12
Tax Considerations............................................................13
Distribution of Fund Shares...................................................17
Calculation of Performance Data...............................................18
Financial Statements..........................................................18
ORGANIZATION OF THE TRUST AND THE FUND
Everest Series Funds Trust (the "Trust") is an open-end management
investment company, or mutual fund, organized as a Delaware business trust on
August 11, 2000. The Fund is one of a series that may be formed by the Trust.
The Fund is a non-diversified series and has its own investment objectives and
policies. The Trust may start another series and offer shares of a new fund
under the Trust at any time.
The Trust is authorized to issue an unlimited number of interests (or
shares). Shares of the Fund have equal voting rights and liquidation rights, and
are voted in the aggregate and not by Fund except in matters where a separate
vote is required by the Investment Company Act of 1940 (the "1940 Act") or when
the matter affects only the interest of a particular Fund. When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each full share owned and fractional votes for fractional shares owned. The
Trust does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the 1940 Act in order to
facilitate communications among shareholders.
Each share of the Fund represents an equal proportionate interest in
the assets and liabilities belonging to that Fund with each other share of that
Fund and is entitled to such dividends and distributions out of the income
belonging to the Fund as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
any Fund into a greater or lesser number of shares of that Fund so long as the
proportionate beneficial interests in the assets belonging to that Fund and the
rights of shares of any other Fund are in no way affected. In case of any
liquidation of a Fund, the holders of shares of the Fund being liquidated will
be entitled to receive as a class a distribution out of the assets, net of the
liabilities, belonging to that Fund. Expenses attributable to any Fund are borne
by that Fund. Any general expenses of the Trust not readily identifiable as
belonging to a particular Fund are allocated by or under the direction of the
Trustees in such manner as the Trustees allocate such expenses on the basis of
relative net assets or number of shareholders. No shareholder is liable to
further calls or to assessment by the Trust without his or her express consent.
The assets of the Fund received for the issue or sale of its shares,
and all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, shall constitute the underlying assets of the Fund. In the
event of the dissolution or liquidation of the Fund, the holders of shares of
the Fund are entitled to share pro rata in the net assets of the Fund available
for distribution to shareholders
INVESTMENT STRATEGIES AND RISKS
The following discussion supplements the description of the Fund's
investment strategies, risks and management policies set forth in the
"Investment Objectives," "Principal Investment Strategies" and the "Principal
Investment Risks" sections of the Prospectus. Unless otherwise noted, whenever
an investment policy or limitation states a maximum percentage of the Fund's
assets that may be invested in any security or other asset, or sets forth a
policy regarding quality standards, such standard or percentage limitation will
be determined immediately after and as a result of the Fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values, net
assets, or other circumstances will not be considered when determining whether
the investment complies with the Fund's investment policies and limitations.
FUNDAMENTAL INVESTMENT LIMITATIONS
The Fund has adopted certain fundamental investment policies and
restrictions that cannot be changed without approval by the holders of a
majority of the outstanding voting shares of the Fund. As defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), a "vote of the
majority of the outstanding voting securities" means the lesser of the vote of
(a) 67% or more of the Fund's shares at a shareholders' meeting where more than
50% of the outstanding shares are represented in person or by proxy or (b) more
than 50% of the Fund's shares. However, except for the fundamental investment
limitations listed below, the investment policies and limitations described in
this SAI are not fundamental and may be changed without shareholder approval.
The following are the Fund's fundamental investment limitations set
forth in their entirety. Without approval by a vote of the majority of the
outstanding voting securities of the Fund, the Fund may not:
(1) Modify the principal investment strategy of the Fund, that requires the
Fund to invest not less than 20% and not more than 60% of the Fund assets
in exchange traded index shares of issuers that are unaffiliated with the
Fund and that track the performance of each of (i) Standard & Poor's
500(R) Index, (ii) Nasdaq-100 Index(R) and (iii) the Dow Jones Industrial
AverageSM except (x) as provided herein under "--Non-Principal Investment
Strategies and Risks." Notwithstanding the foregoing, the Fund may select
alternate exchange traded index shares of issuers that are not affiliated
with the Fund to replace any that are currently invested in. In every
such instance that a substitute trade index share is utilized, the
securities invested in will measure the same general market as the
current trade index. The Fund will only invest in exchange traded index
shares in which Everest Funds Management, LLC, the investment advisor to
the Fund (the "Investment Advisor") believes that the issuer of such
shares is a "regulated investment company" under the Internal Revenue
Code of 1986, as amended (the "Code"). See "Tax Considerations."
(2) Issue senior securities, except in connection with an insurance program
established by the Fund pursuant to an exemptive order issued by the
Securities and Exchange Commission (the "Commission") or as otherwise
permitted under the 1940 Act.
(3) Purchase securities or mak investments other than in accordance with its
investment objective and policies.
(4) Purchase securities if as a result of such purchase more than 25% of the
Fund's total assets would be invested in any one industry. Investments in
other investment companies shall not be considered an investment in any
particular industry for purposes of this investment limitation. For
purposes of this limitation, there is no limitation on the purchase of
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities.
(5) With respect to 75% of the Fund's total assets, purchase the securities
of any issuer (as that term is defined in the Code) (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities, or securities of other investment
companies) if, as a result, (a) more than 5% of the Fund's assets would
be invested in the securities of that issuer, or (b) the Fund would hold
more than 10% of the outstanding voting securities of that issuer.
(6) Make loans to others, if, as a result, of such loan more than 33 1/3% of
the Fund's total assets are lent to other parties, except through the
purchase of debt obligations or repurchase agreements in accordance with
its investment objective and policies.
(7) Borrow money or enter into reverse repurchase agreements, except that the
Fund may borrow money from banks for temporary or emergency (not
leveraging) purposes, including to fulfill redemption requests which
might otherwise require the untimely disposition of securities, in an
amount up to 33 1/3% of the value of the Fund's total assets (including
the amount borrowed) valued at market less liabilities (not including the
amount borrowed) at the time the borrowing is made. Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation.
(8) Invest in real estate or physical commodities unless acquired as a result
of ownership of securities or other instruments or other instruments (but
this shall not prevent the fund from investing in securities or other
instruments backed by real estate or securities of companies engaged in
the real estate business or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities).
(9) Underwrite securities issued by others except to the extent the Fund may
be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of Fund securities.
(10) Except as otherwise provided in Section 12(d) of the 1940 Act and any
rules promulgated thereunder, purchase or otherwise acquire securities
that are issued by another investment company if, after such acquisition,
the Fund and all affiliated persons of the Fund would own more than 3% of
the total outstanding stock of the acquired company.
