As filed with the Securities and Exchange Commission on September 6, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 |X||X|
Pre-Effective Amendment No. ___ |_||_|
Post-Effective Amendment No. ___ |_||_|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 |X||X|
Amendment No. ___
Threshold Advisor Funds, Inc.
10829 Olive Road
St. Louis, Missouri 63141
Telephone: (314) 824-1000
(Registrant's Name, Address and Telephone Number)
CHARLES W. SCHWEIZER, PRESIDENT
10829 Olive Road
St. Louis, Missouri 63141
Telephone: (314) 824-1000
(Name and Address of Agent for Service)
Copies to:
DEE ANNE SJOGREN, ESQ.
Thompson Coburn LLP
One Firstar Plaza
St. Louis, MO 63101
Approximate Date of Proposed Public Offering:
As soon as practicable after the effectiveness of the Registration Statement
It is proposed that this filing will become effective:
|_||_| 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 this box:
|_||_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
THRESHOLD ADVISOR FUNDS, INC.
CONTENTS OF REGISTRATION STATEMENT
This registration document is comprised of the following:
Cover Sheet
Prospectus for Class A and Class C Shares of Threshold Small Cap Value Fund and
Threshold Mid Cap Fund
Prospectus for Class I Shares of Threshold Small Cap Value Fund and Threshold
Mid Cap Fund
Statement of Additional Information for Threshold Small Cap Value Fund and
Threshold Mid Cap Fund
Part C of Form N-1A
Signature Page
Exhibits
<PAGE>
<TABLE>
<S> <C> <C>
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
N-1A Item No. Location
------------- --------
PART A: PROSPECTUS
Item 1 Front and Back Cover Pages Front and Back Cover Pages
Item 2 Risk/Return Summary: Threshold Small Cap Value Fund: --Investment
Item 3 Risk/Return Summary: Fee Table Threshold Small Cap Value Fund: Fees and Expenses of
Item 4 Investment Objectives, Principal Threshold Small Cap Value Fund: --Investment
Item 5 Management's Discussion of Fund Not applicable
Item 6 Management, Organization, and Capital Management of the Funds; Choosing a Class of Shares
Item 7 Shareholder Information Valuing Fund Shares; Buying Selling and Exchanges
Item 8 Distribution Arrangements Distribution Plan
Item 9 Financial Highlight Information Not applicable
PART B: STATEMENT OF ADDITIONAL INFORMATION
Item 10 Cover Page and Table of Contents Cover Page and Table of Contents
Item 11 Fund History Fund History
Item 12 Description of the Fund and Its Fund Investments; Fund Policies
Item 13 Management of the Fund Management of the Fund
Item 14 Control Persons and Principal Holders of Control Persons and Principal Holders of Securities
Item 15 Investment Advisory and Other Services Advisory and Other Services
Item 16 Brokerage Allocation and Other Practices Brokerage Allocation and Other Practices
Item 17 Capital Stock and Other Securities Fund History; Capital Stock
Item 18 Purchase, Redemption and Pricing of Shares Purchase, Redemption and Pricing of Shares
Item 19 Taxation of the Fund Tax Information
Item 20 Underwriters Underwriter
Item 21 Calculation of Performance Data Calculation of Performance Data
Item 22 Financial Statements Not Applicable
PART C: STATEMENT OF OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
</TABLE>
<PAGE>
[LOGO]
THRESHOLD ADVISOR FUNDS, INC.
10829 Olive Blvd.
St. Louis, MO 63141
(800) 711-1207
THRESHOLD SMALL CAP VALUE FUND
THRESHOLD MID CAP FUND
Prospectus dated ________ ___, 2000
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
[back cover]
A Statement of Additional Information ("SAI") about each Fund has been filed
with the Securities and Exchange Commission ("SEC"), and is incorporated herein
by reference. Additional information about the Funds' investments is available
in the Funds' annual and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. Shareholders may make inquiries or request the SAI and the
Funds' reports to shareholders without charge by calling or writing a Fund at
the telephone number or the address listed on the cover page or by calling the
Fund's transfer agent toll-free at (800) 447-8150. Information about each Fund
may be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be obtained
by calling 1-800-SEC-0330. Copies of information about each Fund may be
obtained, upon payment of a duplicating fee, by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. The Fund also maintains an
Internet site at http://www.thresholdfunds.com.
<PAGE>
TABLE OF CONTENTS
THRESHOLD SMALL CAP FUND
INVESTMENT OBJECTIVE, POLICIES AND RISKS...............................4
PERFORMANCE............................................................5
FEES AND EXPENSES OF SCV FUND..........................................6
THRESHOLD MID CAP FUND
INVESTMENT OBJECTIVES, POLICIES AND RISKS..............................8
PERFORMANCE............................................................9
FEES AND EXPENSES OF THE FUND..............................................9
MANAGEMENT OF THE FUNDS...................................................11
VALUING FUND SHARES.......................................................13
CHOOSING A CLASS OF SHARES................................................13
BUYING, SELLING AND EXCHANGING FUND SHARES................................14
DISTRIBUTIONS.............................................................18
TAX INFORMATION...........................................................20
DISTRIBUTION PLAN.........................................................21
SHAREHOLDER SERVICES......................................................21
<PAGE>
SMALL CAP VALUE FUND
Investment Objective, Policies and Risks
Investment Objective
The investment objective of the Threshold Small Cap Value Fund ("SCV Fund") is
long-term capital appreciation.
Principal Investment Strategies of the Fund
SCV Fund seeks to achieve its objective by investing at least 65% of its total
assets in the equity securities of small capitalization companies. "Small cap"
companies include those companies with a market capitalization of less than $1.5
billion at the time of purchase. SCV Fund focuses its investment process on
equity securities, which include warrants, rights and debt and preferred
securities convertible into equity securities.
SCV Fund attempts to select and purchase securities of small cap companies that
are "value" priced, which means that the ratio of the security's price to
earnings, book value, cash flow or other financial measure is lower than other
companies' in its industry group with similar projected growth rates. SCV Fund
does not consider, however, that any specific price to earnings, book value or
cash flow ratio constitutes value pricing.
SCV Fund uses fundamental research to identify small cap companies with the
potential to rapidly increase sales, cash flow and earnings by taking advantage
of demographic, economic, social or other trends. Such companies may enjoy a
proprietary technology or other business advantage relative to their
competition. Kennedy Capital Management, Inc., Fund's Adviser, evaluates the
management of a small cap company in which SCV Fund invests, including its
ability to implement the company's business plan and its commitment to
increasing shareholder value. SCV Fund attempts to select the stock of small cap
companies that it considers to be inefficiently priced because information about
the company has not been adequately exposed in the marketplace. The Adviser
attempts to improve information flow about these "invisible" companies in an
effort to improve the market's efficiency in pricing the company's stock.
Principal Risks of Investing in SCV Fund
Although SCV Fund seeks long-term capital appreciation, actual future investment
results cannot be predicted. Investment results will fluctuate and there is no
assurance that SCV Fund will achieve its objective. You could lose money on your
investment in SCV Fund or not make as much as if you invested it elsewhere. An
investment in SCV Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
SCV Fund invests primarily in the stocks of smaller companies, which may lack
the managerial, financial or other resources necessary to implement their
business plans or succeed in the face of competition. The prospects for a small
cap company or an industry may deteriorate because of a variety of factors,
including disappointing operating results or changes in the competitive
environment. It may be difficult to sell a small cap stock and this lack of
market liquidity can adversely affect SCV Fund's ability to realize the market
price of a stock, especially during periods of rapid market decline.
SCV Fund's investment results will be affected by general market conditions and
specifically by investors' enthusiasm for small cap value stocks. The Adviser's
assessment of small cap companies may prove incorrect, resulting in losses or
poor performance even in a rising market.
PERFORMANCE
The bar chart and table below provide some indication of the risks of investing
in SCV Fund by showing changes in the performance of the Adviser's small cap
value private accounts and by comparing their performance with a broad measure
of market performance. The performance shown is the performance of all of the
Adviser's small cap value private accounts managed using the same strategy that
the Adviser will use to manage SCV Fund. These returns are compared to the
Russell 2000 Index, a broad measure of market performance, and they reflect
reinvestment of dividends. The returns are calculated without deducting advisory
fees and other mutual fund expenses. Past performance of these private accounts,
which are not subject to the same diversification, tax restrictions, investment
limitations or higher expenses as the SCV Fund, should not be considered a
representation of the SCV Fund's future results. Past performance does not
guarantee future results.
Year-by-Year Annual Total Return
(for the year ending December 31, 1999)
[graph omitted]
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
31.16% 20.75% 35.68% -11.65% 20.01%
During the year ending December 31, 1999 shown in the bar chart above, the
highest return for a quarter was 19.4% (quarter ending June 30, 1999) and the
lowest return for a quarter was -9.35% (quarter ending March 31, 1999).
--------------------------------------------------------------------------------
Average Annual Total Returns
(for the periods ending December 31, 1998)
================================================================================
================================================================================
Past 3 Past 5 Since Inception
Years Years (January 1, 1995)
--------------------------------------------------------------------------------
Small Cap Private Accounts 14.7% 19.2% 19.2%
Russell 2000 Index* 7.9% 14.2% 14.2%
--------------------------------------------------------------------------------
* The Russell 2000 Index is a broad-based index representative of the smaller
cap segment of the U.S. economy in terms of economic sector weightings, market
capitalization and overall risk.
Fees and Expenses of SCV Fund
The following table describes the fees and expenses that you may pay if you buy
and hold shares of the SCV Fund.
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment) Class A Class C
========================================================================================================
Maximum Sales Charge (Load) Imposed on Purchases 5.25% None
(as a percentage of offering price)
Deferred Sales Charge (as a percentage of original purchased price) None None
Redemption Fee (as a percentage of amount redeemed)(1) 1.00% 1.00%
Annual Fund Operating Expenses (expenses Class A Class C
That are deducted from Fund assets)
========================================================================================================
Management Fees 0.85% 0.85%
Distribution (12b-1) Fees 0.25% 1.00%
Other Expenses 0.90% 0.90%
--------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.00% 2.75%
Fee Waiver and Expense Reimbursement(2) -0.55% -0.65%
Net Expenses 1.45% 2.10%
========================================================================================================
</TABLE>
1 Imposed only on purchases of Class A shares in initial amounts of $1 million
or more and on all Class C share purchases if shares are redeemed less than
one year after they are purchased.
2 The Adviser contractually has agreed to waive its advisory fee to the extent
that Class A and Class C total expenses exceed 1.45% and 2.10%, respectively,
for a period ending on October 31, 2001.
Example:
This Example is intended to help you compare the cost of investing in shares of
the SCV Fund with the cost of investing in other mutual funds.
The Example assumes that :
o you invest $10,000 in shares of the SCV Fund for the time period indicated;
o you redeem all of your shares at the end of those periods;
o your investment has a 5% return each year; and
o the SCV Fund's operating expenses remain the same.
<PAGE>
Class A:
Although your actual costs could be higher or lower, based on these assumptions
your costs would be:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
Class C:
Although your actual costs could be higher or lower, based on these assumptions
your costs would be:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
<PAGE>
THRESHOLD MID CAP FUND
Investment Objectives, Policies and Risks
Investment Objective
The investment objective of the Threshold Mid Cap Fund ("MC Fund") is primarily
long-term capital appreciation and, secondarily, current income.
Principal Investment Strategies of the Fund
MC Fund seeks to achieve its objective by investing at least 65% of its total
assets in the equity securities of mid-size companies with a market
capitalization similar to the capitalization of those companies that comprise
the S&P MidCap 400(TM) Index, typically $1.5 to $10 billion ("mid-cap
companies"). MC Fund focuses its investment process on equity securities of
mid-cap companies, including warrants, rights and debt and preferred securities
convertible into equity securities. MC Fund may invest up to 35% of its total
assets in debt securities for current income, capital appreciation or as a
defensive strategy.
MC Fund attempts to identify mid-cap companies that have the financial strength
to take advantage of a potential competitive advantage, either through internal
growth or, alternatively, in relationships with key strategic partners. MC Fund
attempts to select and purchase securities that are priced lower than the
portfolio manager's estimate of the "intrinsic" value of the company. In
determining the intrinsic value of a company, MC Fund's portfolio manager
considers the relation of its stock price to variety of financial measures,
including historical and projected earnings, cash flow, reinvestment rate and
growth rate and compares these relationships to those of other companies in the
same industry.
MC Fund attempts to select the stock of mid-cap companies that it considers to
be inefficiently priced because information about the company has not been
adequately exposed in the marketplace. The Adviser attempts to improve
information flow about these companies in an effort to improve the market's
efficiency in pricing the company's stock. Fundamental research is used to
identify mid-cap companies with the potential to rapidly increase sales, cash
flow and earnings by taking advantage of demographic, economic and social and
other trends. Such companies may enjoy a sustainable competitive advantage
because of proprietary technology, an established niche, market dominance or
other business advantages relative to their competition. MC Fund also seeks
companies whose management has demonstrated a commitment to shareholder value
and appears capable of implementing a viable growth plan. MC Fund attempts to
select mid-cap companies whose business plan includes a catalyst that will
release the value of an asset, such as proprietary technology, a patent or other
asset, that is unappreciated by the market.
MC Fund secondarily seeks to provide current income. MC Fund may invest in debt
securities, primarily U.S. government bonds and investment-grade corporate
securities rated BBB or Bbb or above by S&P's or Moody's. MC Fund also may write
covered calls and purchase debt securities convertible into equity securities.
In anticipation of declining interest rates or broad market declines, MC Fund
may purchase debt securities with the objective of capital preservation. In each
case, obtaining current income is secondary to MC Fund's primary investment
objective of long term capital appreciation.
Principal Risks of Investing in the MC Fund
Although MC Fund seeks primarily long-term capital appreciation and,
secondarily, current income, actual future investment results cannot be
predicted. Investment results will fluctuate and there is no assurance that the
MC Fund will achieve its objective. You could lose money on your investment in
the MC Fund or not make as much as if you invested it elsewhere. An investment
in the MC Fund is not a bank deposit and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
MC Fund invests primarily in the stocks of mid-cap companies, which may lack the
managerial, financial or other resources necessary to implement their business
plans or succeed in the face of competition. The prospects for a company or an
industry may deteriorate because of a variety of factors, including
disappointing operating results or changes in the competitive environment. It
may be difficult to sell a mid-cap stock and this lack of market liquidity can
adversely affect MC Fund's ability to realize the market price of a stock,
especially during periods of rapid market decline. MC Fund's assessment of
mid-cap companies may prove incorrect, resulting in losses or poor performance
even in a rising market.
