API TRUST CAPITAL INCOME FUND
P. O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(804) 846-1361
(800) 544-6060
API Trust ("Trust") is an open-end, management investment company that
currently consists of seven separate series ("Series"). This Prospectus relates
only to shares of the Capital Income Fund ("Fund"), a diversified series of the
Trust. The Fund's primary investment objective is to seek to achieve high
current income. The Fund's secondary objective is growth of capital and income.
The Fund seeks to achieve its objectives by investing in shares of open-end and
closed-end investment companies. No assurance can be given that the Fund will
achieve its investment objectives.
Shares of the Fund are offered through Yorktown Distributors, Inc.
("Distributors"). The Fund's minimum initial investment is $500; subsequent
investments must be at least $100. The Fund pays expenses related to the
distribution of its shares. In addition, the Fund may invest in shares of funds
that charge sales loads and/or pay their own distribution expenses.
This Prospectus sets forth concisely the information about the Trust and
the Fund that a prospective investor should know before investing. It should be
read and retained for future reference. A Statement of Additional Information,
dated October 1, 1997, has been filed with the Securities and Exchange
Commission and, as amended from time to time, is incorporated by reference
herein. It is available, at no charge, by contacting the Trust at the address or
telephone numbers provided above.
Shares of the Fund are not deposits or obligations of, or endorsed or
guaranteed by, any bank, nor are they federally insured or otherwise protected
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 SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS, ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus is dated October 1, 1997.
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TABLE OF CONTENTS
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Topic Page
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TABLE OF FUND EXPENSES................................................................................ 3
FINANCIAL HIGHLIGHTS.................................................................................. 4
GENERAL............................................................................................... 5
INVESTMENT OBJECTIVES AND POLICIES.................................................................... 5
OTHER INVESTMENT POLICIES............................................................................. 7
Selection of Underlying Funds....................................................................... 7
Temporary Investments............................................................................... 7
Borrowing and Other Policies........................................................................ 8
Portfolio Turnover.................................................................................. 8
RISKS AND OTHER CONSIDERATIONS........................................................................ 8
General............................................................................................. 8
Open-End Funds...................................................................................... 9
Closed-End Funds.................................................................................... 9
MANAGEMENT OF THE FUND................................................................................ 10
PURCHASE OF FUND SHARES............................................................................... 12
Distribution Arrangements........................................................................... 12
How Shares May Be Purchased......................................................................... 13
Systematic Investment Plan.......................................................................... 13
Exchange Privileges................................................................................. 13
Determining Net Asset Value......................................................................... 14
REDEMPTION OF FUND SHARES............................................................................. 15
How Shares May Be Redeemed.......................................................................... 15
Systematic Withdrawal Plan.......................................................................... 15
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES.............................................................. 16
Dividends and Other Distributions................................................................... 16
Taxation of the Fund................................................................................ 16
Taxation of Underlying Funds........................................................................ 16
Taxation of Shareholders............................................................................ 16
Qualified Retirement Plans.......................................................................... 17
PERFORMANCE INFORMATION............................................................................... 17
FUND SHARES........................................................................................... 18
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT..................................................... 19
GENERAL INFORMATION................................................................................... 19
APPENDIX.............................................................................................. 20
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TABLE OF FUND EXPENSES
The following tables are intended to assist investors in understanding the
expenses associated with investing in the Fund.
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SHAREHOLDER TRANSACTION EXPENSES
Sales load imposed on purchases.................................................................. None
Redemption fees.................................................................................. None
Sales load imposed on reinvested dividends....................................................... None
Exchange fees.................................................................................... None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)(1)
Management Fees (after waivers)(2)............................................................... 0.00%
12b-1 Fees....................................................................................... 0.50%
Other Expenses................................................................................... 1.27%
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Total Fund Operating Expenses (after waivers)(2)................................................. 1.77%
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(1) "Annual Fund Operating Expenses" are based on operating expenses
incurred by the Fund for the fiscal year ended May 31, 1997. Long-term
shareholders may pay more in 12b-1 fees over time as a percentage of their
initial investment than the amount of the maximum front-end sales charge
permitted under the rules of the National Association of Securities Dealers,
Inc. ("NASD").
(2) The Fund's investment adviser, Yorktown Management & Research Company,
Inc. (the "Adviser") waives its advisory fees in an amount equal to the amount
Distributors (an affiliate of the Adviser) retains with respect to dealer
reallowances resulting from the Fund's purchase of load fund shares and Rule
12b-1 fees received from open-end investment companies. If the Fund's investment
advisory fees had not been waived during the fiscal year ended May 31, 1997, the
Fund's Management Fees and Total Fund Operating Expenses would have been 0.60%
and 2.38%, respectively. See "Management of the Fund" for additional
information. An investor in the Fund will bear not only his proportionate share
of the expenses of the Fund but also indirectly similar expenses of the
underlying funds.
EXAMPLE -- A shareholder would pay the following expenses on a $1,000
investment assuming (1) a 5% annual return and (2) redemption at
the end of each period.
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After 1 year..................... $ 18
After 3 years.................... 56
After 5 years.................... 97
After 10 years................... 210
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The Example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund Operating
Expenses remain the same in the years shown. The 5% annual return assumed in the
Example is required by regulations of the Securities and Exchange Commission
("SEC") and is not a predication of, and does not represent, the projected or
actual performance of Fund shares. The Example should not be considered a
representation of past or future expenses. Actual expenses of the Fund may be
greater or less than those shown.
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FINANCIAL HIGHLIGHTS
The table below provides financial highlights for one share of the Fund for
the periods shown. This information is supplemented by the financial statements
and accompanying notes appearing on the Statement of Additional Information. The
financial statements and notes have been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants, whose report thereon is also included
in the Statement of Additional Information. The financial highlights appearing
below were derived from financial statements audited by Coopers & Lybrand L.L.P.
On February 22, 1991, the Fund adopted a strategy of using multiple investment
styles by investing primarily in the shares of other registered investment
companies.
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FOR THE YEAR/PERIOD ENDED MAY 31,
---------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
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For a share outstanding
throughout each
year/period:
Net asset value,
beginning of
year/period.......... $17.57 $17.21 $16.34 $16.06 $14.69 $13.66 $12.78 $13.40 $13.19 $ 13.64
------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
Income from investment
operations:
Net investment income
(loss)............. 0.32 0.34 0.35 (0.01) (0.06) (0.13) 0.19 0.52 0.55 (0.02)
Net realized and
unrealized gain
(loss) on
investments........ 3.49 2.57 1.64 0.78 1.43 1.16 0.99 (0.57) 0.06 (0.43)
------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
Total income (loss)
from investment
operations......... 3.81 2.91 1.99 1.37 1.03 1.18 (0.05) 0.61 (0.45) 0.77
------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
Distributions:
From net investment
income............. (0.48) (0.28) (0.36) (0.27) (0.57) (0.40)
In excess of net
investment income.. (0.03)
From net realized
gain on security
transactions....... (0.98) (2.27) (0.76) (0.49)
------ ------ ------ ------ ------ ------ ------
Total
distributions.... (1.46) (2.55) (1.12) (0.49) (0.30) (0.57) (0.40)
------ ------ ------ ------ ------ ------ ------
Net asset value,
end of
year/period.... $19.92 $17.57 $17.21 $16.34 $16.06 $14.69 $13.66 $12.78 $13.40 $ 13.19
------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
Total return........... 22.43% 17.65% 13.08% 4.79% 9.33% 7.51% 9.63% (0.41)% 4.65% (24.58)%(2)
Ratios/Supplemental
Data:
Net assets, end of
year/period
(000's omitted).... $8,098 $4,417 $3,031 $2,964 $2,603 $1,828 $1,670 $2,584 $1,822 $ 251
Ratio of expenses to
average net
assets(3).......... 1.77% 2.22% 2.05% 2.12% 2.77% 3.47% 3.83% 2.92% 3.73% 11.34% (2)
Ratio of net
investment income
(loss) to average
net assets......... 1.84% 1.43% 0.75% (0.06)% (0.82)% (0.98)% 1.54% 4.46% 4.69% (2.14)%(2)
Portfolio turnover
rate................. 67% 40% 65% 17% 29% 55% 120% 110% 68% --
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(1) Commencement of operations was April 13, 1988.
