As filed with the Securities and Exchange Commission on May 1, 1998
Registration No. 33-7190
Investment Company Act File No. 811-4750
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Post-Effective Amendment No. 22 |X|
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 25 |X|
FENIMORE ASSET MANAGEMENT TRUST
(Exact Name of Registrant as Specified in Charter)
111 North Grand Street, P.O. Box 399, Cobleskill, N.Y. 12043
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 453-4392
Allan S. Mostoff, Esq.
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
(Name and Address of Agent for Service)
Copies to:
Thomas O. Putnam
118 North Grand Street
Cobleskill, N.Y. 12043
It is proposed that this filing will become effective on May 1, 1998 pursuant to
paragraph (b) of Rule 485.
<PAGE>
CROSS REFERENCE SHEET
REQUIRED BY RULE 495 UNDER THE
SECURITIES ACT OF 1933
FENIMORE ASSET MANAGEMENT TRUST
This filing relates to FAM Value Fund and FAM Equity Income Fund (the
"Funds") each of which are separate investment series of Fenimore Asset
Management Trust (the "Trust") and contains the Prospectus and Statement of
Additional Information relating to the Funds.
Items Required by Form N-1A
---------------------------
Item Number in Part A Prospectus Caption
- --------------------- --------------------
1. Cover Page.................................. Cover Page
2. Synopsis.................................... Fund Expenses
3. Condensed Financial
Information............................... Selected Financial Information
4. General Description of
Registrant................................ General Information and
Capital; Investment
Objective and Investment
Policies
5. Management of the Fund...................... General Information and
Capital; Investment Objective
and Investment Policies;
Investment Advisor
5A. Management's Discussion of
Fund Performance.......................... Included in the Annual Report
of the Registrant
6. Capital Stock and Other
Securities................................ How to Purchase Shares;
Redemption of Shares; Federal
Income Tax Considerations
7. Purchase of Securities
Being Offered............................. How to Purchase Shares;
Purchases Through Selected
Dealers
8. Redemption or Repurchase.................... Redemption of Shares
9. Pending Legal Proceedings................... Inapplicable
<PAGE>
Item Number in Part B Statement of Additional
- --------------------- Information Caption
-----------------------
10. Cover Page.................................. Cover Page
11. Table of Contents........................... Table of Contents
12. General Information and
History................................... Investment Objective and
Policies
13. Investment Objectives and
Policies.................................. Investment Objective and
Policies
14. Management of the Fund...................... History and Background of
Investment Advisor
15. Control Persons and Principal
Holders of Securities..................... Board of Trustees and Officers
16. Investment Advisory and other
Services.................................. History and Background of
Investment Advisor
17. Brokerage Allocation........................ Brokerage Allocations
18. Capital Stock and Other
Securities................................ See Prospectus - General
Information and Capital
19. Purchase, Redemption and
Pricing of Securities
Being Offered............................. Purchase of Shares; Redemption
of Shares
20. Tax Status.................................. Certain Federal Income
Tax Considerations
21. Underwriters................................ Inapplicable
22. Calculations of Performance
Data...................................... Performance Information
23. Financial Statements........................ Financial Statements
-2-
<PAGE>
FAM FUNDS
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111 North Grand Street, P.O. Box 399, Cobleskill, New York, 12043
Telephone Number (800) 932-3271
A "FAM"ILY OF NO-LOAD FUNDS
May 1, 1998
FAM FUNDS, ['FAM'], a family of no-load mutual funds, currently offers two
diversified open end, no-load mutual funds. As no-load funds, shares purchased
directly from FAM are not subject to sales charges, commissions, or any deferred
sales charges, and there are no 12b-1 service or distribution fees.
This prospectus describes FAM Value Fund and FAM Equity-Income Fund. It is the
objective of the Value Fund to maximize long term total return on capital. FAM
Equity-Income has an objective to provide current income as well as long term
capital appreciation by investing primarily (at least 65% of total assets) in
income-producing equity securities. The Funds seek to achieve their objectives
through a "value approach" to common stock selection. The investment manager of
FAM Funds is Fenimore Asset Management, Inc.
Each Fund is a separate investment series of Fenimore Asset Management Trust
which is registered with the Securities and Exchange Commission ("SEC") as an
open-end investment management company. This Prospectus has been designed to
provide you with concise information that an investor should know about the
Funds before investing. Please read the information carefully and retain this
document for future reference.
A Statement of Additional Information for the Funds, dated this same date, has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. A copy is available without charge at the address and
telephone number shown above.
