Prospectus/June 13, 1997
1655 Fort Myer Drive, Arlington, Virginia 22209-3108
Mosaic Equity Trust
Mid-Cap Growth Fund
Investors Fund
Balanced Fund
This Mosaic Equity Trust prospectus offers shares of three separate
portfolios which have different investment objectives and which
invest in differing equity securities, as described below.
Mid-Cap Growth Fund. For long-term investing to obtain
maximum capital appreciation. Portfolio management emphasis is on
smaller, "mid-cap" companies that may offer rapid growth potential.
Current income is not a factor in investment selection. Designed for
investors who can assume an above-average level of risk from
investment in common stock.
Investors Fund. For long-term investing to obtain
capital appreciation with a secondary objective of current
income. Portfolio management emphasis is on established,
high quality companies that have demonstrated a pattern of
consistent growth. Designed for investors who can assume the
market and other risks of common stock investment.
Balanced Fund (formerly known as the Equity Income
Fund). A balanced portfolio with two
primary investment investment objectives: (1) Production of
current income and (2) long-term growth of capital and
income. To achieve its objectives, the portfolio will
diversify among equity securities and U.S. government bonds
and investment grade corporate bonds. Designed for
investors who can assume moderate investment risks in search
of income and long-term growth.
Features
No commissions or sales charges
No "12b-1" expenses
$1,000 minimum initial investment
Free exchanges from other Mosaic mutual funds
Invest or withdraw funds by mail or wire transfer
This Prospectus is intended to be a concise statement of
information which investors should know before investing. After
reading the Prospectus, it should be retained for future
reference. A paper copy of the prospectus is available to
investors who received an electronic prospectus without charge by
calling or writing the Trust.
A Statement of Additional Information concerning the Trust,
bearing the same date as this Prospectus, has been filed with the
Securities and Exchange Commission and is incorporated herein by
reference. It is available without charge by calling or writing
the Trust.
Shares of the Trust are not deposits or obligations of, or
guaranteed or endorsed by, any bank. Shares are not federally
insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency.
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.
Bankers Finance Advisors, LLC
Investment Advisor
<PAGE>
About Mosaic Equity Trust
Mosaic Equity Trust (the "Trust") is a diversified, open-end
management investment company, commonly known as a mutual fund.
The Trust was organized as a Massachusetts business trust under a
Declaration of Trust dated November 18, 1982. The Trust is
managed by Bankers Finance Advisors, LLC (the
"Advisor") of the same address as the Trust.
The Trust offers shares of four separate portfolios: the Mid-Cap
Growth Fund, the Investors Fund, the Balanced
Fund and the Worldwide Growth Fund. The Worldwide
Growth Fund is offered pursuant to a separate prospectus.
Expense Summary
The purpose of this table is to assist investors in understanding
the various costs and expenses that an investor will bear
directly or indirectly (see also "Management of the Trust"
below).
Mid-Cap
Growth Investors Balanced
Shareholder Transaction Expenses
Maximum Sales Load Imposed
on Purchases None None None
Redemption Fee None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.75% 0.75% 0.75%
Other Expenses 0.66% 0.35% 0.60%
Total Fund Operating Expenses 1.41% 1.10% 1.35%
Example 1 Year 3 Years 5 Years 10 Years
You would pay the following
expenses on a $1,000
investment, assuming:
(1) a five percent annual
return and (2) redemption at
the end of each time period:
Mid-Cap Growth Fund $14 $45 $77 $169
Investors Fund $11 $35 $61 $134
Balanced Fund $14 $43 $74 $162
The hypothetical example shown above is based on restated expense
levels expected to be incurred by the Trust's portfolios during the period
beginning June 13, 1997 and is intended to provide the investor
with an understanding of the level of expenses that might be incurred in
the future. The five percent return used in the example is arbitrary and is for
illustrative purposes only. It should not be considered
representative of any portfolio's past or future performance, nor
should the expenses in the example be considered representative
of future expenses, which may actually be greater or less than
those shown. Additional fees and transaction charges described elsewhere
in this prospectus, if applicable, will increase the level
of expenses that can be incurred (fees for certain wire
redemptions, stop payments on checks, bounced investment checks,
broker transactions and retirement plans are described at "How to
Purchase and Redeem Shares").
<PAGE>
Financial Highlights
The financial highlights data for a share outstanding and other
performance information of the Mid-Cap Growth Fund
for the fiscal year ended March 31, 1997 appearing below is
derived from the financial statements audited
by Ernst & Young LLP, independent auditors, whose report appears
in the Annual Report to Shareholders. This report is incorporated
by reference in the Statement of Additional Information and is
available by calling or writing the Trust. The tabulation below
of information for the fiscal years ended March 31, 1988, 1989,
1990, 1991, 1992, 1993, 1994, 1995 and 1996 has also been derived
from the financial statements audited by Ernst & Young LLP.
The financial highlights data for a share outstanding and other
performance information of the Investors Fund
and Balanced Fund for the fiscal year ended December 31, 1996
appearing below is derived from the financial statements of Bascom
Hill Investors, Inc. and Bascom Hill BALANCED Fund, Inc.,
respectively, the economic predecessors of such funds, audited
by Williams, Young & Associates , LLC, independent auditors,
whose report appears in the Annual Report to Shareholders.
This report is incorporated by reference in the Statement of
Additional Information and is available by calling or writing the
Trust. The tabulation below of information for the fiscal years
ended December 31, 1987, 1988, 1989, 1990, 1991, 1992, 1993,
1994 and 1995 has also been derived from the financial statements
audited by Williams, Young & Associates, LLC.
<TABLE>
<CAPTION>
Mid-Cap Growth* Fund
Year ended March 31,
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Net asset
value
beginning
of period $20.488 18.092 21.110 19.970 19.099 18.047 17.634 16.669 15.122 18.017
Net
investment
income $(0.016) 0.133 0.152 0.171 0.092 0.175 0.287 0.378 0.346 0.128
Net
realized &
unrealized
gains
(losses) on
securities $(0.469) 3.621 0.190 2.125 1.031 1.245 0.502 1.557 1.588 (0.277)
Total from
investment
operations $(0.485) 3.754 0.342 2.296 1.123 1.420 0.789 1.935 1.934 (0.149)
Distributions
from net
investment
income $(0.018)(0.115)(0.152)(0.170)(0.121)(0.159)(0.376)(0.396)(0.239)(0.128)
Distributions
from capital
gains $(10.103)(1.243)(3.208)(0.986)(0.131)(0.209) -- (0.574)(0.148)(2.618)
Total
Distributions(10.121)(1.358)(3.360)(1.156)(0.252)(0.368)(0.376)(0.970)(0.387)(2.746)
Net asset
value end
of period $ 9.882 20.488 18.092 21.110 19.970 19.099 18.047 17.634 16.669 15.122
Total
Return (5.59)%21.22% 2.27% 11.57% 5.90% 7.92% 4.76% 11.67% 13.05% 2.47%
Net assets
at end of
period
(thousands) $10,964 17,091 31,590 34,931 38,911 58,867 51,465 36,593 18,262 15,501
Ratio of
expenses to
average net
assets 1.61% 1.41% 1.30% 1.45% 1.35% 1.39% 1.40% 1.47% 1.50% 1.50%
Net
investment
income to
average
net assets (0.12)% 0.56% 0.76% 0.75% 0.44% 0.95% 1.82% 2.59% 2.24% 0.73%
Portfolio
turnover 127% 21% 4% 7% 13% 24% 6% 15% 27% 29%
Average
commission
rate paid $0.0729
*Known as GIT Equity Trust Special Growth Portfolio prior to May 12, 1997.
</TABLE>
Investors Fund#
<TABLE>
Year Ended December 31,
------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S>
NET ASSET VALUE:
Beginning of year
$ 18.03 15.84 16.73 18.15 16.66 12.90 15.62 14.92 13.84 15.11
INCOME FROM INVESTMENT OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income
$ .24 .42 .39 .19 .22 .36 .51 .77 .66 .69
Net realized and unrealized gains or (losses) on securities
3.91 3.45 .26 .34 1.59 3.76 (2.71) 1.62 1.08 (.44)
----- ----- ---- ---- ---- ----- ---- ---- -----
Total from investment operations
$ 4.15 3.87 .65 .53 1.81 4.12 (2.20) 2.39 1.74 .25
LESS DISTRIBUTIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends from net income
$ (.25) (.42) (.39) (.19) (.22) (.36) (.52) (.78) (.66) (.99)
Capital gains distributions
(4.01) (1.26) (1.15) (1.76) (.10) -- -- (.91) -- (.53)
------ ------ ------ ----- ----- ----- ------
Total
distributions $(4.26) (1.68)(1.54)(1.95)(0.32)(0.36)(0.52)(1.69)(0.66) (1.52)
NET ASSET VALUE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
End of period $ 17.92 18.03 15.84 16.73 18.15 16.66 12.90 15.62 14.92 13.84
TOTAL RETURN: % 23.36 24.63 4.09 3.16 10.98 32.05(14.25)16.25 12.76 1.11
Net assets at end of period (thousands)
$13,112 11,860 9,855 9,919 10,286 9,556 7,797 9,646 8,306 7,845
Ratio of expenses to average net assets
% 1.17 1.17 1.20 1.20 1.22 1.22 1.27 1.16 1.16 1.15
Net investment income to average net assets
% 1.20 2.44 2.28 1.00 1.33 2.28 3.78 4.73 4.48 4.60
Portfolio turnover
%81.42 57.62 54.49 80.41 68.83 70.90 84.40 69.60 51.23 35.00
Average Commission Rate
.08 .0819
</TABLE>
Balanced Fund##
<TABLE>
<CAPTION>
Year Ended December 31,
- - - - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
NET ASSET VALUE:
Beginning of year $22.44 20.16 22.36 23.65 23.00 19.04 21.62 20.76 20.13 20.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .50 .75 .72 .62 .59 .73 1.00 1.15 .91 .63
Net realized and
unrealized gains
or (losses) on
securities 3.20 3.53 (.46) .37 1.30 1.43 2.58) 1.34 .63 .10
----- ----- --- ---- ---- ----- ---- ----- ---- -----
Total from
investment
operations $ 3.70 4.28 .26 .99 1.89 2.16 (1.58) 2.49 1.54 .73
LESS DISTRIBUTIONS:
Dividends from net
income $ (.50) (.74) (.72) (.62) (.60) (.73)(1.00)(1.17) (.91) (.60)
Capital gains
distributions (3.61) (1.26)(1.74)(1.66) (.64) (.05) .00 (.46) .00 .00
------ ------ ------ ---- ----- --- ----- --- --- ---
Total
distributions $(4.11) (2.00)(2.46)(2.28)(1.24)(0.78)(1.00)(1.63)(0.91) (0.60)
NET ASSET VALUE:
End of period $22.03 22.44 20.16 22.36 23.65 23.00 19.04 21.62 20.76 20.13
TOTAL RETURN: 17.00 21.51% 1.31 4.35 8.43 25.10 (7.30)12.14 7.75 3.66
Net assets at end of period (thousands)
$11,018 10,857 9,912 13,803 15,349 15,469 13,341 14,430 9,312 5,346
Ratio of expenses to average net assets
1.42% 1.36% 1.34 1.24 1.90 1.94 1.96 2.00 2.00 2.00
Net investment income to average net assets
2.06% 3.36% 3.03 2.53 2.53 3.33 5.00 5.60 4.90 4.80
Portfolio turnover
86.11% 65.83% 76.40 76.01 71.76 64.76 71.60 47.50 .45 .00
Average Commission Rate Paid
.08 .0818
</TABLE>
#The Investors Fund merged with Bascom Hill
Investors, Inc. effective June 13, 1997, the latter becoming
the economic survivor of the merger and whose financial highlights
are presented above. For information purposes only, the financial
highlights of the Investors Fund (known as the Select Growth
Portfolio prior to May 12, 1997) through its fiscal year ended March 31,
1997, derived from financial statements audited by Ernst & Young LLP,
are as follows:
<TABLE>
Investors Fund
Year ended March 31,
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Net asset
value
beginning
of period $21.990 16.706 17.706 18.486 19.670 18.884 17.105 15.707 14.273 17.001
Net
investment
income $(0.048)(0.045)(0.032)(0.053) 0.137 0.268 0.400 0.511 0.580 0.353
Net
realized &
unrealized
gains
(losses) on
securities $2.032 5.329 0.741 (0.318) 1.410 0.736 2.031 1.446 1.287 (1.638)
Total from
investment
operations $1.984 5.284 0.709 (0.371) 1.547 1.004 2.431 1.957 1.867 (1.285)
Distributions
from net
investment
income $ -- -- -- (0.007)(0.175)(0.218)(0.498)(0.559)(0.433)(0.352)
Distributions
from capital
gains $(3.240) -- (1.709)(0.402)(2.556) -- (0.154) -- -- (1.091)
Total
Distributions$(3.240) -- (1.709)(0.409)(2.731)(0.218)(0.652)(0.559)(0.433)(1.443)
Net asset
value end
of period $20.734 21.990 16.706 17.706 18.486 19.670 18.884 17.105 15.707 14.273
Total
Return 9.55% 31.63% 4.55% (2.05)% 8.45% 5.28% 14.65% 12.47% 13.30% (6.81)%
Net assets
at end of
period
(thousands) $7,339 7,389 4,749 4,760 5,742 5,483 3,917 3,280 2,740 3,394
Ratio of
expenses to
average net
assets 1.57% 1.79% 1.90% 2.02% 2.00% 2.00% 2.00% 1.53% 1.50% 1.50%
Net
investment
income to
average
net assets (0.22)%(0.26)%(0.19)%(0.27)% 0.70% 1.44% 2.28% 3.00% 3.42% 2.16%
Portfolio
turnover 124% 56% 82% 48% 125% 60% 12% 35% 23% 22%
Average
commission
rate paid $0.0785
</TABLE>
##Prior to the effective date of this prospectus, the
Balanced Fund was known as the Equity Income Fund.
It changed its investment objectives and merged with Bascom
Hill BALANCED Fund, Inc. effective June 13, 1997,
the latter becoming the economic survivor and
whose financial statements are presented above. For information
purposes only, the financial highlights of the Equity
Income Fund through its fiscal year ended March 31,
1997, derived from financial statements audited by Ernst &
Young LLP, are as follows:
<TABLE>
Equity Income Fund
Year ended March 31,
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Net asset
value
beginning
of period $19.330 15.411 15.809 16.814 15.117 14.805 14.661 13.137 12.300 13.606 12.667
Net
investment
income $0.366 0.373 0.504 0.382 0.416 0.499 0.627 0.690 0.725 0.599 0.634
Net
realized &
unrealized
gains
(losses) on
securities $2.222 3.839 0.364 (0.543) 1.961 0.203 0.298 1.551 0.629 (1.309) 1.087
Total from
investment
operations $2.588 4.212 0.868 (0.161) 2.377 0.702 0.925 2.241 1.354 (0.710) 1.721
Distributions
from net
investment
income $(0.381)(0.293)(0.504)(0.352)(0.449)(0.390)(0.781)(0.717)(0.517)(0.596)(0.634)
Distributions
from capital
gains $(2.363) -- (0.762)(0.492)(0.231) -- -- -- -- -- (0.148)
Total
Distributions$(2.744)(0.293)(1.266)(0.844)(0.680)(0.390)(0.781)(0.717)(0.517)(0.596)(0.782)
Net asset
value end
of period $19.174 19.330 15.411 15.809 16.814 15.117 14.805 14.661 13.137 12.300 13.606
Total
Return 13.88% 27.56% 6.04% (1.08)%16.11% 4.74% 6.58% 17.39% 11.32% (5.37)%13.84%
Net assets
at end of
period
(thousands) $4,960 4,440 3,413 3,625 3,315 2,838 2,709 2,291 1,716 2,160 2,577
Ratio of
expenses to
average net
assets 1.62% 1.92% 2.07% 2.17% 2.19% 2.15% 2.25% 1.55% 1.50% 1.50% 1.47%
Net
investment
income to
average
net assets 1.83% 2.13% 2.53% 2.27% 2.58% 3.47% 4.28% 4.77% 5.54% 4.56% 4.66%
Portfolio
turnover 90% 7% 29% 34% 55% 32% 9% 18% -- 16% 23%
Average
commission
rate paid $0.0808
</TABLE>
<PAGE>
Investment Objective
The three Trust portfolios offered by this prospectus have
different investment objectives and invest in differing equity
securities. The portfolios differ principally in the relative
importance of capital appreciation potential, dividend income and
risk as considerations in selecting investments. The Trust's
investment objectives may be changed without shareholder
approval; however, shareholders will receive prior written notice
of any material change. There can be no assurance that the
Trust's investment objectives will be achieved.