(2) Annualized.
(3) Without fees waived/reimbursed by the investment adviser and distributor,
the ratio of expenses to average net assets would have been 2.38%, 2.82%,
2.65%, 2.72%, 3.37%, 4.07%, 4.43%, 3.53%, 4.38% and 14.77%, respectively.
4
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GENERAL
The Fund seeks to achieve its investment objectives by investing in shares
of open-end and closed-end investment companies (the "underlying funds").
Normally, the Fund will invest in approximately ten to fifty underlying funds,
although it may invest up to 25% of its total assets in any one underlying fund.
All of the Trust's Series that invest in underlying funds may invest in shares
of the same underlying fund; however, the percentage of each Series' assets so
invested may vary and the Series and their affiliates may not hold more than 3%
of an underlying fund's shares. If the Fund holds more than 1% of the shares of
an open-end fund, that fund will be obligated to redeem only 1% of those shares
during any period of less than 30 days. Any shares of an open-end fund held by
the Fund in excess of 1% of the open-end fund's outstanding shares, therefore,
will be considered not readily marketable securities that, together with other
such securities, may not exceed 10% of the Fund's net assets. The Fund may not
purchase shares of investment companies that are not registered with the SEC.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's primary investment objective is to seek to achieve high current
income. The Fund's secondary objective is growth of capital and income. The Fund
seeks to achieve its objectives by investing at least 65% of its total assets in
shares of underlying funds that seek to achieve an objective of high current
income by investing in income-producing equity securities, including
dividend-paying common stocks and convertible securities, long- or short-term
bonds and other fixed-income securities (such as U.S. Government securities,
commercial paper and preferred stock). Under normal conditions, the Fund invests
between 25% and 75% of its total assets in global funds (which invest in foreign
and U.S. securities) and international funds (which invest in foreign
securities). Such funds may be subject to risks due to their investment in
foreign securities. See the Appendix. All investments involve risks, and there
is no assurance that the investment objectives of the Fund will be achieved.
Unlike most fixed-income securities, the amount of dividends, if any, paid
on common stock is not fixed and the holders of equity securities are not
entitled to be paid a fixed amount of principal. Equity securities may have
greater potential for capital appreciation than fixed-income securities, but
carry a correspondingly greater risk of capital loss. Additionally, convertible
securities may offer higher income than the common stocks into which they are
convertible. Prior to their conversion, convertible securities have the same
general characteristics as non-convertible debt securities. While convertible
securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they may reflect changes in
value of the underlying common stock. Convertible securities entail less credit
risk than the issuer's common stock because they rank senior to common stock.
The market value of fixed-income securities is affected by changes in
interest rates. If interest rates fall, the market value of fixed-income
securities tends to rise; if interest rates rise, the value of fixed-income
securities tends to fall. Moreover, the longer the remaining maturity of a
fixed-income security, the greater the effect of interest rate changes on the
market value of the security. This market risk affects all fixed-income
securities, but U.S. Government securities are generally subject to less market
risk.
The Fund may invest in underlying funds that invest only in debt securities
rated at least investment grade (BBB and above/Baa and above) by Standard &
Poor's Ratings Services ("S&P") or Moody's Investors Service, Inc. ("Moody's"),
or in underlying funds that invest in debt securities that are rated below
investment grade by S&P or Moody's. Investment grade debt securities are those
that at the time of purchase have been assigned one of the four highest ratings
by S&P or Moody's or, if unrated, determined by
5
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the underlying fund's investment adviser to be of comparable quality. This
includes debt securities rated BBB by S&P or Baa by Moody's. Moody's considers
securities rated Baa to have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
for such securities to make principal and interest payments than is the case for
higher grade debt securities. Debt securities rated below investment grade
(commonly referred to as "junk bonds"), which include debt securities rated BB,
B, CCC and CC by S&P and Ba, B, Caa, Ca and C by Moody's, are deemed by these
agencies to be predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal and may involve major risk exposure to
adverse conditions. Debt securities rated lower than B may include securities
that are in default or face the risk of default with respect to principal or
interest.
Ratings of debt securities represent the rating agencies' opinion regarding
their quality and are not a guarantee of quality. Subsequent to its purchase by
an underlying fund, the rating of an issue of debt securities may be reduced
below the minimum rating required for purchase by that fund. Credit ratings
attempt to evaluate the safety of principal and interest payments and do not
evaluate the risks of fluctuations in market value. Also, rating agencies may
fail to make timely changes in credit ratings in response to subsequent events,
so that an issuer's current financial condition may be better or worse than the
rating indicates. See the Statement of Additional Information for more
information about S&P and Moody's ratings.
Lower rated debt securities generally offer a higher current yield than
that available from higher grade issues. However, lower rated securities involve
higher risks, in that they are especially subject to adverse changes in general
economic conditions and in the industries in which the issuers are engaged, to
changes in the financial condition of the issuers and to price fluctuation in
response to changes in interest rates.
Accordingly, the yield on lower rated debt securities will fluctuate over
time. During periods of economic downturn or rising interest rates, highly
leveraged issuers may experience financial stress that could adversely affect
their ability to make payments of principal and interest and increase the
possibility of default. In addition, the market for lower rated securities has
expanded rapidly in recent years, and its growth paralleled a long economic
expansion. In the past, the prices of many lower rated debt securities declined
substantially, reflecting an expectation that many issuers of such securities
might experience financial difficulties. As a result, the yields on lower rated
debt securities rose dramatically, but such higher yields did not reflect the
value of the income stream that holder of such securities expected, but rather
the risk that holders of such securities could lose a substantial portion of
their value as a result of the issuers' financial restructuring or default. The
market for lower rated debt securities may be thinner and less active than that
for higher quality securities, which may limit an underlying fund's ability to
sell such securities at their fair value in response to changes in the economy
or the financial markets. Adverse publicity and investor perceptions, whether or
not based on fundamental analysis, may also decrease the values and liquidity of
lower rated securities, especially in a thinly traded market.
An underlying fund may invest in zero coupon securities and payment-in-kind
securities. Zero coupon securities pay no interest to holders prior to maturity
and payment-in-kind securities pay interest in the form of additional
securities. However, a portion of the original issue discount on the zero coupon
securities and the "interest" on payment-in-kind securities must be included in
the underlying fund's income. Accordingly, to continue to qualify for tax
treatment as a regulated investment company and to avoid certain excise taxes,
these funds may be required to distribute as a dividend an amount that is
greater than the total amount of cash they actually receive. These distributions
must be made from a fund's cash assets or, if necessary, from the proceeds of
sales of portfolio securities. A fund will not be able to purchase additional
income-producing securities with cash used to make such distributions, and its
current income
6
<PAGE>
ultimately may be reduced as a result. Zero coupon and payment-in-kind
securities usually trade at a deep discount from their face or par value and
will be subject to greater fluctuations of market value in response to changing
interest rates than debt obligations of comparable maturities that make current
distributions of interest in cash.