The shares offered by this Prospectus are not deposits or obligations of, or
insured, guaranteed, or endorsed by, any bank, the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency, entity or person.
The purchase of any Fund shares involves investment risks, including the
possible loss of principal.
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.
- -------------------------------------------------------------------------------
Investment Advisor:
Fenimore Asset Management, Inc.
118 North Grand Street
Cobleskill, New York 12043
<PAGE>
TABLE OF CONTENTS
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Page
- -------------------------------------------------------------------------------
Expense Information......................................................... 3
Selected Financial Information.............................................. 4
Investment Objective........................................................ 6
Investment Philosophy....................................................... 6
Investment Advisor.......................................................... 7
Investment Policies......................................................... 8
Risk Factors and Special Considerations..................................... 9
How to Purchase Shares...................................................... 9
Fund Purchases and Trade Date............................................... 9
Account Minimums........................................................... 10
Net Asset Value............................................................ 10
Wire Instructions.......................................................... 11
IRA and Retirement Accounts................................................ 11
Purchases Through Selected Dealers......................................... 12
Redemption of Shares....................................................... 12
Shareholder services....................................................... 13
FAMVest Automatic Investment Plan.......................................... 13
Telephone Numbers.......................................................... 13
Fund Statements and Reports................................................ 13
Systematic Withdrawal Plan................................................. 13
Fund Policies.............................................................. 14
Signature Guarantees....................................................... 14
Address Changes............................................................ 14
Distribution Options....................................................... 14
Transferring Ownership of Shares........................................... 15
Backup Withholding Instructions............................................ 15
Performance Information.................................................... 15
Federal Income Tax Considerations.......................................... 16
General Information and Capital............................................ 16
Fund Auditors.............................................................. 16
Distributor and Transfer Agent............................................. 16
Shareholder Servicing Agent................................................ 17
Broker Allocations......................................................... 17
2
<PAGE>
EXPENSE INFORMATION
The purpose of the following table is to assist the investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
FAM VALUE FAM EQUITY-
SHAREHOLDER TRANSACTION EXPENSES FUND INCOME FUND
- -------------------------------------------------------------------------------
Sales Load Imposed on Purchases None None
Sales Load Imposed on Reinvestment of Dividends None None
Exchange Fees None None
Redemption Fees None* None*
Deferred Sales Load None None
- -------------------------------------------------------------------------------
* The Funds' custodian bank imposes an $8 wire redemption fee on shareholders
who request a wire redemption from the Funds.
Annual Fund Operating Expenses are paid out of each Fund's assets and may
include fees for investment management services, maintenance of shareholder
accounts, shareholder servicing, accounting, and other services.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<S> <C> <C> <C> <C>
Management Fee 12b-1 Fees Other Expenses Total Expenses
- ---------------------------------------------------------------------------------------------------------------
FAM Value Fund 1.0% None .24% 1.24%
FAM Equity-Income Fund 1.0% None .50% 1.50% (1)
- ---------------------------------------------------------------------------------------------------------------
<FN>
(1) The Fund's investment advisor has voluntarily agreed to temporarily limit
the total operating expenses of the FAM Equity-Income Fund to 1.5% of its
average daily net assets for its current fiscal year. Without this voluntary
expense limitation, the total operating expenses for FAM Equity-Income Fund
would have been 2.50% for the year ended December 31, 1997. After December 31,
1998, this expense limitation may be terminated, continued, or modified by the
Advisor in its sole discretion.
</FN>
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
- ---------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------
FAM Value Fund $13 $39 $68 $150
FAM Equity-Income Fund $15 $47 $82 $179
This example should not be considered a representation of past or future
expenses or performance. Actual expenses and performance may be greater or
lesser than those shown.
3
<PAGE>
FAM VALUE FUND
SELECTED FINANCIAL INFORMATION
-------------------------------
The following table of selected financial information for the years ended
December 31, 1997, 1996, 1995, 1994, 1993 and 1992 have been audited by
McGladrey & Pullen, LLP, independent certified public accountants, whose report
thereon, which is incorporated by reference, appears in the Fund's Annual Report
to Shareholders. The information for periods prior to January 1, 1992, was
audited by other independent certified public accountants.