PERFORMANCE
The MC Fund commenced operations on __________ ___, 2000 and, as a result, has
no performance at this time.
<PAGE>
FEES AND EXPENSES OF MC FUND
The following table describes the fees and expenses that you may pay if you buy
and hold shares of the MC Fund.
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment) Class A Class C
========================================================================================================
Maximum Sales Charge (Load) Imposed on Purchases 5.25% None
(as a percentage of offering price)
Deferred Sales Charge (as a percentage of original purchased price) None None
Redemption Fee (as a percentage of amount redeemed)(1) 1.00% 1.00%
Annual Fund Operating Expenses (expenses Class A Class C
That are deducted from Fund assets)
========================================================================================================
Management Fees 0.85% 0.85%
Distribution (12b-1) Fees 0.25% 1.00%
Other Expenses 0.90% 0.90%
--------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.00% 2.75%
Fee Waiver and Expense Reimbursement(2) -0.55% -0.65%
Net Expenses 1.45% 2.10%
========================================================================================================
</TABLE>
1 Imposed only on purchases of Class A shares in initial amounts of $1 million
or more and on all purchases of Class C shares redeemed less than one year
after they are purchased.
2 The Adviser contractually has agreed to waive its advisory fee to the extent
that Class A and Class C total expenses exceed 1.45% and 2.10%, respectively,
for a period ending on October 31, 2001.
Example:
This Example is intended to help you compare the cost of investing in Class A
and Class C shares of the MC Fund with the cost of investing in other mutual
funds.
The Example assumes that :
o you invest $10,000 in shares of the MC Fund for the time period indicated;
o you redeem all of your shares at the end of those periods;
o your investment has a 5% return each year; and
o the MC Fund's operating expenses remain the same.
Class A:
Although your actual costs could be higher or lower, based on these assumptions
your costs would be:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
Class C:
Although your actual costs could be higher or lower, based on these assumptions
your costs would be:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
Adviser. Kennedy Capital Management, Inc. (the "Adviser"), located at 10829
Olive Boulevard, St. Louis, MO 63141, serves as investment adviser to the
Threshold Advisor Funds. The Adviser was organized in 1980 to provide investment
management services to pension plans, charitable organizations, mutual funds and
other institutional investors, as well as wealthy individuals. The Adviser
currently manages approximately $1.6 billion for its clients, generally invested
in small cap companies according to a growth, value or blended investment
strategy. The Adviser will receive an advisory fee of 0.85% from each of the SCV
Fund and MC Fund for providing investment advice and portfolio management
services.
Portfolio Managers
SCV Fund
Mr. Timothy Hasara, a portfolio manager of the Adviser since 1995, has
day-to-day investment responsibility for SCV Fund. Mr. Hasara is responsible for
managing approximately $500 million in client funds on behalf of the Adviser in
the small cap value style that he will use to manage SCV Fund. Mr. Hasara
received a B.S. from the University of Notre Dame and a Master's Degree in
Business Management from Johns Hopkins University.
MC Fund
Mr. Richard H. Eckenrodt, a portfolio manager of the Adviser since 1999, has
primary investment responsibility for the MC Fund. Prior to assuming the
management of the MC Fund, Mr. Eckenrodt held portfolio manager and analytical
positions with Lindner Funds. Mr. Eckenrodt managed the Lindner Utility Fund
from 1993 to 1999 and he had investment management authority for the Lindner
Dividend Fund (now Lindner Asset Allocation Fund) and Lindner Growth Fund (now
Lindner Large-Cap Growth Fund). Mr. Eckenrodt had direct responsibility for
total assets in excess of $1 billion. Mr. Eckenrodt holds a B.A. and a Master's
Degree in Economics from the University of Missouri.
Mr. Frank Latuda, Jr., CFA, is Associate Manager of the MC Fund. Mr. Latuda has
served as Director of Research for the Adviser since 1996. Prior to joining the
Adviser, Mr. Latuda was a research analyst with Burns, Pauli, Mahoney & Company.
He holds a B.S. in Electrical Engineering from the University of Notre Dame, and
a Master's Degree in Electrical Engineering and an MBA from the University of
Illinois.
VALUING FUND SHARES
The net asset value of each class of shares of each Fund is determined as of
4:00 p.m. Eastern time on each day on which the New York Stock Exchange is open
for trading and the Funds' custodian and transfer agent are open for business
("Business Day"). The net asset value of all outstanding shares of each class of
each Fund will be determined based on a pro rata allocation of the value of a
Fund's investment income and total capital gains and losses and class expenses
based on comparative net asset value at the beginning of the day. Purchases and
redemptions of a class of a Fund's shares will be made at the next calculation
of net asset value after the order is placed.
Each Fund generally values its portfolio securities as follows. Equity
securities are valued at the last sales price reported by the consolidated quote
system prior to the normal closing of the market on which the securities are
traded. If there was no sale that day, equity securities will be valued at the
mean of the last bid and asked prices. Debt securities (other than short-term
securities) will normally be valued on the basis of prices provided by a pricing
service or determined using quotes from brokers. Investment grade short- term
obligations with 60 days or less to maturity are valued using the amortized cost
method. Securities for which market quotations are not readily available are
valued at fair market value by the Adviser, as determined in good faith pursuant
to procedures approved by the Threshold Advisor Funds' Board of Directors.
CHOOSING A CLASS OF SHARES
CLASS A SHARES. Class A shares are sold at the public offering price, which is
the net asset value per share plus any initial sales charge as described below.
You do not pay a sales charge when you reinvest dividends or distributions paid
by a Fund.
Sales Charge as a % of
Offering Net Amount
Price Invested
Less than $50,000 5.25 5.54
$50,000 but less than $100,000 4.25 4.44
$100,000 but less than $250,000 3.25 3.36
$250,000 but less than $500,000 2.50 2.56
$500,000 but less than $1 million 2.00 2.04
$1 million or more -0- -0-
If you pay no sales charge as a result of investing more than $1 million, you
will pay a redemption fee of 1% of the initial investment amount if you sell
your Class A shares within one year of purchase.
Qualifying for a Reduced Sales Charge.
You may qualify for a reduced sales charge if you own or are purchasing shares
of other Threshold Advisor Funds. If you or your investment consultant notifies
a Fund of your eligibility for a reduced sales charge at the time of your
purchase, you will be credited with the combined value (at the current offering
price) of all your Threshold Advisor Funds and the shares of your spouse and any
children under 21.
The following persons may qualify to purchase Class A shares of the Fund without
a sales charge:
o Current or former directors, officers or employees of a Fund or the
Adviser;
o Current or former directors, partners, officers or employees of selected
organizations providing services to Threshold Advisor Funds, including
legal counsel and advertising and marketing consultants;
o Current or former officers, partners, employees or registered
representatives of broker-dealers which have entered into sales agreements
with the principal underwriter of Threshold Advisor Funds;
o Members of the immediate families of any of the persons above;
o Any trust, custodial account, pension, profit sharing or other benefit plan
of the foregoing persons;
o Insurance company separate accounts;
o Other funds and accounts for which the Adviser or any of its affiliates
serve as investment adviser or manager;
o Employer sponsored retirement plans with at least $1,000,000 in plan assets
or an initial investment of $25,000. Participants in an employee-sponsored
403(b) plan or employer-sponsored 457 plan if (a) the employer has made
special arrangement for the plan to operate as a group through a single
broker-dealer firm or other financial intermediary, and (b) all
participants in the plan purchase shares of Threshold Advisor Funds through
that broker-dealer or financial intermediary.
Reduced sales charges or a waiver of sales charges on Class A shares also may be
available to group plans if the sponsoring organization makes information about
Threshold Advisor Funds available to plan participants, permits informational
meetings with participants regarding Threshold Advisor Funds, and facilitates
purchases by plan participants.
Letter of Intent. A letter of intent is a written representation that you intend
to purchase a specified dollar amount of the Class A shares of a Fund during the
thirteen months following your initial purchase. Based on the amount specified
in the letter of intent, you will qualify for a reduced initial sales charge.
Completing a letter of intent does not obligate you to purchase additional
shares. If, however, you do not buy enough shares to qualify for the projected
level of sales charges by the end of the 13-month period (or when you sell your
shares, if earlier), your sales charge will be recalculated based on the amount
you actually invested. You must pay the additional sales charge within 20 days
after you are notified of the recalculation or it will be deducted from you
account. In the event you sell shares of a fund prior to the end of the 13-month
period, the recalculated sales charge will be deducted from your sales proceeds.
For more information on purchasing under a letter of intent, please consult your
investment consultant.
CLASS C SHARES. You buy Class C shares at net asset value per share without
paying an initial sales charge. If you sell your Class C shares within one year
of purchase, you will pay to the Fund a redemption fee of 1.00% of the Class C
shares being redeemed. In determining whether a redemption fee is payable, it
will be assumed that the redemption is made first of shares that have been held
for more than one year and, second, of shares that are still subject to the
redemption fee.
Minimum Investment. Your initial investment in Class A or Class C shares must be
at least $5,000. Additional investments must be at least $100 for Class A shares
and $500 for Class C shares. You may qualify for lower initial or subsequent
investment minimums if you are opening a retirement plan account, opening an
account for a minor, establishing an automatic investment plan or placing your
trade through an investment consultant. The initial minimum investment for most
types of retirement plans is $250 and additional investments must be at least
$100. The minimum investment for an account for a minor established through a
gift from a relative is $500.
Minimum Account Size. Each Fund requires that you maintain a minimum account
balance of $500. If your account declines below this amount because of a sale or
exchange, the transfer agent will notify you that your account will be
liquidated and closed. You may avoid this by increasing the value of your
account to at least $500 during the calendar quarter after the quarter in which
you receive the notice.
BUYING, SELLING AND EXCHANGING SHARES OF A FUND
Class A and Class C shares of each Fund are sold at the public offering price,
which is the net asset value after any sales charge has been deducted. Each Fund
offers to redeem its shares from its shareholders at any time at the next
determined net asset value without the deduction of any sales charge, although
each Fund imposes a 1.00% redemption fee on purchases of Class A shares in an
initial amount of $1 million or more and on all purchases of Class C shares if
those shares are redeemed less than one year after they are purchased. The
redemption price may be paid either in cash or by a distribution in kind of
securities held by a Fund.
Buying Fund Shares
You may open an account as follows:
BY CONTACTING AN INVESTMENT PROFESSIONAL -
You may buy shares of a Fund from any investment firm that has a sales agreement
with the Fund's distributor. Threshold Advisor Funds considers the services
provided by professional investment consultants to be beneficial to most
investors without extensive investment experience. If you do not have an
investment consultant, please call 1-800-711-1207 for information on how to
locate an investment professional in your area. Threshold Advisor Funds also
maintains a list of financial consultants on its web site at
www.thresholdfunds.com.
BY WIRE -- To purchase by wire:
o Call the Funds' transfer agent toll-free at (800) 447-8150 to obtain an
account and PIN number (for new accounts only)
o Complete and return your account application to the transfer agent
o Instruct your bank to wire your investment to:
UMB Bank N.A.
ABA #
Credit to: #
FBO: [Name of Fund] [Class of Shares]
Your name(s)
Your account number
BY MAIL -- To purchase by mail:
o Complete and sign the account application
o Mail your application and check to:
[Name of Fund] [Class of Shares]
c/o Unified Fund Services, Inc.
431 N. Pennsylvania Street
Indianapolis, IN 46204
If you are making an additional purchase of shares, include your account number
on the check. Checks must be drawn in U.S. dollars on a U.S. bank. Third party
checks will not be accepted by a Fund.
ACCOUNT OPTIONS
Automatic investment plans. You can make regular periodic investments in a Fund
by setting up a periodic transfer from your bank or other depositary account
under the Threshold Periodic Investment Program. You may start an automatic
investment plan in Class A shares with an initial investment of $100. You may
establish an automatic investment plan for an existing Class C account if your
balance is at least $2,500. You may cancel your enrollment in the Periodic
Investment Program at any time or change the dollar amount, frequency, or
investment date by calling or wring to the transfer agent. Because the operation
of this program requires coordination with your bank or other depositary, you
should allow up to 30 days for the transfer agent to establish your
participation in the Periodic Investment Program.
Directed dividends. You can invest the dividends paid by a Fund into another
Threshold Advisor Fund. The value of your second account must be at least
$2,500. There are no fees or charges for directed dividends. If you have a
retirement plan account, you may direct dividends only to accounts with
identical registrations.
Systematic withdrawal plans. When you establish a systematic withdrawal plan,
the transfer agent will sell the number of a Fund's shares or the dollar amount
you specify on a periodic basis and the proceeds will be paid to you or to any
person you select. You must obtain a signature guarantee to direct payments to
another person after you have established your systematic withdrawal plan.
Payments can be made either by check or by electronic funds transfer to a bank
or other depositary account you designate.
To establish a systematic withdrawal plan:
o Your account must have a value of at least $10,000;
o You must request a periodic withdrawals of at least $50; and
o You may not request a periodic withdrawal of more than 10% of the value of
the account (valued at the time the plan is implemented).
Systematic sales of a Fund's shares may be taxable transaction for you. If you
purchase Class A shares while you are making systematic withdrawals from your
account, you may pay unnecessary sales charges.
Direct deposit. Dividends, capital gain distributions and proceeds of a
redemption, including systematic withdrawal payments, will be paid to you by
check unless you arrange for an electronic funds transfer payment. You may
choose to have cash payments deposited directly into your bank or other
depositary account. Please contact the Shareholder Services Department at
1-800-447-8150 for further information.
Selling Fund Shares
You may sell your Fund shares on any Business Day. You or your investment
consultant may write a letter of instruction that includes the information below
and mail your written instructions to the Transfer Agent at the above address.
o your account name(s)
o your account number
o the dollar amount or the number of shares to be redeemed
o how to send the proceeds to you (by check or wire*)
o your signature (the letter must be signed by an authorized person(s) in the
exact name which appears on the account)
o any legal documents, if required
* If you want to have the redemption proceeds wired to your bank
account, provide the name, location, ABA or bank routing number and your bank
account number. Your bank may charge a fee to receive the wire.
Your shares will be sold at the next net asset value calculated after your order
is received in good order by the Funds' transfer agent. You generally will
receive the redemption proceeds within seven (7) days after receipt of your
redemption request. The redemption check will be send to the address of record.
Redemption Fee. If Class A or Class C shares of either Fund are purchased and
then redeemed within twelve months from the date of purchase, a redemption fee
of 1.00% will be deducted from the redemption proceeds by the Fund. In
determining whether a redemption fee is payable, it will be assumed that the
redemption is made first of shares that have been held for more than one year
and, second, of shares that are still subject to the redemption fee.