The investment objectives of the Fund may not be changed without the
affirmative vote of a majority of the Fund's outstanding voting securities as
defined in the Investment Company Act of 1940 ("1940 Act"). Certain other
investment limitations that apply to the Fund also may not be changed without
shareholder approval, as described in the Statement of Additional Information.
All other investment policies, unless otherwise indicated, may be changed by the
Trust's Board of Trustees without shareholder approval.
OTHER INVESTMENT POLICIES
Selection of Underlying Funds
The Adviser selects underlying funds in which to invest based, in part,
upon an analysis of their past performance and their investment objectives,
policies and the investment style of their investment advisers. In selecting
open-end funds in which to invest, the Adviser also considers, among other
factors, the funds' size, cost structure, shareholder services and the
reputation and stability of their investment advisers. In selecting closed-end
funds in which to invest, the Adviser considers, among other factors, the
factors considered for open-end companies and the funds' historical market
discounts, portfolio characteristics, repurchase, tender offer, and dividend
reinvestment programs, provisions for converting into an open-end fund, and
quality of management. The Fund may invest in the securities of closed-end funds
that, at the time of investment by the Fund, are either trading at a discount to
net asset value or at a premium to net asset value.
The underlying funds in which the Fund invests may include new funds and
funds with limited operating history. Underlying funds may, but need not, have
the same investment objectives, policies and limitations as the Fund. For
example, although the Fund will not borrow money for investment purposes, it may
invest all of its assets in underlying funds that borrow money for investment
purposes (i.e., engage in the speculative activity of leveraging) or invest up
to 25% of its total assets in any one such underlying fund.
Temporary Investments
Pending investment, for liquidity or when the Adviser believes market
conditions warrant a defensive position, the Fund may temporarily hold cash or
invest all or any portion of its assets in money market mutual funds or directly
in money market instruments such as (1) U.S. Government securities; (2)
instruments (such as certificates of deposit, demand and time deposits and
bankers' acceptances) of banks and savings associations that are insured by the
Federal Deposit Insurance Corporation; (3) repurchase agreements secured by U.S.
Government securities; and (4) commercial paper, including master demand notes,
rated A-1 by S&P or P-1 by Moody's. To the extent the Fund invests more than
$100,000 in a single bank or savings association, the investment is not
protected by federal insurance. The underlying funds also may invest under
similar circumstances in similar instruments.
7
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Borrowing and Other Policies
The Fund may temporarily borrow money from banks for extraordinary or
emergency purposes, but not in excess of the lesser of 10% of its total assets
(valued at cost) or 5% of its total assets (valued at market). The Fund also may
invest up to 10% of its net assets in securities for which no readily available
market exists and may lend securities constituting up to 5% of its net assets.
Portfolio Turnover
The Fund's portfolio turnover rate may vary greatly from year to year and
will not be a limiting factor when the Adviser deems portfolio changes
appropriate. For the fiscal years ended May 31, 1997 and 1996, the Fund's
portfolio turnover rates were 67% and 40%, respectively. A high portfolio
turnover rate (100% or more), whether incurred by the Fund or an underlying
fund, involves correspondingly greater transaction costs, which will be borne
directly by the Fund or the underlying fund, and increases the potential for
short-term capital gains and taxes.
RISKS AND OTHER CONSIDERATIONS
General
Any investment in an open-end or closed-end investment company involves
risk, and, although the Fund invests in a number of underlying funds, this
practice does not eliminate investment risk. Investment decisions by the
investment advisers of the underlying funds are made independently of the Fund
and its Adviser. Therefore, the investment adviser of one underlying fund may be
purchasing securities of the same issuer whose securities are being sold by the
investment adviser of another underlying fund. The result of this would be an
indirect expense to the Fund without accomplishing any investment purpose.
Some of the underlying funds also could incur more risks than others. For
example, they may trade their portfolios more actively (which results in higher
brokerage costs), may engage in investment practices, including leverage, that
entail greater risks or invest in companies whose securities and other
investments are more volatile. In addition, the underlying funds in which the
Fund invests may or may not have the same investment limitations as those of the
Fund itself. Moreover, while the Fund has a policy of investing no more than 25%
of its total assets in the securities of underlying funds that invest 25% or
more of their total assets in any one industry, the Fund, through its
investments in underlying funds, indirectly may invest more than 25% of its
assets in any one industry. In addition, the underlying funds in which the Fund
invests may have policies themselves that, among other things, permit them to
invest up to 100% of their assets in securities of foreign issuers and to engage
in foreign currency transactions with respect to their investments; invest in
illiquid securities; invest in warrants; lend their portfolio securities; sell
securities short; borrow money for investment purposes; invest 25% or more of
their total assets in one industry; and enter into options, futures and forward
currency contracts. The risks associated with investments in foreign securities
are described in the Appendix to this Prospectus and the risks associated with
these other investment policies are described in the Statement of Additional
Information.
Investing in the Fund also involves certain additional expenses and certain
tax consequences that would not be present in a direct investment in the
underlying funds. An investor in the Fund should recognize that he may invest
directly in the underlying funds and that, by investing in the underlying funds
indirectly through the Fund, he will bear not only his proportionate share of
the expenses of the
8
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Fund (including operating costs and investment advisory and administrative fees)
but also indirectly similar expenses of the underlying funds.
Open-End Funds
The Fund may purchase shares of open-end funds that impose a front-end
sales load ("Load Fund Shares") and shares of open-end funds that do not impose
a front-end sales load. However, the Fund may not invest in shares of open-end
funds that are sold subject to a redemption fee of more than 1%. An open-end
fund is currently permitted under the rules of the NASD to impose front-end
sales loads as high as 8.5% of the public offering price (9.29% of the net
amount invested); provided that it does not also impose an asset-based sales
charge. The Adviser anticipates, however, investing substantially all of the
Fund's assets in funds that impose no front-end sales load or impose a front-end
sales load of no more than 3% of the public offering price of the shares. Fund
purchases may often qualify for so-called quantity discounts whereby a lower
front-end sales load is applied to purchases of, for example, $50,000 or more.
Additionally, where possible, the Adviser will seek to reduce the front-end
sales load imposed by purchasing shares pursuant to (i) letters of intent,
permitting it to obtain reduced front-end sales loads by aggregating its
intended purchases over time; (ii) rights of accumulation, permitting it to
obtain reduced front-end sales loads as it purchases additional shares of an
underlying fund; and (iii) rights to obtain reduced front-end sales loads by
aggregating its purchases of several funds within a family of mutual funds. In
addition to any front-end sales load imposed by an open-end fund, the open-end
fund may be subject to annual distribution and service fees of up to 1.00% of
the fund's average daily net assets.
Front-end sales loads generally are split into the dealer reallowance
(which typically comprises at least 80% of the amount of the charge) and the
underwriter's retention. Yorktown Distributors, Inc., the distributor of the
Fund shares, generally will be designated as the dealer entitled to receive the
dealer reallowance portion of the sales charge on purchases of Load Fund Shares
by the Fund. However, Distributors will not retain any dealer reallowance in
excess of 1% of the public offering price on any transaction, nor will it be
designated as the dealer entitled to receive the dealer reallowance portion of
the sales charge where such reallowance would exceed 1% of the public offering
price. The Adviser has agreed to waive its advisory fees in an amount equal to
amounts Distributors retains as (i) dealer reallowances resulting from the
Fund's purchase of Load Fund Shares and (ii) Rule 12b-1 fees received from
underlying open-end funds.