<TABLE>
(For a share outstanding throughout
the year) 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year........$26.53 $24.58 $21.04 $20.40 $20.50 $16.87 $12.06 $12.85 $10.78 $8.14
------ ----- ----- ----- ----- ----- ----- ----- ----- ----
Income from investment operations:
Net investment income..................... 0.08 0.18 0.21 0.12 0.09 0.10 0.08 0.08 0.08 0.29
Net realized and unrealized gain (loss)
on investments........................... 10.29 2.58 3.94 1.27 (0.05) 4.11 5.63 (0.77) 2.11 2.60
----- ---- ---- ----- ---- ---- ---- ---- ---- ----
Total from investment operations.......... 10.37 2.76 4.15 1.39 0.04 4.21 5.71 (0.69) 2.19 2.89
----- ---- ---- ---- ---- ---- ---- ---- ---- ----
Less distributions:
Dividends from net investment income...... (0.08) (0.18) (0.21) (0.12) (0.09) (0.10) (0.08) (0.08) (0.06) (0.25)
Distributions from net realized gains..... (1.06) (0.63) (0.40) (0.63) (0.05) (0.48) (0.82) (0.02) (0.06) 0.00
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total distributions....................... (1.14) (0.81) (0.61) (0.75) (0.14) (0.58) (0.90) (0.10) (0.12) (0.25)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Change in net asset value for the year.... 9.23 1.95 3.54 0.64 (0.10) 3.63 4.81 (0.79) 2.07 2.64
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value, end of year..............$35.76 $26.53 $24.58 $21.04 $20.40 $20.50 $16.87 $12.06 $12.85 $10.78
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return ............................. 39.06% 11.23% 19.71% 6.82% 0.21% 25.08% 47.63% -5.36% 20.32% 35.50%
Ratios/supplemental data
Net assets, end of year (000)........ $333,159 $253,378 $267,158 $210,579 $220,138 $44,694 $13,973 $6,449 $4,665 $2,028
Ratios to average net assets of:
Expenses......................... 1.24% 1.27% 1.25% 1.39% 1.39% 1.50% 1.49% 1.53% 1.51% 1.48%
Net investment income............ 0.25% 0.64% 0.92% 0.58% 0.58% 0.81% 0.66% 0.72% 0.56% 2.89%
Portfolio turnover rate................... 9.47% 12.48% 9.67% 2.15% 4.83% 9.84% 13.56% 9.19% 14.97% 12.40%
Average commission rate paid
(per share)*.............................. $0.0409 $0.0497
<FN>
* For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average cimmission rate paid per share for security trades on
which commissions are charged.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
------------------------------
FAM EQUITY-INCOME FUND
SELECTED FINANCIAL INFORMATION
The following table of selected financial information for the year ended
December 31, 1997 and for the period April 1, 1996 (inception) to December 31,
1996 has been audited by McGladrey & Pullen, LLP, independent certified public
accountants, whose report thereon, which is incorporated by reference, appears
in the Fund's Annual Report to Shareholders.
- -------------------------------------------------------------------------------
<S> <C> <C>
Per Share Information Year Ended April 1, 1996
(For a share outstanding December 31, (inception) to
throughout the period) 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------
Net asset value, beginning of period . . . . . . . . . . . . . . $10.99 $10.00
----- ------
Income from investment operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . 0.27 0.19
Net realized and unrealized gain
on investments . . . . . . . . . . . . . . . . . . . . . . . . 2.65 0.99
---- ----
Total from investment operations . . . . . . . . . . . . . . . . 2.92 1.18
Less distributions:
Dividends from net investment income . . . . . . . . . . . . . . (0.27) 0.19
Distributions from net realized gains . . . . . . . . . . . . . (0.44) --
----- -----
Total distributions. . . . . . . . . . . . . . . . . . . . . . . (0.71) (0.19)
----- -----
Change in net asset value for the period . . . . . . . . . . . . 2.21 0.99
----- -----
Net asset value, end of period . . . . . . . . . . . . . . . . . $13.20 $10.99
===== ======
Total Return** . . . . . . . . . . . . . . . . . . . . . . . . . 26.90% 15.90%
Ratios/supplemental data
Net assets, end of period (000). . . . . . . . . . . . . . . . . $4,386 $2,539
Ratios to average net assets of:**
Expenses, total . . . . . . . . . . . . . . . . . . . . . . . 2.50% 5.04%
Expenses, net of fees waived and
expenses assumed by advisor . . . . . . . . . . . . . . . . 1.50% 1.50%
Net investment income . . . . . . . . . . . . . . . . . . . . 2.27% 3.05%
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . 15.63% 0.00%
Average commission rate paid (per share)*. . . . . . . . . . . . $0.0535 $0.0460
<FN>
* For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate paid per share for security trades on
which commissions are charged.
** Annualized for period less than one year.
</FN>
</TABLE>
5
<PAGE>
----------------------
INVESTMENT OBJECTIVES
FAM offers two mutual funds with distinctly different investment objectives. The
Funds seek to achieve their objective through a "value approach" to common stock
selection. Under normal market conditions, each Fund is expected to be fully
invested in common stocks and securities that are convertible into common
stocks.