(11) Offer or sell any of its shares through a principal underwriter or
otherwise at a public offering price which includes a sales load of more
than 1.5% pursuant to section 12(d) 1-(f).
(12) Purchase or maintain any position in a securities-related issuer except
in the approximate proportion that the issuer's stock is represented in
the relevant index in which the Fund invests through exchange traded
index shares, except insofar as may be necessary for the Fund to retain
its status as a "regulated investment company" under the Code.
(13) Purchase or maintain a general partnership interest or a security issued
by the Fund's investment advisor, promoter, or principal underwriter, or
any affiliated company's investment advisor, promoter, or principal
underwriter, or any affiliated person of such investment advisor,
promoter, or principal underwriter.
Along with the Fund's own regulations of borrowing money from a bank in
paragraph (7) above, the 1940 Act limits the ability of the Fund to borrow money
from a bank. Section 18(f)(1) of the 1940 Act prohibits an open-end investment
company from borrowing from a bank unless there is an asset coverage of 300% for
all borrowings. However, for an open-end investment company that elects to
commit itself to pay in cash all requests for redemption pursuant to Rule 18f-1
of the 1940 Act, that investment company is exempt from the requirements of
Section 18(f)(1) to the extent necessary to enable it to effectuate cash
redemptions. The Fund has made such an election to pay all redeemed shares in
cash and, is therefore not subject to Section 18(f)(1).
NON-PRINCIPAL INVESTMENT STRATEGIES AND RISKS
In addition to the principal investment strategies that are set forth
under the "Investment Objectives," "Principal Investment Strategies" and the
"Principal Investment Risks" sections of the Prospectus, the Fund has various
additional investment policies.
CASH MANAGEMENT; TEMPORARY DEFENSIVE POLICIES. The Fund may hold
uninvested cash or can invest it in cash equivalents such as money market
securities, repurchase agreements or shares of money market funds temporarily
for defensive purposes or to assist in meeting shareholder redemptions.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements
with commercial banks, brokers or dealers either for defensive purposes due to
market conditions or to generate income from its excess cash balances. A
repurchase agreement involves a sale of securities to the Fund, with the
concurrent agreement of the commercial bank, broker or dealer which the
Investment Advisor believes to be financially sound who agrees to repurchase the
securities at the same price plus an amount equal to an agreed upon interest
rate, within a specified time. The seller usually agrees to repurchase the
securities within a week, but, on occasion, agrees to repurchase at a later
time. The value of the underlying securities will always be at least equal to
the repurchase price, including any accrued interest earned on the repurchase
agreement. The Fund will make payment for such securities only upon physical
delivery or evidence of book-entry transfer to the account of the custodian or a
bank acting as agent for the Fund.
The use of repurchase agreements involves certain risks. In the event
of a bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto; (b)
possible subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights.
REVERSE REPURCHASE AGREEMENTS. The Fund may invest in reverse
repurchase agreements, where a Fund sells a security to a bank, broker or dealer
in return for cash and agrees to repurchase that security at an agreed upon
price and time. The Fund will only enter into repurchase agreements in which the
creditworthiness of the parties has been reviewed and found satisfactory by the
Investment Advisor. These transaction may increase the fluctuation in the market
price of the assets of the Fund.
FUTURES/OPTIONS TRANSACTIONS. The Fund may use futures as a substitute
for a comparable market position in the underlying securities and may purchase
and write options thereon. A futures contract is an agreement between two
parties, a buyer and a seller, to exchange a particular commodity or financial
instrument at a specific price on a specific date in the future. An option
transaction generally involves a right, which may or may not be exercised, to
buy or sell a commodity or financial instrument at a particular price on a
specified future date. Futures contracts and options are standardized and traded
on exchanges, where the exchange serves as the ultimate counterparty for all
contracts. Consequently, the primary credit risk on futures contracts is the
creditworthiness of the exchange. Futures contracts are subject to market risk
(i.e., exposure to adverse price changes).
Upon exercise of an option on a futures contract, the writer of the
option delivers to the holder of the option the futures position and the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the futures contract. The potential loss related to the purchase of options
on futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time of
sale, there are no daily cash payments to reflect changes in the value of the
underlying contract; however, the value of the option does change daily and that
change would be reflected in the net asset value of the Fund.
Although the Fund intends to purchase or sell futures contracts only if
there is an active market for such contracts, no assurance can be given that a
liquid market will exist for any particular contract at any particular time.
Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contract prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting the Fund to
substantial losses. If it is not possible, or if the Fund determines not to
close a futures position in anticipation of adverse price movements, the Fund
will be required to make daily cash payments on variation margin.
The Fund's futures transactions must constitute permissible
transactions pursuant to regulations promulgated by the Commodity Futures
Trading Commission. In addition, the Fund may not engage in futures transactions
if the sum of the amount of initial margin deposits and premiums paid for
unexpired options on futures contracts, other than those contracts entered into
for bona fide hedging purposes, would exceed 5% of the liquidation value of the
Fund's assets, after taking into account unrealized profits and unrealized
losses on such contracts; provided, however, that in the case of an option on a
futures contract that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in calculating the 5% liquidation limit. Pursuant to
regulations or published positions of the Securities and Exchange Commission,
the Fund may be required to segregate cash or high quality money market
instruments in connection with its futures transactions in an amount generally
equal to the entire value of the underlying security.
SECURITIES LENDING. The Fund may lend securities from its portfolio to
brokers, dealers and financial institutions (but not individuals) in order to
increase the return on its portfolio. The value of the loaned securities may not
exceed one-third of the Fund's total assets and loans of portfolio securities
are fully collateralized based on values that are marked-to-market daily. The
Fund will not enter into any portfolio security lending arrangement having a
duration of longer than one year. The principal risk of portfolio lending is
potential default or insolvency of the borrower. In either of these cases, the
Fund could experience delays in recovering securities or collateral or could
lose all or part of the value of the loaned securities. The Fund may pay
reasonable administrative and custodial fees in connection with loans of
portfolio securities and may pay a portion of the interest or fee earned thereon
to the borrower or a placing broker.
In determining whether or not to lend a security to a particular
broker, dealer or financial institution, the Investment Advisor considers all
relevant facts and circumstances, including the size, creditworthiness and
reputation of the broker, dealer, or financial institution. Any loans of
portfolio securities are fully collateralized based on values that are marked to
market daily. The Fund does not enter into any portfolio security lending
arrangement having a duration of longer than one year. Any securities that the
Fund may receive as collateral will not become part of the Fund's investment
portfolio at the time of the loan and, in the event of a default by the
borrower, the Fund will, if permitted by law, dispose of such collateral except
for such part thereof that is a security in which the Fund is permitted to
invest. During the time securities are on loan, the borrower will pay the Fund
any accrued income on those securities, and the Fund may invest the cash
collateral and earn income or receive an agreed-upon fee from a borrower that
has delivered cash-equivalent collateral.