Although open-end fund shares are redeemable by the Fund upon demand to the
issuer, under certain circumstances, an open-end fund may determine to make a
payment for redemption of its shares to the Fund wholly or partly by a
distribution in kind of securities from its portfolio, in lieu of cash, in
conformity with the rules of the SEC. In such cases, the Fund may hold
securities distributed by an open-end fund until the Adviser determines that it
is appropriate to dispose of such securities. Such disposition generally will
entail additional costs to the Fund.
Closed-End Funds
Shares of closed-end funds are typically offered to the public in a
one-time initial public offering by a group of underwriters who retain a spread
or underwriting commission of between 4% and 6% of the initial public offering
price. Such securities are then listed for trading on the New York Stock
Exchange ("NYSE"), the American Stock Exchange or the Nasdaq Stock Market
("Nasdaq") or, in some cases, may be traded in other over-the-counter ("OTC")
markets. Because the shares of closed-end funds cannot be
9
<PAGE>
redeemed upon demand to the issuer like the shares of an open-end investment
company (such as the Fund), investors seek to buy and sell shares of closed-end
funds in the secondary market.
The Fund generally will purchase shares of closed-end funds only in the
secondary market. The Fund will incur normal brokerage costs on such purchases
similar to the expenses the Fund would incur for the purchase of equity
securities in the secondary market. The Fund may, however, also purchase
securities of a closed-end fund in an initial public offering when, in the
opinion of the Adviser, based on a consideration of the nature of the closed-end
fund's proposed investments, the prevailing market conditions and the level of
demand for such securities, they represent an attractive opportunity for growth
of capital. The initial offering price typically will include a dealer spread,
which may be higher than the applicable brokerage cost if the Fund purchased
such securities in the secondary market.
The shares of many closed-end funds, after their initial public offering,
frequently trade at a price per share which is less than the net asset value per
share, the difference representing the "market discount" of such shares. This
market discount may be due in part to the investment objective of long-term
appreciation, which is sought by many closed-end funds, as well as to the fact
that the shares of closed-end funds are not redeemable by the holder upon demand
to the issuer at the next determined net asset value but rather are subject to
the principles of supply and demand in the secondary market. A relative lack of
secondary market purchasers of closed-end fund shares also may contribute to
such shares trading at a discount to their net asset value.
The Fund may invest in shares of closed-end funds that are trading at a
discount to net asset value or at a premium to net asset value. There can be no
assurance that the market discount on shares of any closed-end fund purchased by
the Fund will ever decrease. In fact, it is possible that this market discount
may increase and the Fund may suffer realized or unrealized capital losses due
to further decline in the market price of the securities of such closed-end
funds, thereby adversely affecting the net asset value of the Fund's shares.
Similarly, there can be no assurance that any shares of a closed-end fund
purchased by the Fund at a premium will continue to trade at a premium or that
the premium will not decrease subsequent to a purchase of such shares by the
Fund.
Closed-end funds may issue senior securities (including preferred stock and
debt obligations) or borrow money for the purpose, and with the effect of,
leveraging the closed-end fund's common shares in an attempt to enhance the
current return to such closed-end fund's common shareholders. The Fund's
investment in the common shares of closed-end funds that are financially
leveraged may create an opportunity for greater total return on its investment,
but at the same time may be expected to exhibit more volatility in market price
and net asset value than an investment in shares of investment companies without
a leveraged capital structure. The Fund will only invest in common shares of
closed-end funds and will not invest in any senior securities issued by
closed-end funds.
MANAGEMENT OF THE FUND
The Trust's Board of Trustees has overall responsibility for the operation
of the Trust. Pursuant to that responsibility, the Board has selected the
Adviser to act as investment adviser and administrator for the Fund. Services
provided by the Adviser include, but are not limited to, the provision of a
continuous investment program for the Fund and supervision of all matters
relating to the operation of the Fund. Among other things, the Adviser is
responsible for making investment decisions and placing orders to buy, sell or
hold particular securities, furnishing corporate officers and clerical staff and
providing office space, office equipment and office services.
10
<PAGE>
The Adviser has acted as the investment adviser to the Fund since it
commenced operations on April 13, 1988. The Adviser, whose address is 2303
Yorktown Avenue, Lynchburg, Virginia 24501, was incorporated under the laws of
the State of Maryland in 1984 and is controlled by David D. Basten. In addition,
Mr. Basten currently serves as the Fund's portfolio manager and has served in
that capacity since commencement of the Fund's operations. He is also the
portfolio manager of the Trust's other Series.
For its services, the Adviser receives a monthly fee, calculated daily,
payable at an annual rate of 0.60% of the average daily net assets of the Fund.
The Adviser reduces its advisory fees on a dollar for dollar basis to the extent
Distributors receives (i) dealer reallowances on purchases by the Fund of shares
of open-end funds that are sold with a sales load and (ii) Rule 12b-1 fees
received from underlying open-end funds.
The Adviser places orders for the purchase and sale of portfolio
investments for the Fund's account with brokers or dealers, selected by it in
its discretion, including Distributors. With respect to purchases of Load Fund
Shares, the Adviser will direct, to the extent possible, substantially all of
the Fund's orders to Distributors. Where Distributors acts as the dealer with
respect to the purchases of Load Fund Shares, it will retain dealer reallowances
on those purchases up to a maximum of 1% of the public offering price of the
shares. Distributors may not be designated as the dealer on any sales where such
reallowance exceeds 1% of the public offering price. If Distributors is unable
to act as dealer with respect to a particular transaction, the Adviser will
direct such order to another broker-dealer. Factors in the selection of such a
broker-dealer include the receipt of research, analysis and advice and similar
services and the sale of Fund shares by such broker-dealer.
Distributors also may assist in the execution of the Fund's portfolio
transactions to purchase open-end fund shares for which it may receive
distribution payments from the funds or their underwriter in accordance with the
distribution plans of those funds. In providing execution assistance,
Distributors receives orders from the Adviser, places them with the fund's
distributor, transfer agent or other person as appropriate, confirms the trade,
price and number of shares purchased, assures prompt payment by the Fund and
proper completion of the order.
11
<PAGE>
PURCHASE OF FUND SHARES
Distribution Arrangements
Yorktown Distributors, Inc., whose address is 2303 Yorktown Avenue,
Lynchburg, Virginia 24501, is the distributor of shares of the Fund.
Distributors is an affiliate of the Adviser and is controlled by David D.
Basten.
Under a plan of distribution ("Plan") adopted by the Trust's Board of
Trustees and approved by the Fund's shareholders pursuant to Rule 12b-1 under
the 1940 Act, the Fund pays Distributors, as compensation for Distributors'
distribution activities with respect to the Fund, a monthly fee at the annual
rate of 0.25% of the average daily net assets of the Fund. In addition, the Fund
pays Distributors, as compensation for Distributors' service activities with
respect to the Fund and its shareholders, a monthly fee at the annual rate of
0.25% of the average daily net assets of the Fund. Distributors may also receive
dealer reallowances (up to a maximum of 1% of the public offering price) on
purchases by the Fund of shares of underlying funds that are sold with a
front-end sales load.