FAM VALUE FUND has an investment objective to maximize long term total return on
capital. To achieve this objective the Fund intends to seek both appreciation
and to a lesser degree dividend income, which constitute the two principal
components of a common stock investment return. This investment may be an
appropriate investment vehicle for a long term shareholder whose focus is
capital appreciation.
FAM EQUITY-INCOME has an investment objective of providing current income as
well as long term capital appreciation for its shareholders by investing
primarily (at least 65% of its total assets) in income-producing equity
securities. This Fund may be an appropriate investment for shareholders who
primarily seek capital appreciation where income is an additional consideration.
The investment objective of each Fund is a fundamental policy and, as such, may
not be changed without a vote of majority of each Fund's shareholders. The
investment manager to both Funds is Fenimore Asset Management, Inc.
------------------------
INVESTMENT PHILOSOPHY
FAM's investment philosophy is to seek out well-managed, financially sound
companies that it considers to be undervalued in the marketplace. Utilizing
basic Graham and Dodd investment principles, FAM is categorized as a bottom-up
value manager and strives to select companies that have reasonable long term
growth expectations.
FAM's fundamental investment philosophy is based upon the four following tenets:
GOOD BUSINESSES
FAM searches for businesses that are understandable, highly profitable,
and are part of industry groups that can be fairly evaluated.
FINANCIALLY STRONG COMPANIES
FAM uses many criteria to determine the true business worth of a
company, including cash flow and balance sheet analysis. Specifically,
FAM will be seeking to invest Fund assets in companies that may have
some or all of the following characteristics: high returns on capital,
low debt structures, strong working capital positions, and a high level
of insider ownership.
6
<PAGE>
UNDERVALUED OPPORTUNITIES
FAM employs a "value approach" in making its common stock selections
when it manages each Fund's assets. This approach is based upon FAM's
belief that at any given point in time the securities of some companies
sell at a discount from their true business worth. Factors considered
include the company's current earnings and FAM's opinion as to its
future earnings potential. After identifying a company whose securities
are determined by FAM to have a favorable price-to-value relationship,
FAM plans to invest the Fund's assets in such securities and to hold
them until their intrinsic value becomes fully reflected in the market
price of such securities.
ABLE MANAGEMENT TEAMS
Some of the securities in which FAM invests are issued by companies
which may not be well known to the general public or have strong
institutional ownership or recognition. Before purchasing these
securities FAM places considerable emphasis upon evaluating
management's ability through personal conversations and/or meetings
with corporate officers. Such conversations and/or meetings are
extensive and continue throughout FAM's interest in the company and its
securities. FAM also examines the amount of stock owned by insiders,
including members of management.
In addition to the above tenets, FAM Equity-Income Fund employs the following
principle:
DIVIDEND YIELD AND STABILITY
Recognizing that current income is important to shareholders, the Fund
seeks out common stocks, preferred stocks, or other investments
convertible into common stock, that provide reasonable income. FAM
analyzes the historical dividend payout ratios of such securities, the
growth of such ratios, and future potential dividends.
Over time, dividend income has proven to be an important component of
total return. Also, dividend income tends to be a more stable source of
total return than capital appreciation. While the price of a company's
common stock can be significantly affected by market fluctuations and
other short term factors, its dividend payments usually have greater
stability. For this reason, securities which pay a high level of
dividend income are generally less volatile in price than securities
which pay a low level of dividend income.
Although the objective is to select stocks with these characteristics,
FAM is aware that it is unrealistic to assume that each selection will
have all or even several of the above characteristics.
FAM'S INVESTMENT APPROACH REQUIRES PATIENCE ON THE PART OF THE INVESTOR DUE TO
ITS INVESTMENT PHILOSOPHY WHICH IS LONG TERM IN NATURE. EACH FUND IS AN
APPROPRIATE INVESTMENT FOR THOSE WHOSE GOAL IS TO CAPITALIZE ON SHORT TERM
MARKET FLUCTUATIONS OR IF SHORT TERM MARKET CORRECTIONS WOULD CAUSE YOU TO SELL
YOUR SHARES.