BORROWING. As a fundamental policy, the Fund is permitted to borrow to
the extent permitted under the 1940 Act. However, the Fund currently intends to
borrow money for temporary or emergency (not leveraging) purposes, and may
borrow up to one-third of the value of its total assets (including the amount
borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made.
ILLIQUID SECURITIES. The Fund may not invest in securities as to which
a liquid trading market does not exist.
U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in various types of
U.S. Government obligations. U.S. Government obligations include securities
issued or guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities. U.S. Treasury obligations differ mainly in the
length of their maturity. Treasury bills, the most frequently issued marketable
government securities, have a maturity of up to one year and are issued on a
discount basis. U.S. Government obligations also include securities issued or
guaranteed by federal agencies or instrumentalities, including
government-sponsored enterprises.
Payment of principal and interest on U.S. Government obligations may be
backed by the full faith and credit of the United States or may be backed solely
by the issuing or guaranteeing agency or instrumentality itself. In the latter
case, the investor must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government would provide financial support to its agencies or instrumentalities
(including government-sponsored enterprises) where it is not obligated to do so.
In addition, U.S. Government obligations are subject to fluctuations in market
value due to fluctuations in market interest rates. As a general matter, the
value of debt instruments, including U.S. Government obligations, declines when
market interest rates increase and rises when market interest rates decrease.
Certain types of U.S. Government obligations are subject to fluctuations in
yield or value due to their structure or contract terms.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The Trust's board of trustees (the "Board of Trustees") supervises and
manages the affairs of the Fund. In accordance with Delaware's Business Trust
Act, a trustee of the Trust is responsible for performing his or her duties in
good faith, in a manner such trustee reasonably believes to be in the best
interests of the Trust and with the care that an ordinarily prudent person in a
like position would use under similar circumstances. The Trust is not required
to hold annual shareholder meetings.
The names, business addresses and ages of the directors and officers of
the Trust together with information as to their principal business occupations
during at least the past five years are shown below. Each director who is an
"interested person" of the Fund, as defined in the 1940 Act, is indicated by an
asterisk.
<TABLE>
<CAPTION>
------------------------------------ -------------------- -----------------------------------------------------------------
NAME, AGE, ADDRESS POSITIONS WITH THE PRINCIPAL OCCUPATION DURING PAST 5 YEARS
TRUST
------------------------------------ -------------------- -----------------------------------------------------------------
<S> <C> <C>
*Vinod Gupta (54) President, Founder of infoUSA Inc., a company that compiles and
5711 S. 86th Circle Chairperson of the updates the proprietary databases of 12 million businesses
Omaha, NE 68127 Board, Trustee and 200 million consumers in the United States and Canada;
Treasurer and Chairman of the Board of infoUSA Inc. since 1972 and Chief
Secretary Executive Officer from 1972 until September 1997 and since
August 1998.
------------------------------------ -------------------- -----------------------------------------------------------------
*Thomas F. Pflug (42) Trustee President of Pflug Investment Management, Inc., investment
14441 Dupont Court advisor, since its organization in April of 1992. Mr.
Omaha, NE 68144 Pflug previously was the Vice-President of Wallace R. Weitz
& Co. from May of 1989 through April of 1992.
------------------------------------ -------------------- -----------------------------------------------------------------
Harold W. Andersen (77) Trustee Contributing editor and newspaper executive with the Omaha
5711 S. 86th Circle World-Herald from 1946 to the present where he has served
Omaha, NE 68127 as director, president and chairman of the board of
directors.
------------------------------------ -------------------- -----------------------------------------------------------------
Richard M. Krasno (58) Trustee President of the Monterey Institute of International
P.O. Box 3858 Studies since 1989. From 1981 to 1998, Mr. Krasno served
Chapel Hill, NC 27515 for the Institute of International Education as its
President-Chief Executive Officer from 1983 to 1998
and as an Executive Vice President and its Chief Operating
Officer from 1981 to 1983.
------------------------------------ -------------------- -----------------------------------------------------------------
Terence R. McAuliffe (43) Trustee Chairman of American Heritage Trust, a premier builder of
7527 Old Dominion Dr. single-family homes in Central Florida and is the President
McLean VA 22102 and CEO of several real estate related entities and is on
the Boards of Directors of several private companies.
------------------------------------ -------------------- -----------------------------------------------------------------
</TABLE>
* Vinod Gupta is an "interested person" of the Fund, as defined in the
1940 Act. He serves as the President of the Investment Advisor of the Fund.
* Thomas F. Pflug is also an "interested person" of the Fund, as
defined in the 1940 Act. He is the President of the Sub-Advisor of the Fund.
Trustees of the Trust who are not "interested persons" of the Fund are
not paid by the Fund, but are reimbursed for expenses incurred in attending
meetings of the Board of Trustees. None of the trustees of the Trust or the
highest paid executives received over $60,000 in compensation.
The Trust, the Investment Advisor and the principal underwriter of the
Fund have all adopted codes of ethics under Rule 17j-1 promulgated under the
Investment Company Act. These codes of ethics permit personnel subject to the
codes to invest in securities, including securities that may be purchased or
held by the Fund.
MANAGEMENT OWNERSHIP
As of ________, 2000, for organizational purpose only, Vinod Gupta, President
and sole shareholder of the Investment Advisor, owned 100% of the outstanding
shares of the Fund.
INVESTMENT ADVISOR
Everest Funds Management, LLC, a Delaware limited liability company, is
the Investment Advisor to the Fund. The Investment Advisor is under the control
of Vinod Gupta, who has voting control and is the sole manager of the Investment
Advisor. Vinod Gupta is also the Chairperson of the Board of Trustees, the
President, the Treasurer and the Secretary of the Fund. Vinod Gupta is the
founder of infoUSA Inc., a company that compiles and updates proprietary
databases of 12 million businesses and 200 million consumers in the United
States and Canada. Mr. Gupta has been Chairman of the Board of infoUSA Inc.
since its incorporation in 1972 and has served as its Chief Executive Officer
from the time of its incorporation in 1972 until September 1997 and since August
1998.