Telephone transaction privileges. If your account is registered in your name,
you can sell shares of a Fund by telephone. If you do not want your account to
have telephone transaction privileges, you must indicate that choice on your
account application or by writing the transfer agent. In order to place a
telephone transaction, please contact the Fund's transfer agent at
1-800-447-8150. The shareholder services department is open between 8:00 a.m.
and 5:00 p.m. Eastern time on each Business Day.
Suspension of redemptions. Each Fund reserves the right to suspend redemptions
or postpone the date of payment:
(a) for any periods during which the New York Stock Exchange
("Exchange") is closed (other than for customary weekend and holiday
closings), or when trading on the Exchange is restricted,
(b) at such time as an emergency exists as determined by the
Securities and Exchange Commission ("SEC") so that disposal of a
Fund's investments or determination of its net asset value is not
reasonably practicable, or
(c) for such other periods as the SEC by order may permit for
protection of a Fund's shareholders.
If the shares being redeemed recently were purchased by check, payment may be
delayed to verify that the check has been honored, normally not more than
fifteen (15) days.
Redemptions in Kind. Although each Fund intends to redeem shares in cash, it
reserves the right to pay the redemption price in whole or in part by a
distribution of readily marketable securities held by the Fund. However,
shareholders always will be entitled to redeem shares for cash up to the lesser
of $250,000 or 1% of a Fund's net asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. In addition, if
redemption is made in kind, shareholders who receive securities and sell them
could receive less than the redemption value of their securities and could incur
certain transaction costs.
Exchanging Fund Shares. You may exchange your shares of a Fund for the shares of
the same class of another Threshold Advisor Fund without the imposition of any
fee, subject to the requirements described below. The automatic exchange will be
effective on the day after your instructions are received by a Fund's transfer
agent.
At the time you make your exchange request you must have at least $5,000
invested in Threshold Advisor Funds. Your exchange request must be for at least
$1,000 and as a result of the exchange you must have at least $2,500 in each
Threshold Advisor Fund you own. Shares you acquire as part of an exchange will
continue to be subject to any redemption fee that applies to the shares you
originally purchased. When you ultimately sell your shares, the date of your
original purchase will determine the amount of any redemption fee.
Before you request an exchange, consider each Fund's investment objective and
policies as described in the Fund's prospectus. An exchange may also result in
the payment of income taxes. Your investment consultant should be able to assist
you in evaluating an exchange among different series of Threshold Advisor Funds.
Exchange limitations. Each Fund imposes a limit of three exchanges per year. The
exchange limitation is designed to discourage short-term trading, which can
increase the expenses incurred by a Fund and reduce returns for other
shareholders. Threshold Advisor Funds may view accounts for which one person
gives instructions or accounts that act on the advice provided by a single
source to be under common control and, thus, subject to this limit. Accounts of
broker-dealers or other financial intermediaries that aggregate client accounts
are not subject to this limitation.
Telephone transaction privileges. If your account is registered in your name,
you can exchange shares of a Fund by telephone. If you do not want your account
to have telephone transaction privilege, you must indicate that choice on your
account application or by writing the transfer agent. In order to place a
telephone transaction, please contact the Fund's transfer agent at
1-800-447-8150. The shareholder services department is open between 8:00a.m. and
5:00 p.m. Eastern time on each Business Day.
DISTRIBUTIONS AND TAXES
Net investment income distributed by a Fund generally consists of interest
income and dividends received on investments, less expenses. The dividends you
receive, whether or not reinvested, will be taxed as ordinary income.
Each Fund also distributes net capital gains to its shareholders normally once a
year. Capital gains are generated when a Fund sells its assets for a profit.
Capital gains are taxed differently depending on how long the Fund has held the
asset sold. Distributions of gains recognized on the sale of assets held for 12
months or less are taxed as ordinary income; distributions of gains recognized
on the sale of assets held longer than 12 months are taxed at lower capital
gains rates. If a Fund distributes to its shareholders an amount exceeding its
income and gains, this excess will gradually be treated as a non-taxable return
of capital.
Unless you indicate another option on your account application, any dividends
and capital gain distributions paid to you by a Fund automatically will be
invested in additional Fund shares. Alternatively, you may elect to have: (1)
dividends paid to you in cash and the amount of any capital gain distributions
reinvested; or (2) the full amount of any dividends and capital gain
distributions paid to you in cash.
Selling shares (including redemptions) and receiving distributions (whether
reinvested or taken in cash) usually are taxable events to a Fund's
shareholders. These transactions typically create the following tax liabilities
for taxable accounts:
SUMMARY OF TAX LIABILITY FOR TAXABLE ACCOUNTS:
Type of transaction Tax status
------------------- ----------
Income dividends Ordinary income rate
Short-term capital gain distributions Ordinary income tax
Long-term capital gain distributions Capital gains rate
Sales of shares (including redemptions) owned Long-term capital gains or
more than 12 months losses (capital gains rate)
Sales of shares (including redemptions) owned Gains are taxed at the same
for 12 months or less rate as ordinary income,
losses are subject to
special rules
Distributions to retirement plans. Fund distributions received by your qualified
retirement plan, such as a 401(k) plan or IRA, are generally tax-deferred; this
means that you are not required to report Fund distributions on its income tax
return when paid to your plan, but, rather, when your plan makes payments to its
beneficiary. Special rules apply to payouts from Roth and Education IRAs.
Dividends-received deductions. Corporate investors may be entitled to a
dividends-received deduction on a portion of the ordinary dividends they receive
from the Fund.
Tax reporting. If you are a non-retirement plan holder, then each year, we will
send you a Form 1099 that tells you the amount of distributions you received for
the prior calendar year, and the tax status of those distributions, and a list
of reportable sale transactions. Generally, a Fund's distributions are taxable
to you in the year you received them. However, any dividends that are declared
in October, November or December but paid in January are taxable as if received
in December of the year they are declared.
Withholding taxes. If you are a non-corporate shareholder and if a Fund does not
have your correct social security or other taxpayer identification number,
federal law requires us to withhold and pay to the Internal Revenue Service 31%
of your distributions and sales proceeds. If you are subject to backup
withholding, we also will withhold and pay to the IRS 31% of your distributions.
Any tax withheld may be applied against the tax liability on your federal income
tax return.
Because your tax situation is unique, you should consult your tax professional
about federal, state and local tax consequences.
DISTRIBUTION PLAN
Each Fund has adopted a distribution plan for its Class A and Class C shares
offered through this prospectus in accordance with Rule 12b-1 under the
Investment Company Act of 1940. Under this plan, a Fund pays an annual fee to
Unified Management Corp., the Fund's distributor, of 0.25% and 1.00% for Class A
and Class C Shares, respectively, to help defray the cost of distributing the
Fund's shares and servicing its shareholders. Because these fees are an ongoing
expense, over time they reduce the net investment results of a Fund. Depending
on the amount of your investment and the length of time you hold the shares,
your investment results will not equal the results of a different class of
shares of a Fund having a different sales charge and fee structure.
SHAREHOLDER SERVICES
The Threshold Advisor Funds' website at www.thresholdfunds.com contains
information on each Fund. If your account is registered in your name with the
Funds' transfer agent, you can obtain current account information. Prospectuses
for all Threshold Advisor Funds are also available.
Contacting shareholder services
You can contact a Fund by calling the transfer agent at 1-800-447-8150.
Information on each Fund's Class A and Class C net asset value and on your
account (if your account is registered in your name with the transfer agent) is
available. In addition, you may speak with a shareholder servicing agent with
respect to any question you have regarding a Fund or your account. If your
account is held by a broker-dealer or other financial institution, our
shareholder servicing department will not have specific information regarding
your Fund account.
Selected information about each Fund is available through a voice-response
system. You will need to obtain and use a personal identification number (PIN)
to retrieve specific information about your account through the voice-response
system. Please contact Shareholder Services at 1-800-447-8150 to obtain a PIN
number or with questions regarding the voice response system.
<PAGE>
[LOGO]
THRESHOLD ADVISOR FUNDS, INC.
10829 Olive Blvd.
St. Louis, MO 63141
(800) 711-1207
THRESHOLD SMALL CAP VALUE FUND
THRESHOLD MID CAP FUND
Prospectus dated ________ ___, 2000
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
[back cover]
A Statement of Additional Information ("SAI") about each Fund has been filed
with the Securities and Exchange Commission ("SEC"), and is incorporated herein
by reference. Additional information about the Funds' investments is available
in the Funds' annual and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. Shareholders may make inquiries or request the SAI and the
Funds' reports to shareholders without charge by calling or writing a Fund at
the telephone number or the address listed on the cover page or by calling the
Fund's transfer agent toll-free at (800) 447-8150. Information about each Fund
may be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be obtained
by calling 1-800-SEC-0330. Copies of information about each Fund may be
obtained, upon payment of a duplicating fee, by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. The Fund also maintains an
Internet site at http://www.thresholdfunds.com.
<PAGE>
TABLE OF CONTENTS
THRESHOLD SMALL CAP FUND
INVESTMENT OBJECTIVE, POLICIES AND RISKS..................................4
PERFORMANCE...............................................................5
FEES AND EXPENSES OF SCV FUND.............................................6
THRESHOLD MID CAP FUND
INVESTMENT OBJECTIVES, POLICIES AND RISKS.................................8
PERFORMANCE...............................................................9
FEES AND EXPENSES OF THE FUND.................................................9
MANAGEMENT OF THE FUNDS......................................................11
VALUING FUND SHARES..........................................................13
CHOOSING A CLASS OF SHARES...................................................13
BUYING, SELLING AND EXCHANGING FUND SHARES...................................14
DISTRIBUTIONS................................................................18
TAX INFORMATION..............................................................20
DISTRIBUTION PLAN............................................................21
SHAREHOLDER SERVICES.........................................................21
<PAGE>
SMALL CAP VALUE FUND
Investment Objective, Policies and Risks
Investment Objective
The investment objective of the Threshold Small Cap Value Fund ("SCV Fund") is
long-term capital appreciation.
Principal Investment Strategies of the Fund
SCV Fund seeks to achieve its objective by investing at least 65% of its total
assets in the equity securities of small capitalization companies. "Small cap"
companies include those companies with a market capitalization of less than $1.5
billion at the time of purchase. SCV Fund focuses its investment process on
equity securities, which include warrants, rights and debt and preferred
securities convertible into equity securities.
SCV Fund attempts to select and purchase securities of small cap companies that
are "value" priced, which means that the ratio of the security's price to
earnings, book value, cash flow or other financial measure is lower than other
companies' in its industry group with similar projected growth rates. SCV Fund
does not consider, however, that any specific price to earnings, book value or
cash flow ratio constitutes value pricing.
SCV Fund uses fundamental research to identify small cap companies with the
potential to rapidly increase sales, cash flow and earnings by taking advantage
of demographic, economic, social or other trends. Such companies may enjoy a
proprietary technology or other business advantage relative to their
competition. Kennedy Capital Management, Inc., Fund's Adviser, evaluates the
management of a small cap company in which SCV Fund invests, including its
ability to implement the company's business plan and its commitment to
increasing shareholder value. SCV Fund attempts to select the stock of small cap
companies that it considers to be inefficiently priced because information about
the company has not been adequately exposed in the marketplace. The Adviser
attempts to improve information flow about these "invisible" companies in an
effort to improve the market's efficiency in pricing the company's stock.
Principal Risks of Investing in SCV Fund
Although SCV Fund seeks long-term capital appreciation, actual future investment
results cannot be predicted. Investment results will fluctuate and there is no
assurance that SCV Fund will achieve its objective. You could lose money on your
investment in SCV Fund or not make as much as if you invested it elsewhere. An
investment in SCV Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
SCV Fund invests primarily in the stocks of smaller companies, which may lack
the managerial, financial or other resources necessary to implement their
business plans or succeed in the face of competition. The prospects for a small
cap company or an industry may deteriorate because of a variety of factors,
including disappointing operating results or changes in the competitive
environment. It may be difficult to sell a small cap stock and this lack of
market liquidity can adversely affect SCV Fund's ability to realize the market
price of a stock, especially during periods of rapid market decline.
SCV Fund's investment results will be affected by general market conditions and
specifically by investors' enthusiasm for small cap value stocks. The Adviser's
assessment of small cap companies may prove incorrect, resulting in losses or
poor performance even in a rising market.
PERFORMANCE
The bar chart and table below provide some indication of the risks of investing
in SCV Fund by showing changes in the performance of the Adviser's small cap
value private accounts and by comparing their performance with a broad measure
of market performance. The performance shown is the performance of all of the
Adviser's small cap value private accounts managed using the same strategy that
the Adviser will use to manage SCV Fund. These returns are compared to the
Russell 2000 Index, a broad measure of market performance, and they reflect
reinvestment of dividends. The returns are calculated without deducting advisory
fees and other mutual fund expenses. Past performance of these private accounts,
which are not subject to the same diversification, tax restrictions, investment
limitations or higher expenses as the SCV Fund, should not be considered a
representation of the SCV Fund's future results. Past performance does not
guarantee future results.
Year-by-Year Annual Total Return
(for the year ending December 31, 1999)
[graph omitted]
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
31.16% 20.75% 35.68% -11.65% 20.01%
During the year ending December 31, 1999 shown in the bar chart above, the
highest return for a quarter was 19.4% (quarter ending June 30, 1999) and the
lowest return for a quarter was -9.35% (quarter ending March 31, 1999).
--------------------------------------------------------------------------------
Average Annual Total Returns
(for the periods ending December 31, 1998)
================================================================================
Past 3 Past 5 Since Inception
Years Years (January 1, 1995)
--------------------------------------------------------------------------------
Small Cap Private Accounts 14.7% 19.2% 19.2%
--------------------------------------------------------------------------------
Russell 2000 Index* 7.9% 14.2% 14.2%
--------------------------------------------------------------------------------
* The Russell 2000 Index is a broad-based index representative of the smaller
cap segment of the U.S. economy in terms of economic sector weightings, market
capitalization and overall risk.
Fees and Expenses of SCV Fund
The following table describes the fees and expenses that you may pay if you buy
and hold shares of the SCV Fund.