-------------------
INVESTMENT ADVISOR
FAM Funds retain Fenimore Asset Management, Inc., ("Fenimore"), a New York
corporation majority-owned by Mr. Thomas O. Putnam, as its Investment Advisor
under an annual contract. Fenimore has been continuously offering investment
advisory and consulting services under contract since 1975 to individuals,
pension, profit sharing, IRA and Keogh plans, corporations, and non-profit
organizations generally located in a service area that includes the continental
United States. Mr. Putnam, Fenimore's principal investment professional, was
born in 1944, has been actively employed as an investment advisor since 1974,
7
<PAGE>
and holds responsibilities for Fenimore's investment management and research
activities. Mr. Putnam is the sole shareholder of FAM Shareholder Services,
Inc., FAM's shareholder servicing agent. Mr. Putnam co-manages both FAM VALUE
FUND and FAM EQUITY-INCOME FUND. Diane C. Van Buren, co-manager of FAM VALUE
FUND, is employed by the Fund's advisor as Investment Management Associate. She
has been actively involved in investment and portfolio management and research
activities since 1980. Paul C. Hogan, CFA, co-manager of FAM EQUITY-INCOME, is
also employed by the Fund's advisor as Investment Research Analyst. He has been
actively involved in investment research activities since 1991. Fenimore employs
a staff of experienced investment professionals to manage assets for other
corporate and individual clients.
Mr. Putnam, as principal officer of Fenimore, serves as President and Chairman
of the Board of Trustees of Fenimore Asset Management Trust. Under the terms of
the investment advisory contract, Fenimore receives a monthly fee from each Fund
equal to 1% per annum of the average daily market value of its net assets. The
rate is consistent with that being charged by Fenimore to manage its other
client accounts and has been established in recognition that the
advisor has agreed to assume certain expenses, including all distribution
expenses of the Funds.
FAM Funds and the Advisor have jointly adopted a Code of Ethics which places
certain express restrictions on the personal trading practices of personnel of
both the FAM Funds and the Advisor. This Code of Ethics complies in all material
respects with the recommendations set forth in the 1994 Report of the Advisory
Group on Personal Investing of the Investment Company Institute. In addition,
FAM Funds and the Advisor have developed procedures that provide for the
administration and enforcement of the Code through the continuous monitoring of
personal trading practices.
-------------------
INVESTMENT POLICIES
Under normal market conditions each Fund will attempt to remain fully invested
in common stocks and securities that are convertible into common sticks, such as
convertible bonds and convertible preferred stocks. To the extent the Funds
invest in convertible securities, the Funds will only acquire convertible issues
having an S&P rating of A or better. For temporary defensive purposes, the Funds
may also invest all of their assets in fixed-income securities. Generally, each
Fund only intends to invest in fixed-income securities when, in the opinion of
Fenimore, common stocks possess higher risks than are commensurate with the
potential rewards anticipated and fixed-income securities present a viable
alternative. Such fixed-income securities may include some or all of the
following:
(1) U.S. Treasury notes, bonds or bills, which carry the full faith
and credit of the U.S. government;
(2) securities issued by any of the agencies of the U.S.
Government, such as the Federal National Mortgage Association and
the Federal Home Loan Bank Board;
(3 deposits in or certificates issued by any member bank of the
Federal Reserve System; and
(4) corporate bonds or notes of issuing companies that FAM has
analyzed and believes to be financially sound, with such issues
being either high grade (i.e., ranked within the top three rating
categories by one or more of the recognized credit rating
agencies), or non-rated and issued by companies that FAM has
analyzed and believes to be equivalent.
8
<PAGE>
FAM may also invest in those regulated investment companies commonly referred to
as "money market funds," which restrict themselves to investments in similar
quality short term fixed securities, primarily U.S. Treasury and government
agency securities. Purchases of such money market funds will be limited to 10%
of each Fund's assets at market, with investment in any single fund not to
exceed 5% of either Fund's assets at any one time. As a result of the Funds'
investing in such money market funds, shareholders of each Fund will bear not
only their proportionate share of the operating and investment advisory expenses
of their respective Fund, but they will also indirectly bear similar expenses of
the underlying money market funds during the period in which their Fund is
invested in such funds.
FAM Equity-Income Fund has an objective to provide current income as well as
long term capital appreciation. For this reason, the Fund may invest up to 35%
of its total assets in fixed-income securities. The Fund may also invest in the
common stocks of real estate investment trusts. Real estate investment trusts
may include equity real estate investment trusts, which generally invest in
commercial real estate properties, and mortgage real estate investment trusts,
which generally invest in real estate related loans. Equity real estate
investment trusts may be affected by changes in the value of the underlying
property owned by the trust, while mortgage real estate investment trusts may be
affected by the quality of credit extended.
--------------------------------------
RISK FACTORS AND SPECIAL CONSIDERATIONS
Under normal market conditions, each fund is expected to be fully invested in
common stocks and securities that are convertible into common stocks.