As distributor of Fund shares, Distributors may spend such amounts as it
deems appropriate on any activities or expenses primarily intended to result in
the sale of the Fund's shares or the servicing and maintenance of shareholder
accounts, including compensation to employees of Distributors; compensation to
and expenses, including overhead and telephone and other communication expenses,
of Distributors and selected dealers who engage in or support the distribution
of shares or who service shareholder accounts; the costs of printing and
distributing prospectuses, statements of additional information, and reports for
other than existing shareholders; the costs of preparing, printing and
distributing sales literature and advertising materials; and internal costs
incurred by Distributors and allocated by Distributors to its efforts to
distribute shares of the Fund such as office rent, employee salaries, employee
bonuses and other overhead expenses.
During the period it is in effect, the Plan obligates the Fund to pay fees
to Distributors as compensation for its distribution and service activities, not
as reimbursement for specific expenses incurred. Thus, even if Distributors'
expenses exceed its fees, the Fund will not be obligated to pay more than those
fees and, if Distributors' expenses are less than such fees, it will retain the
full fee and realize a profit.
Distributors may also pay certain banks, fiduciaries, custodians for public
funds, investment advisers and broker-dealers a fee for administrative services
in connection with the distribution of Fund shares. Such fees would be based on
the average net asset value represented by shares of the administrators'
customers invested in the Fund. This fee is in addition to any commissions these
entities may receive from Distributors out of the fees it receives pursuant to
the Plan, and, if paid, will be reimbursed by the Adviser and not the Fund.
Distributors also may provide additional incentives to brokers that sell
shares of the Fund. In some instances, these incentives may be offered only to
certain brokers that have sold or may sell significant amounts of shares. Such
incentives may include permitting brokers to be named the dealer of record on
underlying fund shares purchased by the Fund, with the result that those brokers
could receive trail commissions from the underwriters of those underlying funds.
These commissions could be paid as long as the Fund held the underlying fund
shares in its portfolio and the underwriters continued to pay the trail
commissions. If these commissions were not paid to those brokers, then the
commissions could be paid to Distributors and could thereby reduce the fees paid
by the Fund to the Adviser for advisory services. See "Management of the Fund".
12
<PAGE>
Applicable banking laws prohibit certain deposit-taking institutions from
underwriting or distributing securities. There is currently no precedent
prohibiting banks from performing administrative services in connection with the
distribution of Fund shares. If a bank were prohibited from performing such
administrative services, its shareholder clients would be permitted to remain
shareholders of the Fund and alternate means of servicing such shareholder would
be sought. It is not expected that shareholders would suffer any adverse
financial consequences as a result of any of these occurrences.
How Shares May Be Purchased
Application forms for the purchase of Fund shares can be obtained from
Distributors or from a broker-dealer that has entered into an agreement with
Distributors. The Fund's minimum initial investment is $500, and the minimum for
additional investments is $100. An exception to these minimums is granted for
investments made pursuant to special plans or if approved by Distributors. All
orders are executed at the net asset value per share next computed after receipt
and acceptance of the order by Fund Services, Inc., the Fund's transfer agent.
The Fund does not impose a front-end sales load when Fund shares are purchased;
however, a broker-dealer may charge its client a fee for selling Fund shares.
The Trust and Distributors reserve the right to reject any purchase order.
When shares of the Fund are initially purchased, an account is
automatically established for the shareholder. Any shares of the Fund
subsequently purchased or received as a distribution are credited directly to
the shareholder account. No share certificates are issued unless specifically
requested in writing to the Trust. Certificates are issued in full shares only.
In addition, no certificates are issued for shares purchased by check until 15
business days have elapsed, unless the Trust is reasonably assured that payment
for the shares has been collected. There is no charge for certificate issuance.
Systematic Investment Plan
Shareholders may purchase Fund shares through a Systematic Investment Plan.
Under the Plan, Fund Services, Inc., at regular intervals, will automatically
debit a shareholder's bank checking account monthly or quarterly in an amount of
$100 or more (subject to the $500 minimum initial investment), as specified by
the shareholder. The purchase of Fund shares will be effected at their offering
price at the close of normal trading on the NYSE on or about the 15th day of the
month. To obtain an application for the Systematic Investment Plan, write to
Distributors at the address shown on the back cover of this Prospectus.
Exchange Privileges
Shares of the Fund may be exchanged for shares of any of the Trust's Series
listed below without an exchange fee. The Trust's Series with which exchanges
may be made are:
Growth Fund, which seeks growth of capital. Like the Fund, the Growth Fund
seeks to achieve its investment objective by investing in shares of
underlying funds.
T-1 Treasury Trust, which seeks current income while limiting credit risk.
The T-1 Treasury Trust seeks to achieve its objective by investing in U.S.
Treasury securities with remaining maturities of one year or less.
13
<PAGE>
Shareholders must place exchange orders in writing with the transfer agent,
Fund Services, Inc., at P.O. Box 26305, Richmond, Virginia 23260. Telephone
exchanges are not available. All permitted exchanges will be effected based on
the net asset value per share of each Fund that is next computed after receipt
by the transfer agent of the exchange request in "good order".
An exchange request is considered in "good order" only if:
1. The dollar amount or number of shares to be purchased is indicated.
2. The written request is signed by the registered owner and by any
co-owner of the account in exactly the same name or names used in
establishing the account.
3. Where share certificates have been issued, the written request is
accompanied by the certificates for shares to be redeemed, properly
endorsed in form for transfer, and either the share certificates or
separate instructions of assignment (stock powers) signed by each
registered owner and co-owner exactly as the shares are registered.
4. The signatures on any share certificates (or on accompanying stock
powers) are guaranteed by a member of the Securities Transfer Agents
Medallion Program ("STAMP"), the Stock Exchanges Medallion Program
("SEMP") or the New York Stock Exchange, Inc.'s Medallion Signature
Program ("MSP"). Signature guarantees from a notary public are not
acceptable.
Other supporting legal documents may be required from corporations or other
organizations, fiduciaries or persons other than the stockholder of record
making the exchange request. In addition, exchanges are only available in states
where they may legally be made.
The exchange privilege may be modified or terminated at any time upon 60
days' written notice to shareholders. Before making any exchange, shareholders
should contact Distributors or their broker to obtain more information about
exchanges and prospectuses of the Trust's series to be acquired through the
exchange. For tax purposes, an exchange is treated as a redemption and a
subsequent purchase. Any capital gains or losses on the shares exchanged should
be reported for tax purposes. The price of the acquired shares is the new cost
basis for income tax purposes.
Determining Net Asset Value
The net asset value of the Fund's shares is determined as of the close of
normal trading (currently 4:00 p.m. eastern time) on the NYSE each day that the
NYSE is open for business. The net asset value per share is computed by dividing
the value of the Fund's securities plus any cash and other assets (including
dividends accrued but not yet collected) minus all liabilities (including
accrued expenses) by the total number of Fund shares outstanding.
The Fund's assets consist primarily of shares of open-end and closed-end
funds. Shares of open-end funds are valued at their respective net asset values
under the 1940 Act. An open-end fund values securities in its portfolio for
which market quotations are readily available at their current market value
(generally the last reported sales price) and all other securities and assets at
fair value pursuant to methods established in good faith by the board of
directors/trustees of the underlying fund. Money market funds with portfolio
securities that mature in 397 days or less may use the amortized cost or
penny-rounding methods to value their securities. Shares of closed-end funds
that are listed on U.S. exchanges are valued at the last sales price on the day
the securities are valued or, lacking any sales on such day, at the last
14
<PAGE>
available bid price. Shares of closed-end funds listed on Nasdaq are valued at
the last trade price on Nasdaq at 4:00 p.m., eastern time; other shares traded
in the OTC market are valued at the last bid price available prior to valuation.