The Mid-Cap Growth Fund seeks maximum capital appreciation
through emphasis on smaller, medium-sized companies that
may offer rapid growth potential. Current income is not a factor in the
selection of investments for this portfolio. Because it may assume above-
average investment risks, the Mid-Cap Growth Fund may be
unsuitable for persons who must depend on the invested funds for
other purposes, such as current income.
The Investors Fund seeks capital appreciation with a
secondary objective of current income through investment in
established high quality companies that have demonstrated a pattern of
consistent growth. Consideration is given to the relative value of each
investment, compared with historical trends in its industry.
The Balanced Fund is a balanced mutual fund which
has two investment objectives: (1) Production of current
income and (2) long-term growth of capital and income. To
achieve its objectives, it will invest in a diversified
portfolio of equity securities and U.S. government bonds and
investment grade corporate bonds having potential to realize
both long-term growth and income, and in short-term money
market instruments.
Investment Policies
The Trust seeks to achieve its investment objectives through
diversified investment by each of its portfolios.
For the Mid-Cap Growth and Investors Funds, this
investment will be principally in equity securities. Equity securities
may include common stocks, convertible debt securities, preferred
stocks and warrants. These portfolios intend normally to maintain
at least 65 percent of their assets invested in equity securities.
The percentage of the Balanced Fund's assets which may be
invested at any particular time in equities, bonds and money
market instruments will depend on management's judgment regarding
the risks in the general market. The portfolio will not invest more
than 70% in equity securities and, will maintain at least 25% of its
assets in fixed income senior securities. The portfolio's advisor
monitors many factors affecting the market outlook, including economic
and monetary trends, market momentum, institutional psychology and
historical similarities to current conditions. Careful review is made of
the equity market's relationship to the bond market and interest rate
trends.
The Trust may also invest in short-term money market instruments
for liquidity purposes to meet redemption requirements and it may
hold a portion of its assets in uninvested cash. Short-term
investments that the Trust may hold include U.S. Government
securities, certificates of deposit, high-grade commercial paper
and repurchase agreements. If the Advisor determines that it
would be appropriate to adopt a temporary defensive investment
position by reducing exposure in the equity markets, up to 100
percent of any portfolio could be invested in short-term
investments. To the extent more than 35 percent of
the Mid-Cap Growth or Investors Fund
is so invested, it is not invested in accordance with policies
designed to achieve its stated investment objective.
The Trust's fundamental investment policies, which may not be
changed without a shareholder vote, limit investments in the
securities of any one issuer (excluding U.S. Government
securities) to five percent of a Fund's total assets as of
the date of purchase. Additionally, the Trust will not invest
more than 10 percent of the total assets of a portfolio offered
by this prospectus in securities which cannot be liquidated
within seven days, and it will not invest more than 25 percent of
the total assets of a portfolio in securities of issuers in a
single industry. Other fundamental policies are described in the
Statement of Additional Information.
Specialized Investment Techniques
To achieve its objectives, each portfolio may use certain
specialized investment techniques, including writing covered call
options, investment in foreign securities, "when-issued"
securities, loans of portfolio securities and repurchase
agreement transactions. Use of these techniques may involve
certain risks, some of which are summarized below and described
further in the Statement of Additional Information.
Repurchase agreements involve a sale of securities to the Trust
by a financial institution or securities dealer, simultaneous
with an agreement by that institution to repurchase the same
securities at the same price, plus interest, at a later date. The
Trust will limit repurchase agreement transactions to those
financial institutions and securities dealers who are deemed
creditworthy pursuant to guidelines adopted by the Trust's Board
of Trustees. The Advisor will follow a procedure to ensure that
all repurchase agreements acquired by the Trust are always at
least 100 percent collateralized as to principal and interest.
When investing in repurchase agreements, the Trust relies on the
other party to complete the transaction on the scheduled date by
repurchasing the securities. Should the other party fail to do
so, the Trust would end up holding securities it did not intend
to own. Were it to sell such securities, the Trust might incur a
loss. In the event of insolvency or bankruptcy of the other party
to a repurchase agreement, the Trust could encounter difficulties
and might incur losses upon the exercise of its rights under the
repurchase agreement.
Additional Information About the Balanced Fund
If through appreciation, the total market value of the
Balanced Fund's holdings of equity securities exceeds
70% of total net assets, necessary actions must be
taken to reduce total equities to less than 70% of total net
assets within the following sixty days. The portfolio is not
required to invest exclusively in dividend paying common
stocks. There can be no assurance that the portfolio's
shareholders can be protected from the risk of loss inherent
in common stock investing.
To achieve current income, the Balanced Fund
intends to invest in corporate debt securities and U.S.
Government bonds. Eligible corporate debt securities must be
accorded one of the four highest quality ratings by Standard
& Poor's or Moody's ("investment grade") or, if unrated,
judged by the Advisor to be a comparable quality. Bonds
rated A, AA, or AAA by Standard & Poor's indicate strong to
high capacity of the company to pay interest and repay
principal. However, the fourth highest rating, BBB,
indicates adequate capacity to pay interest and repay
principal but suggests that adverse economic conditions may
weaken the company's ability to meet these obligations, thus
is more speculative and reflects a higher level of risk. The
portfolio may also invest in direct obligations of the
United States government, its agencies and
instrumentalities. It is not anticipated that the portfolio
will invest in United States government securities to
any significant extent and not on a routine basis, but only
when such securities appear temporarily attractive on a
yield basis when compared to other fixed income securities
of similar maturities. It is anticipated that 25-50% of the
portfolio's total net assets will generally be invested in
debt securities which have an average weighted maturity
of less than 10 years. The portfolio intends to maintain at
least 25% of its assets in fixed income senior securities,
not including any convertible securities. Mere investment
in government or corporate bonds provides no assurance that
the portfolio's shareholders can be protected from certain
risks in bond investing including increasing price
fluctuation as bond maturities become longer.
Investment Risk Considerations
Although diversification of investments may tend to reduce the
exposure involved in holding individual equity securities,
substantially all of the securities purchased by the Trust will
be subject to market and business risks. The Mid-Cap Growth
Fund may invest in new companies or in the securities of
companies in emerging industries; the Mid-Cap Growth Fund
may therefore involve an above-average level of risk and should
be only one part of a balanced investment program. Certain of the
specialized investment techniques the Trust intends to use,
including investment in foreign securities and repurchase
agreement transactions, may involve risks greater than those that
would be experienced by holding a portfolio of conventional
equity securities; see "Specialized Investment Techniques" above.
Because of its investments in bonds, the Balanced Fund
also bears interest rate risk in that as interest rates rise, the value of
the bonds in its portfolio will generally fall.
Management of the Trust
The Trustees. Under the terms of the Declaration of Trust, which
is governed by the laws of the Commonwealth of Massachusetts, the
Trustees are ultimately responsible for the conduct of the
Trust's affairs. They serve indefinite terms of unlimited
duration and they appoint their own successors, provided that
always at least two-thirds of the Trustees have been elected by
shareholders. The Declaration of Trust provides that a Trustee
may be removed at any special meeting of shareholders by a vote
of two-thirds of the Trust's outstanding shares.
The Advisor. Bankers Finance Advisors, LLC is a division of Madison
Investment Advisors, Inc., 6411 Mineral Point Road, Madison,
Wisconsin, 53705 ("Madison"). Bankers Finance Advisors, LLC
administers approximately $200 million in assets and manages the
Mosaic family of mutual funds, which includes stock, bond and money
market portfolios. Madison, a registered investment advisory firm for
over 23 years, provides professional portfolio management services
to a number of clients, including stock and bond mutual funds, and
has approximately $2.8 billion under management.
The Advisor is responsible for the day-
to-day administration of the Trust's activities. Investment
decisions regarding each of the Trust's portfolios can be
influenced in various manners by a number of individuals. The
individuals primarily responsible for the management of the
Trust's Funds are Frank E. Burgess and Jay R. Sekelsky. Mr. Burgess,
President and founder of Madison, began managing the
Funds after July 31, 1996. Mr. Sekelsky, vice president, has served
as a principal of Madison since 1990. Prior to joining Madison,
he was vice president for Wellington Management Company of Boston,
Massachusetts. He has been involved in the management of the Trust's
portfolios since July 31, 1996.
The Advisor is controlled by Madison. The Advisor purchased
the investment management assets of Bankers Finance Investment
Management Corp. effective July 31, 1996. The Advisor has the
same address as the Trust.
Compensation. For its services under its Investment Advisory
Agreement with the Trust, the Advisor receives a fee, payable
monthly, calculated as 3/4 percent per annum of the average daily
net assets of each of the Trust portfolios offered by this
prospectus. The Advisor may, in turn, compensate certain
financial organizations for services resulting in purchases of
Trust shares.
Distributor. GIT Investment Services, Inc. of the same address as
the Trust acts as the Trust's Distributor. The Distributor is
wholly owned by A. Bruce Cleveland.
Services Agreement. Under a separate Services Agreement with the
Trust, the Advisor provides operational and other support
services, for which it receives a flat fee based on or below cost.
Transfer Agent and Dividend Paying Agent. The Trust acts as its
own transfer agent and dividend paying agent.
Expenses. The Trust is responsible for all of its expenses not
assumed by the Advisor, including the costs of the following:
shareholder services; legal, custodian and audit fees; trade
association memberships; accounting; certain Trustees' fees and
expenses; fees for registering the Trust's shares; the
preparation of prospectuses, proxy materials and reports to
shareholders; and the expense of holding shareholder meetings.
For the fiscal year ending March 31, 1997, the expenses paid by
each portfolio offered by this prospectus, including advisory
fees and reimbursable expenses paid to the Advisor, were as
follows: for the Mid-Cap Growth Fund, $244,681; for the
Investors Fund, $119,131; and for the Balanced
Fund, $76,826.
The Trust and Its Shares
Under the terms of the Declaration of Trust the Trustees may
issue an unlimited number of whole and fractional shares of
beneficial interest without par value for each series of shares
they have authorized. All shares issued will be fully paid and
nonassessable and will have no preemptive or conversion rights.
Under Massachusetts law, the shareholders may, under certain
circumstances, be held personally liable for the Trust's
obligations. The Declaration of Trust, however, provides
indemnification out of Trust property of any shareholder held
personally liable for obligations of the Trust.
Shares in four portfolios are authorized by the Trustees: Mid-Cap
Growth Fund, Investors Fund, Balanced
Fund and Worldwide Growth Fund. Shares of each
portfolio are of a single class, each representing an equal
proportionate share in the assets, liabilities, income and
expense of the respective portfolio and each having the same
rights as any other share within the series.
Each share has one vote and fractional shares have fractional
votes. Voting is not cumulative.
The Trust does not intend to have regular shareholder meetings.
Shareholder inquiries can be made to the offices of the Trust at
the address on the cover of the prospectus.
Dividends
Each Fund's net income is declared as dividends and
distributed to shareholders annually at the end of
the Trust's December 31 fiscal year. The Trust also intends to
declare and pay quarterly dividends on Balanced Fund shares.
Dividends are paid in the form of additional shares credited to
investor accounts, unless a shareholder elects in writing to
receive dividend payments by check or direct deposit. Any net
realized short- and long-term capital gains will be paid to
shareholders as capital gain distributions. Prior to inclusion
in declared dividends, the Trust's net income will be reflected
in each portfolio's net asset value per share.
Performance Information
From time to time the Trust advertises its total return. Total
return is based on historical data and is not intended to
indicate future performance.
For advertising purposes, total return takes changes in share
prices into account, assuming that dividends and other
distributions are reinvested when paid. In addition to average
annual total return, the Trust may quote total return over
various periods, and may quote the aggregate total return for a
period. The Trust may also cite the ranking or performance of a
portfolio as reported in the public media or by independent
performance measurement firms.
Further information on the methods used to calculate the Trust's
total return may be found in the Trust's Statement of Additional
Information. The Trust's Annual Report contains additional
performance information. A copy of the Annual Report may be
obtained without charge by calling or writing the Trust at the
telephone number and address on the cover of this prospectus.
Taxes
Federal
For federal income tax purposes, the Trust intends to maintain
its status under Subchapter M of the Internal Revenue Code as a
regulated investment company by distributing to shareholders 100
percent of its net income and net capital gains for each
portfolio by the end of its fiscal year. The Internal Revenue
Code also requires each portfolio to distribute at least 98
percent of undistributed net income and capital gains realized
from the sale of investments by calendar year-end. The capital
gains distribution is determined as of October 31 each year.
Capital gains distributions, if any, are taxable to the
shareholder. The Trust will send shareholders an annual notice of
dividends and other distributions paid during the prior year.
State and Local
At the state and local level, dividend income and capital gains
are generally considered taxable income. Because tax laws vary
from state to state, shareholders should consult their tax
advisers concerning the impact of mutual fund ownership in their
own tax jurisdictions.
Cost Basis
Because each Fund's share price fluctuates, a redemption of
shares by the shareholder creates a capital gain or loss which has
tax consequences. It is the shareholder's responsibility to
calculate the cost basis of shares purchased. Shareholders are
advised to retain all statements received from the Trust and to
maintain accurate records of their investments.
Certification of Tax Indentification Number
Shareholders who fail to provide a certified social security or tax
identification number may be subject to federal withholding at a
rate of 31 percent of reportable income such as dividend,
capital gain distributions and redemptions.
Net Asset Value
The net asset value per share of each portfolio is calculated as
of the close of the New York Stock Exchange each day the New York
Stock Exchange is open for trading. The net asset value per share
of each portfolio is determined by adding the value of all its
securities and other assets, subtracting liabilities and dividing
the result by the total number of outstanding shares for the
portfolio.
For purposes of calculating net asset value, securities traded on
national securities exchanges are valued at their daily closing
sale prices, if available, and if not available, such securities
are valued at the mean between the bid and ask prices. Other
securities for which current market quotations are readily
available are valued at the mean between their bid and ask
prices; securities for which current market quotations are not
readily available are valued at their fair value as determined in good
faith according to procedures established by the Trustees. The
Trustees may use an independent pricing service for
determination of securities values.
Shareholder Transactions
Transactions into or out of the Trust are recorded in shares
and maintained to an accuracy of 1/1000th of a share.
Certificates will not be issued to represent shares in the Trust.
For institutions needing to maintain separate information on accounts
under their management, the Trust will provide a subaccounting report.
The option to initiate inter-fund exchanges and redemptions and
to obtain account balance information by telephone is available
automatically to all shareholders. The Trust will employ
reasonable security procedures to confirm that instructions
communicated by telephone are genuine; and if it does not, it may be
liable for losses due to unauthorized or fraudulent transactions.
These procedures can include, among other things, requiring one
or more forms of personal identification prior to acting upon
telephone instructions, providing written confirmations and
recording all telephone transactions. Certain transactions,
including account registration or address changes, must be
authorized in writing.
How to Purchase and Redeem Shares
Purchasing Shares
Purchases are priced at the net asset value per share
next determined after the purchase order is received by the Trust
in proper form. Each shareholder is given an account with a
balance denominated in shares.