Accordingly, an investment in the FAM Funds is subject to the type of market
risk that is generally associated with equity investments. The value of the
Funds' investments may be affected by changes in the value of the overall stock
market such that the value of your investment upon redemption may be more or
less than the initial amount invested. In addition, investors should be aware
that there can be no assurance that the Funds will fulfill their investment
objective.
-----------------------
HOW TO PURCHASE SHARES
FUND PURCHASES AND TRADE DATE
To establish an account, complete and sign the appropriate application and mail
it, along with your check to FAM Funds, P.O. Box 399, Cobleskill, NY 12043.
Checks should be made payable to the appropriate fund. Please be sure to provide
your Social Security or taxpayer identification number. Cash will not be
accepted. Any applications received not following the above guidelines will be
returned.
The date on which your purchase is credited is your trade date. For purchases
made by check or Federal Funds wire and received by the close of regular trading
on the New York Stock Exchange (generally 4:00 p.m. Eastern time) the trade date
is the date of receipt. For purchases received after the close of regular
trading on the Exchange the trade date is the next business day. Shares are
purchased at the Net Asset Value ("NAV") determined on your trade date.
FAM reserves the right to reject purchase applications or to terminate the
offering of shares made by this Prospectus if, in the opinion of the Board of
Trustees, such termination and/or rejection would be in the best interest of
existing shareholders. In the event that your check does not clear, your
order(s) will be canceled and you may be liable for losses or fees incurred, or
both. FAM has a policy of waiving the minimum initial investment for Fund
trustees, and employees and affiliated persons (including family members) of the
Advisor.
9
<PAGE>
All applications to purchase Fund shares are subject to acceptance by FAM and
are not binding until so accepted. FAM does not accept telephone orders for
the purchase of shares, and it reserves the right to reject applications in
whole or in part.
ACCOUNT MINIMUMS
To begin an investment in the FAM Funds the following minimum initial
investments must be met. All subsequent investments to an existing account
require a minimum of $50.
<TABLE>
<S> <C> <C>
FAM Value Fund FAM Equity-Income Fund*
- -------------------------------------------------------------------------------------------------------------------
To open a new account $2,000 $10,000
To open a new retirement account
{IRA, SEP, or 403(b)(7)} $ 100 $2,000
To open a Uniform Transfer to Minors (UTMA) or
Uniform Gift to Minors (UGMA) account $ 500 $10,000
To open a new account with FAMVest** $ 500 $10,000
- -------------------------------------------------------------------------------------------------------------------
<FN>
*Due to the investment objective of FAM Equity-Income Fund, minimum
investments in this Fund are higher than those of FAM Value Fund.
**FAMVest is FAM Fund's Automatic Investment Plan which requires the
systematic addition of at least $50 per month, as described below. Please refer
to "Redemption of Shares" on page ___.
</FN>
</TABLE>
NET ASSET VALUE
The Net Asset Value ("NAV") is calculated each day at the close of regular
trading on the New York Stock Exchange and on such other days as there is
sufficient trading in the Funds' portfolio of securities to materially affect
its NAV per share. Securities in the Funds' portfolio will ordinarily be valued
based upon market quotes. If quotations are not available, securities or other
assets will be valued by a method which the Board of Trustees believes most
accurately reflects fair value. The NAV per share is determined at each
calculation by dividing the total market value of all assets, cash and
securities held, less liabilities, if any, by the total number of shares
outstanding that day.
10
<PAGE>
WIRE INSTRUCTIONS
If you wish to wire funds to establish a new account, please use the following
instructions. Investors establishing new accounts by wire should first forward
their completed Account Application to FAM Funds stating that the account will
be established by wire transfer and the expected date and amount of the
transfer. Further information regarding wire transfers is available by calling
(800) 932-3271. FAM must have receipt of a wire transfer no later than 4:00 P.M.
in order for the purchase to be made that same business day.
FAM VALUE FUND: FAM EQUITY-INCOME FUND:
- --------------------------------------------------------------------------------
Key Bank of New York Key Bank of New York
ABA #021300077 ABA #021300077
For further credit to For further credit to
account #32531 000 6565 account #32531 001 8610
FAM Value Fund FAM Equity-Income Fund
Fund Investment for: (Name and/or Fund Investment for: (Name and/or
Account Number) Account Number)
If you wish to wire funds to an existing account, please use the same
instructions listed above.