Under the Advisory Agreement between the Trust and the Investment
Advisor, dated as of _____ ___, 2000 (the "Advisory Agreement"), and subject to
the control of the Board of Directors, the Investment Advisor manages the
day-to-day operations of the Fund, including overseeing the purchases and sales
of Fund securities consistent with the Fund's investment objectives and
policies. In addition, the Investment Advisor is responsible for overseeing the
administration of the Fund's daily business affairs such as providing accurate
accounting records, computing accrued income and expenses of the Fund, computing
the daily net asset value of the Fund, assuring proper dividend disbursements,
proper financial information to investors, notices of all shareholders' meetings
and providing sufficient office space, storage, telephone services and personnel
to accomplish these responsibilities. The Advisory Agreement provides that the
Investment Advisor may enter into sub-advisory agreements but that the ultimate
responsibility for managing the assets of the Fund rests with the Investment
Advisor. The Board of Directors of the Fund approved the Advisory Agreement, by
unanimous vote, on ________ __, 2000 in the manner required by the 1940 Act.
The Advisory Agreement provides that the Investment Advisor will not be
liable to the Fund for any error of judgment or mistake of law, or for any loss
suffered by the Fund or its shareholders in connection with matters to which the
Advisory Agreement relates, except for willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties under the
Advisory Agreement.
In exchange for its services, the Investment Advisor is entitled to
receive a monthly management fee from the Fund, based on the average of the net
asset value of the Fund as determined as of the close of each business day of
the month equal to 0.50% of the average daily net assets of the Fund. From the
inception of the Fund, the Investment Advisor has been paid a total of $0.
Pursuant to the Sub-Advisory Agreement between the Investment Advisor
and the Sub-Advisor, the Sub-Advisor will provide certain advisory services to
the Fund, subject to the control of the Investment Advisor and the Board of
Trustees. While the ultimate responsibility for the day-to-day operations of the
Fund remain with the Investment Advisor, the Sub-Advisor will develop and
maintain an investment program for the Fund and will make investment decisions
for all of the assets of the Fund and will place all orders for the purchase and
sale of securities, all on behalf of the Fund. The Sub-Advisor will pay all
expenses incurred by it in connection with its activities under the Sub-Advisory
Agreement other than the cost of securities (including brokerage commission, if
any) purchased for the Fund.
The Sub-Advisory Agreement provides that the Sub-Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund, its shareholders or by the Investment Advisor in connection with the
matters to which the Sub-Advisory Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under the Sub-Advisory Agreement.
The Fund is responsible for paying all its expenses other than those
assumed by the Advisor incurred in the operation of the Fund and any public
offering of the Fund's shares, including, among others, interest, taxes,
brokerage fees and commissions, fees, if any, of the trustees who are not
employees of the Investment Advisor, or any of their affiliates, expenses of
trustees and shareholders' meetings, including the cost of printing and mailing
proxies, expenses of insurance premiums for fidelity and other coverage,
expenses of redemption of Fund shares, expenses of issue and sale of Fund
shares, expenses of printing and mailing stock certificates representing shares
of the Fund, association membership dues, advertising promotional expenses in
connection with the distribution of the Fund shares, including paying for
prospectuses for new shareholders, charges of custodian, transfer agent,
dividend disbursing agent, accounting services agent, investor servicing agent,
and bookkeeping, auditing, and legal expenses. The Fund will also pay the fees
and bear the expense of registering and maintaining the registration of the Fund
and its shares with the Commission and registering or qualifying its shares
under state or other securities laws and the expense of preparing and mailing
prospectuses and reports to shareholders.
The Advisory Agreement and the Sub-Advisory Agreement will continue in
effect from year to year if such continuance is approved in the manner required
by the 1940 Act (i.e., (a) by a vote of a majority of the Board of Trustees or
of the outstanding voting securities of the Fund and (b) by a vote of a majority
of the Trustees who are not parties to the Advisory Agreement or the
Sub-Advisory Agreement, as applicable, or interested persons of any such party),
and if the Investment Advisor shall not have notified the Fund at least 60 days
prior to the anniversary date of the previous continuance that it does not
desire such continuance. The Advisory Agreement or the Sub-Advisory Agreement
may be terminated by the Fund, without penalty, on 60 days' written notice to
the Investment Advisor or the Sub-Advisor, as applicable, and will terminate
automatically in the event of its assignment, as applicable.
UNDERWRITER
Quasar Distributors, LLC is the principal underwriter (the
"Underwriter") and the general distributor of the shares of the Fund pursuant to
a Distribution Agreement among the Underwriter, the Trust and the Investment
Advisor dated as of _________ __, 2000 (the "Distribution Agreement"). The
Underwriter is an affiliate of Firstar Mutual Fund Services, LLC. The
Distribution Agreement was approved by the Board of Directors of the Trust, on
___________ __, 2000 in the manner required by the 1940 Act. See "Management of
the Fund--Trustees and Officers."
SERVICE PROVIDERS
The Trust entered into a series of agreements whereby certain parties
will provide various services to the Fund.
Firstar Mutual Fund Services, LLC ("Firstar") will provide accounting
and administrative services and shareholder servicing to the Fund as transfer
agent and dividend disbursing agent. Firstar's address is 615 E. Michigan
Street, Milwaukee, Wisconsin, 53202. The services to be provided under the
Transfer Agent Servicing Agreement include processing purchase and redemption
transactions, establishing and maintaining shareholder accounts and records,
disbursing dividends declared by the Fund, day-to-day administration of matters
related to the corporate existence of the Fund (other than rendering investment
advice), maintenance of its records and preparation, mailing and filing of
reports, assistance in monitoring the total number of Shares sold in each State
for "Blue Sky" purposes and assistance in the preparation of the Fund's
registration statement under federal and state securities laws.
As compensation for these services, the Fund pays Firstar reasonable
out-of-pocket expenses plus fees pursuant to ______ based on the average net
assets of the Fund.
Pursuant to the Fulfillment Servicing Agreement between Firstar and the
Fund, Firstar will also provide fulfillment services to the Fund, including
shareholder and prospective shareholder customer service.
Firstar Bank, N.A., an affiliate of Firstar, is the custodian of the
assets of the Fund (the "Custodian") pursuant to a custody agreement between the
Custodian and the Trust dated as of _______ __, 2000 ("Custody Agreement"),
whereby the Custodian provides for fees on a transactional basis plus
out-of-pocket expenses. The Custodian's address is 777 East Wisconsin Avenue,
Milwaukee, Wisconsin, 53202.
Pursuant to a Fund Administration Servicing Agreement and a Fund
Accounting Servicing Agreement, each between Firstar and the Company, Firstar
also performs certain administrative and tax reporting functions for the Fund,
including preparation and filing federal and state tax returns, preparing and
filing securities registration compliance filings with various states
compiling data for and preparing notices to the Commission, preparing
financial statements for the Annual and Semi-Annual Reports to the Commission
and current investors, monitoring the Fund's expense accruals and performing
securities valuations and, from time to time, monitoring the Fund's compliance
with the Fund's investment objective and restrictions. Pursuant to the Fund
Administration Servicing Agreement, Firstar is entitled to receive from the
Fund a fee, computed daily and payable monthly, based on the Fund's average
net assets at an annual rate of ___ of __% of average net assets.