Purchases and Uncollected Funds. To protect shareholders against loss or
dilution resulting from deposit items that are returned unpaid,
the proceeds of any redemption may be delayed 10 days or more until it can
be determined that the check or other deposit item (including Automatic
Monthly Investments) used for purchase of the shares has cleared. Such deposit
items are considered "uncollected," until the Trust has determined that they
have actually been paid by the bank on which they were drawn. Purchases made
with cash, federal funds wire or U.S. Treasury check are considered collected
when received and not subject to the 10 day hold. All purchases earn dividends
from the day of credit to a shareholder's account, even while not collected.
New Accounts. The minimum initial investment is $1,000.
By Check: New accounts may be opened by completing an application and
forwarding it with a check to:
Mosaic Equity Trust
1655 Fort Myer Drive, Suite 1000
Arlington, VA 22209-3108
By Wire: Federal funds wires should be sent to Star Bank, N.A.,
Cinti/Trust, ABA No. 0420-0001-3, for credit as follows:
Mosaic Mid-Cap Growth Account No. 48038-8883
(Investor name and account number)
Mosaic Investors Account No. 48038-8883
(Investor name and account number)
Mosaic Balanced Account No. 48038-8883
(Investor name and account number)
Please call the Trust before the funds are wired to ensure proper and
timely credit.
There is a charge of $6.00 for processing incoming wires of less
than $1,000.
When a new account is opened by telephone for funds wired to
the Trust, the investor will be required to submit a signed
application promptly thereafter. Payment of redemption
proceeds is not permitted until a signed application
is on file with the Trust.
By Inter-Fund Exchange. Shareholders may open a new account
by exchange from an existing account when the account
registration and tax identification number will remain
the same. A new account application is required only when
the account registration or tax identification number will
differ from that on the application for the original account.
Exchanges may only be made into funds that are
sold in the shareholder's state of residence.
Subsequent Investments. Subsequent investments may be made
in any amount, but the Trust reserves the right to return
investments of less than $50.00.Checks should be payable to
Mosaic Equity Trust and sent to:
Mosaic Equity Trust
P.O. Box 640393
Cincinnati, OH 45264-0393
Please include an investment deposit slip or a clear indication
of the account to be credited.
By Inter Fund Exchange. Shareholders may redeem shares
from one Mosaic account and concurrently invest the proceeds
in another Mosaic account by telephone when the account registration
and tax identification number remain the same. There is no charge for
this service.
By Automatic Monthly Investment. Shareholders may elect to
have regular monthly investments in any fixed amount of $100
or more. Mosaic will automatically initiate an Electronic
Funds Transfer to credit the shareholder's Mosaic account and
debit a bank account of their choice. You can change the
amount or discontinue the automatic investment anytime.
Redeeming Shares
Redemptions are processed on any day the New York Stock
Exchange is open and are effected at the net asset value per
share next determined after the redemption request is received in
proper form. Redemptions may be made by mail
or by wire transfer or telephone pursuant to preauthorized
instructions.
Signature Guarantees
To protect your investment, the Trust requires signature
guarantees for some redemptions. Signature guarantees help
the Trust ensure the identity of the authorized
shareholder(s). Signature guarantees are required for any
redemption whereby the proceeds are to be delivered to (1) a
person other than the shareholder of record (2) an address
other than the address of record or (3) a bank and bank
account number other than previously designated. The Trust
accepts signature guarantees from banks with FDIC insurance,
certain credit unions, trust companies, and members of a
domestic stock exchange. A guarantee from a notary public
is not an acceptable signature guarantee.
Redemptions and Uncollected Funds. To protect shareholders
against loss or dilution resulting from deposit items that
are returned unpaid, the proceeds of any redemption may be
delayed 10 days or more until it can be determined that the
check or other deposit item (including Automatic Monthly
Investments) used for purchase of the shares has cleared.
Such deposited items are considered "uncollected," until the
Trust has determined that they have actually been paid
by the bank on which they were drawn. Purchases made with
cash, federal funds wire or U.S. Treasury check are
considered collected when received and not subject
to the 10 day hold. All purchases earn dividends from the
day of credit to a shareholder's account, even while not
collected.
By Wire. With one business day's notice, funds can be sent
by wire transfer to the bank and account designated on the
account application or by subsequent written authorization.
Redemption by wires can be arranged by calling the
telephone numbers on the cover of this prospectus. Requests
for wire transfer must be made by 4:00 p.m. EST the day
before the wire will be sent.
Wire Fees: Wires of $10,000 or more will be processed to
U.S. domestic banks without charge. Wire transfers for
lesser amounts will be processed for a fee of $10. Wire
transfers sent to a foreign bank for any amount will be
processed for a fee of $30 or the cost of the wire if
greater.
By Telephone or By Mail. Upon request by telephone or in
writing, redemptions may be sent to the shareholder of
record to the address of record by check of the Trust.
Redemption requests received by mail and telephone are
normally processed within one business day.
Stop Payment on Check Issued By the Trust. Call the Trust to place a
stop payment on a check issued by the Trust.
Normally, the Trust charges a fee of $28.00, or the cost of stop payment,
if greater, for stop payment requests on a check issued by the Trust on
behalf of a shareholder. Certain documents may be needed before such a
request can be processed.
Automatic Periodic Redemptions. Shareholders may request one
or more automatic periodic redemptions of a fixed or readily
determinable sum, or of the actual dividends paid. Such
payments may be sent to the shareholder or to any other
payee preauthorized in writing by the shareholder. There is
no charge for this service, but the Trust reserves the right
to impose a charge, or to impose a minimum amount for
periodic redemptions.
Closing an Account
An account may be closed by telephone, wire transfer or by
mail as explained above.
When an account is closed, shares will be redeemed at the
next determined net asset value.
Minimum Balance. The Trust reserves the right to
involuntarily redeem accounts with balances of less than
$700. Prior to closing any such account, the shareholder
will be given 30 days written notice, during which time the
shareholder may increase his or her balance to avoid having
the account closed.
Transaction Charges
Bounced Investment Checks. Shareholders will be charged (by
redemption of shares) $10.00 for items deposited for
invesment that are returned unpaid for any reason. The
Trust charges $5.00 to process each bearer bond coupon
deposited.
Broker Fees. Shareholders who purchase or redeem shares
through a securities broker may be charged a transaction fee
by the broker for the handling of the transaction if the
broker so elects. Such charges are retained by the
broker and not transmitted to the Trust. However,
shareholders may engage in any transaction directly with the
Trust to avoid such charges.
Additional Charges: The Trust reserves the right to impose
additional charges, upon 30 days written notice, to cover
the costs of unusual transactions. Services for which
charges could be imposed include, but are not limited to,
processing items sent for special collection, international
wire transfers, research and processes for retrieval of
documents or copies of documents.
Retirement Plans
IRAs. Individual Retirement Accounts ("IRAs") may be opened with
a reduced minimum investment of $500. Even though they may be
nondeductible or partially deductible, IRA contributions up to
the allowable annual limits may be made, and the earnings on such
contributions will accumulate tax-free until distribution. The
Trust currently charges an annual fee of $12 per shareholder
(not per IRA account) invested in an IRA at Mosaic. This fee may
be prepaid by the shareholder. A separate application is required
for IRA accounts.
Keogh Plans. The Trust also offers Keogh (or H.R. 10) plans for
self-employed individuals and their employees, which enable them
to obtain tax-sheltered retirement benefits similar to those
available to employees covered by other qualified retirement
plans. Currently the Trust charges an annual fee of
$15 per shareholder (not per Keogh account) invested in
a Keogh at Mosaic.
The Trust also offers SEP IRAs, SIMPLEs, 401(k) and 403(b)
retirement plans. Further information on the retirement plans
available through the Trust, including minimum investments, may
be obtained by calling the Trust's shareholder service
department.
<PAGE>
Telephone Numbers
Shareholder Service
Washington, DC area: 703/528-6500
Toll-free nationwide: 888/670-3600
The Mosaic Family of Mutual Funds
Mosaic Equity Trust
Investors Fund
Balanced Fund
Mid-Cap Growth Fund
Worldwide Growth Fund
Mosaic Income Trust
Maximum Income Fund
Government Fund
Mosaic Bond Fund
Mosaic Tax-Free Trust
Arizona Fund
Maryland Fund
Missouri Fund
Virginia Fund
National Fund
Money Market
Mosaic Government Money Market
For more complete information on any Mosaic Fund,
including charges and expenses, request a prospectus by
calling the numbers above. Read it carefully before you
invest or send money. This prospectus does not constitute an
offering by the distributor in any jurisdiction in which such
offering may not be lawfully made.
Mosaic Funds
1655 Fort Myer Drive
Arlington Virginia 22209
http://www.mosaicfunds.com
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated June 13, 1997
For use with the prospectus of the Mid-Cap Growth, Investors
and Balanced Funds dated June 13, 1997 and with the
prospectus of the Worldwide Growth Fund dated July 31, 1996.
MOSAIC EQUITY TRUST
1655 Fort Myer Drive
Arlington, VA 22209-3108
(800) 336-3063
(703) 528-6500
This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the prospectuses of Mosaic Equity
Trust bearing the dates indicated above (the "Prospectuses"). A
copy of each Prospectus may be obtained from the Trust at the
address and telephone numbers shown.
Table of Contents
Introductory Information ("About Mosaic Equity Trust") 2
Supplimental Investment Policies
("Investment Objectives" and "Investment Policies") 2
Investment Limitations
("Investment Policies") 6
The Investment Advisor
("Management of the Trust") 7
Organization of the Trust
("The Trust and Its Shares") 8
Trustees and Officers
("Management of the Trust") 10
Administrative and Other Expenses
("Management of the Trust") 11
Portfolio Transactions
("Management of the Trust") 11
Shareholder Transactions
("How to Purchase and Redeem Shares") 12
Share Redemptions
("How to Purchase and Redeem Shares") 13
Retirement Plans
("How to Purchase and Redeem Shares") 14
Declaration of Dividends
("Dividends") 14
Determination of Net Asset Value
("Net Asset Value") 14
Additional Tax Matters
("Taxes") 15
Total Return Calculations
("Performance Information") 16
Custodians and Special Custodians 17
Legal Matters and Independent Auditors
("Financial Highlights") 17
Additional Information 17
Financial Statements and Report of Independent Auditors
("Financial Highlights") 17
Note: The items appearing in parentheses above are cross
references to sections in the Prospectuses which correspond to
the sections of this Statement of Additional Information.
<PAGE>
Introductory Information
Mosaic Equity Trust (the "Trust") currently issues four series of
shares: Worldwide Growth Fund shares, Mid-Cap Growth Fund shares
(known as Special Growth Fund shares prior to May 12, 1997),
Investors Fund shares (known as Select Growth Fund shares
prior to May 12, 1997) and Balanced Fund shares. These
four series of shares correspond, respectively, to three separate
portfolios consisting primarily of equity securities: the
Worldwide Growth Fund, the Mid-Cap Growth Fund, and the
Investors Fund, and one portfolio investing in a combination of
fixed income and equity securities: the Balanced Fund. These
portfolios are described more fully below (see "Supplemental
Investment Policies"). Prior to June 13, 1997, the Balanced
Fund was known as the Equity Income Fund.
Supplemental Investment
The investment objectives of the Trust are described in the
Prospectuses (see "Investment Objectives"). Reference should also
be made to the Prospectuses for general information concerning
the Trust's investment policies (see "Investment Policies").
The Mid-Cap Growth, Investors and Worldwide Growth
Funds of the Trust seek to achieve their investment objectives
through diversified investment by each of its portfolios principally
in equity securities, while the Balanced Fund seeks to
achieve its investment objective through diversified
investment in a combination of equity and fixed-income
securities.
Basic Investment Policies. The Trust intends generally to select
portfolio investments on the basis of their fundamental values
rather than on the basis of technical market factors. This means
that the Trust's investments will normally be held until there is
a change in the fundamental considerations that were the reason
for their purchase. However, the Trust will be free to sell any
of its investments at any time in response to market timing or
other considerations. Any such sales may result in realized long-
term or short-term capital gains and losses. The Trust does not
intend to engage in extensive short-term trading; thus, since it
will not normally be able to take advantage of short-term market
swings, the Trust should not be viewed as a vehicle for short-
term investment.
The Worldwide Growth Fund assumes the highest risks among
the Trust's four portfolios. It invests in foreign securities
subject to currency fluctuation against the U.S. dollar and in
securities issued by companies located in countries with
unpredictable political systems. The portfolio also bears the
risk that it may be limited in its ability to invest in certain
international markets if the U.S. Government or foreign
governments impose restrictions on such investment. Under such
circumstances, the Fund may be required to invest in U.S.
securities. Likewise, laws or regulations regarding
convertibility and repatriation of assets may require the
portfolio to increase its U.S. market investments in order to
ensure an adequate supply of U.S. dollars to meet anticipated
redemptions. Currently, it is not anticipated that such
considerations will affect the portfolio's investment strategy.
The Mid-Cap Growth Fund is intended to achieve the highest
capital appreciation while assuming the highest risks of the
Trust's three domestic securities portfolios. Such risks may
arise from investments in companies that have limited resources,
that lack a stable earnings history or may be incurring losses,
that are engaged in the development of unproven products or that
are promoting products and services lacking well established
sales. This portfolio emphasizes investments in smaller companies
that may offer rapid growth potential. It may also invest in
companies undergoing fundamental changes deemed to offer the
possibility of a rapid increase in value.
The Investors Fund seeks investments that are
undervalued or have good management and significant growth
potential. Investments for this portfolio are selected on the
basis of such fundamental measures as the relationship between
stock price and underlying tangible assets, the ratio of stock
price to earnings compared with typical historical or other
contemporary levels for this ratio, and the company's relative
rate of growth and market position.
The Balanced Fund is intended to earn substantial
current dividend income with some capital appreciation while
assuming less risk than the Trust's other portfolios.
Consideration will also be given to an investment's potential for
appreciation as a hedge against inflation and factors tending to
protect the investment's value. The Advisor believes that capital growth and
production of income can best be achieved through flexibility of
investment strategies. Although the careful selection of
common stocks and bonds is a primary factor affecting
the investment return of the portfolio, the percentage of
the portfolio's assets which may be invested at any
particular time in common stocks or bonds will depend
upon management's judgment regarding the risks present in
the stock and fixed income markets. When management
believes that market risks are high and the prices of common
stocks or bonds may decline, the portfolio may move
substantial assets out of common stocks or bonds and into
short-term fixed income instruments such as U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Agency Notes or highly
rated commercial paper or money market funds.
While investments in the Balanced Fund are intended to be less
volatile than those of the Trust's other portfolios, no assurance
can be given that this portfolio will avoid losses or succeed in
growing at a rate matching the rate of inflation. Experience has
shown that high levels of inflation may depress stock prices,
limiting the value of common stocks as an inflation hedge.
Other Policies. The Trust will not invest more than 25% of the
assets of a portfolio in any one industry. During defensive
periods the Trust may invest without limitation in U.S.
Government securities and the money market obligations of
domestic banks, their branches and other domestic depository
institutions (see "Investment Limitations"). The Trust will limit
its investments to liquid securities having readily available
market quotations, except that up to 10% of the Mid-Cap, Select
or Balanced Fund and up to 15% of the Worldwide Growth
Fund may be invested in securities having restrictions on
resale or which are otherwise illiquid (see "Investment
Limitations").
Debt Instruments. The portion of any portfolio of the Trust that
is not invested in equity securities may be invested in debt
instruments. The "Debt Instruments" in which the Mid-Cap Growth,
Investors and Worldwide Growth Funds of the Trust may invest
are limited to the following U.S. dollar denominated investments:
(1) U.S. Government securities; (2) obligations of banks having
total assets of $750 million or more (including assets of
affiliates); (3) high grade commercial paper; (4) other corporate
and foreign government obligations of investment grade issued and
sold publicly within the United States; and (5) repurchase
agreements involving any of the foregoing securities.