IRA AND RETIREMENT ACCOUNTS
An individual having earned income and her or his spouse may each have one or
more Individual Retirement Accounts, or "IRAs", the number and amounts limited
only by the maximum allowed contribution per year. Existing IRA accounts may be
rolled over or transferred at any time into a new IRA account, which may be
invested in Fund shares. Chase Manhattan Bank, N.A., is empowered and agrees to
act as custodian of shares purchased. Monies deposited into an IRA account may
be invested in shares of one of the Funds upon the filing of the appropriate
forms. Forms establishing traditional IRAs, Roth IRAs, Education IRAs, SEP-
IRAs, Simple Plans and 403(b)(7) plans are available by calling FAM Funds at
(800) 932-3271. The annual maintenance fee for IRAs and other retirement
accounts is $15, however, this annual fee is waived for retirement accounts with
balances in excess of $10,000. Should an investor choose to invest in both
Funds, only one annual maintenance fee will be charged. In addition, if an
investor has more than one retirement account, only one annual maintenance fee
is charged. Investors are urged to consult with a tax advisor in connection with
the establishment of retirement plans.
Monies or deposits into other types of retirement plans and/or Keogh accounts
may also be invested in FAM Fund shares. However, the qualification and
certification of such plans must first be prearranged by the investor's own tax
specialists who would assist and oversee all plan compliance requirements.
Although FAM endeavors to provide assistance to those investors interested in
such plans, it neither offers nor possesses the necessary professional skills or
knowledge regarding the establishment or compliance maintenance of retirement
plans. Therefore, it is recommended that professional counsel be retained by the
investor before investing such monies in shares of FAM Funds.
No signature guarantee is required if a shareholder elects to transfer an IRA,
SEP IRA, or 403(b)(7) plan to another custodian or in the event of a mandatory
distribution.
11
<PAGE>
PURCHASES THROUGH SELECTED DEALERS
Certain Selected Dealers may effect transactions of the FAM Funds. FAM may
accept orders from broker-dealers who have been previously approved by the
Funds. It is the responsibility of such broker-dealers to promptly forward
purchase or redemption orders to the Funds. Although there is no sales charge
levied directly by the Funds, broker-dealers may charge the investor a
transaction-based fee for their services at either the time of purchase or the
time of redemption. Such charges may vary amongst broker-dealers but in all
cases will be retained by the broker-dealer and not remitted to the FAM Funds or
the Advisor. The Advisor may make payments to such companies out of its own
resources to compensate these companies for certain administrative services
provided in connection with the Funds. Shareholders who wish to transact through
a broker-dealer should contact FAM at (800) 932-3271 for further information.
REDEMPTION OF SHARES
Shareholders wishing to redeem shares may tender them to FAM any business day by
executing a written request for redemption, in good order as described below,
and delivering the request by mail or by hand to the Funds, 111 North Grand
Street, P.O. Box 399, Cobleskill, NY 12043. FAM offers no telephone redemptions.
DEFINITION OF GOOD ORDER: Good order means that the written redemption request
must include the following:
1. The Fund account number, name, and Social Security or Tax I.D. number.
2. The amount of the transaction (specified in dollars or shares).
3. Signatures of all owners exactly as they are registered on the account.
4. Signature guarantees are required if the value of shares being redeemed
exceeds $25,000; or if payment is to be sent to an address other than
the address of record; or if payment is to be made payable to a payee
other than the shareholder; or if there has been an address change in
the last 30 days.
5. Certificates, if any are held, signed and containing a proper signature
guarantee.
6. Other supporting legal documentation that might be required, in the case
of retirement plans, corporations, trusts, estates and certain other
accounts.
Shareholders requesting redemption proceeds to be wired from FAM will incur a $8
wire fee charged by the Funds' custodian.
Shareholders may sell all or any portion of their shares on any such business
day that NAV is calculated. Such shares will be redeemed by FAM at the next such
calculation after such redemption request is received and accepted by FAM. When
a redemption occurs shortly after a recent purchase made by check, FAM Funds may
hold the redemption proceeds beyond 7 days but only until the purchase check
clears, which may take up to 15 days or more. IF YOU ANTICIPATE REDEMPTIONS SOON
AFTER YOU PURCHASE YOUR SHARES, YOU ARE ADVISED TO WIRE FUNDS TO AVOID DELAY.
FAM reserves the right, however, to withhold payment up to seven (7) days if
necessary to protect the interests and assets of the Funds and their
shareholders. In the event the New York Stock Exchange is closed for any reason
other than normal weekend or holiday closing or if trading on that exchange is
restricted for any reason, or in the event of any emergency circumstances as
determined by the Securities and Exchange Commission, the Board of Trustees
shall have the authority and may suspend redemptions or postpone payment dates
accordingly.