Other Fund assets are valued at current market value or, where unavailable,
at fair value as determined in good faith by or under the direction of the Board
of Trustees. Securities having 60 days or less remaining to maturity are valued
at their amortized cost.
REDEMPTION OF FUND SHARES
How Shares May Be Redeemed
Fund shares may be redeemed by mailing redemption requests to the Fund's
transfer agent, Fund Services, Inc., at P.O. Box 26305, Richmond, Virginia
23260. Upon receipt at the offices of Fund Services, Inc. of a redemption
request in "good order", as described in "Exchange Privileges" above, the shares
will be redeemed at the net asset value per share computed at the close of
normal trading on the NYSE on that day. Redemption requests received after the
close of normal trading will be executed at the net asset value per share next
computed. The signature(s) on all redemption request of $10,000 or more must be
guaranteed as described above.
Redemption proceeds will be forwarded within five days of the receipt of a
redemption request. If the shares to be redeemed were paid for by check, then to
allow clearance the redemption proceeds may be delayed for up to 15 days after
the purchase date. The redemption proceeds may be more or less than the original
cost.
Other supporting legal documents may be required from corporations or other
organizations, fiduciaries or persons other than the stockholder of record
making the redemption request. If there is a question concerning the redemption
of Fund shares, contact Distributors, your broker or Fund Services, Inc.
Because of the high cost of maintaining small accounts, the Trust reserves
the right to redeem shareholder accounts of less than $100 net asset value
resulting from redemptions or exchanges. If the Trust elects to redeem such
shares, it will notify the shareholder of its intention to do so and provide the
shareholder with the opportunity to increase the amount invested to $100 or more
within 30 days of notice.
Systematic Withdrawal Plan
An investor who has made an initial investment of at least $10,000 in the
Fund or otherwise has accumulated shares valued at no less than $10,000 is
eligible for a Systematic Withdrawal Plan. If so eligible, the investor may
arrange for fixed withdrawal payments (minimum payment -- $100; maximum
payment -- 1% per month or 3% per quarter of the total net asset value of the
Fund shares in the shareholder account at inception of the Systematic Withdrawal
Plan) at regular monthly or quarterly intervals. Withdrawal payments are made to
the investor or to the beneficiaries designated by him. An investor is not
eligible for a Systematic Withdrawal Plan if he is making regular purchase
payments pursuant to the Systematic Investment Plan described above.
15
<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Dividends and Other Distributions
Dividends from the Fund's net investment income, if any, are distributed at
least annually. Any net capital gain (the excess of net long-term capital gain
over net short-term capital loss) realized from the sale of shares of underlying
funds and other portfolio securities also is distributed at least annually.
Unless the Trust receives instructions to the contrary from a shareholder before
the record date, it will be assumed that the shareholder wishes to receive both
dividends and capital gain distributions in additional Fund shares. Instructions
continue in effect until the Trust is notified in writing that a change is
desired. All reinvested dividends and capital gain distributions are reinvested
in additional Fund shares on the payment date at those shares' net asset value
on that day. Account statements are mailed to shareholders evidencing each
reinvestment. If the Trust has received instructions that a shareholder wishes
to receive dividends and capital gain distributions in cash, and the U.S. Postal
Service cannot deliver a check representing the payment thereof, or if any such
check remains uncashed for six months, the check(s) will be reinvested in Fund
shares at the then current net asset value per share of the Fund and the
shareholder's election will be changed so that future distributions will be
received in additional Fund shares.
Taxation of the Fund
The Fund is treated as a separate corporation for federal income tax
purposes and intends to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"), so that it will be relieved of federal income tax on that part of its
investment company taxable income (consisting generally of net investment income
and net short-term capital gain) and net capital gain that is distributed to its
shareholders. To the extent, however, that the Fund does not distribute to its
shareholders by the end of any calendar year substantially all of its ordinary
income for that year and substantially all of its capital gain net income for
the one-year period ending on October 31 of that year, plus certain other
amounts, a 4% excise tax will imposed on the Fund.
Taxation of Underlying Funds
The Fund intends only to invest in underlying funds that intend to qualify
for treatment as RICs under the Code. If an underlying fund fails to qualify as
a RIC it may be subject to federal income tax. No assurance can be given,
however, that an underlying fund will qualify as a RIC.
Taxation of Shareholders
Dividends from the Fund's investment company taxable income are taxable to
its shareholders, other than tax-exempt entities (including individual
retirement accounts and qualified retirement plans), as ordinary income, whether
received in cash or reinvested in additional Fund shares, to the extent of the
Fund's earnings and profits. Distributions of the Fund's net capital gain, when
designated as such, are taxable to those shareholders as long-term capital
gains, whether received in cash or reinvested in additional Fund shares and
regardless of the length of time the shares have been held. Under the Taxpayer
Relief Act of 1997 ("Act"), different maximum tax rates apply to net capital
gain depending on the taxpayer's holding period and marginal rate of federal
income tax -- generally, 28% for gain on capital assets held for more than one
year but not more than 18 months and 20% (10% for taxpayers in the 15% marginal
tax bracket) on capital assets held for more than 18 months. The Act, however,
does not address the application of these rules to distributions by RICs,
including whether a RIC's holding period can be
16
<PAGE>
"passed through" to its shareholders. Instead, the Act authorizes the issuance
of regulations to do so. Accordingly, shareholders should consult their tax
advisers as to the effect of the Act on distributions by the Fund to them of net
capital gain.
If the Fund realizes gain from the disposition of shares of any underlying
fund held by the Fund as capital assets for more than one year, or if the Fund
receives a distribution from any underlying fund that is designated as a capital
gain distribution, the amount of that gain or distribution, respectively, is
included in any capital gain distribution made by the Fund to its shareholders.
Any other gain on disposition of shares of an underlying fund and any other
distribution received there from is included in the Fund's investment company
taxable income.
The Fund advises its shareholders of the tax status of distributions
following the end of each calendar year. The Fund is required to withhold 31% of
all dividends, capital gain distributions and redemption proceeds payable to any
individuals and certain other noncorporate shareholders who do not provide the
Fund with a correct taxpayer identification number. Withholding also is required
from dividends and capital gain distributions payable to such shareholders who
otherwise are subject to backup withholding.
A redemption of Fund shares will result in taxable gain or loss to the
redeeming shareholder, depending upon whether the redemption proceeds are more
or less than the shareholder's adjusted basis for the redeemed shares. Similar
tax consequences will result upon an exchange of shares of the Fund for shares
of another Series. Capital gain on the redemption or exchange of Fund shares
held for more than one year will be long-term capital gain, in which event it
will be subject to federal income tax at the rates indicated above. If a
shareholder purchases Fund shares within thirty days after redeeming other Fund
shares at a loss, all or part of that loss will not be deductible and instead
will increase the basis of the newly purchased shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. Because other
federal, state or local tax considerations may apply, investors are urged to
consult their tax advisers.