___________ acts as legal counsel to the Fund.
____________________ is the auditor of the Trust.
PORTFOLIO TRANSACTIONS
Subject to the review of the Investment Advisor, the Sub-Advisor will
be authorized to allocate the Fund's securities transactions to the Underwriter
and to other broker-dealers who help distribute the Fund's shares. In connection
with its duties to arrange for the purchase and sale of portfolio securities,
the Sub-Advisor will select such broker-dealers who will, in the Sub-Advisor's
judgment, implement the Fund's policy to achieve best execution at the best
available price. Consistent with the rules of the National Association of
Securities Dealers, Inc., the Sub-Advisor will allocate transactions to such
broker-dealers only when it reasonably believes that the commissions and
transaction quality is comparable to that available from other qualified
broker-dealers, subject to seeking the best available price and execution
available and such other policies as the Board of Trustees may determine.
When allocating transactions to broker-dealers, the Sub-Advisor is
authorized to consider, in determining whether a particular broker-dealer will
provide best execution, the broker-dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as well as the
difficulty of the transaction in question, and thus need not pay the lowest
spread or commission available if the Investment Advisor determines in good
faith that the amount of commission is reasonable in relation to the value of
the brokerage and research services provided by the broker-dealer, viewed either
in terms of the particular transaction or the Sub-Advisor's overall
responsibilities as to the accounts as to which it exercises investment
discretion. If, on the foregoing basis, the transaction in question could be
allocated to two or more broker-dealers, the Sub-Advisor is authorized in making
such allocation, to consider, (a) whether a broker-dealer has provided research
services, as further discussed below; and (b) whether a broker-dealer has sold
Fund shares or the shares of any other investment company or companies having
the Sub-Advisor as its investment advisor or having the same sub-manager,
administrator or principal underwriter as the Fund. Such research may be in
written form or through direct contact with individuals and may include
quotations on portfolio securities and information on particular issuers and
industries, as well as on market, economic or institutional activities, and may
also include comparison of the performance of the Fund to the performance of
various indices and investments for which reliable performance data is available
and similar information prepared by recognized mutual fund statistical services.
The Fund recognizes that no dollar value can be placed on such research services
or on execution services, that such research services may or may not be useful
to the Fund or other accounts of the Sub-Advisor and that such research received
by such other accounts may or may not be useful to the Fund.
Any portfolio transaction may be executed through broker-dealers who
are affiliated with the Fund, the Investment Advisor or the Sub-Advisor if, in
the Sub-Advisor's judgment, the use of such affiliated brokers is likely to
result in price and execution at least as favorable as those of other qualified
brokers, and if, in the transaction, the affiliated broker-dealer charges a
commission rate consistent with those charged by the affiliated broker-dealer to
comparable unaffiliated customers in similar transactions. All transactions with
affiliated broker-dealers will comply with Rule 17e-1 under the 1940 Act.
Since the inception of the Fund, the Fund paid no brokerage commissions
to a broker that is affiliated with the Fund, its Advisor, Sub-Advisor, or the
Underwriter.
The Investment Advisor will cause the Fund to deal directly with the
selling or purchasing principal or market maker without incurring brokerage
commissions unless the Investment Advisor determines that a better price or
execution may be obtained by paying such commissions. Purchases from
underwriters include a commission or concession paid by the issuer to the
underwriter and principal transactions placed through broker-dealers include a
spread between the bid and asked prices.
Under the 1940 Act, the Fund may not purchase portfolio securities from
any underwriting syndicate of which the Underwriter, as principal, is a member
except under certain limited circumstances set forth in Rule 10f-3 thereof.
These conditions relate among other things, to the reasonableness of the
broker-dealer spread, the amount of securities that may be purchased from any
one issuer, and the amount of the Fund's assets that may be invested in a
particular issue. The rule also requires that any purchase made subject to its
provisions be reviewed at least quarterly by the Fund's Board of Directors,
including a majority of the Fund's Board of Directors who are not interested
persons of the Fund as defined by the 1940 Act.
The Board of Trustees will review quarterly the Investment Advisor's
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of the Fund. Such review is conducted for the
purpose of determining if the markups and commissions, if any, paid by the Fund
are reasonable in relation to the benefits received by the Fund taking into
account the competitive practices in the industry.
PURCHASING FUND SHARES
As described in the prospectus, Shares of the Fund may be purchased by
check, by wire transfer of funds through a bank or through one or more brokers
authorized by the Fund to receive purchase orders. The minimum initial
investment is $10,000. Investments may be made in any amount in excess of the
minimum and subsequent investments may be in any amount.
No stock certificates will be issued for the purchase of Fund Shares.
Instead, an account will be established for each investor and all shares
purchased or received, including those obtained through reinvestment of
distributions, will be registered on the books of the Fund and credited to such
account.
The Fund has the right to limit the amount of purchases and to refuse
to sell shares to any person.
VALUING FUND SHARES--NET ASSET VALUE
The net asset value of the Fund will be determined as of the close of
trading (normally 4:00 p.m. Eastern time) on each day the New York Stock
Exchange is open for trading. The New York Stock Exchange ("NYSE") is open for
trading Monday through Friday except New Year's Day, Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Additionally, if any of the aforementioned
holidays falls on a Saturday, the New York Stock Exchange will not be open for
trading on the succeeding Monday, unless unusual business conditions exist, such
as the ending of a monthly or the yearly accounting period.
Securities which are traded on a recognized stock exchange are valued
at the last sale price on the securities exchange on which such securities are
primarily traded or at last sale price on the national securities market. Put
options are valued at the last sales price on the valuation date if the last
sales price is between the closing bid and asked prices. Otherwise, put options
are valued at the mean of the closing bid and asked prices. Debt securities
(other than short-term instruments) are valued at prices furnished by a national
pricing service, subject to review by the Investment Advisor and determination
of the appropriate price whenever a furnished price is significantly different
from the previous day's furnished price. Debt instruments maturing within 60
days are valued by the amortized cost method. Any securities for which market
quotations are not readily available are valued at their fair value as
determined in good faith by the Board of Directors.
SELLING (REDEEMING) FUND SHARES
Redemption proceeds are normally wired or mailed on the next business
day following receipt of wired or telephoned instructions, but in no event later
than seven days following receipt of such requests. Redemptions may be suspended
or payment dates postponed more than seven days when (a) the NYSE is closed
(other than weekends or holidays), when trading on the NYSE is restricted during
any period when an emergency exists as a result of which (i) disposal of the
Fund's investments is not reasonably practicable, or (ii) it is not reasonably
practicable for the Fund to determine the value of the Fund's net assets, or (c)
for such other periods as the Commission may by order permit for the protection
of the Fund's shareholders.