In addition to the above, the Worldwide Growth Fund may
invest in corporate and foreign government obligations which are
issued and sold publicly outside the U. S. Such debt securities
may be in the top four rating categories or have, in the
Advisor's judgment, the characteristics of investment grade
securities. The Trust is permitted to invest in foreign debt
securities which are speculative and, in the Advisor's judgment,
have credit characteristics similar to debt securities rated
below investment grade quality. Foreign government issuers of
such securities may have a large foreign debt and foreign
corporate issuers may be highly leveraged. As such, the risks
associated with acquiring the securities of such issuers is
greater than is the case with higher rated securities. The
issuer's ability to service its debt obligations may be adversely
affected by foreign economic
downturns and by specific issuer developments such as the
unavailability of additional financing. The risk of default by
the issuer is significantly greater for speculative securities
because they may be unsecured or subordinated to other creditors.
The market for such securities is generally less liquid than for
investment grade securities and the Worldwide Growth Fund
may experience difficulty disposing of any such securities.
"U.S. Government securities" are obligations issued or guaranteed
by the United States Government, its agencies and
instrumentalities. U.S. Government securities include direct
obligations of the United States issued by the U.S. Treasury,
such as Treasury bills, notes and bonds. Also included are
obligations of the various federal agencies and
instrumentalities, such as the Government National Mortgage
Association, the Federal Farm Credit System, the Federal Home
Loan Mortgage Corporation and the Federal Home Loan Banks, the
Small Business Administration, the Student Loan Marketing
Association, and deposits fully insured as to principal by
federal deposit insurance. Except for Treasury securities, all of
which are full faith and credit obligations, U.S. Government
securities may either be agency securities backed by the full
faith and credit of the United States, such as those issued by
the Government National Mortgage Association, or only by the
credit of the particular federal agency or instrumentality which
issues them, such as those issued by the Federal Farm Credit
System and the Federal Home Loan Mortgage Corporation; some such
agencies have borrowing authority from the U.S. Treasury, while
others do not.
Bank obligations include certificates of deposit ("CDs"), bankers
acceptances ("BAs") and time deposits. CDs are generally short-
term, interest-bearing negotiable certificates issued by banks
against funds deposited with the issuing bank for a specified
period of time. BAs are time drafts drawn against a business,
often an importer, and "accepted" by a bank, which agrees
unconditionally to pay the draft on its maturity date. BAs are
negotiable and trade in the secondary market. Time deposits
include money market deposit accounts. The Trust will not invest
in non-transferable time deposits having penalties for early
redemption if such time deposits mature in more than seven
calendar days, and such time deposits maturing in two business
days to seven calendar days will be limited to 10% of the Mid-Cap
Growth, Investors or Balanced Fund's respective
total assets and limited to 15% of the Worldwide Growth
Fund's total assets.
"Commercial paper" describes the unsecured promissory notes
issued by major corporations to finance short-term credit needs.
Commercial paper is issued in maturities of nine months or less
and usually on a discount basis. High grade commercial paper is
rated A-1 by Standard and Poor's Corporation ("S&P") or P-1 by
Moody's Investors Service, Inc. ("Moody's") or is of equivalent
quality. Other corporate and foreign government obligations
generally include notes and debentures (for maturities not
exceeding 10 years) and bonds (for longer maturities). These
obligations normally pay interest to the holder semiannually;
they may be either secured or, more commonly, unsecured.
Investment grade obligations are those rated Baa or better by
Moody's or BBB or better by S&P or are of equivalent quality.
The Balanced Fund may invest in the Debt Instruments
described above and in the investment grade fixed-income securities
described more fully in the Prospectus (see "Additional Information
About the Balanced Fund").
Specialized Investment Techniques. In order to achieve its
investment objectives, the Trust may use, when the Advisor deems
appropriate, certain specialized investment techniques. Such
specialized investment techniques principally include those
identified in the Prospectus (see "Investment Policies") which
are described more fully below:
1. Covered Call Options. The Trust may write "covered call
options" against any of its portfolio securities. These options
represent contracts sold on a national options exchange or in the
over-the-counter market allowing the purchaser of the contract to
buy specified underlying securities at a specified price (the
"strike price") prior to a specified expiration date. Writing
covered call options may increase the Trust's income, because a
fee (the "premium") is received by the Trust for each option
contract written, but unless the option contract is exercised it
has no other ultimate impact on the Trust. The premium received,
plus the strike price of the option, will always be greater than
the value of the underlying securities at the time the option is
written.
When an option contract is "covered" it means that the Trust, as
the writer of the option contract, holds in its portfolio the
underlying securities described in the contract or securities
convertible into such securities. Thus, if the holder of the
option decides to exercise his purchase rights, the Trust may
sell at the strike price securities it already holds in portfolio
or may obtain by conversion (rather than risking having to first
buy the securities in the open market at an undetermined price).
However, an option contract would not normally be exercised
unless the market price for the underlying securities specified
were greater than the strike price. Thus, when an option is
exercised the Trust will normally be forced to sell portfolio
securities at below their current market value or otherwise will
be required to buy a corresponding call contract at a price
reflecting this price differential to offset the call contract
previously written (such an offsetting call contract purchase is
called a "closing purchase transaction").
To the extent the Trust writes covered call options it will be
foregoing any opportunity for appreciation on the underlying
securities above the strike price during the period prior to
expiration of the option contract. The Trust reserves the right
to close out call option contracts written at any time in closing
purchase transactions, but there is no assurance that the Trust
will be able to effect such transactions at any particular time
or at an acceptable price. The Trust will not sell the securities
covering an option contract written prior to its expiration date
unless substitute covering securities are purchased or unless the
contract written is first offset in a closing purchase
transaction; nor will the Trust write additional option contracts
if more than 25% of the Trust's assets would then be required to
cover the options written. All of the Trust's investments will be
selected on a basis consistent with its investment policies for
the respective portfolio, notwithstanding the potential for
additional premium income from option writing. The writing of
options could increase the Trust's gross income from securities
held less than three months, and is therefore limited by tax
considerations to providing 30% of gross income or less (see
"Additional Tax Matters").
2. When-Issued Securities. The Trust may purchase and sell
securities on a when-issued or delayed delivery basis. When-
issued and delayed delivery transactions arise when securities
are bought or sold with payment for and delivery of the
securities scheduled to take place at a future time. Frequently
when newly issued securities are purchased, payment and delivery
may not take place for 15 to 45 days after the Trust commits to
the purchase. Fluctuations in the value of securities contracted
for future purchase settlement may increase changes in the value
of the respective portfolio, because such value changes must be
added to changes in the values of those securities actually held
in the portfolio during the same period. When-issued transactions
represent a form of leveraging; the Trust will be at risk as soon
as the when-issued purchase commitment is made, prior to actual
delivery of the securities purchased.
When engaging in when-issued or delayed delivery transactions,
the Trust must rely upon the buyer or seller to complete the
transaction at the scheduled time; if the other party fails to do
so, then the Trust might lose a purchase or sale opportunity that
could be more advantageous than alternative opportunities
available at the time of the failure. If the transaction is
completed, intervening changes in market conditions or the
issuer's financial condition could make it less advantageous than
investment alternatives otherwise available at the time of
settlement. While the Trust will only commit to securities
purchases that it intends to complete, it reserves the right, if
deemed advisable, to sell any securities purchase contracts
before settlement of the transaction; in any such case the Trust
could realize either a gain or a loss, despite the fact that the
original transaction was never completed. When fixed price
contracts are made for the purchase of when-issued securities,
the Trust will maintain in a segregated account designated
investments which are liquid or mature prior to the scheduled
settlement and cash sufficient in aggregate value to provide
adequate funds for completion of the scheduled purchase.
3. Foreign Securities. The Trust may invest in securities of
foreign issuers that are listed on a recognized domestic or
foreign exchange without restriction. At least 65% of the
Worldwide Growth Fund is intended to be invested in foreign
equity securities. Foreign investments involve certain special
considerations not typically associated with domestic
investments. Foreign investments may be denominated in foreign
currencies and may require the Trust to hold temporary foreign
currency bank deposits while transactions are completed; although
the Trust might therefore benefit from favorable currency
exchange rate changes, it could also be affected adversely by
changes in exchange rates, by currency control regulations and
by costs incurred when converting between various currencies.
Furthermore, foreign issuers may not be subject to the uniform
accounting, auditing and financial reporting requirements
applicable to domestic issuers, and there may be less publicly
available information about such issuers.
In general, foreign securities markets have substantially less
volume than comparable domestic markets and therefore foreign
investments may be less liquid and more volatile in price than
comparable domestic investments. Fixed commissions in foreign
securities markets may result in higher commissions than for
comparable domestic transactions, and foreign markets may be
subject to less governmental supervision and regulation than
their domestic counterparts. Foreign securities transactions are
subject to documentation and delayed settlement risks arising
from difficulties in international communications. Moreover,
foreign investments may be adversely affected by diplomatic,
political, social or economic circumstances or events in other
countries, including civil unrest, expropriation or
nationalization, unanticipated taxes, economic controls, and acts
of war. Individual foreign economies may also differ from the
United States economy in such measures as growth, productivity,
inflation, national resources and balance of payments position.
4. Loans of Portfolio Securities. The Trust, in certain
circumstances, may be able to earn additional income by loaning
portfolio securities to a broker-dealer or financial institution.
The Trust may make such loans only if cash or U.S. Government
securities, equal in value to 100% of the market value of the
securities loaned, are delivered to the Trust by the borrower and
maintained in a segregated account at full market value each
business day. During the term of any securities loan, the
borrower will pay to the Trust all dividend and interest income
earned on the loaned securities; at the same time the Trust will
also be able to invest any cash portion of the collateral or
otherwise will charge a fee for making the loan, thereby
increasing its overall potential return. It is the Trust's policy
that it shall have the option to terminate any loan of portfolio
securities at any time upon seven days' notice to the borrower.
In making a loan of securities, the Trust would be exposed to the
possibility that the borrower of the securities might be unable
to return them when required, which would leave the Trust with
the collateral maintained against the loan; if the collateral
were of insufficient value, the Trust could suffer a loss. The
Trust may pay fees for the placement, administration and custody
of securities loans, as it deems appropriate.
Any loans by the Trust of portfolio securities will be made in
accordance with applicable guidelines established by the
Securities and Exchange Commission or the Trustees. In
determining whether to lend securities to a particular broker,
dealer or other financial institution, the Advisor will consider
the creditworthiness of the borrowing institution. The Trust will
not enter into any securities lending agreement having a duration
of greater than one year.
5. Repurchase Agreement Transactions. A repurchase agreement
involves the acquisition of securities from a financial
institution, such as a bank or securities dealer, with the right
to resell the same securities to the financial institution on a
future date at a fixed price. Repurchase agreements are a highly
flexible medium of investment, in that they may be for very short
periods, including frequently maturities of only one day. Under
the Investment Company Act of 1940, repurchase agreements are
considered loans and the securities involved may be viewed as
collateral. It is the Trust's policy to limit the financial
institutions with which it engages in repurchase agreements to
banks, savings and loan associations and securities dealers
meeting financial responsibility standards prescribed in
guidelines adopted by the Trustees.
When investing in repurchase agreements, the Trust could be
subject to the risk that the other party may not complete the
scheduled repurchase and the Trust would then be left holding
securities it did not expect to retain. If those securities
decline in price to a value of less than the amount due at the
scheduled time of repurchase, then the Trust could suffer a loss
of principal or interest. The Advisor will follow procedures
designed to ensure that repurchase agreements acquired by the
Trust are always at least 100% collateralized as to principal and
interest. It is the Trust's policy to require delivery of
repurchase agreement collateral to its Custodian or (in the case
of book-entry securities held by the Federal Reserve System) that
such collateral is registered in the Custodian's name or in
negotiable form. In the event of insolvency or bankruptcy of the
other party to a repurchase agreement, the Trust could encounter
restrictions on the exercise of its rights under the repurchase
agreement.
To the extent the Trust requires cash to meet redemption requests
and determines that it would not be advantageous to sell
portfolio securities to meet those requests, then it may sell its
portfolio securities to another investor with a simultaneous
agreement to repurchase them. Such a transaction is commonly
called a "reverse repurchase agreement." It would have the
practical effect of constituting a loan to the Trust, the
proceeds of which would be used to meet cash requirements for
redemption requests. During the period of any reverse repurchase
agreement, the Trust would recognize fluctuations in value of the
underlying securities to the same extent as if those securities
were held by the Trust outright. If the Trust engages in reverse
repurchase agreement transactions, it will maintain in a separate
account designated securities which are liquid or mature prior to
the scheduled repurchase and cash sufficient in aggregate value
to provide adequate funds for completion of the repurchase. It is
the Trust's current operating policy not to engage in reverse
repurchase agreements for any purpose, if as a result reverse
repurchase agreements in the aggregate would exceed five percent
of the Trust's total assets.
6. Foreign Currency Transactions. Securities acquired in foreign
markets will normally be denominated in foreign currency instead
of U.S. dollars. When such securities are sold, the Trust will
normally convert the proceeds to U.S. dollars; the resulting
foreign exchange transaction may be completed immediately (a
"spot transaction"). Under such circumstances, the foreign
exchange dealer will realize a profit based on the difference
between the price at which it buys a particular currency and the
price at which it sells such currency. In order to avoid the
costs of spot transactions, the Trust may enter into forward
currency exchange contracts involving an obligation to purchase
or sell a specific foreign currency at an agreed price and date.
Currency traders (typically large commercial banks) and their
customers trade these contracts directly. Generally, these
contracts are traded without deposit requirements or commissions.
The Trust will normally be "covered" in any forward contract long
positions it may hold. In the case of an uncovered long position
in a forward contract, the Trust may cover the contract it sells
by establishing and maintaining with its Custodian or Special
Custodian a segregated account consisting of cash or other liquid
assets. When a forward contract matures, the Trust may sell
portfolio securities and make delivery of foreign currency or it
may retain portfolio securities and terminate its forward
contract by purchasing an "offsetting" contract with the same
currency trader, thereby obliging the Trust to purchase the same
amount of the foreign currency. This may result in a gain or
loss to the Trust. The Trust may be required to engage in spot
transactions to sell or purchase additional foreign currency
depending on the extent to which the market value of foreign
denominated securities rises or falls, respectively, between the
date a forward contract is established and the date it matures.
The Worldwide Growth Fund may engage in a form of foreign
currency transaction known as "settlement hedging" by entering
into a forward contract in order to fix a definite U.S. dollar
price for specific foreign securities in connection with the
purchase or sale of such securities. This helps to ensure that
the portfolio has a sufficient volume of foreign currency to
purchase foreign securities after any exchange rate fluctuations
between the date a transaction is initiated and the date it is
settled.
Another form of foreign currency transaction in which the
Worldwide Growth Fund may engage in is "portfolio hedging."
This is accomplished by entering into a forward contract in order
to generally hedge securities in the entire portfolio that are
denominated in foreign currencies against losses caused by a
decline in foreign currency values. This allows the portfolio to
exchange foreign currency for U.S. dollars at a fixed exchange
rate. If the Trust engages in portfolio hedging, it foregoes the
opportunity to profit from an increase in value of the foreign
currency relative to the U.S. dollar.
The portfolio may also write covered put and call options and
purchase put and call options on currencies to hedge against
movements in exchange rates. Premiums for currency options held
by the portfolio may not exceed five percent of its total assets.
The portfolio will make no attempt to hedge all of its portfolio
positions and may not hedge any positions. Hedging will not
eliminate price fluctuations or prevent losses from currency
fluctuations. The portfolio will not enter foreign currency
transactions for speculative purposes.