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment) Class I
========================================================================================================
Maximum Sales Charge (Load) Imposed on Purchases None
(as a percentage of offering price)
Deferred Sales Charge (as a percentage of original purchased price) None
Redemption Fee (as a percentage of amount redeemed) None
Annual Fund Operating Expenses (expenses Class I
That are deducted from Fund assets)
========================================================================================================
Management Fees 0.85%
Distribution (12b-1) Fees None
Other Expenses 0.90%
--------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.75%
Fee Waiver and Expense Reimbursement(1) -0.30%
Net Expenses 1.45%
========================================================================================================
</TABLE>
1 The Adviser contractually has agreed to waive its advisory fee to the extent
that Class I total expenses exceed 1.45% for a period ending on October 31,
2001.
Example:
This Example is intended to help you compare the cost of investing in Class I
shares of the SCV Fund with the cost of investing in other mutual funds.
The Example assumes that:
o you invest $10,000 in shares of the SCV Fund for the time period indicated;
o you redeem all of your shares at the end of those periods;
o your investment has a 5% return each year; and
o the SCV Fund's operating expenses remain the same.
<PAGE>
Class I:
Although your actual costs could be higher or lower, based on these assumptions
your costs would be:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
------------------------------ -------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
<PAGE>
THRESHOLD MID CAP FUND
Investment Objectives, Policies and Risks
Investment Objective
The investment objective of the Threshold Mid Cap Fund ("MC Fund") is primarily
long-term capital appreciation and, secondarily, current income.
Principal Investment Strategies of the Fund
MC Fund seeks to achieve its objective by investing at least 65% of its total
assets in the equity securities of mid-size companies with a market
capitalization similar to the capitalization of those companies that comprise
the S&P MidCap 400(TM) Index, typically $1.5 to $10 billion ("mid-cap
companies"). MC Fund focuses its investment process on equity securities of
mid-cap companies, including warrants, rights and debt and preferred securities
convertible into equity securities. MC Fund may invest up to 35% of its total
assets in debt securities for current income, capital appreciation or as a
defensive strategy.
MC Fund attempts to identify mid-cap companies that have the financial strength
to take advantage of a potential competitive advantage, either through internal
growth or, alternatively, in relationships with key strategic partners. MC Fund
attempts to select and purchase securities that are priced lower than the
portfolio manager's estimate of the "intrinsic" value of the company. In
determining the intrinsic value of a company, MC Fund's portfolio manager
considers the relation of its stock price to variety of financial measures,
including historical and projected earnings, cash flow, reinvestment rate and
growth rate and compares these relationships to those of other companies in the
same industry.
MC Fund attempts to select the stock of mid-cap companies that it considers to
be inefficiently priced because information about the company has not been
adequately exposed in the marketplace. The Adviser attempts to improve
information flow about these companies in an effort to improve the market's
efficiency in pricing the company's stock. Fundamental research is used to
identify mid-cap companies with the potential to rapidly increase sales, cash
flow and earnings by taking advantage of demographic, economic and social and
other trends. Such companies may enjoy a sustainable competitive advantage
because of proprietary technology, an established niche, market dominance or
other business advantages relative to their competition. MC Fund also seeks
companies whose management has demonstrated a commitment to shareholder value
and appears capable of implementing a viable growth plan. MC Fund attempts to
select mid-cap companies whose business plan includes a catalyst that will
release the value of an asset, such as proprietary technology, a patent or other
asset, that is unappreciated by the market.
MC Fund secondarily seeks to provide current income. MC Fund may invest in debt
securities, primarily U.S. government bonds and investment-grade corporate
securities rated BBB or Bbb or above by S&P's or Moody's. MC Fund also may write
covered calls and purchase debt securities convertible into equity securities.
In anticipation of declining interest rates or broad market declines, MC Fund
may purchase debt securities with the objective of capital preservation. In each
case, obtaining current income is secondary to MC Fund's primary investment
objective of long term capital appreciation.
Principal Risks of Investing in the MC Fund
Although MC Fund seeks primarily long-term capital appreciation and,
secondarily, current income, actual future investment results cannot be
predicted. Investment results will fluctuate and there is no assurance that the
MC Fund will achieve its objective. You could lose money on your investment in
the MC Fund or not make as much as if you invested it elsewhere. An investment
in the MC Fund is not a bank deposit and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
MC Fund invests primarily in the stocks of mid-cap companies, which may lack the
managerial, financial or other resources necessary to implement their business
plans or succeed in the face of competition. The prospects for a company or an
industry may deteriorate because of a variety of factors, including
disappointing operating results or changes in the competitive environment. It
may be difficult to sell a mid-cap stock and this lack of market liquidity can
adversely affect MC Fund's ability to realize the market price of a stock,
especially during periods of rapid market decline. MC Fund's assessment of
mid-cap companies may prove incorrect, resulting in losses or poor performance
even in a rising market.
PERFORMANCE
The MC Fund commenced operations on __________ ___, 2000 and, as a result, has
no performance at this time.
<PAGE>
FEES AND EXPENSES OF MC FUND
The following table describes the fees and expenses that you may pay if you buy
and hold shares of the MC Fund.
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment) Class I
========================================================================================================
Maximum Sales Charge (Load) Imposed on Purchases None
(as a percentage of offering price)
Deferred Sales Charge (as a percentage of original purchased price) None
Redemption Fee (as a percentage of amount redeemed) None
Annual Fund Operating Expenses (expenses Class I
That are deducted from Fund assets)
========================================================================================================
Management Fees 0.85%
Distribution (12b-1) Fees None
Other Expenses 0.90%
--------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.75%
Fee Waiver and Expense Reimbursement(1) -0.30%
Net Expenses 1.45%
========================================================================================================
</TABLE>
1 The Adviser contractually has agreed to waive its advisory fee to the extent
that Class I total expenses exceed 1.45% for a period ending on October 31,
2001.
Example:
This Example is intended to help you compare the cost of investing in Class I
shares of the MC Fund with the cost of investing in other mutual funds.
The Example assumes that:
o you invest $10,000 in shares of the MC Fund for the time period indicated;
o you redeem all of your shares at the end of those periods;
o your investment has a 5% return each year; and
o the MC Fund's operating expenses remain the same.
Class I:
Although your actual costs could be higher or lower, based on these assumptions
your costs would be:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
<PAGE>
You would pay the following expenses if you did not redeem your shares:
--------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
Adviser. Kennedy Capital Management, Inc. (the "Adviser"), located at 10829
Olive Boulevard, St. Louis, MO 63141, serves as investment adviser to the
Threshold Advisor Funds. The Adviser was organized in 1980 to provide investment
management services to pension plans, charitable organizations, mutual funds and
other institutional investors, as well as wealthy individuals. The Adviser
currently manages approximately $1.6 billion for its clients, generally invested
in small cap companies according to a growth, value or blended investment
strategy. The Adviser will receive an advisory fee of 0.85% from each of the SCV
Fund and MC Fund for providing investment advice and portfolio management
services.
Portfolio Managers
SCV Fund
Mr. Timothy Hasara, a portfolio manager of the Adviser since 1995, has
day-to-day investment responsibility for SCV Fund. Mr. Hasara is responsible for
managing approximately $500 million in client funds on behalf of the Adviser in
the small cap value style that he will use to manage SCV Fund. Mr. Hasara
received a B.S. from the University of Notre Dame and a Master's Degree in
Business Management from Johns Hopkins University.
MC Fund
Mr. Richard H. Eckenrodt, a portfolio manager of the Adviser since 1999, has
primary investment responsibility for the MC Fund. Prior to assuming the
management of the MC Fund, Mr. Eckenrodt held portfolio manager and analytical
positions with Lindner Funds. Mr. Eckenrodt managed the Lindner Utility Fund
from 1993 to 1999 and he had investment management authority for the Lindner
Dividend Fund (now Lindner Asset Allocation Fund) and Lindner Growth Fund (now
Lindner Large-Cap Growth Fund). Mr. Eckenrodt had direct responsibility for
total assets in excess of $1 billion. Mr. Eckenrodt holds a B.A. and a Master's
Degree in Economics from the University of Missouri.
Mr. Frank Latuda, Jr., CFA, is Associate Manager of the MC Fund. Mr. Latuda has
served as Director of Research for the Adviser since 1996. Prior to joining the
Adviser, Mr. Latuda was a research analyst with Burns, Pauli, Mahoney & Company.
He holds a B.S. in Electrical Engineering from the University of Notre Dame, and
a Master's Degree in Electrical Engineering and an MBA from the University of
Illinois.
VALUING FUND SHARES
The net asset value of each class of shares of each Fund is determined as of
4:00 p.m. Eastern time on each day on which the New York Stock Exchange is open
for trading and the Funds' custodian and transfer agent are open for business
("Business Day"). The net asset value of all outstanding shares of each class of
each Fund will be determined based on a pro rata allocation of the value of a
Fund's investment income and total capital gains and losses and class expenses
based on comparative net asset value at the beginning of the day. Purchases and
redemptions of a class of a Fund's shares will be made at the next calculation
of net asset value after the order is placed.
Each Fund generally values its portfolio securities as follows. Equity
securities are valued at the last sales price reported by the consolidated quote
system prior to the normal closing of the market on which the securities are
traded. If there was no sale that day, equity securities will be valued at the
mean of the last bid and asked prices. Debt securities (other than short-term
securities) will normally be valued on the basis of prices provided by a pricing
service or determined using quotes from brokers. Investment grade short- term
obligations with 60 days or less to maturity are valued using the amortized cost
method. Securities for which market quotations are not readily available are
valued at fair market value by the Adviser, as determined in good faith pursuant
to procedures approved by the Threshold Advisor Funds' Board of Directors.
CLASS I SHARES
Class I shares are designed to be sold by registered investment advisers,
broker-dealers and other investment professionals. Class I shares are sold with
no front-end sales charge, contingent deferred sales charge or redemption fee.
There also are no 12b-1 fees attributable to Class I shares.
Minimum Investment. Your initial investment in Class I shares must be at least
$250,000. Additional investments must be at least $100. You may qualify for
lower initial or subsequent investment minimums if you are opening a retirement
plan account, opening an account for a minor, establishing an automatic
investment plan or placing your trade through an investment consultant. The
initial minimum investment for most types of retirement plans is $250 and
additional investments must be at least $100. The minimum investment for an
account for a minor established through a gift from a relative is $500.
Minimum Account Size. Each Fund requires that you maintain a minimum account
balance of $500. If your account declines below this amount because of a sale or
exchange, the transfer agent will notify you that your account will be
liquidated and closed. You may avoid this by increasing the value of your
account to at least $500 during the calendar quarter after the quarter in which
you receive the notice.
BUYING, SELLING AND EXCHANGING SHARES OF A FUND
Class I shares of each Fund are sold at the public offering price, which is the
net asset value after any sales charge has been deducted. Each Fund offers to
redeem its shares from its shareholders at any time at the next determined net
asset value without the deduction of any sales charge. The redemption price may
be paid either in cash or by a distribution in kind of securities held by a
Fund.
Buying Fund Shares
You may open an account as follows:
BY CONTACTING AN INVESTMENT PROFESSIONAL -
You may buy shares of a Fund from any investment firm that has a sales agreement
with the Fund's distributor. Threshold Advisor Funds considers the services
provided by professional investment consultants to be beneficial to most
investors without extensive investment experience. If you do not have an
investment consultant, please call 1-800-711-1207 for information on how to
locate an investment professional in your area. Threshold Advisor Funds also
maintains a list of financial consultants on its web site at
www.thresholdfunds.com.
BY WIRE -- To purchase by wire:
o Call the Funds' transfer agent toll-free at (800) 447-8150 to obtain an
account and PIN number (for new accounts only)
o Complete and return your account application to the transfer agent
o Instruct your bank to wire your investment to:
UMB Bank N.A.
ABA #
Credit to: #
FBO: [Name of Fund] [Class of Shares]
Your name(s)
Your account number
BY MAIL -- To purchase by mail:
o Complete and sign the account application
o Mail your application and check to:
[Name of Fund] [Class of Shares]
c/o Unified Fund Services, Inc.
431 Pennsylvania Street
Indianapolis, IN 46204
If you are making an additional purchase of shares, include your account number
on the check. Checks must be drawn in U.S. dollars on a U.S. bank. Third party
checks will not be accepted by a Fund.
ACCOUNT OPTIONS
Automatic investment plans. You can make regular periodic investments in a Fund
by setting up a periodic transfer from your bank or other depositary account
under the Threshold Periodic Investment Program. You may start an automatic
investment plan in Class I shares with an initial investment of $_________. You
may cancel your enrollment in the Periodic Investment Program at any time or
change the dollar amount, frequency, or investment date by calling or wring to
the transfer agent. Because the operation of this program requires coordination
with your bank or other depositary, you should allow up to 30 days for the
transfer agent to establish your participation in the Periodic Investment
Program.
Directed dividends. You can invest the dividends paid by a Fund into another
Threshold Advisor Fund. The value of your second account must be at least
$2,500. There are no fees or charges for directed dividends. If you have a
retirement plan account, you may direct dividends only to accounts with
identical registrations.
Systematic withdrawal plans. When you establish a systematic withdrawal plan,
the transfer agent will sell the number of a Fund's shares or the dollar amount
you specify on a periodic basis and the proceeds will be paid to you or to any
person you select. You must obtain a signature guarantee to direct payments to
another person after you have established your systematic withdrawal plan.
Payments can be made either by check or by electronic funds transfer to a bank
or other depositary account you designate.
To establish a systematic withdrawal plan:
o Your account must have a value of at least $10,000;
o You must request a periodic withdrawals of at least $50; and
o You may not request a periodic withdrawal of more than 10% of the value of
the account (valued at the time the plan is implemented).
Systematic sales of a Fund's shares may be taxable transaction for you.
Direct deposit. Dividends, capital gain distributions and proceeds of a
redemption, including systematic withdrawal payments, will be paid to you by
check unless you arrange for an electronic funds transfer payment. You may
choose to have cash payments deposited directly into your bank or other
depositary account. Please contact the Shareholder Services Department at
1-800-447-8150 for further information.
Selling Fund Shares
You may sell your Fund shares on any Business Day. You or your investment
consultant may write a letter of instruction that includes the information below
and mail your written instructions to the Transfer Agent at the above address.
o your account name(s)
o your account number
o the dollar amount or the number of shares to be redeemed
o how to send the proceeds to you (by check or wire*)
o your signature (the letter must be signed by an authorized person(s) in the
exact name which appears on the account)
o any legal documents, if required
* If you want to have the redemption proceeds wired to your bank
account, provide the name, location, ABA or bank routing number and your bank
account number. Your bank may charge a fee to receive the wire.
Your shares will be sold at the next net asset value calculated after your order
is received in good order by the Funds' transfer agent. You generally will
receive the redemption proceeds within seven (7) days after receipt of your
redemption request. The redemption check will be send to the address of record.