If you designate a savings and loan association as the bank to receive
your telephone redemption proceeds, please note that if the savings and loan
association is not a participant in the Federal Reserve System, redemption
proceeds must be wired to a commercial bank which is a correspondent of the
savings and loan association. You should discuss wire procedures and costs with
their savings and loan association before completing the telephone redemption
authorization on the account application form.
Pursuant to an election by the Fund under Rule 18f-1 of the 1940 Act
that was filed with the Securities and Exchange Commission on August 14, 2000,
all redemptions will be made in cash.
An investor will not receive interest on amounts represented by
uncashed redemption checks.
TAX CONSIDERATIONS
The following is a summary of certain tax considerations generally
affecting the Fund and its shareholders. No attempt is made to present a
detailed explanation of the tax treatment of the Fund or its shareholders, and
the discussions here are not intended as substitutes for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund intends to file the requisite election and to satisfy all
other requirements necessary to be characterized as a regulated investment
company under Subchapter M of the Code. As a regulated investment company, the
Fund will not be subject to federal income tax on the portion of its net
investment income (i.e., its investment company taxable income, as that term is
defined in the Code, without regard to the deduction for dividends paid ) and
net capital gain (i.e., the excess of net long-term capital gain over net
short-term capital loss) that it distributes to shareholders, provided that it
distributes at least 90% of its net investment income for the taxable year (the
"Distribution Requirement"), and satisfies certain other requirements of the
Code that are described below. In addition to satisfying the Distribution
Requirement for each taxable year, a regulated investment company must derive at
least 90% of its gross income from dividends, interest, certain payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities or foreign currencies, to the extent such currency gains are
directly related to the regulated investment company's principal business of
investing in stock or securities, and other income, including but not limited to
gains from options, futures or forward contracts, derived with respect to its
business of investing in such stock, securities or currencies (the "Income
Requirement").
In addition, at the close of each quarter of the Fund's taxable year,
(a) at least 50% of the market value of the Fund's assets must be represented by
cash, securities of other regulated investment companies, United States
government securities and other securities, with such other securities limited,
in respect of any one issuer (as contemplated by the Code), to an amount not
greater than 5% of the Fund's assets and not greater than 10% of the outstanding
voting securities of such issuer and (b) not more than 25% of the value of its
assets may be invested in the securities, other than United States government
securities or securities of other regulated investment companies, of any one
issuer (as contemplated by the Code) or any two or more issuers that the Fund
controls and which are determined to be engaged in the same or similar trades or
businesses or related trades or businesses.
The Fund may engage in options and futures contracts. The Fund's
transactions in index and interest rate futures contracts and options on these
futures contracts (collectively "section 1256 contracts") will be subject to
special provisions of the Code that, among other things, may affect the
character of gains and losses realized by the Fund (i.e., may affect whether
gains or losses are ordinary or capital), accelerate recognition of income to
the Fund and defer Fund losses. These rules could therefore affect the
character, amount and timing of distributions to shareholders. These provisions
also (a) will require the Fund to mark-to-market certain types of the positions
in its portfolio (i.e., treat them as if they were closed out) and (b) may cause
the Fund to recognize income without receiving cash with which to pay dividends
or make distributions in amounts necessary to satisfy the Distribution
Requirement and avoid the 4% excise tax (described below). The Fund will monitor
its transactions, will make the appropriate tax elections and will make the
appropriate entries in its books and records when it engages in these
transactions in order to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company.
All section 1256 contracts held by the Fund at the end of its taxable
year are required to be marked to their market value, and any unrealized gain or
loss on those positions will be included in the Fund's income as if each
position had been sold for its fair market value at the end of the taxable year.
The resulting gain or loss will be combined with any gain or loss realized by
the Fund from positions in section 1256 contracts closed during the taxable
year. Provided such positions were held as capital assets and were not part of a
"hedging transaction" nor part of a "straddle," 60% of the resulting net gain or
loss will be treated as long-term capital gain or loss, and 40% of such net gain
or loss will be treated as short-term capital gain or loss, regardless of the
period of time the positions were actually held by the Fund.
If, in any taxable year, the Fund fails to qualify as a regulated
investment company under the Code or fails to meet the distribution requirement,
it would be taxed in the same manner as an ordinary Trust and distributions to
its shareholders would not be deductible by the Fund in computing its taxable
income. In addition, in the event of a failure to qualify, the Fund's
distributions, to the extent derived from the Fund's current or accumulated
earnings and profits, would constitute dividends eligible for the corporate
dividends-received deduction, which are taxable to shareholders as ordinary
income, even though those distributions might otherwise, at least in part, have
been treated in the shareholders' hands as capital gain. If the Fund fails to
qualify as a regulated investment company in any year, it must pay out its
earnings and profits accumulated in that year in order to qualify again as a
regulated investment company. In addition, the Fund may be required to recognize
any net built-in gains with respect to certain of its assets (i.e. the excess of
the aggregate gains, including items of income, over aggregate losses that would
have been realized with respect to such assets if the Fund had been liquidated)
in order to qualify as a regulated investment company in a subsequent year.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year, or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year. The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that a Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its net
investment income for each taxable year. Such distributions will be taxable to
shareholders as ordinary income and treated as dividends for federal income tax
purposes, but they will qualify for the 70% dividends-received deduction for
Trusts only to the extent discussed below.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute any
such amounts. If net capital gain is distributed and designated as a capital
gain dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares.
Under current legislation, the maximum rate of tax on long-term capital
gains of individuals is 20% for long-term capital gains with respect to capital
assets held for more than 12 months. Additionally, beginning after December 31,
2000, the maximum tax rate for capital assets with a holding period beginning
after that date and held for more than five years will be 18%.
Conversely, if the Fund elects to retain its net capital gain, the Fund
will be taxed thereon, except to the extent of any available capital loss
carryovers, at the 35% corporate tax rate. If the Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
of record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends-received deduction generally available
to Trusts to the extent of the amount of qualifying dividends received by the
Fund from domestic Trusts for the taxable year. A dividend received by the Fund
will not be treated as a qualifying dividend (a) if it has been received with
respect to any share of stock that the Fund has held for less than 46 days (91
days in the case of certain preferred stock) during the 90 day period beginning
on the date which is 45 days before the date on which such share becomes
ex-dividend with respect to such dividend (during the 180 day period beginning
90 days before such date in the case of certain preferred stock) under Sections
246(c)(3) and (4) of the Code; (b) to the extent that the Fund is under an
obligation (pursuant to a short sale or otherwise) to make related payments with
respect to positions in substantially similar or related property; or (c) to the
extent the stock on which the dividend is paid is treated as debt-financed under
Section 246A of the Code. Moreover, the dividends-received deduction for a
corporate shareholder may be disallowed or reduced if the corporate shareholder
fails to satisfy the foregoing requirements with respect to its shares of the
Fund. In the case where the Fund invests all of its assets and the Fund
satisfies the holding period rules pursuant to Section 246(c) of the Code, a
corporate shareholder which satisfies the foregoing requirements with respect to
its shares of the Fund should receive the dividends-received deduction.