Qualified Retirement Plans
An investment in shares of the Fund may be appropriate for individual
retirement accounts (including "education individual retirement accounts" and
"Roth IRAs," both available to certain taxpayers beginning in 1998), tax
deferred annuity plans under section 403(b) of the Code, self-employed
individual retirement plans (commonly referred to as "Keogh plans"), simplified
employee pension plans and other qualified retirement plans (including section
401(k) plans). Capital gain distributions and dividends received on Fund shares
held by any of these accounts or plans are automatically reinvested in
additional Fund shares, and taxation thereof is deferred until distributed by
the account or plan. Investors who are considering establishing such an account
or plan may wish to consult their attorneys or other tax advisers with respect
to individual tax questions. The option of investing in these accounts or plans
through regular payroll deductions may be arranged with Distributors and the
employer.
17
<PAGE>
PERFORMANCE INFORMATION
From time to time, quotations of the Fund's average annual total return
("Standardized Return") may be included in advertisements, sales literature or
shareholder reports. Standardized Return shows percentage rates reflecting the
average annual change in the value of an assumed initial investment of $1,000,
assuming the investment has been held for periods of one year, five years and
ten years as of a stated ending date. If a five and/or ten-year period has not
yet elapsed, data will be provided as of the end of a period corresponding to
the life of the Fund. Standardized Return assumes that all dividends and capital
gain distributions were reinvested in shares of the Fund.
In addition, other total return performance data ("Non-Standardized
Return") regarding the Fund may be included in advertisements, sales literature
or shareholder reports. Non-Standardized Return shows a percentage rate of
return encompassing all elements of return (i.e., income and capital
appreciation or depreciation); and it assumes reinvestment of all dividends and
capital gain distributions. Non-Standardized Return may be quoted for the same
or different periods as those for which Standardized Return is quoted.
Non-Standardized Return may consist of cumulative total returns, average annual
total returns, year-by-year rates or any combination thereof. Cumulative total
return represents the cumulative change in value of an investment in the Fund
for various periods. Average annual total return refers to the annual compound
rate of return of an investment in the Fund. The total return of the Fund is
increased to the extent that the Adviser has waived all or a portion of its
advisory fee or reimbursed all or a portion of the Fund's expenses. Total return
figures are based on historical performance of the Fund, show the performance of
a hypothetical investment and are not intended to indicate future performance.
Additional information about the Fund's performance is contained in the
Statement of Additional Information and the Fund's annual report to
shareholders, each of which may be obtained without charge by contacting the
Trust at the address or telephone numbers on the cover of this Prospectus.
FUND SHARES
The Trust was organized as a Massachusetts business trust in January 1985
under the name American Pension Investors Trust and is registered with the SEC
under the 1940 Act as an open-end management investment company. The Trust
currently consists of seven separate Series: the Capital Income Fund, the Growth
Fund, the T-1 Treasury Trust, the Yorktown Classic Value Trust, the Yorktown
Value Income Trust, the Treasuries Trust and the Multiple Index Trust. The Board
of Trustees may elect to add additional Series in the future, although it has no
present plan to do so. This Prospectus relates only to shares of the Capital
Income Fund.
The Trust is authorized to issue an unlimited number of shares of
beneficial interest without par value of separate Series. Shares of beneficial
interest of the Fund, when issued, are fully paid, nonassessable, fully
transferable, redeemable at the option of the shareholder and have equal
dividend and liquidation rights and noncumulative voting rights. The shares of
each Series of the Trust will be voted separately except when an aggregate vote
of all Series is required by the 1940 Act.
The Trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing trustees
unless and until such time as less than a majority of the trustees holding
office have been elected by shareholders, at which time the trustees then in
office will call a shareholders' meeting for the election of trustees. Under the
1940 Act, shareholders of record of no less than two-thirds of the outstanding
shares of the Trust may remove a trustee by vote cast in person or by proxy at a
meeting called for that purpose. The trustees are required to call a meeting of
shareholders for
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<PAGE>
the purpose of voting upon the question of removal of any trustee when requested
in writing to do so by the shareholders of record of not less than 10% of the
Trust's outstanding shares.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
MainStreet Trust Company, 1 Ellsworth Street, Martinsville, Virginia 24112,
serves as the Fund's custodian. Fund Services, Inc., 1500 Forest Avenue, Suite
111, Richmond, Virginia 23229, is the Fund's transfer and dividend disbursing
agent.
GENERAL INFORMATION
Fund shareholders are kept informed through semi-annual and annual reports.
Any inquiries should be directed in writing to the Trust at P.O. Box 2529, 2303
Yorktown Avenue, Lynchburg, Virginia 24501. Shareholders may direct general
telephone inquiries to the Trust at the numbers listed on the back cover of this
Prospectus. Telephone inquiries regarding shareholder account information should
be directed to the Fund's transfer agent at the number listed on the back cover
of this Prospectus.
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<PAGE>
APPENDIX
FOREIGN SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS
Foreign Securities
An underlying fund may invest up to 100% of its assets in securities of
foreign issuers. Investments in foreign securities involve risks relating to
political and economic developments abroad as well as those that may result from
the differences between the regulation to which U.S. issuers are subject and
that applicable to foreign issuers. These risks may include expropriation,
confiscatory taxation, withholding taxes on dividends and interest, limitations
on the use or transfer of an underlying fund's assets and political or social
instability or diplomatic developments. These risks often are heightened to the
extent an underling fund invests in issuers located in emerging markets.
Individual foreign economies may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. Securities of many foreign companies may be less liquid and
their prices more volatile than securities of comparable U.S. companies.
Moreover, the underlying funds generally calculate their net asset values and
complete orders to purchase, exchange or redeem shares only on days when the
NYSE is open. However, foreign securities in which the underlying funds may
invest may be listed primarily on foreign stock exchanges that may trade on
other days (such as U.S. holidays and weekends). As a result, the net asset
value of an underlying fund's portfolio may be significantly affected by such
trading on days when the Adviser does not have access to the underlying funds
and shareholders do not have access to the Fund.
Additionally, because foreign securities ordinarily are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect an underlying fund's net asset value, the value of dividends
and interest earned, gains and losses realized on the sale of securities and net
investment income and capital gain, if any, to be distributed to shareholders by
the underlying fund. If the value of a foreign currency rises against the U.S.
dollar, the value of the underlying fund's assets denominated in that currency
will increase; correspondingly, if the value of a foreign currency declines
against the U.S. dollar, the value of the underlying fund's assets denominated
in that currency will decrease. The exchange rates between the U.S. dollar and
other currencies are determined by supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation and other economic and political conditions. The costs attributable
to foreign investing that an underlying fund must bear frequently are higher
than those attributable to domestic investing. For example, the costs of
maintaining custody of foreign securities exceed custodian costs related to
domestic securities.
Foreign Currency Transactions
In connection with its portfolio transactions in securities traded in a
foreign currency, an underlying fund may enter into forward contracts to
purchase or sell an agreed upon amount of a specific currency at a future date
that may be any fixed number of days from the date of the contract agreed upon
by the parties at a price set at the time of the contract. Under such an
arrangement, concurrently with the entry into a contract to acquire a foreign
security for a specified amount of currency, the fund would purchase with U.S.
dollars the required amount of foreign currency for delivery at the settlement
date of the purchase; the fund would enter into similar forward currency
transactions in connection with the sale of foreign
20
<PAGE>
securities. The effect of such transactions would be to fix a U.S. dollar price
for the security to protect against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date the security is purchased or sold
and the date on which payment is made or received, the normal range of which is
three to fourteen days. These contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Although such contracts tend to
minimize the risk of loss due to a decline in the value of the subject currency,
they tend to limit commensurately any potential gain that might result should
the value of such currency increase during the contract period.