Telephone transaction privileges. If your account is registered in your name,
you can sell shares of a Fund by telephone. If you do not want your account to
have telephone transaction privileges, you must indicate that choice on your
account application or by writing the transfer agent. In order to place a
telephone transaction, please contact the Fund's transfer agent at
1-800-447-8150. The shareholder services department is open between 8:00 a.m.
and 5:00 p.m. Eastern time on each Business Day.
Suspension of redemptions. Each Fund reserves the right to suspend redemptions
or postpone the date of payment:
(a) for any periods during which the New York Stock Exchange ("Exchange")
is closed (other than for customary weekend and holiday closings), or when
trading on the Exchange is restricted,
(b) at such time as an emergency exists as determined by the Securities and
Exchange Commission ("SEC") so that disposal of a Fund's investments or
determination of its net asset value is not reasonably practicable, or
(c) for such other periods as the SEC by order may permit for protection of
a Fund's shareholders.
If the shares being redeemed recently were purchased by check, payment may be
delayed to verify that the check has been honored, normally not more than
fifteen (15) days.
Redemptions in Kind. Although each Fund intends to redeem shares in cash, it
reserves the right to pay the redemption price in whole or in part by a
distribution of readily marketable securities held by the Fund. However,
shareholders always will be entitled to redeem shares for cash up to the lesser
of $250,000 or 1% of a Fund's net asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. In addition, if
redemption is made in kind, shareholders who receive securities and sell them
could receive less than the redemption value of their securities and could incur
certain transaction costs.
Exchanging Fund Shares. You may exchange your shares of a Fund for the shares of
the same class of another Threshold Advisor Fund without the imposition of any
fee, subject to the requirements described below. The automatic exchange will be
effective on the day after your instructions are received by a Fund's transfer
agent.
At the time you make your exchange request you must have at least $5,000
invested in Threshold Advisor Funds. Your exchange request must be for at least
$1,000 and as a result of the exchange you must have at least $2,500 in each
Threshold Advisor Fund you own. Shares you acquire as part of an exchange will
continue to be subject to any redemption fee that applies to the shares you
originally purchased. When you ultimately sell your shares, the date of your
original purchase will determine the amount of any redemption fee.
Before you request an exchange, consider each Fund's investment objective and
policies as described in the Fund's prospectus. An exchange may also result in
the payment of income taxes. Your investment consultant should be able to assist
you in evaluating an exchange among different series of Threshold Advisor Funds.
Exchange limitations. Each Fund imposes a limit of three exchanges per year. The
exchange limitation is designed to discourage short-term trading, which can
increase the expenses incurred by a Fund and reduce returns for other
shareholders. Threshold Advisor Funds may view accounts for which one person
gives instructions or accounts that act on the advice provided by a single
source to be under common control and, thus, subject to this limit. Accounts of
broker-dealers or other financial intermediaries that aggregate client accounts
are not subject to this limitation.
Telephone transaction privileges. If your account is registered in your name,
you can exchange shares of a Fund by telephone. If you do not want your account
to have telephone transaction privilege, you must indicate that choice on your
account application or by writing the transfer agent. In order to place a
telephone transaction, please contact the Fund's transfer agent at
1-800-447-8150. The shareholder services department is open between 8:00a.m. and
5:00 p.m. Eastern time on each Business Day.
DISTRIBUTIONS AND TAXES
Net investment income distributed by a Fund generally consists of interest
income and dividends received on investments, less expenses. The dividends you
receive, whether or not reinvested, will be taxed as ordinary income.
Each Fund also distributes net capital gains to its shareholders normally once a
year. Capital gains are generated when a Fund sells its assets for a profit.
Capital gains are taxed differently depending on how long the Fund has held the
asset sold. Distributions of gains recognized on the sale of assets held for 12
months or less are taxed as ordinary income; distributions of gains recognized
on the sale of assets held longer than 12 months are taxed at lower capital
gains rates. If a Fund distributes to its shareholders an amount exceeding its
income and gains, this excess will gradually be treated as a non-taxable return
of capital.
Unless you indicate another option on your account application, any dividends
and capital gain distributions paid to you by a Fund automatically will be
invested in additional Fund shares. Alternatively, you may elect to have: (1)
dividends paid to you in cash and the amount of any capital gain distributions
reinvested; or (2) the full amount of any dividends and capital gain
distributions paid to you in cash.
Selling shares (including redemptions) and receiving distributions (whether
reinvested or taken in cash) usually are taxable events to a Fund's
shareholders. These transactions typically create the following tax liabilities
for taxable accounts:
SUMMARY OF TAX LIABILITY FOR TAXABLE ACCOUNTS:
Type of transaction Tax status
Income dividends Ordinary income rate
Short-term capital gain distributions Ordinary income tax
Long-term capital gain distributions Capital gains rate
Sales of shares (including redemptions) owned Long-term capital gains or
more than 12 months losses (capital gains rate)
Sales of shares (including redemptions) owned Gains are taxed at the same
for 12 months or less rate as ordinary income,
losses are subject to special
rules
Distributions to retirement plans. Fund distributions received by your qualified
retirement plan, such as a 401(k) plan or IRA, are generally tax-deferred; this
means that you are not required to report Fund distributions on its income tax
return when paid to your plan, but, rather, when your plan makes payments to its
beneficiary. Special rules apply to payouts from Roth and Education IRAs.
Dividends-received deductions. Corporate investors may be entitled to a
dividends-received deduction on a portion of the ordinary dividends they receive
from the Fund.
Tax reporting. If you are a non-retirement plan holder, then each year, we will
send you a Form 1099 that tells you the amount of distributions you received for
the prior calendar year, and the tax status of those distributions, and a list
of reportable sale transactions. Generally, a Fund's distributions are taxable
to you in the year you received them. However, any dividends that are declared
in October, November or December but paid in January are taxable as if received
in December of the year they are declared.
Withholding taxes. If you are a non-corporate shareholder and if a Fund does not
have your correct social security or other taxpayer identification number,
federal law requires us to withhold and pay to the Internal Revenue Service 31%
of your distributions and sales proceeds. If you are subject to backup
withholding, we also will withhold and pay to the IRS 31% of your distributions.
Any tax withheld may be applied against the tax liability on your federal income
tax return.
Because your tax situation is unique, you should consult your tax professional
about federal, state and local tax consequences.
DISTRIBUTION PLAN
Each Fund has adopted a distribution plan for its Class A and Class C shares
offered through a separate prospectus in accordance with Rule 12b-1 under the
Investment Company Act of 1940. Under this plan, a Fund pays an annual fee to
Unified Management Corp., the Fund's distributor, of 0.25% and 1.00% for Class A
and Class C Shares, respectively, to help defray the cost of distributing the
Fund's shares and servicing its shareholders. Class I Shares pay no 12b-1 fee.
Because these fees are an ongoing expense, over time they reduce the net
investment results of a Fund. Depending on the amount of your investment and the
length of time you hold the shares, your investment results will not equal the
results of a different class of shares of a Fund having a different sales charge
and fee structure.
SHAREHOLDER SERVICES
The Threshold Advisor Funds' website at www.thresholdfunds.com contains
information on each Fund. If your account is registered in your name with the
Funds' transfer agent, you can obtain current account information. Prospectuses
for all Threshold Advisor Funds are also available.
Contacting shareholder services
You can contact a Fund by calling the transfer agent at 1-800-447-8150.
Information on each Fund's Class I net asset value and on your account (if your
account is registered in your name with the transfer agent) is available. In
addition, you may speak with a shareholder servicing agent with respect to any
question you have regarding a Fund or your account. If your account is held by a
broker-dealer or other financial institution, our shareholder servicing
department will not have specific information regarding your Fund account.
Selected information about each Fund is available through a voice-response
system. You will need to obtain and use a personal identification number (PIN)
to retrieve specific information about your account through the voice-response
system. Please contact Shareholder Services at 1-800-447-8150 to obtain a PIN
number or with questions regarding the voice response system.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THRESHOLD ADVISOR FUNDS, INC.
THRESHOLD SMALL CAP VALUE FUND
THRESHOLD MID CAP FUND
________ ___, 2000
Threshold Advisor Funds, Inc. is an open-end, diversified management investment
company.
This Statement of Additional Information should be read in conjunction with the
Prospectus for the Fund dated ________ ___, 2000 ("Prospectus"). A copy of the
Prospectus may be obtained without charge by calling toll-free (800) 711-1207.
This Statement of Additional Information is not a prospectus and is authorized
for distribution to prospective investors only if preceded or accompanied by a
current Prospectus.
<PAGE>
TABLE OF CONTENTS
FUND HISTORY..................................................................1
DESCRIPTION OF THE FUND.......................................................1
FUND INVESTMENTS..............................................................2
FUND POLICIES.................................................................7
MANAGEMENT OF THE FUND........................................................9
CODE OF ETHICS................................................................9
CONTROL PERSONS AND PRINCIPAL SECURITY HOLDERS...............................10
ADVISORY AND OTHER SERVICES..................................................10
BROKERAGE ALLOCATION AND OTHER PRACTICES.....................................12
CAPITAL STOCK................................................................13
PURCHASE, REDEMPTION AND PRICING OF SHARES...................................13
TAX INFORMATION..............................................................15
UNDERWRITER..................................................................16
CALCULATION OF PERFORMANCE DATA..............................................16
FINANCIAL STATEMENTS.........................................................18
APPENDIX A: DESCRIPTION OF BOND RATINGS.....................................19
APPENDIX B: OPTIONS CONTRACTS...............................................21
<PAGE>
FUND HISTORY
Threshold Advisor Funds, Inc. was incorporated under the laws of the State of
Maryland on June 16, 2000. Threshold Advisor Funds currently is comprised of two
investment portfolios each with three classes of common stock, Class A, Class C
and Class I, each par value $0.01. Threshold Advisor Funds has the authority to
issue multiple series and classes of shares.
DESCRIPTION OF THE FUNDS
Threshold Advisor Funds is a diversified, open-end management investment company
registered under the Investment Company Act of 1940 ("1940 Act").
Threshold Small Cap Value Fund ("SCV Fund") is a series of the Threshold Advisor
Funds. Its objective is long-term capital appreciation. The Fund seeks to
achieve its objective by investing at least 65% of its total assets in equity
securities of small-capitalization companies, each of which has a total market
capitalization of less than $1.5 billion ("small cap companies").
Threshold Mid Cap Fund ("MC Fund") also is a series of the Threshold Advisor
Funds. Its objective is primarily long-term capital appreciation and,
secondarily, current income. The Fund seeks to achieve its objective by
investing at least 65% of its total assets in equity securities of mid-size
companies with a market capitalization similar to those companies that comprise
the S&P MidCap 400(TM) Index, typically $1.5 to $10 billion ("mid-cap
companies"). MC Fund also may invest up to 35% of its total assets in debt
securities for current income, capital appreciation or as a defensive strategy.
The SCV Fund and the MC Fund (collectively, the "Funds" and each a "Fund") each
have three classes of shares. The classes differ with respect to the charges
that investors pay as follows:
Class A. Class A shares are sold at the public offering price, which is the net
asset value per share plus an initial sales charge as described in the Fund's
Class A prospectus. Selected persons may be able to purchase Class A shares at a
reduced commission or at net asset value. Class A shareholders who initially
purchase shares worth $1 million or more and redeem those shares within one year
of purchase will be required to pay a 1.00% redemption fee. Class A shareholders
pay a 12b-1 distribution fee of 0.25% per year. The minimum purchase for Class A
shares is $5,000, subject to certain exceptions.
Class C. Purchasers of Class C shares pay no commission at the time the Fund is
acquired. Class C shareholders are required to pay a redemption fee of 1.00% if
they sell their Class C shares within one year of purchase. Class C shareholders
pay a 12b-1 distribution fee of 1.00% per year. The minimum purchase for Class C
shares is $5,000, subject to certain exceptions.
Class I. Purchasers of Class I shares pay no commission at the time of purchase,
no front-end or contingent deferred sales charges and no 12b-1 distribution
fees. The minimum purchase for Class I shares is $250,000.
FUND INVESTMENTS
As described below, the SCV Fund and the MC Fund may invest in the following
types of instruments:
Equity Securities
Common Stocks. Each Fund may invest in common stocks. Common Stocks
represent the residual ownership interest in the issuer and are entitled to the
income and increase in the value of the assets and business of the entity after
all of its obligations and preferred stock are satisfied. Common stocks
generally have voting rights. Common stocks fluctuate in price in response to
many factors including historical and prospective earnings of the issuer, the
value of its assets, general economic conditions, interest rates, investor
perceptions and market liquidity.
Preferred Stock. Each Fund may invest in preferred stock. A preferred
stock blends the characteristics of a bond and common stock. It can offer the
higher yield of a bond and has priority over common stock in equity ownership,
but does not have the seniority of a bond and its participation in the issuer's
growth may be limited. Preferred stock has preference over common stock in the
receipt of dividends and in any residual assets after payment to creditors
should the issuer be dissolved. Although the dividend is set at a fixed annual
rate, in some circumstances it can be changed or omitted by the issuer.
Real Estate Investment Trusts ("REITs"). Each Fund may invest in REITs.
REITs include equity REITs, which own real estate properties, and mortgage
REITs, which make construction, development and long-term mortgage loans. The
value of an equity REIT may be affected by changes in the value of the
underlying property, while a mortgage REIT may be affected by the quality of the
credit extended. The performance of both types of REITs depends upon conditions
in the real estate industry, management skills and the amount of cash flow. The
risks associated with REITs include defaults by borrowers, self-liquidation,
failure to qualify as a pass-through entity under the Federal tax law, failure
to qualify as an exempt entity under the 1940 Act and the fact that REITs are
not diversified.
Warrants and Rights. Each Fund may purchase warrants and rights, which
are instruments that permit a Fund to acquire, by subscription, the capital
stock of a corporation at a set price, regardless of the market price for such
stock. No Fund will invest more than 5% of its respective net assets in
warrants. Warrants may be either perpetual or of limited duration. There is a
greater risk that warrants might drop in value at a faster rate than the
underlying stock.
Convertible Securities. Each Fund may invest in convertible securities.
Convertible securities include corporate bonds, notes and preferred stock that
can be converted into or exchanged for a prescribed amount of common stock of
the same or a different issue within a particular period of time at a specified
price or formula. A convertible security entitles the holder to receive interest
paid or accrued on debt or dividends paid on preferred stock until the
convertible stock matures or is redeemed, converted or exchanged. Convertible
securities combine the fixed-income characteristics of bonds and capital
appreciation potential of common stock. While no securities investment is
without some risk, investments in convertible securities generally entail less
risk than the issuer's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed income security. The market value of
convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. While convertible securities
generally offer lower interest or dividend yields than nonconvertible debt
securities of similar quality, they do enable the investor to benefit from
increases in the market price of the underlying common stock..