7. Global Depository Shares and American Depository Receipts.
The Trust may invest in Global Depository Shares ("GDSs") or
American Depository Receipts ("ADRs"). These instruments are
negotiable receipts for a given number of shares of securities in
a foreign corporation. The foreign stock certificates remain in
the custody of a foreign bank. GDSs are issued by foreign banks
and traded in foreign markets while ADRs are issued by large
commercial U.S. banks and traded in U.S. markets or on U.S.
exchanges. The GDS or ADR represents the depository bank's
guarantee that it holds the underlying securities. The Trust may
invest in a GDS or ADR in lieu of trading in the underlying
shares on a foreign market. GDS investments (which include such
similarly denominated foreign securities as European Depository
Receipts) have the same risks as other foreign securities. By
comparison, ADRs are subject to a degree of U.S. regulation and
are denominated in U.S. dollars.
8. Closed-end funds. The Worldwide Growth Fund may invest
in shares of closed-end investment companies ("closed-end funds")
which hold securities of the type purchased by the portfolio.
Closed-end funds are similar to other corporations in that a
fixed number of shares are authorized and issued, but differ from
open-end investment companies in that their price is not based on
the net asset value of the underlying securities of the fund.
The portfolio may invest in foreign closed-end funds or U.S.
closed-end funds. No greater than five percent of the value of
the total assets of the portfolio may be invested in shares of
any one U.S. closed-end fund. The Trust may invest in closed-end
funds which hold foreign securities of companies traded on the
markets of countries in which the portfolio's direct ownership of
securities is restricted.
9. Convertible securities. In addition to other equity
securities, the Balanced Fund may invest in
"convertible securities." Securities convertible into
common stocks and securities having equity characteristics
are bonds that are convertible into a specific number of
shares of the common stock of the issuer either at any time
or usually at a specific future date at a determined price
per share of common stock. Such bonds tend to participate in
a substantial portion of the price appreciation of the
underlying common stock while enjoying some protection
against depreciation due to higher interest rates afforded
most bonds and because of the anticipation of the bond's
maturity. The portfolio anticipates that convertible
securities will represent less than 25% of it's total
assets. All convertible bonds must meet the same quality
ratings required of corporate bonds, as described in the
following paragraph. The risks involved in investment in
convertible securities are similar to the risks of
investment in the underlying common stocks.
Policy Review. If, in the judgment of a majority of the Trustees
of the Trust, unanticipated future circumstances make inadvisable
the continuation of the Trust's policy of seeking capital
appreciation from investment principally in equity securities, or
continuation of the more specific policies of each portfolio,
then the Trustees may change any such policies without
shareholder approval, subject to the limitations provided
elsewhere in this Statement of Additional Information (see
"Investment Limitations") and after giving 30 days' written
notice to the Trust's affected shareholders.
Except for the fundamental investment limitations placed upon the
Trust's activities, the Trustees reserve the right to review and
change the other investment policies and techniques employed by
the Trust, from time to time as they deem appropriate, in
response to market conditions and other factors. Reference should
be made to "Investment Limitations" for a description of those
fundamental investment policies which may not be changed without
shareholder approval. Such fundamental policies would permit the
Trust, after notice to shareholders but without a shareholder
vote, to adopt policies permitting a wide variety of investments,
including money market instruments, all types of common and
preferred equity securities, all types of long-term debt
securities, convertible securities, and certain types of option
contracts. In the event of such a policy change, a change in the
Trust's name might be required. There can be no assurance that
the Trust's present objectives will be achieved.
Investment Limitations
The Trust has adopted as fundamental policies the following
limitations on its investment activities, which apply to each of
its portfolios; these fundamental policies may not be changed
without a majority vote of the Trust's shareholders as defined in
the Investment Company Act of 1940 (see "Organization of the
Trust").
1. Permissible Investments. Subject to the investment policies
from time to time adopted by the Trustees, the Trust may purchase
any type of securities under such terms as the Trust may
determine; and any such securities may be acquired pursuant to
repurchase agreements with financial institutions or securities
dealers or may be purchased from any person, under terms and
arrangements determined by the Trust, for future delivery. Any of
these securities may have limited markets and may be purchased
with restrictions on transfer; however, the Trust may not make
any investment (including repurchase agreements) for which there
is no readily available market and which may not be redeemed,
terminated or otherwise converted into cash within seven days,
unless after making the investment not more than 10% of the
Mid-Cap Growth, Investors or Balanced Funds' net
assets would be so invested and not more than 15% of the
Worldwide Growth Fund's net assets would be so invested.
Securities of foreign issuers not listed on a recognized domestic
or foreign exchange are considered to be illiquid securities and
fall within this percentage limitation unless, in the Advisor's
reasonable judgment, such securities may be liquidated in the
ordinary course of business in seven or fewer days.
2. Restricted Investments. Not more than five percent of the
value of the total assets of a portfolio of the Trust may be
invested in the securities of any one issuer (other than
securities issued or guaranteed by the United States Government
or any of its agencies or instrumentalities and excluding bank
deposits); nor may securities be purchased when as a result more
than 10% of the voting securities of the issuer would be held by
any portfolio of the Trust. Except to the extent a portfolio
purchases obligations issued or guaranteed by the United States
Government or its agencies and instrumentalities, obligations
which provide income exempt from federal income taxes, and
obligations of domestic banks, their branches, and other domestic
depository institutions, the Trust will limit its investments so
that not more than 25% of the assets of each of its portfolios
are invested in any one industry. For purposes of these
restrictions, the issuer is deemed to be the specific legal
entity having ultimate responsibility for performance of the
obligations evidenced by the security and whose assets and
revenues principally back the security. Any security that does
not have a governmental jurisdiction or instrumentality
ultimately responsible for its repayment may not be purchased by
the Trust when the entity responsible for such repayment has been
in operation for less than three years, if such purchase would
result in more than five percent of the total assets of the
respective portfolio of the Trust being invested in such
securities.
The Trust may not purchase the securities of other investment
companies, except for shares of unit investment trusts and, with
respect to the Worldwide Growth Fund only, closed-end
investment companies, holding securities of the type purchased by
the Trust itself and then only if the value of such shares of any
one investment company does not exceed 5% of the value of the
total assets of the Trust's portfolio in which the shares are
included and the aggregate value of all such shares does not
exceed 10% of the value of such total assets, or except in
connection with an investment company merger, consolidation,
acquisition or reorganization. The Trust may not purchase any
security for purposes of exercising management or control of the
issuer, except in connection with a merger, consolidation,
acquisition or reorganization of an investment company. The Trust
may not purchase or retain the securities of any issuer if, to
the knowledge of the Trust's management, the holdings of those of
the Trust's officers, Trustees and officers of its Advisor who
beneficially hold one-half percent or more of such securities,
together exceed 5% of such outstanding securities.
3. Borrowing and Lending. It is a fundamental policy of the Trust
that it may borrow (including engaging in reverse repurchase
agreement transactions) in amounts not exceeding 25% of a
portfolio's total assets for investment purposes. A portfolio of
the Trust may not otherwise issue senior securities representing
indebtedness and may not pledge, mortgage or hypothecate any
assets to secure bank loans, except in amounts not exceeding 15%
of its net assets taken at cost.
The Trust may loan its portfolio securities in an amount not in
excess of one-third of the value of the portfolio's gross assets,
provided collateral satisfactory to the Trust's Advisor is
continuously maintained in amounts not less than the value of the
securities loaned. The Trust may not lend money (except to
governmental units), but is not precluded from entering into
repurchase agreements or purchasing debt securities.
4. Other Activities. The Trust may not act as an underwriter
(except for activities in connection with the acquisition or
disposition of securities intended for or held by one of the
Trust's portfolios), make short sales or maintain a short
position (unless a Trust portfolio owns at least an equal amount
of such securities, or securities convertible or exchangeable
into such securities, and not more than 25% of the portfolio's
net assets is held as collateral for such sales). Nor may the
Trust purchase securities on margin (except for customary credit
used in transaction clearance), invest in commodities, purchase
interests in real estate, real estate limited partnerships, or
invest in oil, gas or other mineral exploration or development
programs or oil, gas or mineral leases. However, the Trust may
purchase securities secured by real estate or interests therein
and may use financial futures contracts, including contracts
traded on a regulated commodity market or exchange, to purchase
or sell securities which the Trust would be permitted to purchase
or sell by other means and where the Trust intends to take or
make the required delivery. The Trust may acquire put options in
conjunction with a purchase of portfolio securities; it may also
purchase put options and write call options covered by securities
held in the respective portfolio (and purchase offsetting call
options in closing purchase transactions), provided that the put
option purchased or call option written at all times remains
covered by portfolio securities, whether directly or by
conversion or exchange rights; but it may not otherwise invest in
or write puts and calls or combinations thereof.
Except as otherwise specifically provided, the foregoing
percentage limitations need only be met when the investment is
made or other relevant action is taken. As a matter of operating
policy in order to comply with certain applicable State
restrictions, but not as a fundamental policy, the Trust will not
pledge, mortgage or hypothecate in excess of 10% of a portfolio's
total assets taken at market value. Although permitted to do so
by its fundamental policies, it is the Trust's current policy not
to use financial futures contracts and not to acquire put options
nor to invest in warrants (other than warrants acquired as a part
of a unit or attached to other securities at the time of
purchase) if such warrants (valued at the lower of cost or
market) would then exceed five percent of a portfolio's net
assets and any such warrants not listed on the New York or
American Stock Exchange would exceed two percent of the
portfolio's net assets.
Notwithstanding the Trust's fundamental policies, it does not
presently intend to borrow (including engaging in reverse
repurchase agreement transactions) for investment purposes nor to
borrow (including engaging in reverse repurchase agreement
transactions) for any purpose in amounts in excess of five
percent of a portfolio's total assets. If the Trust were to
borrow for the purpose of making additional investments, such
borrowing and investment would constitute "leverage." Leverage
would exaggerate the impact of increases or decreases in the
value of a portfolio's total assets on its net asset value, and
thus increase the risk of holding the portfolio's shares.
Furthermore, if bank borrowings by the Trust for any purpose
exceeded one-third of the value of a portfolio's total assets
(net of liabilities other than the bank borrowings), then the
Investment Company Act of 1940 would require the portfolio,
within three business days, to liquidate assets and
commensurately reduce bank borrowings until the borrowing level
was again restored to such one-third level. Funds borrowed for
leverage purposes would be subject to interest costs which might
not be recovered by interest, dividends or appreciation from the
respective securities purchases. The Trust might also be required
to maintain minimum bank balances in connection with such
borrowings or to pay line-of-credit commitment fees or other fees
to continue such borrowings; either of these requirements would
increase the cost of the borrowing.
In connection with the Trust's limitation on the industry
concentration of its investments, domestic banks and their
branches may include the domestic branches of foreign banks, to
the extent such domestic branches are subject to the same
regulations as United States banks; but they will not include the
foreign branches of domestic banks, unless the obligations of
such foreign branches are unconditionally guaranteed by the
domestic parent.
If a portfolio of the Trust alters any of the foregoing current
operating policies (relating to financial futures contracts,
options, warrants or borrowing), it will notify shareholders of
the policy revision at least 30 days prior to its implementation
and describe the new investment techniques to be employed. In the
implementation of its investment policies the Trust will not
consider securities to be readily marketable unless they have
readily available market quotations.
The Investment Advisor
Bankers Finance Advisors, LLC, 1655 Fort Myer
Drive, Arlington, Virginia 22209-3108, is the investment adviser
to the Trust and is called the "Advisor" throughout this
Statement of Additional Information and the Prospectus. The
Advisor is responsible for the investment management of the Trust
and is authorized to execute the Trust's portfolio
transactions, to select the methods and firms with which such
transactions are executed, to oversee the Trust's operations, and
otherwise to administer the affairs of the Trust as it deems
advisable. In the execution of these responsibilities, the
Advisor is subject to the investment policies and limitations of
the Trust described in the Prospectus and this Statement of
Additional Information, to the terms of the Declaration of Trust
and the Trust's By-Laws, and to written directions given from
time to time by the Trustees.
The Advisor is a Wisconsin limited liability company, wholly
owned by Madison Investment Advisors, Inc.
("Madison"), 6411 Mineral Point Road, Madison, Wisconsin.
Madison was founded in 1973 and is an independent, registered
investment adviser which has numerous advisory clients.
The investment advisory agreement between the Trust, on behalf
of the portfolios, and the Advisor is subject to annual review
and approval by the Trustees, including a majority of those Trustees
who are not "interested persons," as defined in the Investment
Company Act of 1940. The investment advisory agreement was
approved by shareholders for an initial two year term at a special
meeting of each portfolio's shareholders held in July 1996.
The investment advisory agreement may be terminated at any time,
without penalty, by the Trustees or, with respect to any series
or class of the Trust's shares, by the vote of a majority of the
outstanding voting securities of that series or class (see
"Organization of the Trust"), or by the Advisor, upon sixty days'
written notice to the other party. The investment advisory
agreement may not be assigned by the Advisor, and will
automatically terminate upon any assignment.
Background of the Advisor. The Advisor was formed in 1996 by
Madison for the purpose of providing investment management
services to the Mosaic family of mutual funds, including the Trust.
The Advisor purchased the investment management assets of the
former adviser to the Trust, Bankers Finance Investment
Management Corp on July 31, 1996. For periods prior to July 31,
1996, references in this Statement of Additional Information and in
the Prospectus to the "Advisor" refer to Bankers Finance Investment
Management Corp. The Advisor also serves as the investment adviser to
Government Investors Trust, Mosaic Income Trust and Mosaic Tax-Free
Trust.
Management. Frank E. Burgess is President, Treasurer and
Director of Madison and Vice President of the Advisor.
Mr. Burgess owns the controlling interest in Madison,
which, in turn, controls the Advisor. Mr. Burgess is also a Trustee and
Vice President of the Trust. Mr. Burgess holds the same positions
with Government Investors Trust, Mosaic Income Trust and
Mosaic Tax-Free Trust. Katherine L. Frank is President and Treasurer
of the Advisor and Vice President of Madison. Ms. Frank holds the
same positions with Government Investors Trust, Mosaic Income Trust and
Mosaic Tax-Free Trust.
Advisory Fee and Expense Limitations. For its services under the
investment advisory agreement, the Advisor receives a fee,
payable monthly, calculated as 3/4 percent per annum of the
average daily net assets of the Mid-Cap Growth, Investors and
Balanced Funds during the month and as one percent per
annum of the average daily net assets of the Worldwide Growth
Fund during the month. Such fees do not decrease as net
assets increase. The Advisor may waive or reduce such fees during
any period; the Advisor may also reduce such fees on a permanent
basis, without any requirement for consent by the Trust or its
shareholders, under such terms as it may determine, by written
notice thereof to the Trust.
In addition, the Advisor has agreed, in any event, to be
responsible for the fees and expenses of the Trustees and
officers of the Trust who are affiliated with the Advisor, the
rent expenses of the Trust's principal executive office premises,
and its various promotional expenses (including the distribution
of Prospectuses to potential shareholders). Other than investment
management and related expenses, and the foregoing items, the
Advisor is not obligated to provide or pay for any other services
to the Trust, although it has discretion to elect to do so.
The investment advisory agreement permits the Advisor to make
payments out of its fee to other persons. During the fiscal year
ended March 31, 1997, the Advisor received fees of $113,760 with
respect to the Mid-Cap Growth Fund; and for the fiscal year ended
December 31, 1996, $99,818 with respect to the Investors Fund, and
$91,311 with respect to the Balanced Fund. During the fiscal year
ended March 31, 1996, for the Mid-Cap Fund and December 31, 1995
for the Investors and Balanced Funds, the Advisor received advisory fees of
$219,111 with respect to the Mid-Cap Growth Fund, $91,637
with respect to the Investors Fund, and $88,169 with
respect to the Balanced Fund. During the fiscal years ended March 31,
1995 for the Mid-Cap Fund and December 31, 1994 for the Investors and
Balanced Funds, the Advisor received advisory fees of
$264,829 with respect to the Mid-Cap Growth Fund, $78,454
with respect to the Investors Fund, and $93,783 with
respect to the Balanced Fund. During prior fiscal years
the Advisor has waived portions or all of its advisory fees with respect
to each of the Trust's portfolios. During the fiscal years ended March
31, 1997 and 1996, the Advisor received advisory fees of $14,176 and
$14,252, respectively, with regard to the Worldwide Growth Fund.