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<PAGE>
API TRUST CAPITAL INCOME FUND ACCOUNT APPLICATION
Please Make Checks Payable to and Addressed to: API TRUST
P.O. Box 26305, Richmond, Virginia 23260
For Questions Please Call: (800) 544-6060
Amount: $ Confirm #:
------------------------- -------------------------------
Minimum Initial Investment $500, Subsequent $100
ACCOUNT REGISTRATION
<TABLE>
<S> <C>
TYPE OF ACCOUNT CHECK ONE: [ ] [ ] JOINT [ ] GIFTS/TRANSFERS TO A [ ] TRUST [ ] BUSINESS
INDIVIDUAL TENANTS MINOR COMPLETE D COMPLETE E
COMPLETE A ONLY ONLY ONLY
COMPLETE A & B COMPLETE C ONLY
</TABLE>
A
<TABLE>
<S> <C>
- --------------------------------------------------- --- --- --- - --- --- - --- --- --- ---------------
First Name, Middle Initial, Last Name Social Security Number (Required) Date of Birth
B
- --------------------------------------------------- --- --- --- - --- --- - --- --- --- ---------------
First Name, Middle Initial, Last Name Social Security Number (Required) Date of Birth
</TABLE>
Joint account holders will be considered "joint tenants with rights of
survivorship" unless otherwise specified. Joint account holders may elect to
register their account as an "either/or" account. Such an election permits
shares to be redeemed and certain instructions to be honored upon the request of
any one of the account holders. By electing "either/or" status, checks or some
written requests with only one signature, from one tenant will be honored. If
"either/or" is elected, the joint account holders agree that the Fund, its
transfer agent and principal underwriter shall not be held liable for any loss
sustained as a result of complying with these instructions.
[ ] "Either/or" election [ ] All signatures required
C
<TABLE>
<S> <C>
- --------------------------------------------------- -------------------------
Custodian's Name (only one permitted) As Custodian For Minor's Name (only one permitted)
under the Uniform Gifts/Transfers to Minors Act.
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State Minor's Social Security Number (Required) Minor's Date of Birth
D
- --------------------------------------------------- ---------------------------------------------------
Name of Trustee Name of Trust
- --------------------------------------------------- ------------------------- -----------------------------
Name of Second Trustee (if any) Date of Trust (Required) Taxpayer Identification Number
(Required)
E
[ ] Corporation [ ] Partnership [ ] Other
- --------------------------------------------------- ---------------
Name of Business Specify
- --------------------------------------------------- ---------------------------------------------------
Taxpayer Identification Number Person to Contact Concerning Account
- --------------------------------------------------------------------------------
MAILING ADDRESS
- --------------------------------------------- --------------- --------------- ---------------
Street Address and Apartment Number or Box Number City State Zip Code
I am a: [ ] U.S. Citizen [ ] Resident Alien
------------------------------ ---------------------------
(Area Code) Day Phone (Area Code) Evening Phone
[ ] Non-Resident Alien
----------------------------
Please Specify Country
(ADDITIONAL INFORMATION REQUIRED ON REVERSE)
<PAGE>
CORPORATE AND TRUST CERTIFICATION
I hereby certify: (i) that I am the duly qualified Secretary of , a
corporation duly organized and existing under the laws of , or (ii) that
is/are the currently acting trustee(s) of , and that all actions by
shareholders, directors, trustees and other bodies necessary to execute this
Application and establish an account with API Trust have been taken; and
further, that any one of the following officers or trustees, unless a greater
number is specified, is, and until further notice to API Trust, will be duly
authorized and empowered to purchase, sell, assign, transfer, and withdraw
securities and funds from the account established hereby.
Dated this day of , 19
----- ------------ -----
- ---------------------------------------------------- ----------------------------------------------------
Name Title Signature of Secretary or Trust Officer
If more than one signature is required on the account, please specify the number
of signatures required and identify the individuals below:
- ---------------------------------------------------- ----------------------------------------------------
Name Title Signature
- ---------------------------------------------------- ----------------------------------------------------
Name Title Signature
</TABLE>
LIMITED AUTHORIZATION
I hereby authorize API Trust, its transfer agent and its principal underwriter
to transmit information (such as statements) and to honor redemption
instructions from the party designated below concerning my account:
Broker/Dealer [ ] Investment Adviser [ ]
<TABLE>
<S> <C>
- ---------------------------------------------------- ----------------------------------------------------
Firm Name Firm Address
( )
- ---------------------------------------------------- ----------------------------------------------------
Main Office Phone Number Client Securities Firm Account No.
- ---------------------------------------------------- ----------------------------------------------------
Registered Representative Name
</TABLE>
DISTRIBUTION OPTIONS
If no box below is checked, all distributions (dividends and capital gains) will
be reinvested in additional shares.
[ ] I would like all dividends and capital gains (if any) reinvested in my
account.
[ ] I would like all dividends and capital gains (if any) paid to me in cash.
[ ] I would like all dividends (if any) paid to me in cash and all capital gains
(if any) reinvested in my account.
AUTOMATIC INVESTMENT PLAN
Purchases through the Automatic Investment Plan are effected on the 15th day of
the month (or the following business day). Check one:
[ ] Monthly Investment [ ] Quarterly Investment
(March, June, September, December)
Amount of Systematic Investment $___________________ ($100 Minimum)
PLEASE ATTACH A VOIDED CHECK TO THIS APPLICATION.
SYSTEMATIC WITHDRAWAL PLAN
(The minimum initial investment or public offering price of any existing
account must be $10,000 or more.)
[ ] Check here if you would like additional information and the Application
for Systematic Withdrawal Plan sent to you.
SIGNATURES
I acknowledge receipt of a current prospectus of Yorktown Classic Value Trust
and agree to be bound by its terms and the terms set forth herein. As required
by law and under penalties of perjury, I certify that (1) the Social Security or
other taxpayer identification number (TIN) provided on this application is my
correct TIN, and (2) currently I am not under IRS notification that I am subject
to backup withholding. (Please strike out clause (2) if you are currently under
notification.)
<TABLE>
<S> <C>
- ---------------------------------------------------- ----------------------------------------------------
Applicant Date Joint Applicant Date
- ---------------------------------------------------- ----------------------------------------------------
Other Authorized Signature Date Other Authorized Signature Date
</TABLE>
<PAGE>
EXECUTIVE OFFICES
American Pension Investors Trust
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060
INVESTMENT ADVISER
Yorktown Management & Research
Company, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060
DISTRIBUTOR
Yorktown Distributors, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060
TRANSFER AND DIVIDEND
DISBURSING AGENT
Fund Services, Inc.
P.O. Box 26305
Richmond, Virginia 23260
(800) 628-4077
CUSTODIAN
MainStreet Trust Company
P.O. Box 5228
Martinsville, Virginia 24115
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
250 West Pratt Street
Baltimore, Maryland 21201
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information and
representations must not be relied upon as having been authorized by the Trust
or its distributor. This Prospectus does not constitute an offering by the Trust
or its distributor in any jurisdiction to any person to whom such offering may
not lawfully be made.
CAPITAL INCOME FUND
PROSPECTUS
[API TRUST LOGO]
THIS PROSPECTUS IS DATED OCTOBER 1, 1997