American Depository Receipts ("ADRs")
Each Fund may invest in sponsored and unsponsored ADRs. ADRs are
receipts that represent interests in or are convertible into, securities of
foreign issuers. These receipts are not necessarily denominated in the same
currency as the underlying securities into which they may be converted.
ADRs may be purchased through "sponsored" or "unsponsored" facilities.
A sponsored facility is established jointly by the issuer of the underlying
security and a depository, whereas a depository may establish an unsponsored
facility without participation by the issuer of the depository security. Holders
of unsponsored depository receipts generally bear all the costs of such
facilities and the depository of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through voting rights to the holders of such
receipts of the deposited securities. Generally, ADRs in registered form are
designed for use in the U.S. securities market and ADRs in bearer form are
designed for use outside the U.S. For purposes of certain investment
limitations, ADRs are considered to be foreign securities and are subject to
many of the risks inherent in investing in foreign securities.
Debt Securities
MC Fund may invest up to 35% of its total assets in debt securities.
The market value of debt securities is influenced primarily by changes in the
level of interest rates. Generally, as interest rates rise, the market value of
debt securities decreases. Conversely, as interest rates fall, the market value
of debt securities increases. Factors that could result in a rise in interest
rates, and a decrease in the market value or debt securities, include an
increase in inflation, or inflation expectations, an increase in the rate of
U.S. economic growth, an increase in the Federal budget deficit or an increase
in the price of commodities such as oil. Debt securities include the following:
Corporate Debt Obligations. The Mid Cap Fund may invest in corporate
debt securities, including corporate bonds, debentures, notes and other similar
corporate debt instruments. The MC Fund invests primarily in investment grade
non-convertible corporate debt. This Fund may invest only in investment grade
corporate debt obligations rated at lease BBB or Baa or higher by S&P or Moody's
Investor Services, respectively. Securities rated BBB or Baa are considered to
have speculative characteristics and changes in economic conditions are more
likely to lead to a weakened capacity to pay interest and repay principal than
is the case with higher grade bonds. MC Fund may retain a security that has been
downgraded below investment grade if, in the opinion of its portfolio manager,
it is in the Fund's best interest.
Bank Deposit Notes - MC Fund may invest in bank deposit notes, which are
obligations of a bank, rather than bank holding company corporate debt. The only
structural difference between bank deposit notes and certificates of deposit is
that interest on bank deposit notes is calculated on a 30/360 basis as are
corporate notes/bonds. Similar to certificates of deposit, deposit notes
represent bank level investments and, therefore, are senior to all holding
company corporate debt.
Bankers' Acceptances - MC Fund may invest in bankers acceptances, which are
short-term credit instruments used to finance the import, export, transfer or
storage of goods. They are termed "accepted" when a bank guarantees their
payment at maturity.
Bank Obligations - For purposes of the MC Fund's investment policies with
respect to bank obligations, the assets of a bank or savings institution will be
deemed to include the assets of its domestic and foreign branches. Investments
in obligations issued by foreign banks and foreign branches of U.S. banks may
involve risks that are different from investments in obligations of domestic
branches of U.S. banks. These risks may include future unfavorable political and
economic developments, possible withholding taxes on interest income, seizure or
nationalization of foreign deposits, currency controls, interest limitations, or
other governmental restrictions which might affect the payment of principal or
interest on the securities held by the Mid Cap Fund. Additionally, these
institutions may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting and recordkeeping requirements than
those applicable to domestic branches of U.S. banks.
Certificates of deposit issued by domestic branches of domestic banks do
not benefit materially, and certificates of deposit issued by foreign branches
of domestic banks do not benefit at all, from insurance from the Federal Deposit
Insurance Corporation.
Both domestic banks and foreign branches of domestic banks are subject to
extensive governmental regulations, which may limit both the amount and types of
loans which may be made and interest rates which may be charged. In addition,
the profitability of the banking industry is dependent largely upon the
availability and costs of funds for the purpose of financing and lending
operations under prevailing money market conditions. General economic conditions
as well as exposure to credit losses arising from possible financial
difficulties of borrowers play an important part in the operations of this
industry.
Commercial Paper and other Short-Term Corporate Obligations - MC Fund may
invest in commercial paper, which refers to promissory notes representing an
unsecured debt of a corporation or finance company with a fixed maturity of no
more than 270 days. The other corporate obligations in which the MC Fund may
invest shall consist of high quality, U.S. dollar denominated short-term bonds
and notes (including variable amount master demand notes) issued by domestic
corporations bearing fixed, floating or variable interest rates.
Debentures - MC Fund may invest in debt obligations, such as bonds and
debentures, issued by corporations and other business organizations that are
rated at the time of purchase within the four highest ratings categories of
Standard & Poor's Rating Group ("S&P") or Moody's Investors Service, Inc
("Moody's") or, if unrated, are determined to be of comparable quality by
Kennedy Capital Management, Inc., the Fund's Adviser. Unrated securities will be
determined to be of comparable quality to rated debt obligations if, among other
things, other outstanding obligations of the issuers of such securities are
rated A or better. Debentures are unsecured debt securities. The holder of a
debenture is protected only by the general creditworthiness of the issuer. See
Appendix A, Description of Bond Ratings, for additional information.
Temporary Investments
Cash Equivalents -SCV Fund and MC Fund each may invest in cash equivalents
including certificates of deposit, bearer deposit notes, bankers acceptances,
government obligations, commercial paper, short-term corporate debt securities
and repurchase agreements.
Certificates of Deposit - SCV Fund and MC Fund each may invest in
certificates of deposits. CDs are issued against funds deposited in an eligible
bank (including its domestic and foreign branches, subsidiaries and agencies),
are for a definite period of time, earn a specified rate of return and are
normally negotiable.
U.S. Government Securities - Each Fund may invest in securities issued or
guaranteed by the U.S. Government, including U.S. Treasury obligations (see
definition below) and securities issued by U.S. agencies and instrumentalities.
U. S. Government agencies or instrumentalities which issue or guarantee
securities include, but are not limited to, the Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States, Small
Business Administration, GNMA, General Services Administration, Central Bank for
Cooperatives, Federal Home Loan Banks, FHLMC, Federal Intermediate Credit Banks,
Federal Land Banks, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board, Inter-American Development Bank,
Asian-American Development Bank, Agency for International Development, Student
Loan Marketing Association and International Bank of Reconstruction and
Development.
Obligations of U.S. Government agencies and instrumentalities may or may
not be supported by the full faith and credit of the United States. Some are
backed by the right of the issuer to borrow from the Treasury; others by
discretionary authority of the U.S. Government to purchase the agencies'
obligations; while still others, such as the Student Loan Marketing Association,
are supported only by the credit of the instrumentality. In the case of
securities not backed by the full faith and credit of the United States, the
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment.
U.S. Treasury Obligations - Each Fund may invest in U.S. Treasury
obligations, which include bills, notes and bonds issued by the
U.S. Treasury and STRIPS.
Illiquid Securities
SCV Fund and MC Fund each may invest up to 15% of its net assets in
illiquid securities, including securities having legal or contractual
restrictions on resale or no readily available market. As a result of such
illiquidity, a Fund may not be able to sell these instruments when the Adviser
considers it desirable to do so or may have to sell them at a lower price than
could be obtained if they were more liquid. These factors may have an adverse
impact on net asset value. The sale of illiquid securities may require more time
and result in higher transaction costs and other selling expenses than the sale
of liquid securities.
Rule 144A under the Securities Act of 1933, as amended ("1933 Act"),
establishes a "safe harbor" from the registration requirements of the 1933 Act
for resales of certain securities to qualified institutional buyers.
Institutional markets for restricted securities that have developed as a result
of Rule 144A provide both readily ascertainable values for certain restricted
securities and the ability to liquidate an investment to satisfy share
redemption orders. As a result, Rule 144A securities will not be deemed to be
illiquid provided that the Adviser has determined such securities are liquid
pursuant to procedures established by the Board of the Directors. An
insufficient number of qualified institutional buyers interested in purchasing
Rule 144A-eligible securities held by a Fund, however, could affect adversely
the marketability of such portfolio securities and a Fund may be unable to
dispose of such securities promptly or at reasonable prices.
Options
Each Fund may purchase put and call options for hedging purposes only. Such
options may relate to interest rates and other economic factors and would not
exceed 5% of a Fund's net assets. MC Fund may sell calls ("covered calls") on
stocks that the Fund owns as a method of generating additional income. The sale
of covered calls may have the effect of reducing the potential for capital
appreciation, increasing portfolio turnover and increasing income taxed at
ordinary rates. See Appendix B - Options Contracts.
Repurchase Agreements
Each Fund each may enter into repurchase agreements ("repos"). A repo
provides a means to earn income on funds for periods as short as overnight, is
an arrangement under which the purchaser (i.e., a Fund) purchases securities and
the seller agrees, at the time of sale, to repurchase the securities at a
specified time and price. The repurchase price may be higher than the purchase
price, the difference being income to the purchaser, or the purchase and
repurchase prices may be the same, with interest at a stated rate due to the
purchaser together with the repurchase price on repurchase. In either case, the
income to the purchaser is unrelated to the interest rate on the securities
subject to the repurchase agreement. Repurchase agreements are considered to be
loans under the 1940 Act.
A Fund may enter into repurchase agreements with any bank or registered
broker-dealer who, in the opinion of the Fund's Board of Directors, presents a
minimum risk of bankruptcy during the term of the agreement based upon
guidelines which periodically are reviewed by the Board. A Fund may enter into
repurchase agreements as a short-term investment of its idle cash in order to
earn income. The securities will be held by a custodian (or subcustodian) or in
the Federal Reserve/U.S. Treasury book entry system. If the market value of the
securities subject to the repurchase agreement becomes less than the repurchase
price (including interest), a Fund will direct the seller of the securities to
deliver additional securities so that the market value of all securities subject
to the repurchase agreement will equal or exceed the repurchase price.
In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before the repurchase of the
securities under a repurchase agreement, a Fund may encounter a delay and incur
costs before being able to sell the security being held as collateral. Delays
may involve loss of interest or decline in price of the securities. Apart from
the risk of bankruptcy or insolvency proceedings, there is also the risk that
the seller may fail to repurchase the securities, in which case a Fund may incur
a loss if the proceeds to that Fund from the sale of the securities to a third
party are less than the repurchase price.
FUND POLICIES
The following restrictions have been adopted by SCV Fund and MC Fund and may be
changed only by the majority vote of a Fund's outstanding shares, which as used
herein means the lesser of (a) 67% of the shares of a Fund present at the
meeting if the holders of more than 50% of the shares are present and
represented at the shareholders' meeting or (b) more than 50% of the shares of a
Fund.
Each Fund may not:
1. Invest more than 25% of its total assets in the securities of companies
primarily engaged in only one industry other than the U.S. Government, its
agencies and instrumentalities. Finance companies as a group are not
considered a single industry for purposes of this policy.
2. Act as an underwriter (sell securities for others), except to the extent
that a Fund may be deemed to be an underwriter in connection with the
disposition of portfolio securities or the sale of its own shares under
federal securities laws.
3. Borrow money or property in excess of 33 1/3% of its total assets less all
liabilities and indebtedness other than the bank or other borrowings,
except that each Fund may borrow up to an additional 5% of its total assets
for temporary defensive purposes.
4. Buy or sell real estate, unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the each
Fund from investing in securities of companies engaged in the real estate
business or real estate investment trusts.
5. Buy or sell physical commodities unless acquired as a result of ownership
of securities or other instruments.
6. Lend portfolio securities in excess of 30% of its net assets, of which no
more than 10% of its net assets shall be placed with any one borrower. In
making loans of portfolio securities, a Fund receives the market price in
cash, U.S. government securities, letters of credit or such other
collateral as may be permitted by regulatory agencies and approved by the
board. If the market price of the loaned securities goes up, a Fund will
receive additional collateral on a daily basis. The risks are that the
borrower may not provide additional collateral when required or return the
securities when due. During the existence of the loan, a Fund receives cash
payments equivalent to all interest or other distributions paid on the
loaned securities. A loan will not be made unless the Adviser believes the
opportunity for additional income outweighs the risks.
7. Make loans to any person or firm, except that each Fund may enter into
repurchase agreements and lend its investment securities to broker-dealers
or other institutional investors; provided, however, that the making of a
loan shall not be construed to include the acquisition for investment of
bonds, debentures, notes or other evidences of indebtedness of any
corporation or government which are publicly distributed.
8. Purchase from or sell portfolio securities to an officer, director or other
"interested person" of a Fund, as defined in the 1940 Act, including the
Adviser and its affiliates, except as permitted by the 1940 Act and
exemptive rules or orders thereunder.
9. Issue senior securities (including borrowing money from banks and other
entities and through reverse repurchase agreements) in excess of 33 1/3% of
its total assets (including the proceeds of senior securities issued).
The following non-fundamental investment restrictions apply to SCV Fund and MC
Fund and may be changed with respect to each Fund by a majority vote of the
Board of Directors (the "Board").
1. Each Fund may not purchase securities on margin or effect short sales
(except that a Fund may obtain such short-term credits as may be necessary
for the clearance of purchases or sales of securities).
2. Each Fund may invest up to 10% of its total assets in the securities of
other investment companies to the extent permitted by law. A Fund may incur
duplicate advisory or management fees when investing in another mutual
fund.
3. A Fund may not invest more than 15% of its net assets in securities that
lack an established secondary trading market or are otherwise considered
illiquid, including time deposits and repurchase agreements that mature in
more than seven days. Rule 144A-eligible securities will not be deemed to
illiquid provided that the Adviser determines they are liquid. In
determining the liquidity of Rule 144A commercial paper issued in
transactions not involving a public offering under Section 4(2) of the
Securities Act of 1933, the Adviser, under guidelines established by the
Board, will evaluate relevant factors such as the issuer and the size and
nature of its commercial paper programs, the willingness and ability of the
issuer or dealer to repurchase the paper, and the nature of the clearance
and settlement procedures for the paper.