No advisory fees were paid with respect to the Worldwide Growth
Fund for periods prior to the fiscal year ended March 31, 1996.
Organization of the Trust
The Trust's Declaration of Trust, dated November 18, 1982, has
been filed with the Secretary of State of the Commonwealth of
Massachusetts and the Clerk of the City of Boston, Massachusetts.
The Prospectuses contain general information concerning the
Trust's form of organization and its shares (see "The Trust and
Its Shares"), including the series of shares currently
authorized.
Series and Classes of Shares. The Trustees may authorize at any
time the creation of additional series of shares (the proceeds of
which would be invested in separate, independently managed
portfolios) and additional classes of shares within any series
(which would be used to distinguish among the rights of different
categories of shareholders, as might be required by future
regulations, methods of share distribution or other unforeseen
circumstances) with such preferences, privileges, limitations,
and voting and dividend rights as the Trustees may determine. All
consideration received by the Trust for shares of any additional
series or class, and all assets in which such consideration is
invested, would belong to that series or class (but classes may
represent proportionate undivided interests in a series), and
would be subject to the liabilities related thereto. The
Investment Company Act of 1940 would require the Trust to submit
for the approval of the shareholders of any such additional
series or class any adoption of an investment advisory contract
or any changes in the Trust's fundamental investment policies
related to the series or class.
The Trustees may divide or combine the shares of any series into
a greater or lesser number of shares without thereby changing the
proportionate interests in the series. Any assets, income and
expenses of the Trust not readily identifiable as belonging to a
particular series are allocated by or under the direction of the
Trustees in such a manner as they deem fair and equitable. Upon
any liquidation of the Trust or of a series of its shares, the
shareholders are entitled to share pro-rata in the liquidation
proceeds available for distribution. Shareholders of each series
have an interest only in the assets allocated to that series.
Voting Rights. The voting rights of shareholders are not
cumulative, so that holders of more than 50 percent of the shares
voting can, if they choose, elect all Trustees being selected,
while the holders of the remaining shares would be unable to
elect any Trustees. As of March 10, 1997, the shareholders which
held five percent or more of the Mid-Cap Growth Fund were:
Charles Schwab & Co., 101 Montgomery St., San
Fransisco, CA (6%) and Robert Geroch, 12325 Algonquin Road,
Palos Park, IL (5%); of the Investors Fund: Firstcinco
Trust Company, Box 1118, Cincinnati, OH 45201 (7%) and Wenonah
Development Company, 1019 Park Street, Peekskill, NY 10566 (7%);
of the Balanced Fund, Wenonah Development Company,
1019 Park Street, Peekskill, NY 10566 (5%); and of the Worldwide
Growth Fund: Wenonah Development Company, 1019 Park
Street, Peekskill, NY 10566 (11%).
Shareholder votes relating to the election of Trustees, approval
of the Trust's selection of independent auditors and
any contract with a principal underwriter, as well as any other
matter in which the interests of all shareholders are
substantially identical, will be voted upon without regard to
series or classes of shares. Matters that do not affect any
interest of a series or class of shares will not be voted upon by
the unaffected shareholders. Certain other matters in which the
interests of more than one series or class of shares are
affected, but where such interests are not substantially
identical, will be voted upon separately by each series or class
affected and will require a majority vote of each such series or
class to be approved by it. When a matter is voted upon
separately by more than one series or class of shares, it may be
approved with respect to a series or class even if it fails to
receive a majority vote of any other series or class or fails to
receive a majority vote of all shares entitled to vote on the
matter.
Because there is no requirement for annual elections of Trustees,
the Trust does not anticipate having regular annual shareholder
meetings after the initial meeting; shareholder meetings will be
called as necessary to consider questions requiring votes by the
shareholders. The selection of the Trust's independent auditors
will be submitted to a vote of ratification at any annual
meetings held by the Trust. Any change in the Declaration of
Trust, in the Investment Advisory Agreement (except for
reductions of the Advisor's fee) or
in the fundamental investment policies of the Trust must be
approved by a majority of the affected shareholders before it can
become effective. For this purpose, a "majority" of the shares of
the Trust means either the vote, at an annual or special meeting
of the shareholders, of 67 percent or more of the shares present
at such meeting if the holders of more than 50 percent of the
outstanding shares of the Trust are present or represented by
proxy or the vote of 50 percent of the outstanding shares of the
Trust, whichever is less. Voting groups will be comprised of
separate series and classes of shares or of all of the Trust's
shares, as appropriate to the matter being voted upon.
The Declaration of Trust provides that two-thirds of the holders
of record of the Trust's shares may remove a Trustee from office
either by declarations in writing filed with the Trust's
Custodian or by votes cast in person or by proxy at a meeting
called for the purpose. The Trustees are required to promptly
call a meeting of shareholders for the purpose of voting on
removal of a Trustee if requested to do so in writing by the
record holders of at least 10% of the Trust's outstanding shares.
Ten or more persons who have been shareholders for at least six
months and who hold shares with a total value of at least $25,000
(or 1% of the Trust's net assets, if less) may require the
Trustees to assist a shareholder solicitation to call such a
meeting by providing either a shareholder mailing list or an
estimate of the number of shareholders and approximate cost of
the shareholder mailing, in which latter case, unless the
Securities and Exchange Commission determines otherwise, the
shareholders desiring the solicitation may require the Trustees
to undertake the mailing if those shareholders provide the
materials to be mailed and assume the cost of the mailing.
Shareholder Liability. Under Massachusetts law, the share-holders
of an entity such as the Trust may, under certain circumstances,
be held personally liable for its obligations. The Declaration of
Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument,
entered into or executed by the Trust or the Trustees. The
Declaration of Trust provides for indemnification out of the
Trust property of any shareholder held personally liable for the
obligations of the Trust. The Declaration of Trust also provides
that the Trust shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of
the Trust and satisfy any judgment thereof. Thus the risk of a
shareholder incurring financial loss on account of status as a
shareholder is limited to circumstances in which the Trust
itself would be unable to meet its obligations.
Liability of Trustees and Others. The Declaration of Trust
provides that the officers and Trustees of the Trust will not be
liable for any neglect, wrongdoing, errors of judgment, or
mistakes of fact or law, except that they shall not be protected
from liability arising out of willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties to the
Trust. Similar protection is provided to the Advisor under the
terms of the investment advisory agreement and the services
agreement. In addition, protection from personal liability for
the obligations of the Trust itself, similar to that provided to
shareholders, is provided to all Trustees, officers, employees
and agents of the Trust.
Trustees and Officers
The Trustees and executive officers of the
Trust and their principal occupations during the past five years
are shown below:
Frank E. Burgess <F1>
6411 Mineral Point Road, Madison, WI 53705
Trustee and Vice President
President and Director of Madison Investment
Advisors, Inc., the entity which controls the Advisor. Prior to
forming Madison in 1973, he was Assistant Vice President and
Trust Officer of M&I Bank of Madison, Wisconsin. Mr. Burgess
received his BS from Iowa State University and his law degree
from the University of Wisconsin. He is a member of the State
Bar of Wisconsin. b. 8/4/42.
Thomas S. Kleppe***
7100 Darby Road, Bethesda, MD 20817
Trustee
Private Investor; formerly Visiting Professor at the University
of Wyoming, Secretary of the U.S. Department of the Interior,
Administrator of the U.S. Small Business Administration, U.S.
Congressman from North Dakota, Vice President and Director of
Dain, Kalman & Quail, investment bankers, and President of Gold
Seal Co., manufacturers of household cleaning products. Attended
Valley City State College of North Dakota. b. 7/1/19.
James R. Imhoff, Jr.***
429 Gammon Place, Madison, WI 53719
Trustee
Chairman and CEO of First Weber Group, Inc. of Madison, WI,
a residential real estate company; Chairman of the Wisconsin
Real Estate Board of the Department of Regulation and
Licensing; Director to the University of Wisconsin School of
Business, Center for Urban Land Economics Research; Director
of the Park Bank, Wisconsin; formerly President of the
Wisconsin Realtors Association and the Greater Madison Board
of Realtors and Director of the National Association of
Realtors. An alumnus of the Marquette University School of
Business. b. 5/20/44.
Lorence D. Wheeler***
P.O. Box 431, Madison, WI 53701
Trustee
President of Credit Union Benefits Services, Inc., a
provider of retirement plans and related services for credit
union employees nationwide. Previously a shareholder of the
law firm of Bell, Metzner & Gierart, SC. Mr. Wheeler
received his law degree from the University of Wisconsin.
b. 1/31/38.
Katherine L. Frank
6411 Mineral Point Road, Madison, WI 53705
President
President of Mosaic Investment Funds, Vice President
of Madison Investment Advisors, Inc. A graduate
of Macalester College, St. Paul, Minnesota.
Julia M.Nelson
1655 Fort Myer Drive, Arlington, VA 22209-3108
Vice President
Vice President of Mosaic Investment Funds.
Jay R. Sekelsky
6411 Mineral Point Road, Madison, WI 53705
Vice President
Vice President of Mosaic Investment Funds and of
Madison Investment Advisors, Inc. Formerly Vice President
of Wellington Management Group of Boston, MA.
Mr. Sekelsky holds a BBA in Accounting and an MBA in
Finance from the University of Wisconsin.
Christopher C. Berberet
6411 Mineral Point Road, Madison, WI 53705
Vice President
Vice President of Mosaic Investment Funds and of
Madison Investment Advisors, Inc. Formerly the
Director of Fixed Income Management for the
ELCA Board of Pensions, Minneapolis, MN. A
graduate of the University of Wisconsin.
W. Richard Mason
1655 Ft. Myer Drive, Arlington, VA 22209
Secretary
Secretary of Mosaic Investment Funds, Mosaic Investment
Services, Inc., Presidential Savings Bank, FSB and
Presidential Service Corporation. Formerly Assistant
General Counsel for the Investment Company
Institute. Mr. Mason holds a BS in Foreign Service
from Georgetown University and received his law
degree from The George Washington University. He is
a member of the District of Columbia and Texas bars.
[FN]
<F1>
Trustee deemed to be an "interested person" of the Trust as the
term is defined in the Investment Company Act of 1940. Only those
persons named in the table of Trustees and officers who are not
interested persons of the Trust are eligible to be compensated by
the Trust. The compensation of each non-interested Trustee
who may be compensated by the Trust has been fixed at $4,000
per year, to be pro-rated according to the number of regularly
scheduled meetings each year. Four Trustees' meetings are currently
scheduled to take place each year. In addition to such compensation,
those Trustees who may be compensated by the Trust shall be reimbursed
for any out-of-pocket expenses incurred by them in connection with the
affairs of the Trust. Mr. Kleppe will receive annual compensation
from the Trust and from the other investment companies managed
by the Advisor or Madison (see "the Investment Advisor") totalling
$15,000. Mr. Imhoff and Mr. Wheeler will receive annual
compensation from the Trust and from other investment companies
managed by the Advisor or Madison totalling $18,000.
During the last fiscal year of the Trust, the Trustees were compensated
as follows:
Total
Pension or Compensation
Retirement from
Aggregate Benefits Estimated Portfolios
Compensa- Accrued as Annual and Fund
tion part of Benefits Complex
from Portfolios Upon Paid to
Portfolios Expense Retirement Trustees(a)
Frank E. Burgess 0 0 0 0
Thomas S. Kleppe 1,000 0 0 15,000
James R. Imhoff, Jr.(b)1,000 0 0 14,250
Lorence D. Wheeler(b) 1,000 0 0 14,250
(a) Prior to the effective date of this Statement of Additional
Information, the complex was comprised of 4 trusts and three
corporations with a total of 16 funds and/or series. As of the
effective date of this Statement of Additional Information,
the complex is comprised of 4 trusts with a total of 15 funds
and/or series.
(b) Messrs. Imhoff and Wheeler joined the Board of Trustees on
July 31, 1996.
***
Member of the Audit Committee of the Trust. The Audit Committee
is responsible for reviewing the results of each audit of the
Trust by its independent auditors and for recommending the
selection of independent auditors for the coming year.
Under the Declaration of Trust, the Trustees are entitled to be
indemnified by the Trust to the fullest extent permitted by law
against all liabilities and expenses reasonably incurred by them
in connection with any claim, suit or judgment or other liability
or obligation of any kind in which they become involved by virtue
of their service as Trustees of the Trust, except liabilities
incurred by reason of their willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of their office.
As of March 20, 1997 the Trustees and officers directly or
indirectly owned less than one percent of the outstanding shares
in the Mid-Cap Growth Funds, while 7% of the Investors
Fund, 1% of the Balanced Fund
and 8% of the Worldwide Growth Fund was held directly or
indirectly by the Trustees and officers.
Adminstrative and Other Expenses
Except for certain expenses assumed by the Advisor (see "The
Investment Advisor"), the Trust is responsible for payment from
its assets of all of its expenses. These expenses can include any
of the business or other expenses of organizing, maintaining and
operating the Trust. Certain expense items which may represent
significant costs to the Trust include the payment of the
Advisor's fee; the expense of shareholder accounting, customer
services, and calculation of net asset value; the fees of the
Custodian, of the Trust's independent accountants, and of legal
counsel to the Trust; the expense of registering the Trust and
its shares, of printing and distributing prospectuses and
periodic financial reports to current shareholders, and of trade
association membership; and the expense of preparing shareholder
reports, proxy materials and of holding shareholder meetings of
the Trust. The Trust is also responsible for any extraordinary or
non-recurring expenses it may incur.
Services Agreement. The Trust does not have any officers or
employees who are paid directly by the Trust. The Trust has
entered into a services agreement with the Advisor for the
provision of operational and other services required by the
Trust. Such services may include the functions of shareholder
servicing agent and transfer agent, bookkeeping and portfolio
accounting services, the handling of telephone inquiries, cash
withdrawals and other customer service functions including
monitoring wire transfers, and providing to the Trust appropriate
supplies, equipment and ancillary services necessary to the
conduct of its affairs. The Trust is registered with the
Securities and Exchange Commission as the transfer agent for its
shares and acts as its own dividend-paying agent; while transfer
agent personnel and facilities are included among those provided
to the Trust under the services agreement, the Trust itself is
solely responsible for its transfer agent and dividend payment
functions and for the supervision of those functions by its
officers.
All such services provided to the Trust by the Advisor are
rendered at a flat percentage fee reviewed and approved at least
annually by the Trustees. Such fee is expected to approximate
the cost of providing such services. The term "cost"
includes both direct expenditures and the related overhead
costs, such as depreciation, employee supervision, rent and the like;
reimbursements to the Advisor pursuant to the Services Agreement
are in addition to and independent of payments made pursuant to
the Investment Advisory Agreement. The Advisor provides
such services to Mosaic Income Trust, Mosaic Tax-Free Trust and
Mosaic Government Money Market.
Distribution Agreement. GIT Investment Services, Inc. acts as the
Trust's distributor pursuant to a distribution agreement, dated
January 11, 1983, without compensation under such agreement. This
agreement has an initial term of two years and may thereafter
continue in effect only if approved annually by the Trustees,
including a majority of those who are not "interested persons,"
as defined in the Investment Company Act of 1940; the agreement
provides for distribution of the Trust's shares without a sales
charge to the investor. The distributor may act as the Trust's
agent for any sales of its shares, but the Trust may also sell
its shares directly to any person. The distributor makes the
Trust's shares continuously available to the general public in
those states where it has qualified to do so, but has assumed no
obligation to purchase any of the Trust's shares. The distributor
is wholly owned by A. Bruce Cleveland, its President.