For purposes of the corporate alternate minimum tax ("AMT"), the
corporate dividends-received deduction is not itself an item of tax preference
that must be added back to taxable income or is otherwise disallowed in
determining a Trust's AMT. However, corporate shareholders of the Fund will
generally be required to take the full amount of any dividend received from the
Fund into account, without a dividends-received deduction, in determining its
adjusted current earnings.
Distributions by the Fund that do not constitute ordinary income
dividends, or capital gain dividends will be treated as a return of capital to
the extent of, and in reduction of, the shareholder's tax basis in his or her
shares; any excess will be treated as gain from the sale of his or her shares,
as discussed below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund. Shareholders receiving a distribution in the form
of additional shares will be treated as receiving a distribution in an amount
equal to the amount of cash they could have received had they elected to receive
the distribution in cash. In addition, if the net asset value at the time a
shareholder purchases shares of the Fund reflects undistributed net investment
income or recognized capital gain net income, or unrealized appreciation in the
value of the assets of the Fund, distributions of such amounts will be taxable
to the shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders, and made by the Fund, on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the federal income
tax consequences of distributions made or deemed made during the year. In
addition, if the Fund declares a dividend prior to the time prescribed by law
for the filing of its return for year and distributes the amount of such
dividend to its shareholders in the 12-month period following the close of the
taxable year, but not later than the date of the first regular dividend payment
made after such declaration, the dividend so declared and distributed shall,
upon election by the Fund, be considered as having been paid during the taxable
year, provided that the Fund makes required elections and provides proper
notices.
The Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of ordinary income dividends and capital gain
dividends, and the proceeds of redemption of shares, paid to any shareholder (a)
who has provided either an incorrect tax identification number or no number at
all, (b) who is subject to backup withholding by the IRS for failure to report
the receipt of interest or dividend income properly, or (c) who has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
Trust or other exempt recipient.
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from or treated as arising from
the sale or redemption of shares of a Fund will be considered capital gain or
loss and will be long- term capital gain or loss if the shares were held for
longer than one year.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign Trust, or foreign
partnership ("Foreign Shareholder"), depends on whether the income from the Fund
is "effectively connected" with a United States trade or business carried on by
such shareholder.
If the income from the Fund is not effectively connected with a United
States trade or business carried on by a Foreign Shareholder, dividends paid to
a Foreign Shareholder from net investment income will be subject to United
States withholding tax at the rate of 30% (or lower treaty rate) upon the gross
amount of the dividend. Such a Foreign Shareholder would generally be exempt
from United States federal income tax on gains realized on the sale of shares of
the Fund and capital gain dividends and amounts retained by the Fund that are
designated as undistributed capital gains.
If the income from the Fund is effectively connected with a United
States trade or business carried on by a Foreign Shareholder, then ordinary
income dividends, capital gain dividends, and any gains realized upon the sale
of shares of the Fund will be subject to United States federal income tax at the
rates applicable to United States citizens or domestic Trusts.
In the case of foreign noncorporate shareholders, the Fund may be
required to withhold United States federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding tax (or taxable at a
reduced treaty rate) unless such shareholders furnish the Fund with proper
notification of their foreign status.
The tax consequences to a Foreign Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign Shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund,
including the applicability of foreign taxes.
STATE AND LOCAL TAX MATTERS
Depending on the residence of the shareholder for tax purposes,
distributions may also be subject to state and local taxes or withholding taxes.
Most states provide that a regulated investment company may pass through without
restriction to its shareholders state and local income tax exemptions available
to direct owners of certain types of United States government securities, such
as United States Treasury obligations. Thus, for residents of these states,
distributions derived from a Fund's investment in certain types of United States
government securities should be free from state and local income taxes to the
extent that the interest income from such investments would have been exempt
from state and local income taxes if such securities had been held directly by
the respective shareholders themselves. Certain states, however, do not allow a
regulated investment company to pass through to its shareholders the state and
local income tax exemptions available to direct owners of certain types of
United States government securities unless the regulated investment company
holds at least a required amount of United States government securities.
Accordingly, for residents of these states, distributions derived from a Fund's
investment in certain types of United States government securities may not be
entitled to the exemptions from state and local income taxes that would be
available if the shareholders had purchased United States government securities
directly. Shareholders' dividends attributable to the Fund's income from
repurchase agreements generally are subject to state and local income taxes,
although states and regulations vary in their treatment of such income. The
exemption from state and local income taxes does not preclude states from
asserting other taxes on the ownership of United States government securities.
To the extent that the Fund invests to a substantial degree in United States
government securities that are subject to favorable state and local tax
treatment, shareholders of the Fund will be notified as to the extent to which
distributions from the Fund are attributable to interest on such securities.
Rules of state and local taxation of ordinary income dividends and capital gain
dividends from regulated investment companies may differ from the rules for
federal income taxation in other respects. Shareholders are urged to consult
their tax advisers as to the consequences of these and other state and local tax
rules affecting investment in the Fund.
EFFECT OF FUTURE LEGISLATION
The foregoing general discussion of federal income tax consequences is
based on the Code and the Treasury Regulations promulgated thereunder as in
effect on the date of this Prospectus. Future legislative or administrative
changes or court decisions may significantly change the conclusions expressed
herein, and any such changes or decisions may have a retroactive effect with
respect to the transactions contemplated herein.
DISTRIBUTION OF FUND SHARES
The shares of the Fund are offered without a sales charge on a
continuous, best efforts basis by Quasar Distributors, LLC, the Underwriter and
general distributor of shares of the Fund.
Pursuant to the Distribution Agreement, the Underwriter is entitled to
compensation from the Fund in an amount equal to $_______. Since the inception
of the Fund, the aggregate amount of underwriting commissions has been $0.
CALCULATION OF PERFORMANCE DATA
The Fund may publish certain performance figures in advertisements from
time to time. These performance figures may include average annual total return
figures.
AVERAGE ANNUAL TOTAL RETURN
Average annual total return reflects the hypothetical annually
compounded return that would have produced the same cumulative total return if
the Fund's performance had been constant over the entire period, and is computed
according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years in the base period.