4. For temporary investment purposes, each Fund may invest 100% of its total
assets in cash and cash-equivalent short-term obligations. The cash
equivalent investments a Fund may use are short-term U.S. government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers acceptances and letters of credit of banks or
savings and loan associations having capital, surplus and undivided profits
(as of the date of its most recently published annual financial statements)
in excess of $100 million (or the equivalent in the instance of a foreign
branch of a U.S. bank) at the date of investment. Each Fund also may
purchase short-term corporate notes and obligations rated in the top two
classifications by Moody's or S&P or the equivalent and may use repurchase
agreements with broker-dealers registered under the Securities Exchange Act
of 1934 and with commercial banks.
MANAGEMENT OF THE FUND
Board of Directors. The Board provides broad supervision over each Fund's
affairs. The Adviser is responsible for the management of each Fund and the
Funds' officers are responsible for their operations. The directors and officers
of each Fund are listed below, together with their principal occupations during
the past five years.
<TABLE>
<S> <C> <C>
Name, Address and Position with
Date of Birth the Fund Principal Occupation During Past 5 Years
--------------------- --------------- ----------------------------------------
Charles W. Schweizer* Director, President and General Counsel of Kennedy Capital
10829 Olive Blvd. President and Management, Inc. since 3/99 and 3/98, respectively;
St. Louis, MO 63141 Treasurer Associate, Thompson Coburn LLP from 6/96 to 3/98; and
(10/21/45) Associate, Blackwell Sanders Peper Martin from 9/95-6/96.
Richard T. Eckenrodt* Director and Portfolio Manager with Kennedy Capital Management, Inc.
10829 Olive Blvd. Portfolio Manager since 10/99. Prior to that, portfolio manager and
St. Louis, MO 63141 analyst with The Lindner Funds 1993 to 1999.
(9/8/49)
Timothy Hasara* Director and Portfolio Manager with Kennedy Capital Management, Inc.
10829 Olive Blvd. Portfolio Manager since 1/95.
St. Louis, MO 63141
(10/26/63)
</TABLE>
*Messrs. Schweizer, Eckenrodt and Hasara, by virtue of their position with the
Adviser, each is deemed to be an "interested person" of each Fund as defined by
the 1940 Act.
The Fund compensates each Independent Director by an annual fee of $2,000.
Directors also are reimbursed for any expenses incurred in attending meetings.
In addition, officers and directors of each Fund are eligible to purchase Class
A shares of a Fund at net asset value, without the payment of an sales charge.
Each Fund commenced operations on ______ ___, 2000 and, as a result, paid no
compensation to its independent directors for the prior year.
<TABLE>
<S> <C> <C> <C> <C> <C>
Name of person and position Aggregate Pension or Estimated Total
Compensation Retirement annual Compensation from
from Small Cap Benefits benefits upon Fund Complex paid
Value Fund and accrued as retirement to Directors
Mid Cap Fund part of Fund
expenses
------------------------------------------ ------------------ --------------- --------------- -------------------
Charles W. Schweizer, Director, $0 $0 $0 $0
President and Treasurer
Richard T. Eckenrodt, Director $0 $0 $0 $0
Timothy Hasara, Director $0 $0 $0 $0
</TABLE>
CODE OF ETHICS
Threshold Adviser Funds and the Adviser each have adopted a Code of Ethics under
Rule 17j-1 of the 1940 Act. The Code of Ethics permits portfolio managers to
invest in securities, including securities that may be purchased or held by a
Fund, subject to certain restrictions designed to prevent improper trading that
could harm a Fund.
CONTROL PERSONS AND PRINCIPAL SECURITY HOLDERS
All directors and officers of each Fund as a group own less than 1% of the
outstanding shares of each Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Adviser. Kennedy Capital Management, Inc., 10829 Olive Blvd., St. Louis, MO
63141, serves as Adviser to each Fund. A majority of the voting securities of
the Adviser are owned by The Gerald T. Kennedy Irrevocable 1996 Trust. The
remainder of the voting securities are owned by employees and directors of the
Adviser. Thomas Hoops, an independent certified public accountant and Patrica
Row, an officer of the Adviser, serve as Trustees of the Trust. The Adviser is
paid an investment advisory fee of 0.85% by each Fund as compensation for its
investment advisory services. The Advisory Agreement between the Adviser and
Threshold Advisor Funds initially was approved by the Board and the initial
shareholder of each Fund effective as of _________ ___,2000. Under the terms of
the Advisory Agreement, the Adviser agrees to provide investment advisory
services to each Fund, with discretion to purchase and sell securities on behalf
of a Fund in accordance with its investment objective, policies and
restrictions. The Advisory Agreement will automatically terminate if assigned
and may be terminated without penalty by a vote of a majority of the Board or by
a vote of a majority of the outstanding voting securities of a Fund on no less
than thirty (30) days' nor more than sixty (60) days' written notice to the
Adviser, or by the Adviser upon sixty (60) days' written notice to a Fund. The
Advisory Agreement will continue in effect provided that annually such
continuance is specifically approved by a vote of the Board, including the
affirmative votes of a majority of the Directors who are not parties to the
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of considering such
approval, or by the vote of shareholders.
Principal Underwriter. Unified Management Corp., 431 N. Pennsylvania Street,
Indianapolis, IN 46204, serves as principal underwriter to Threshold Adviser
Funds.
As described more fully in the Prospectus, the Distributor under a distribution
plan adopted pursuant to Rule 12b-1 under the 1940 Act, is paid by each Fund
0.25% and 1.00% per annum of the average daily net assets of Class A and Class C
shares of that Fund, respectively, for distribution-related services.
Custodian. The Funds' securities and cash are held by UMB Bank, 928 Grand
Boulevard, Kansas City, Missouri 64106 through a custodian agreement. The
Custodian is permitted to deposit some or all of a Fund's securities in central
depository systems as allowed by federal law. Each Fund pays the Custodian a fee
for serving as custodian of its assets according to the following fee schedule:
Each Fund also pays the Custodian stated portfolio transaction fees and the
Custodian's out-of-pocket expenses. The Custodian also receives a fee of [fee
schedule] plus out-of-pocket expenses for serving as fund accountant to each
Fund.
Transfer Agent. The Fund has a Transfer Agency Agreement with Unified Fund
Services, Inc., 431 North Pennsylvania Street, Indianapolis, IN 46204. This
agreement governs the transfer agent's responsibility for administering and/or
performing transfer agent functions, for acting as service agent in connection
with dividend and distribution functions and for performing shareholder account
administration agent functions in connection with the issuance, exchange and
redemption or repurchase of the Fund's shares. Under the agreement, the transfer
agent will earn a fee from each Fund according to the following fee schedule:
Each Fund also pays the Transfer Agent stated activity fees and the Transfer
Agent's out-of-pocket expenses. The fees paid to the Transfer Agent may be
changed from time to time upon agreement of the parties without shareholder
approval.
Administrator. Each Fund pays a fee for administrative services provided to the
Fund by Unified Fund Services, Inc., 431 North Pennsylvania Street,
Indianapolis, IN 46204. (the "Administrator"). Pursuant to the terms of an
Administration Agreement, the Administrator supervises the overall supervision
of each Fund, including, among other responsibilities, the preparation and
filing of all documents required for compliance by each Fund with applicable
laws and regulations, arranging for the maintenance of books and records of a
Fund, and supervision of other organizations that provide services to each Fund.
Each Fund pays the Administrator an annual fee of ______% of average daily net
assets.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Advisory Agreement provides, in substance, that in executing portfolio
transactions and selecting brokers or dealers, the principal objective of the
Adviser is to seek the best net price and execution available. It is expected
that securities ordinarily will be purchased in customary public markets, and
that in assessing the best net price and execution available, the Adviser shall
consider all factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis.
In selecting brokers or dealers to execute particular transactions, the Adviser
is authorized to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934), provision
of statistical quotations (including the quotations necessary to determine the
Fund's net asset value), the sale of a Fund's shares by such broker or the
servicing of a Fund's shareholders by such broker, and other information
provided to a Fund or to the Adviser, provided, however, that the Adviser
determines that it has received the best net price and execution available. The
Adviser also is authorized to cause each Fund to pay a commission to a broker or
dealer who provides such brokerage and research services for executing a
portfolio transaction that exceeds the amount of the commission another broker
or dealer would have charged for effecting that transaction. The Board or the
Adviser, as appropriate, must determine in good faith, however, that such
commission was reasonable in relation to the value of the brokerage and research
services provided viewed in terms of that particular transaction or in terms of
all the accounts over which the Adviser exercises investment discretion.
The fees of the Adviser are not reduced by reason of receipt of such brokerage
and research services. The Adviser does not provide any services to a Fund
except portfolio investment management and related recordkeeping services.
However, with disclosure to and pursuant to written guidelines approved by the
Board, the Adviser may execute portfolio transactions through an affiliated
broker-dealer or the Distributor, who may receive usual and customary brokerage
commissions (within the meaning of Rule 17e-1 under the 1940 Act) for doing so.
The Adviser is not presently affiliated with any broker-dealer.
CAPITAL STOCK
Threshold Adviser Funds was incorporated under the laws of the State of Maryland
on June 16, 2000. Threshold Adviser Funds is not required to hold annual
shareholders meetings. However, a Fund will hold special shareholder meetings
whenever required to do so under the federal securities laws or the Threshold
Adviser Funds' Articles of Incorporation or by-laws. Directors can be removed by
a shareholder vote at special shareholder meetings.
Threshold Adviser Funds currently is comprised of two investment portfolios each
with three classes of common stock, Class A, Class C and Class I, each par value
$0.01. Threshold Adviser Funds has the authority to issue multiple series and
classes of shares. Each share of common stock is entitled to one vote on matters
affecting a Fund. Share voting rights are not cumulative, and shares have no
preemptive or conversion rights.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Net Asset Value. The net asset value of each Fund is determined as of 4:00 p.m.
Eastern time on each day on which the New York Stock Exchange is open for
trading and the Funds' custodian and transfer agent are open for business
("Business Day"). The net asset value of all outstanding shares of each class of
each Fund will be determined based on a pro rata allocation of the value of a
Fund's investment income and total capital gains and losses and class expenses
based on comparative net asset value at the beginning of the day. Purchases and
redemptions of a class of a Fund's shares will be made at next calculation of
net asset value after the order is placed.
Valuation. In determining net assets before shareholder transactions, the
securities held by each Fund are valued as follows as of the close of business
of the New York Stock Exchange (the Exchange):
- Securities, except bonds other than convertibles, traded on a securities
exchange for which a last-quoted sales price is readily available are
valued at the last sales price reported by the consolidated quote system
prior to the closing of the exchange on which the securities are listed.
- Securities traded on a securities exchange for which a last-quoted sales
price is not readily available are valued at the mean of the closing bid
and asked prices, looking first to the bid and prices on the exchange where
the security is primarily traded and, if none exist, to the
over-the-counter market.
- Securities included in the Nasdaq(R) National Market System ("Nasdaq") are
valued at the last-quoted sales price in this market.
- Securities included in Nasdaq for which a last-quoted sales price is not
readily available, and other securities traded over-the-counter but not
included in the Nasdaq are valued at the mean of the closing bid and asked
prices.
- Options traded on major exchanges are valued at the last-quoted sales price
on their primary exchange.
- Short-term securities maturing more than 60 days from the valuation date
are valued at the readily available market price or approximate market
value based on current interest rates. Short-term securities maturing in 60
days or less that originally had maturities of more than 60 days at
acquisition date are valued at amortized cost using the market value on the
61st day before maturity. Short-term securities maturing in 60 days or less
at acquisition date are valued at amortized cost. Amortized cost is an
approximation of market value determined by systematically increasing the
carrying value of a security if acquired at a discount, or reducing the
carrying value if acquired at a premium, so that the carrying value is
equal to maturity value on the maturity date.
- Securities without a readily available market price, bonds other than
convertibles and other assets are valued at fair value as determined in
good faith by the Board. The Board is responsible for selecting methods it
believes provide fair value. When possible, bonds are valued by a pricing
service independent from a Fund. If a valuation of a bond is not available
from a pricing service, the bond will be valued by a dealer knowledgeable
about the bond if such a dealer is available.
The Exchange, the Adviser and the Funds will be closed on the following
holidays: New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Redeeming Shares. Investors have a right to redeem their shares at any time. For
an explanation of redemption procedures, please see the Prospectus.
During an emergency, the Board can suspend the computation of net asset value,
stop accepting payments for purchase of shares or suspend the duty of each Fund
to redeem shares for more than seven days. Such emergency situations would occur
if:
o The New York Stock Exchange closes for reasons other than the usual weekend
and holiday closings or trading on the Exchange is restricted, or
o Disposal of a Fund's securities is not reasonably practicable or it is not
reasonably practicable for the Fund to determine the fair value of its net
assets, or
o The SEC, under the provisions of the 1940 Act, declares a period of
emergency to exist.
Should a Fund stop selling shares, the Board may make a deduction from the value
of the assets held by the Fund to cover the cost of future liquidations of the
assets so as to distribute fairly these costs among all shareholders.
Each Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates each Fund to redeem shares in cash, with respect to any one
shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the
net assets of the Fund at the beginning of the period. Although redemptions in
excess of this limitation would normally be paid in cash, each Fund reserves the
right to make these payments in whole or in part in securities or other assets
in case of an emergency, or if the payment of a redemption in cash would be
detrimental to the existing shareholders of a Fund as determined by the Board.
In these circumstances, the securities distributed would be valued as set forth
in the prospectus. Should a Fund distribute securities, a shareholder may incur
brokerage fees or other transaction costs in converting the securities to cash.
TAX INFORMATION
STATUS AND TAXATION OF THE FUNDS
The Fund was organized as a corporation, but intends to continue to qualify for
treatment as a regulated investment company (a "RIC") under the Code in each
taxable year. There can be no assurance that it actually will so qualify. If the
Fund qualifies as a RIC, its dividend and capital gain distributions generally
are subject only to a single level of taxation. This differs from distributions
of a regular business corporation which, in general, are taxed first as taxable
income of the distributing corporation, and then again as dividend income of the
shareholder.
If the Fund does qualify as a RIC but (in a particular tax year) distributes
less than ninety-eight percent (98%) of its ordinary income and its capital gain
net income (as the Code defines each such term), the Fund is subject to an
excise tax. The excise tax, if applicable, is four percent (4%) of the excess of
the amount required to have been distributed over the amount actually
distributed for the applicable year. If the Fund does not qualify as a RIC, its
income will be subject to taxation as a regular business corporation, without
reduction by dividends paid to shareholders of the Fund.