Portfolio Transactions
Decisions as to the purchase and sale of securities for the
Trust, and decisions as to the execution of these transactions,
including selection of market, broker or dealer and the
negotiation of commissions are, where applicable, to be made by
the Advisor, subject to review by the officers and Trustees of
the Trust.
In general, in the purchase and sale of portfolio securities the
Trust will seek to obtain prompt and reliable execution of orders
at the most favorable prices or yields. In determining the best
price and execution, the Advisor may take into account a dealer's
operational and financial capabilities, the type of transaction
involved, the dealer's general relationship with the Advisor, and
any statistical, research or other services provided by the
dealer to the Advisor, including payment for the use by the
Advisor of electronic research services. Research and statistical
information regarding securities may be used by the Advisor for
the benefit of all members of the Mosaic family of
mutual funds and by other clients of Madison. To the extent
such non-price factors are taken into account the execution price
paid may be increased, but only in reasonable relation to the benefit
of such non-price factors to the Trust as determined in good faith by
the Advisor.
Brokers or dealers who execute portfolio transactions for the
Trust may also sell its shares; however, any such sales will not
be either a qualifying or disqualifying factor in the selection
of brokers or dealers. During its three most recent fiscal years
the Trust paid aggregate brokerage commissions as follows: $132,000
for the fiscal year ending March 31, 1997; $156,680 for the fiscal
year ending March 31, 1996; and $126,777 for
the fiscal year ending March 31, 1995.
The Advisor anticipates that brokerage transactions involving
securities of foreign companies will be conducted primarily on
the markets or stock exchanges in which such companies are
located. Such markets or exchanges are generally subject to less
governmental supervision and regulation than those in the U.S.
Brokerage costs for purchase and sale of such foreign securities
may be higher than costs for domestic securities and such costs
may be non-negotiable. Foreign security trading practices,
including settlement procedures where Trust assets may be
released prior to payment, may expose the portfolios invested in
foreign securities to increased risk.
The Trust reserves the right to purchase portfolio securities
through an affiliated broker, when deemed in the Trust's best
interests by the Advisor, provided that: (1) the transaction is
in the ordinary course of the broker's business; (2) the
transaction does not involve a purchase from another broker or
dealer; (3) compensation to the broker in connection with the
transaction is not in excess of one percent of the cost of the
securities purchased; and (4) the terms to the Trust for
purchasing the securities, including the cost of any commissions,
are not less favorable to the Trust than terms concurrently
available from other sources. Any compensation paid in connection
with such a purchase will be in addition to fees payable to the
Advisor under the investment advisory agreement. The Trust does
not anticipate that any such purchases through affiliates will
represent a significant portion of its total activity; no such
transactions took place during the Trust's most recent fiscal
year.
The Trust does not expect to engage in a significant amount of
short-term trading, but securities may be purchased and sold in
anticipation of market fluctuations, as well as for other
reasons. The Trust anticipates that annual portfolio turnover for
each of its portfolios generally will not exceed 100%, but the
actual turnover rate will not be a limiting factor if the Trust
deems it desirable to conduct purchases and sales of portfolio
securities. Reference should be made to the Prospectuses for
actual rates of portfolio turnover (see "Financial Highlights").
Shareholder Transactions
The Prospectuses describe the basic procedures for investing in
the Trust (see "How to Purchase and Redeem Shares"). The
following information concerning other investment procedures is
presented to supplement the information contained in the
Prospectuses.
Shareholder Service Policies. The Trust's policies concerning
shareholder services are subject to change from time to time.
Minimum Initial Investment and Balance. The Trust reserves
the right to change its minimum initial investment
requirement or the minimum account size below which an account
is subject to a monthly service charge, or involuntary closing by
the Trust. The Trust may also institute a minimum amount for
subsequent investments, if it so chooses, by 30 days written
notice to its shareholders.
Special Service Charges. The Trust further reserves the right,
after 30 days written notification to shareholders, to impose
special charges for services provided to individual
shareholders that are not regularly afforded to shareholders
generally. Such service charges may include but are not limited
to special custodian bank processing charges such as fees for
stop payment orders and returned checks. The Trust's standard
service charges are also subject to adjustment from time to time.
Subaccounting Services. The Trust offers subaccounting services
to institutions. The Trustees reserve the right to determine from
time to time such guidelines as they deem appropriate to govern
the level of subaccounting service that can be provided to
individual institutions in differing circumstances. Normally, the
Trust's minimum initial investment to open an account will not
apply to subaccounts; however, the Trust reserves the right to
impose the same minimum initial investment requirement that would
apply to regular accounts, if it deems that the cost of carrying
a particular subaccount or group of subaccounts is otherwise
likely to be excessive. The Trust may provide and charge for sub-
accounting services which it determines exceed those services
which can be provided without charge. The availability and cost
of such additional services will be determined in each case by
negotiation between the Trust and the parties requesting the
additional services. The Trust is not presently aware of any such
services for which a charge will be imposed.
Crediting of Investments. The Trust reserves the right to reject any
investment in the Trust for any reason and may at any time suspend all new
investment in the Trust. The Trust may also, in its discretion or
at the instance of the Advisor, decline to give recognition as an
investment to funds wired for credit to any account, until such
funds are actually received by the Trust. Under present federal
regulatory guidelines, the Advisor may be responsible for any
losses resulting from changes in the Trust's net asset values
which are incurred by the Trust as a result of failure to receive
funds from an investor to whom recognition for investment was
given in advance of receipt of payment.
If shares are purchased to be paid for by wire and the wire is
not received by the Trust or if shares are purchased by a check
which, after deposit, is returned unpaid or proves uncollectible,
then the share purchase may be canceled immediately. The
shareholder that gave notice of the intended wire or submitted the
check will be held fully responsible for any losses so incurred
by the Trust, the Advisor or the distributor. As a condition of
the Trust's public offering, (which the shareholder will be deemed
to have agreed by submitting an order for the purchase of the
Trust's shares) the distributor shall have the shareholder's power
of attorney coupled with an interest, authorizing the distributor
to redeem sufficient shares from any fund of the shareholder for
which it acts as a principal underwriter or distributor, or to
liquidate sufficient other assets held in any brokerage account
of the shareholder with the distributor, and to apply the proceeds
thereof to the payment of all amounts due to the Trust from the
shareholder arising from any such losses. Any such redemptions or
liquidations will be limited to the amount of the actual loss
incurred by the Trust at the time the share purchase is canceled
and will be preceded by notice to the shareholder and an opportunity
for the shareholder to make restitution of the amount of the loss.
The Trust will retain any profits resulting from such
cancellations or redemptions and, if the purchase payment was by
a check actually received, will absorb any such losses unless
they prove recoverable.
Funds Received by Wire. Wires are normally converted into shares
in the Trust at the net asset value next determined, provided the
Trust is notified of the wire.
Checks. Checks drawn on foreign banks will not be considered received
until the Trust has actual receipt of payment in U.S. dollars
after submission of the check for collection; collection of such
checks through the international banking system may require 30
days or more.
Purchase Orders From Brokers. An order to purchase shares which is received
by the Trust from a securities broker will be considered received in proper
form for the net asset value per share determined as of the close of the
New York Stock Exchange on the day of the order, provided the
broker received the order from its customer prior to that time
and transmitted it to the Trust prior to 4 p.m. Washington, DC
time. Shareholders who invest in the Trust through a broker may be
charged a commission for the handling of the transaction, if the
broker so elects. A shareholder may deal directly
with the Trust without a fee.
Share Redemptions
The value of shares redeemed will be determined according to the
share net asset value next calculated after the request has been received
in proper form. (See "Determination of Net Asset Value.") Thus, any such
request received in proper form prior to the close of the New York Stock
Exchange (normally 4 p.m. Washington, DC time) on a business day
will reflect the net asset value calculated at that time; later
withdrawal requests will be processed to reflect the share net
asset value figure calculated on the next day the calculation is
made. The Trust calculates net asset values each day the New York
Stock Exchange is open for trading.
Net asset value determinations will apply as of the day the
redemption order is submitted in proper form. A redemption
request may not be deemed to be in proper form unless a signed
account application has been submitted to the Trust by the
shareholder or such an application is submitted with the redemption
request. Shareholders should be aware that it is possible, should
the share net asset value of the respective portfolio fall as a
result of normal market value changes, that amounts available for
withdrawal from an account could be less than the amount of the
original investment.
The Trust will use its best efforts in normal
circumstances to handle redemptions within the times previously
given. However, it may, for any reason, suspend the right of
redemption or postpone payment for any shares in the Trust for
any period up to seven days. The Trust's sole responsibility with
regard to redemptionsshall be to process, within the
aforementioned time period, redemption requests in proper form.
Neither the Trust, its affiliates, nor the Custodian can accept
responsibility for any act or event which has the effect of
delaying or preventing timely transfers of payment to or from
shareholders. By law, payment for shares in the Trust may be
suspended or delayed for more than seven days only during any
period when the New York Stock Exchange is closed, other than
customary weekend and holiday closings; when trading on such
Exchange is restricted, as determined by the Securities and
Exchange Commission; or during any period when the Securities and
Exchange Commission has by order permitted such suspension.
Unless the shareholder's current address is on file with the
Trust on the original account application or by means of
subsequent written notice signed by the authorized signers for
the account, the Trust may require signed written
instructions to process redemptions and account closings. In
response to verbal requests, however, redemption proceeds will
normally be mailed to the shareholder at the address shown on the
Trust's records, provided an original signed application has been
received. When an account is closed, the Trust reserves the right
to make payment by check of any final dividends declared to the
date of the redemption to close the account, but not yet paid, on
the same day such dividends are paid to other shareholders,
rather than at the time the account is closed. Payments of
redemption proceeds may normally be wired in response to verbal
requests by any party in accordance with preauthorized written
wire instructions.
Inter-Fund Exchanges. Funds exchanged between shareholder accounts
will earn dividends on the account being credited beginning with the
day the exchange is made. All exchanges will be effected at
the net asset value per share of the respective accounts next
determined after the exchange request is received in proper form.
If an exchange is to be made between investor accounts that are
not held in the same name and tax identification number or do not
have the same mailing address or signatories, then the Trust may
require any transfer between them to be made by making a
withdrawal from one account and a corresponding investment in the
other using the same procedures that would apply to any other
withdrawal or investment.
The Trust reserves the right, when it deems such action necessary
to protect the interests of its shareholders, to refuse to honor
withdrawal requests made by individuals purporting to act with
the authority of another person or on behalf of a corporation or
other legal entity or whose identity has not been established to
the Trust's satisfaction. Each such individual must provide a
corporate resolution or other appropriate evidence of his
authority or identity satisfactory to the Trust. The Trust
reserves the right to refuse any third party redemptions.
If, in the opinion of the Trustees, extraordinary conditions
exist which make cash payments undesirable, payments for any
shares redeemed may be made in whole or in part in securities and
other property of the Trust; except, however, that the Trust has
elected, pursuant to rules of the Securities and Exchange
Commission, to permit any shareholder of record to make
redemptions wholly in cash to the extent the shareholder's
redemptions in any 90-day period do not exceed the lesser of one
percent of the aggregate net assets of the Trust or $250,000. Any
property of the Trust distributed to shareholders will be valued
at its net asset value. In disposing of any such property
received from the Trust, an investor might incur commission costs
or other transaction costs; there is no assurance that an
investor attempting to dispose of any such property would
actually receive the full net asset value for it. Except as
described herein, however, the Trust intends to pay for all share
redemptions in cash.
Retirement Plans
General information on retirement plans offered by the Trust is
provided in the Prospectus (see "Retirement Plans").
Additional information concerning these retirement
plans is provided below.
IRAs. The minimum initial contribution for an IRA plan with the
Trust is $500. Spousal IRAs are accepted by creating two
accounts, one for each spouse. For IRAs opened in connection with
a payroll deduction or SEP plan, the Trust may waive the initial
investment minimum on a case-by-case basis.
The Trust's annual account maintenance fee is deducted from the
account at the end of each year or at the time of the account's
closing unless prepaid by the shareholder.
Other Retirement Plans or Retirement Plan Accounts. The Trust
does not intend to impose any monthly minimum balance charge with
respect to retirement plan accounts. The Trust offers prototype
Keogh, SEP IRA, SIMPLE, 401(k) and 403(b) retirement plans. The
Trust may waive the initial investment minimum for prototype or
other retirement plan accounts on a case by case basis.
Declaration of Dividends
Substantially all of the Trust's accumulated net investment
income will be declared as dividends and distributed to the
shareholders of the Worldwide Growth, Mid-Cap Growth and
Investors Funds once a year at the end of the Trust's December 31
fiscal year. The Trust intends to declare and pay regular Balanced
Fund dividends quarterly. The amount of the Trust's
net investment income will reflect the Trust's dividend income,
any premiums earned for writing call options, any interest income
(plus any discount earned less premium amortized), less expenses
accrued with respect to each portfolio for the period. All items
of income and expense which apply solely to one of the Trust's
portfolios will be wholly allocated to that portfolio; such items
which are not clearly applicable to one portfolio will be
allocated between portfolios pro-rata on the basis of their
relative net assets or upon such other basis as the Trustees
determine is equitable.
Net capital gains, if any, will be declared as a capital gains
dividend on or before December 31.
Any declaration of dividends with respect to a portfolio is
dependent upon the level of income and capital gains earned by
the portfolio during the fiscal year. No historical rate of
dividend payments will be indicative of future dividends.
Notice of dividends will be mailed to each shareholder when the
dividends are paid; for tax purposes each shareholder will also
receive an annual summary of dividends paid by the Trust and the
extent to which they constitute capital gains dividends (see
"Additional Tax Matters").
Determination of Net Asset Value
The net asset value of each portfolio of the Trust, and of the
respective shares, is calculated once each day the New York Stock
Exchange is open for trading. The net asset value of the Trust is
not calculated on New Year's Day, the observance of Washington's
Birthday (President's Day), Good Friday, the observance of Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day and
on other days the New York Stock Exchange is closed for trading.
The net asset value calculation is made as of the close of the
New York Stock Exchange, as described in the Prospectus.
Net asset value per share of each portfolio is determined by
adding the value of all its securities and other assets,
subtracting its liabilities and dividing the result by the total
number of outstanding shares that represent an interest in the
portfolio. These calculations are performed by the Trust and for
its account, pursuant to the Services Agreement (see
"Administrative and Other Expenses"). The Trust does not charge a
"sales load," and accordingly its shares are both offered and
redeemed at net asset value.
Securities traded on a securities exchange are valued at their
closing sales price on the principal market on which such
securities are traded, if available, and if not available, such
securities are valued at the mean between the bid and ask prices.
Other securities for which current market quotations are readily
available are valued at the mean between their bid and ask
prices; securities for which current market quotations are not
readily available are valued at their fair value as determined in
good faith by the Trustees. The Trustees may authorize reliance
upon an independent pricing service for the determination of
securities values. An independent pricing service may price
securities with reference to market transactions in comparable
securities and to historical relationships among the prices of
comparable securities; such prices may also reflect an allowance
for the impact upon prices of the larger transactions typical of
trading by institutions. The Trust's shares will be priced by
rounding their value to the nearest one-tenth of one cent.
Valuation of Covered Call Options. When call options are written,
the premium received is reflected on the Trust's books as a cash
asset offset by a deferred credit liability, so the premium has
no impact on net asset value at that time. The deferred credit
amount is then marked to the market value of the outstanding
option contract daily. If the option contract is exercised, the
Trust reflects a sale of the appropriate securities (which may be
either the underlying portfolio securities or corresponding
securities purchased in the open market to deliver against the
option contract) at a price equal to the option strike price plus
the option premium received, and the deferred credit liability is
then extinguished. If the option expires without being exercised
(or if it is offset by a closing purchase transaction), then the
Trust recognizes the deferred credit as a gain (reduced by the
cost of any closing purchase transaction).