ERV = ending redeemable value of the hypothetical $1,000
payment made at the beginning of the base period (reduced
by the maximum sales charge) assuming reinvestment of all
dividends and distributions.
All performance figures are based on historical results and are not
intended to indicate future performance.
FINANCIAL STATEMENTS
Audited financial statements will be filed by a pre-effective
amendment.
THE EVEREST SERIES FUNDS TRUST
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) DECLARATION OF TRUST
(i) Certificate of Trust 1
(ii) Agreement and Declaration of Trust 1
(b) BYLAWS 1
(c) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS-- Incorporated by reference
to the Declaration of Trust and Bylaws.
(d) INVESTMENT ADVISORY AGREEMENTS
(i) Form of Investment Advisory Agreement 1
(ii) Form of Investment Sub-Advisory Agreement 1
(e) FORM OF UNDERWRITING AGREEMENT 1
(f) BONUS OR PROFIT SHARING CONTRACTS 3
(g) FORM OF CUSTODY AGREEMENT 1
(h) OTHER MATERIAL CONTRACTS
(i) Form of Fund Administration Servicing Agreement 1
(ii) Form of Transfer Agent Servicing Agreement 1
(iii) Form of Fund Accounting Servicing Agreement 1
(iv) Form of Fulfillment Servicing Agreement 1
(i) OPINION AND CONSENT OF COUNSEL 2
(j) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 2
(k) OMITTED FINANCIAL STATEMENTS 3
(l) AGREEMENT RELATING TO INITIAL CAPITAL 2
(m) RULE 12B-1 PLAN 3
(n) RULE 18F-3 PLAN 3
(o) RESERVED
(p) CODE OF ETHICS 2
1 Filed herewith.
2 To be filed by subsequent amendment.
3 Not applicable.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
No person is directly or indirectly controlled by or under common
control with the Registrant.
ITEM 25. INDEMNIFICATION.
Reference is made to Article V of the Registrant's Declaration of
Trust.
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."
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
<TABLE>
<CAPTION>
---------------------- ----------------------------- --------------------------------------------------------
Position with Everest Funds
Name Management, LLC1 Other Businesses, Etc.
---------------------- ----------------------------- --------------------------------------------------------
<S> <C> <C>
Vinod Gupta President and Manager Founder of infoUSA Inc., a company that compiles and
updates the proprietary databases of 12 million
businesses and 200 million consumers in the United
States and Canada; Chairman of the Board of infoUSA
Inc. since 1972 and Chief Executive Officer from 1972
until September 1997 and since August 1998.
Douglas M. Larson Chief Investment Officer From June, 1999 through April, 2000, Mr. Larson served
as a Vice President and Senior Trust Officer of
Commercial Federal Bank in Omaha, Nebraska, before
which he served as Senior Vice President and Senior
Trust Officer at Marquette Bank from April 1996
through June 1999. Prior to that, Mr. Larson served
as a Trust Department Manager and Trust Officer in two
community banks in central Iowa.
---------------------- ----------------------------- --------------------------------------------------------
</TABLE>
1The principal business address is 5711 S. 86th Circle, Omaha, Nebraska 68127.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Quasar Distributors, LLC, 615 East Michigan Street, Milwaukee,
Wisconsin, 53202, the Distributor for shares of the Registrant,
will also act as principal underwriter for other open-end
investment companies not yet under registration as of the date of
filing.
(b) To the best of Registrant's knowledge, the directors and
executive officers of Quasar Distributors, LLC are as follows:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES WITH QUASAR POSITIONS AND OFFICES WITH
BUSINESS ADDRESS DISTRIBUTORS, LLC REGISTRANT
--------------------------------------------- ---------------------------------------- ------------------------------
<S> <C> <C>
James R. Schoenike President, Board Member None
--------------------------------------------- ---------------------------------------- ------------------------------
Donna J. Berth Treasurer None
--------------------------------------------- ---------------------------------------- ------------------------------
James J. Barresi Secretary None
--------------------------------------------- ---------------------------------------- ------------------------------
Joe Redwine Board Member None
--------------------------------------------- ---------------------------------------- ------------------------------
Bob Kern Board Member None
--------------------------------------------- ---------------------------------------- ------------------------------
Paul Rock Board Member None
--------------------------------------------- ---------------------------------------- ------------------------------
Jennie Carlson Board Member None
--------------------------------------------- ---------------------------------------- ------------------------------
</TABLE>
The address of each of the foregoing is 615 East Michigan Street, Milwaukee,
Wisconsin, 53202.
(c) The following table sets forth the commissions and other
compensation received, directly or indirectly, from the Fund during the last
fiscal year by the principal underwriter who is not an affiliated person of the
Fund.
<TABLE>
<CAPTION>
(2) (3)
NET UNDERWRITING COMPENSATION ON (4) (5)
(1) DISCOUNTS AND REDEMPTION AND BROKERAGE OTHER
NAME OF PRINCIPAL UNDERWRITER COMMISSION REPURCHASES COMMISSIONS COMPENSATION
------------------------------------- ------------------- ------------------ ---------------- -----------------
------------------------------------- ------------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Quasar Distributors, LLC None None None None
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The books and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 are maintained at the following locations:
--------------------------------------------- ----------------------------------
Records Relating to: Are located at:
--------------------------------------------- ----------------------------------
Registrant's fund accountant, administrator Firstar Mutual Fund Services, LLC
and transfer agent 615 East Michigan Street
Milwaukee, WI 53202
--------------------------------------------- ----------------------------------
Registrant's custodian Firstar Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
--------------------------------------------- ----------------------------------
Registrant's investment advisor Everest Funds Management, LLC
5711 S. 86th Circle
Omaha, NE 68127
--------------------------------------------- ----------------------------------
Registrant's sub-investment advisor Pflug Investment Management, Inc.
14441 Dupont Court Suite 100
Omaha, NE 68144
ITEM 29. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A AND B.
Inapplicable
ITEM 30. UNDERTAKINGS.
The Fund hereby undertakes to file an amendment to the registration
statement with certified financial statements showing the initial capital
received before accepting subscriptions from more than 25 persons if the Fund
intends to raise initial capital under Section 14(a)(3) of the Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Trust has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Omaha and State of Nebraska, on the 15th day of
August, 2000.
EVEREST SERIES FUNDS, INC.
By: /S/ VINOD GUPTA
----------------------
Vinod Gupta, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on August 15, 2000.
SIGNATURE TITLE
/S/ VINOD GUPTA President, Secretary, Treasurer,
--------------- Chairperson of the Board and
Vinod Gupta Trustee