To continue to qualify for treatment as a regulated investment company ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), the Fund must, among other requirements:
o Derive at least ninety percent (90%) of its gross income each taxable year
from dividends, interest, payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign
currencies, and certain other income (including gains from options,
futures, or forward contracts derived with respect to the RIC's business of
investing in stock, securities, or foreign currencies) ("Income
Requirement");
o Diversify its investments in securities within certain statutory limits;
and
o Distribute annually to its shareholders at least ninety percent (90%) of
its investment company taxable income (generally, taxable net investment
income less net capital gain) (the "Distribution Requirement").
Hedging strategies, to reduce risk in various ways, are subject to complex rules
that determine for federal income tax purposes the character and time for
recognition of gains and losses the MC Fund realizes in connection with the
hedge. The MC Fund's income from options derived with respect to its business of
investing in stock or securities should qualify as allowable income for the MC
Fund under the Income Requirement.
The foregoing is only a summary of some of the important federal income tax
considerations affecting the Fund and its shareholders and is not intended as a
substitute for careful tax planning. Accordingly, prospective investors should
consult their own tax advisers for more detailed information regarding the above
and for information regarding federal, state, local and foreign taxes.
UNDERWRITER
Rule 12b-1 Plan. To help the Distributor defray the cost of distribution and
servicing, each Fund and the Distributor entered into a Plan and Agreement of
Distribution (Plan). Under the Plan, the Distributor is paid a fee at an annual
rate of 0.25% and 1.00% of each Fund's Class A and Class C Shares, respectively,
average daily net assets.
The Plan must be approved annually by the Board, including a majority of the
Independent Directors, if it is to continue for more than a year. At least
quarterly, the Board must review written reports concerning the amounts expended
under the Plan and the purposes for which such expenditures were made. The Plan
and any agreement related to it may be terminated at any time by vote of a
majority of Board members who are not interested persons of the Company and have
no direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, or by vote of a majority of the outstanding
voting securities of the Fund's shares or by the Distributor. The Plan (or any
agreement related to it) will terminate in the event of its assignment, as that
term is defined in the 1940 Act. The Plan may not be amended to increase the
amount to be spent for distribution without shareholder approval, and all
material amendments to the Plan must be approved by a majority of the Board
members, including a majority of the Board members who are not interested
persons of the Fund and who do not have a financial interest in the operation of
the Plan or any agreement related to it. The selection and nomination of
disinterested Board members is the responsibility of the other disinterested
Board members. No Board member who is not an interested person, has any direct
or indirect financial interest in the operation of the Plan or any related
agreement.
CALCULATION OF PERFORMANCE DATA
Average Annual Total Return Quotation. The advertised total return for each Fund
is calculated by equating an initial amount invested in the Fund to the ending
redeemable value, according to the following formula:
P(1 + T)n = ERV
where "P" is a hypothetical initial payment of $1,000; "T" is the average annual
total return for the Fund; "n" is the number of years involved; and "ERV" is the
ending redeemable value of a hypothetical $1,000 payment made in the Fund at the
beginning of the investment period covered. Each Fund commenced operations on
_______ __, 2000.
Each Fund also may use aggregate total return figures for various periods which
represent the cumulative change in value of an investment in the Fund for the
specific period. Such total returns reflect changes in share prices in a Fund
and assume reinvestment of dividends and distributions.
In reports or other communications to shareholders or in advertising material,
each Fund may from time to time compare its performance with that of other
mutual funds in rankings prepared by Lipper Analytical Services, Inc.,
Morningstar, Inc., IBC/Donoghue, Inc. and other similar independent services
which monitor the performance of mutual funds or publications such as the "New
York Times" and the "Wall Street Journal." Each Fund also may compare its
performance with various other indices prepared by independent services such as
Standard & Poor's or Morgan Stanley.
Advertisements for each Fund may compare a Fund to federally insured investments
such as bank certificates of deposit and credit union deposits, including the
long-term effects of inflation on these types of investments. Advertisements may
also compare the historical rate of return of different types of investments.
FINANCIAL STATEMENTS
Each Fund's financial statements to be contained in the Annual Report to
shareholders at the end of the fiscal year will be audited by Deloitte & Touche
LLP, One City Center, St. Louis, Missouri 63101. The independent auditors also
provide other accounting and tax-related services as requested by each Fund.
Copies of the annual report are available, upon request and without charge, by
calling the transfer agent toll-free at (800) ___-______, or by writing to the
following address: Unified Fund Services, Inc., 431 North Pennsylvania Street,
Indianapolis, Indiana 46204.
The Prospectus and this Statement of Additional Information do not contain all
the information included in the Registration Statement filed with the Securities
and Exchange Commission under the Securities Act of 1933 with respect to the
securities offered by the Fund's Prospectus. Certain portions of the
Registration Statement have been omitted from the Prospectus and this Statement
of Additional Information, pursuant to the rules and regulations of the
Securities and Exchange Commission. The Registration Statement including the
exhibits filed therewith may be examined at the office of the Securities and
Exchange Commission in Washington, D.C.
Statements contained in the Prospectus or in this Statement of Additional
Information as to the contents of any contract or other documents referred to
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectus and this Statement of Additional Information
form a part, each such statement being qualified in all respects by such
reference.
<PAGE>
APPENDIX A: DESCRIPTION OF BOND RATINGS
These ratings concern the quality of the issuing corporation. They are not an
opinion of the market value of the security. Such ratings are opinions on
whether the principal and interest will be repaid when due. A security's rating
may change which could affect its price.
Ratings by Moody's Investors Service, Inc. are Aaa, Aa, A, Baa, Ba, B, Caa, Ca,
and C.
Bonds rated:
Aaa are judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edged." Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa are judged to be of high quality by all standards. Together with the Aaa
group they comprise what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not be as large as
in Aaa securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term risk
appear somewhat larger than the Aaa securities.
A possess many favorable investment attributes and are to be considered as
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa are considered as medium-grade obligations (i.e., they are neither highly
protected nor poorly secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ratings by Standard & Poor's Ratings Group are AAA, AA, A, BBB, BB, B, CCC, CC,
C and D.
AAA has the highest rating assigned by S&P. Capacity to pay interest and repay
principal is extremely strong.
AA has a very strong capacity to pay interest and repay principal and differs
from the highest rated issues only in small degree.
A has a strong capacity to pay interest and repay principal, although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher-rated categories.
BBB is regarded as having adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher-rated categories.
Non-rated securities will be considered for investment when they possess a risk
comparable to that of rated securities consistent with the Fund's objectives and
policies. When assessing the risk involved in each non-rated security, the Fund
will consider the financial condition of the issuer or the protection afforded
by the terms of the security.
<PAGE>
APPENDIX B: OPTIONS CONTRACTS
MC Fund may buy options traded on any U.S. exchange or in the over-the-counter
market. Options in the over-the-counter market will be purchased only when the
Adviser believes a liquid secondary market exists for the options and only from
dealers and institutions the Adviser believes present a minimal credit risk.
Some options are exercisable only on a specific date. In that case, or if a
liquid secondary market does not exist, the MC Fund could be required to buy or
sell securities at disadvantageous prices, thereby incurring losses.
OPTIONS. An option is a contract. A person who buys a call option for a security
has the right to buy the security at a set price for the length of the contract.
A person who buys a put option has the right to sell a security at a set price
for the length of the contract. An option is covered if the writer owns the
security (in the case of a call) or sets aside the cash or securities of
equivalent value (in the case of a put) that would be required upon exercise.
The price paid by the buyer for an option is called a premium. In addition the
buyer generally pays a broker a commission. The writer receives a premium, less
another commission, at the time the option is written. The cash received is
retained by the writer whether or not the option is exercised. A writer of a
call option may have to sell the security for a below-market price if the market
price rises above the exercise price. A writer of a put option may have to pay
an above-market price for the security if its market price decreases below the
exercise price. The risk of the writer is potentially unlimited, unless the
option is covered.
Options can be used to produce incremental earnings, protect gains and
facilitate buying and selling securities for investment purposes. The use of
options may benefit the Fund and its shareholder by improving the Fund's
liquidity and by helping to stabilize the value of its net assets.
BUYING OPTIONS. Put and call options may be used as a trading technique to
facilitate buying and selling securities for investment reasons. They also may
be used for investment. Options are used as a trading technique to take
advantage of any disparity between the price of the underlying security in the
securities market and its price on the options market. It is anticipated the
trading technique will be utilized only to effect a transaction when the price
of the security plus the option price will be as good or better than the price
at which the security could be bought or sold directly. When the option is
purchased, the Fund pays a premium and a commission. It then pays a second
commission on the purchase or sale of the underlying security when the option is
exercised. For recordkeeping and tax purposes, the price obtained on the
purchase of the underlying security will be the combination of the exercise
price, the premium and both commissions. When using options as a trading
technique, commissions on the option will be set as if only the underlying
securities were traded.
The risk the MC Fund assumes when it buys an option is the loss of the premium.
To be beneficial to the MC Fund, the price of the underlying security must
change within the time set by the option contract. Furthermore, the change must
be sufficient to cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the exercise of the
option and sale (in the case of a call) or purchase (in the case of a put) of
the underlying security. Even then the price change in the underlying security
does not ensure a profit since prices in the option market may not reflect such
a change.
If a covered call option is exercised, the security is sold by the MC Fund. The
premium received upon writing the option is added to the proceeds received from
the sale of the security. The MC Fund will recognize a capital gain or loss
based upon the difference between the proceeds and the security's basis.
Premiums received from writing outstanding call options will be included as a
deferred credit in the Statement of Assets and Liabilities and adjusted daily to
the current market value.
Options are valued at the close of the New York Stock Exchange. An option listed
on a national exchange, Chicago Board of Exchange or Nasdaq will be valued at
the last-quoted sales price or, if such a price is not readily available, at the
mean of the last bid and asked prices. Net premiums on call options closed or
premiums on expired call options are treated as short-term capital gains.
<PAGE>
PART C. OTHER INFORMATION
Item 23. Financial Statements and Exhibits
(a) Financial Statements included as a part of this Registration Statement:
1. Included in Part A of this Registration Statement: None
2. Included in part B of this Registration Statement: None
(b) Exhibits
1. Articles of Incorporation - to be filed
2. By-Laws - to be filed
3. Voting Trust Agreement - none
4. Specimen Security - none
5. a. Management Agreement - to be filed
b. Administration Agreement - to be filed
6. Distribution Agreement - to be filed
7. Bonus, Profit-Sharing or Pension Plan - none
8. a. Custodian Agreement - to be filed
b. Fund Accounting Agreement - to be filed
9. Transfer Agency Agreement - to be filed
10. Opinion and Consent of Counsel - to be filed
11. Consent of Independent Auditors - to be filed
12. Financial Statements Omitted from Prospectus - none
13. Letter of Investment Intent - to be filed
14. Plan Pursuant to Rule 12b-1 - to be filed
15. Financial Data Schedule - to be filed
16. Plan Pursuant to Rule 18f-3 - to be filed
17. Code of Ethics - to be filed
Item 24. Persons Controlled by or Under Common Control with Registrant
None
Item 25. Indemnification
Article Seventh, Section (j) of the Articles of Incorporation
of the Fund provides that:
The Corporation shall indemnify: (a) its directors to the full
extent provided by the general laws of the State of Maryland
now or hereafter in force, including the advance of expenses
under the procedures provided by such laws; (b) its officers
to the same extent it shall indemnify its directors; and (c)
its officers who are not directors to such further extent as
shall be authorized by the Board of Directors and be
consistent with law; provided, however, that nothing herein
shall be construed to protect any director or officer of the
Corporation against any liability to which such director or
officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his or her
office. The foregoing shall not limit the authority of the
Corporation to indemnify other employees and agents consistent
with the law.
A director or officer of the Corporation shall not be liable
to the Corporation or its stockholders for monetary damages as
a director or officer, except to the extent such exemption
from liability or limitation thereof is not permitted by
statutory or decisional law (including the 1940 Act) as
currently in effect or as the same may hereafter be amended or
judicially interpreted; provided, however, that nothing herein
shall be construed to protect any director or officer of the
Corporation against any liability to which such director or
officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his or her
office. No amendment, modification or repeal of this Article
SEVENTH shall adversely affect any right or protection of a
director or officer that exists at the time of such amendment,
modification or repeal.
Item 26. Business and Other Connections of the Investment Manager
Kennedy Capital Management, Inc., 10829 Olive Blvd., St. Louis, MO 63141, offers
investment management services to the Fund. Information as to the officers and
directors of the Manager is included in the Manager's current Form ADV filed
with the SEC and is incorporated herein by reference.
Item 27. Principal Underwriter
(a) Unified Management Corp., is the principal underwriter for the Fund.
(b) The directors and officers of the principal underwriter are as
follows:
Name Title Position with Fund
---- ----- ------------------
Timothy L. Ashburn Director None
Thomas G. Napurano Director, CFO and Exec. Vice None
Stephen D. Highsmith, Jr. Secretary, Senior Vice None
Lynn Wood Director, President and CEO None
(c) Not Applicable
Item 28. Location of Accounts and Records
The books and other documents required by Rule 31a-1 under the Investment
Company Act of 1940 are maintained in the physical possession of the Fund's
Adviser, custodian or transfer agent.
Item 29. Management Services
All substantive provisions of any management-related service contract are
discussed in Parts A and B of this Registration Statement.
Item 30. Undertakings
Registrant hereby undertakes, if requested by the holders of at least 10% of the
Registrant's outstanding shares, to call a meeting of shareholders for the
purpose of voting upon the question of removal of a director(s) and to assist in
communications with other shareholders in accordance with Section 16(c) of the
1940 Act, as though Section 16(c) applied.
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of its latest annual report to shareholders, upon request
and without charge.
Registrant hereby undertakes to carry out all indemnification provisions of its
Articles of Incorporation in accordance with Investment Company Act Release No.
11330 (Sept. 4, 1980) and successor releases.
Insofar as indemnifications for liability arising under the Securities Act of
1933, as amended ("1933 Act"), may be permitted to directors, officers and
controlling person of the Registrant pursuant to the provision under Item 27
herein, or otherwise, the Registrant has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the 1933 Act
and is, therefor, 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 director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, 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 1933 Act and will be governed by the final
adjudication.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this initial Registration Statement on Form N-1A to be signed on its behalf by
the undersigned, thereto duly authorized, in the City of St. Louis and the State
of Missouri on September 1, 2000.
THRESHOLD ADVISOR FUNDS, INC.
BY: /s/Charles W. Schweizer
President
Attest:
/s/Charles W. Schweizer
Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this initial Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
/s/Charles W. Schweizer President, Treasurer and September 1, 2000
Director
/s/Timothy Hasara Director September 1, 2000
/s/Richard Eckenrodt Director September 1, 2000
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description