Additional Tax Matters
Shareholders are urged to consult their tax advisors regarding
the application of foreign, federal, state and local taxes to an
investment in the Trust. The following is a general and
abbreviated summary of the applicable statutes and regulations
currently in effect. These rules are subject to legislative and
administrative change which may be prospective or retroactive.
To qualify as a "regulated investment company" and avoid Trust-
level federal income tax under the Internal Revenue Code (the "Code"),
each Trust portfolio must, among other things, distribute 100% of its net
income and net capital gains in the fiscal year in which it is earned.
The Code also requires the distribution of at least 98% of net
income for the calendar year and capital gains determined as of October 31
each year before the calendar year end in order to avoid a 4% excise tax.
Each portfolio intends to distribute all taxable income to the extent it is
realized and avoid imposition of Federal income and excise taxes.
To qualify as a regulated investment company under the Code, each Trust
portfolio must derive at least 90% of its gross income
from dividends, interest, gains from the sale or disposition of
securities, and certain other types of income, and derive less
than 30% of its gross income from the sale or disposition of
securities held for less than three months. Should a portfolio fail to
qualify as a "regulated investment company" under the Code, the
portfolio would be taxed as a corporation with no allowable
deduction for the distribution of dividends.
Shareholders of the portfolio, however, will be subject to
federal income tax on any ordinary net income and net capital
gains realized by the portfolio and distributed to shareholders
as regular or capital gains dividends, whether distributed in
cash or in the form of additional shares. Generally, dividends
declared by a portfolio during October, November or December of
any calendar year and paid to shareholders prior to February 1 of
the following year will be treated for tax purposes as received
in the year the dividend was declared. Since normally at least
65% of each portfolio's assets (except the Balanced Fund) will be
invested in equity securities, some of which may pay eligible dividends,
a substantial portion of the regular dividends paid by the
portfolio is expected to be eligible for the dividends received
deduction for corporate shareholders (70% of dividends received).
Foreign securities held by a portfolio may be subject to
withholding or taxation by foreign governments on their interest
or dividends. Such withholding or taxation may be reduced or
eliminated by tax conventions between certain countries and the
U.S. However, as long as more than 50% of the value of any
portfolio's assets at the close of a taxable year consists of
securities of foreign corporations, the Trust may elect to treat
its shareholders as having paid the foreign tax directly, and not
deduct the taxes itself. If such an election is made, these
shareholders will be required to include their proportionate
share of such withholding or taxes in their U.S. income tax
returns as gross income, treat such proportionate share as taxes
paid by them, and deduct such proportionate share in computing
their taxable incomes or, alternatively, use them as foreign tax
credits against their U.S. income taxes. The Trust will annually
report to shareholders the amount per share of foreign
withholding or taxes paid by their portfolio, if applicable. The
Trust cannot assure shareholders that they will be eligible for
the foreign tax credit.
The Advisor does not anticipate that any portfolio will invest in
securities issued by a passive foreign investment company
("PFIC"). For federal income tax purposes, a PFIC is any foreign
corporation where 75% or more of its gross income for the taxable
year is passive income (foreign personal holding company income
as defined in Section 954(c) of the Code), or the average
percentage of its assets (by value) held by the corporation which
produce passive income or which are held for the production of
passive income is at least 50%. Foreign securities held by any
portfolio nevertheless may be determined to be issued by a PFIC.
In the event of such classification, the portfolio holding PFIC
securities may be subject to a liability for interest on taxes
deferred as a result of the PFIC's failure to distribute
dividends. This liability could reduce the portfolio's net asset
value and total performance. In the event any portfolio is
determined to hold PFIC securities, the Advisor may make any
reasonable election permitted by Treasury regulations regarding
PFIC securities.
Shareholders who fail to comply with the interest and dividends
"backup" withholding provisions of the Code (by filing Form W-9
or its equivalent, when required) or who have been determined
by the Internal Revenue Service to have failed to properly report
dividend or interest income, may be subject to a 31% withholding
requirement on transactions with the Trust.
For tax purposes, the Trust will send shareholders an annual
notice of dividends paid during the prior year. Investors are
advised to retain all statements received from the Trust to
maintain accurate records of their investment. Shareholders of
each portfolio of the Trust will be subject to federal income tax
on the net capital gains, if any, realized by each portfolio and
distributed to shareholders as capital gains dividends.
Shareholders should carefully consider the tax implications of
buying the Trust's shares just prior to declaration of a regular
or capital gains dividend. Prior to the declaration, the value of
the distribution will be reflected in net asset value per share
and thus will be paid for by the shareholder when the shares are
purchased; when the dividend is declared the amount to be
distributed will be deducted from net asset value, lowering the
value of the shareholder's investment by the same amount, but the
shareholder nevertheless will be taxed on the amount of the
dividend without any offsetting deduction for the drop in share
value until the shares are ultimately redeemed. A loss on the
sale of shares held for six months or less will be treated as a
long-term capital loss to the extent of any capital gains
dividend received.
The Trust reserves the right to involuntarily redeem any of its
shares if, in its judgment, ownership of the Trust's shares has
or may become so concentrated as to make the Trust a personal
holding company under the code.
State and Local Taxes. Dividends paid by the Trust are generally
expected to be subject to any state or local taxes on income.
Shareholders should consult their tax advisers about the status
of distributions from the Trust in their own tax jurisdictions.
Total Return Calculations
In order to provide a basis for comparisons of the Trust's
portfolios with similar funds, with comparable market indices,
and with investments such as savings accounts, savings
certificates, taxable and tax-free bonds, common stocks, money
market funds and money market instruments, the Trust calculates
total return for each of its portfolios.
Total Return. Average annual total return is calculated by
finding the compounded annual rate of return over a given period
that would be required to equate an assumed initial investment in
the portfolio to the ending redeemable value the investment would
have had at the end of the period, raking into account the effect
of the changes in the portfolio's share price during the period
and any recurring fees charged to shareholder accounts, and
assuming the reinvestment of all dividends and other
distributions at the applicable share price when they were paid.
Non-annualized aggregate total returns may also be calculated by
computing the simple percentage change in value that equates an
assumed initial investment in the portfolio with its redeemable
value at the end of a given period, determined in the same manner
as for average annual total return calculations.
Representative Total Return Quotations. The following
representative total return quotations for the Investors
Fund and the Balanced Fund represent the
performance of their economic predecessors, Bascom Hill
Investors, Inc. and Bascom Hill BALANCED Fund, Inc.
For the year ended December 31, 1996, the average annualized
total return of the Mid-Cap Growth Fund was 6.14%; of the
Investors Fund was 23.36%; of the Balanced
Fund was 17.00%; and of the Worldwide Growth Fund
was 9.26%. For the period beginning April 16, 1993
(commencement date and public offering) through December
31, 1996, the average annualized total return for the Worldwide
Growth Fund was 4.50%. For the calendar quarter ending
December 31, 1996 the non-annualized aggregate total return
of the Mid-Cap Growth Fund was 4.38%;
of the Investors Fund was 5.50%; of the Balanced
Fund was 3.86%; and of the Worldwide Growth Fund was
(-0.65)%.
The 10-year average annualized total return through December 31,
1996, and the 5-year average annualized total return of the
Mid-Cap Growth Fund through such date was 9.53% and 8.83%,
respectively. Its non-annualized aggregate total return for
ten years and since inception on July 21, 1983 were 148.51%
and 319.11%, respectively.
The 10-year average annualized total return through December 31,
1996 and the 5-year average annualized total
return of the Investors Fund through such date was
10.58% and 12.78%, respectively, and its non-annualized aggregate
total returns for ten years and since inception on November 1, 1978
were 173.38% and 987.98%, respectively.
The 10-year average annualized total return through December 31,
1996 and the 5-year average annualized total return of the Balanced
Fund through such date was 10.19% and 8.96%,
respectively, and its non-annualized aggregate total returns for
ten years and since inception on December 18, 1986 were 135.87%
and 136.59%, respectively.
The aggregate total return since inception on April 16, 1993
through December 31, 1996 for the Worldwide Growth Fund was
17.72%.
Performance Comparisons. From time to time, in advertisements or
in reports to shareholders and others, the Trust may compare the
performance of its portfolios to that of recognized market
indices or may cite the ranking or performance of its portfolios
as reported in recognized national periodicals, financial
newsletters, reference publications, radio and television news
broadcasts, or by independent performance measurement firms.
The Trust may also compare the performance of its portfolios to
that of other funds managed by the same Advisor. It may compare
its performance to that of other types of investments,
substantiated by representative indices and statistics for those
investments.
Market indices which may be used include those compiled by major
securities firms, such as Salomon Brothers, Shearson Lehman
Hutton, the First Boston Corporation, and Merrill Lynch; other
indices compiled by securities rating or valuation services, such
as Ryan Financial Corporation and Standard and Poor's Corporation
may also be used. Periodicals which report market averages and
indices, performance information, and/or rankings may include:
The Wall Street Journal, Investors Daily, The New York Times, The
Washington Post, Barron's, Financial World Magazine, Forbes
Magazine, Money Magazine, Kiplinger's Personal Finance, and the
Bank Rate Monitor. Independent performance measurement firms
include Lipper Analytical Services, Inc., Frank Russell Company,
SCI and CDA Investment Technologies.
In addition, a variety of newsletters and reference publications
provide information on the performance of mutual funds, such as
the Donoghue's Money Fund Report, No-Load Fund Investor,
Wiesenberger Investment Companies Service, the Mutual Fund Source
Book, the Mutual Fund Directory, the Switch Fund Advisory, Mutual
Fund Investing, the Mutual Fund Observer, Morningstar, and the
Bond Fund Survey. Financial news is broadcast by the Financial
News Network, Cable News Network, Public Broadcasting System, and
the major television networks as well as by numerous independent
radio and television stations.
The Trust may also disclose the contents of each of its portfolios as
frequently as daily in advertisements and elsewhere.
Lipper Analytical Services, Inc. measures the performance of the
Mid-Cap Growth Fund compared to mutual funds with total net
assets ranging from $25 million to $50 million categorized as
"Mid-Cap Company Growth funds"; the performance of the Equity
Income Fund is compared to mutual funds with total net
assets ranging from $0.1 million to $10 million categorized as
"Balanced funds"; and the performance of the Investors
Fund is compared to mutual funds with total net assets
ranging from $0.1 million to $10 million categorized as "Growth
funds." As of the date of this Statement of Additional
Information, the Worldwide Growth Fund is expected to be
compared to mutual funds categorized as "Emerging Markets funds."
If any of these categories should be changed by Lipper Analytical
Services, Inc., including the final categorization of the
Worldwide Growth Fund, comparisons will be made thereafter
based on the revised categories.
It should be noted that the investment results of the Trust's
portfolios will tend to fluctuate over time, so historical total
returns should not be considered representations of what an
investment may earn in any future period. Actual distributions to
shareholders will tend to reflect changes in portfolio income,
and will also depend upon the level of the Trust's expenses,
realized or unrealized investment gains and losses, and the
relative results of the Trust's investment policies. Thus, at any
point in time future total returns may be either higher or lower
than past results, and there is no assurance that any historical
performance record will continue.
Custodians and Special Custodians
StarBank, N.A., 425 Walnut Street, Cincinnati, OH 45202, is
Custodian for the cash and securities of the Trust. The Custodian
maintains custody of the Trust's cash and securities, handles its
securities settlements and performs transaction processing for
cash receipts and disbursements in connection with the purchase
and sale of the Trust's shares.
The Trust may appoint as Special Custodians, from time to time,
certain banks, trust companies, and firms which are members of
the New York Stock Exchange and trade for their own account in
the types of securities purchased by the Trust. Such Special
Custodians will be used by the Trust only for the purpose of
providing custody and safekeeping services of relatively short
duration for designated types of securities which, in the opinion
of the Trustees or of the Advisor would most suitably be held by
such Special Custodians rather than by the Custodian. In the
event any such Special Custodian is used, it shall serve the
Trust only in accordance with a written agreement with the Trust
meeting the requirements of the Securities and Exchange
Commission for custodians and approved and reviewed at least
annually by the Trustees, and, if a securities dealer, only if it
delivers to the Custodian its receipt for the safekeeping of each
lot of securities involved prior to payment by the Trust for such
securities.
The Trust has approved the appointment by the Custodian of
certain eligible foreign custodians to serve as Special
Custodians to hold foreign securities as necessary. These
eligible custodians have entered into a written agreement with
the Custodian for this purpose. The written agreement and the
eligible foreign custodians are approved annually by the
Trustees.
The Trust may also maintain deposit accounts for the handling of
cash balances of relatively short duration with various banks, as
the Trustees or officers of the Trust deem appropriate, to the
extent permitted by the Investment Company Act of 1940.
Legal Matters and Independent Auditors
DeWitt Ross & Stevens, S.C., 8000 Excelsior Drive, Madison,
Wisconsin, 53708, acts as legal counsel to the Trust.
Sullivan & Worcester LLP, 1025 Connecticut Avenue, NW,
Washington, DC, 20036, acts as review counsel to the Trust's
independent Trustees.
Ernst & Young LLP, 1225 Connecticut Avenue, NW, Washington, DC
20036 serves as independent auditors to the Trust.
From time to time the Trust may be or become involved in
litigation in the ordinary conduct of its business. Material
items of litigation having consequences of possible or
unspecified damages, if any, are disclosed in the notes to the
Trust's financial statements (see "Financial Statements and
Report of Independent Auditors)."
Additional Information
The Trust issues semi-annual and annual reports to its
shareholders and may issue other reports, such as quarterly
reports, as it deems appropriate; the annual reports are audited
by the Trust's independent auditors.
Statements contained in this Statement of Additional Information
and in the Prospectuses as to the contents of contracts and other
documents are not necessarily complete. Investors should refer to
the documents themselves for definitive information as to their
detailed provisions. The Trust will supply copies of its
Declaration of Trust and By-Laws to interested persons upon
request.
The Trust and shares in the Trust have been registered with the
Securities and Exchange Commission in Washington, DC, by the
filing of a registration statement. The registration statement
contains certain information not included in the Prospectuses or
not included in this Statement of Additional Information and is
available for public inspection and copying at the offices of
such Commission.
Financial Statements and Report of Independent Auditors
Audited Financial Statements for the Trust,
together with the Report of Ernst & Young LLP, Independent
Auditors for the fiscal year ended March 31, 1997, appear in the
respective Annual Report to shareholders for the Trust for
the fiscal year ended March 31, 1997, which is incorporated
herein by reference.
Audited Financial Statements for Bascom Hill Investors, Inc. and
Bascom Hill BALANCED Fund, Inc., the economic survivors of the
mergers with the Investors Fund and Balanced Fund, respectively,
together with the reports of Williams, Young & Associates, LLC,
Independent Auditors for their fiscal years ended December 31, 1996,
appear in the respective Annual Report to Shareholders for such funds
for the fiscal year ended December 31, 1996, incorporated herein by reference.
They have been filed with the SEC and are furnished to investors with this
Statement of Additional Information.
Excluded from such incorporation by reference is the Trust's
letter to shareholders appearing in each semi-annual Report.
Such Report has been filed with the Securities and Exchange
Commission and the latest Annual Report is furnished to investors
in such portfolios with this Statement of Additional Information.
Additional copies of such Annual Report are available upon
request at no charge by writing or calling the Trust at the
address and telephone number shown on the cover page.
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Legal Matters and Independent
Auditors" and "Financial Statements and Report of Independent Auditors"
in the Statement of Additional Information and to the incorporation by
reference in this Post-Effective Amendment Number 18 to registration
Statement Number 2-80805 (Form N-1A) of our reports dated May 2, 1997,
on the financial statements and financial highlights of Mosaic Equity
Trust (formerly GIT Equity Trust) for the year ended March 31, 1997,
included in the 1997 Annual Reports to Shareholders.
(signature)
Ernst and Young LLP
Washington, DC
June 13, 1997