Redemption of shares, whether it be a normal voluntary redemption or an
involuntary redemption, may result in the shareholder realizing a taxable
capital gain or loss.
12
<PAGE>
---------------------
SHAREHOLDER SERVICES
FAMVEST
AUTOMATIC INVESTMENT PLAN
FAM Funds offers FAMVest, an automatic investment plan whereby authorization is
granted and instructions are provided to charge the regular bank checking
account of a shareholder on a regular basis to provide systematic additions to
the shareholder's account. The bank at which the shareholder checking account is
maintained must be a member of the Automated Clearing House (ACH). While there
is no charge to shareholders for this service, a charge of $10.00 may be
deducted from a shareholder's Fund account in case of returned items. NOTE:
Individual Retirement Account ("IRA") contributions made through FAMVest are
assumed to be current year contributions. A shareholder's FAMVest may be
terminated at any time without charge or penalty by the shareholder or the Fund.
TOLL-FREE TELEPHONE NUMBERS
AND AUTO-ACCESS LINE
For your convenience, FAM Funds offers two toll-free numbers.
LIVE LINE (800) 932-3271
For shareholders who prefer the "human" touch, our live line is answered
personally by an associate ready to assist you with your call. Our hours of
operation are Monday through Friday 8:30 a.m. to 5:00 p.m. Eastern Standard
time.
AUTO-ACCESS LINE (800) 453-4392
For shareholders who prefer the convenience of automation, our Auto-Access line
offers:
*24 - hour a day availability
*latest closing price
*automatic access to individual account balances and transactions
NOTE: FAM FUNDS DOES NOT ALLOW TELEPHONE PURCHASES OR REDEMPTIONS.
FUND STATEMENTS AND REPORTS
Each Fund will mail an updated account statement anytime there is a transaction
in your account. Additionally, account statements are mailed to all shareholders
on a quarterly basis. Financial reports of the Funds are mailed to all
shareholders twice a year as of June 30 and December 31.
SYSTEMATIC WITHDRAWAL PLAN
For your convenience you may elect to have automatic periodic redemptions from
your account. Shareholders who wish to participate in the systematic withdrawal
plan must complete the appropriate form and return it to FAM 30 days prior to
the first scheduled redemption.
13
<PAGE>
---------------
FUND POLICIES
SIGNATURE GUARANTEES
For our mutual protection, signature guarantees may be required on certain
written transaction requests. A signature guarantee verifies the authenticity of
your signature and may be obtained from "eligible guarantor institutions".
Eligible guarantor institutions include (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities exchanges,
registered securities associations and clearing agencies; (3) securities
broker-dealers which are members of a national securities exchange or a clearing
agency or which have minimum net capital of $100,000; or (4) institutions that
participate in the Securities Transfer Agent Medallion Program ("STAMP") or
other recognized signature medallion program.
A signature guarantee cannot be provided by a notary public.
Signature guarantees will be required under the following circumstances:
1. Redemption of Shares IF:
* the value of shares being redeemed exceeds $25,000
* payment is requested payable to a payee other than the
shareholder of record
* payment is to be sent to an address other than the
address of record
* an address change accompanies the redemption request or there has
been a change of address on the account during the last 30 days
* the shares are represented by a negotiable stock certificate
2. Transferring of Ownership and/or Account Name Changes
ADDRESS CHANGES
You may notify FAM of changes in your address of record either by writing us or
calling our Shareholder Services Line. Because your address of record impacts
every piece of information we send you, please notify us promptly. To protect
you and FAM, all requests to redeem shares, the proceeds of which are to be paid
by check, made within 30 days of our receipt of an address change (including
redemption requests that are accompanied by an address change) must be made in
writing, signed by each person in whose name the shares are owned, and all
signatures must be guaranteed.
DISTRIBUTION OPTIONS
Investors who want dividend and/or capital gains distributions sent to them in
cash rather than invested in additional shares must arrange this by making a
request to FAM, such written request to include all necessary documentation to
the complete satisfaction of FAM. Unless investors request cash distributions in
writing at least 7 business days prior to the distribution, or on the Account
Application, all dividends and other distributions will be reinvested
automatically in additional shares of the Funds. Capital gains, if any, will be
distributed in December. FAM Equity- Income will distribute net income dividends
on a quarterly basis normally in March, June, September, and December.
14
<PAGE>
TRANSFERRING OWNERSHIP OF SHARES
You may transfer ownership of your shares to another person or organization by
written instructions to FAM Funds, signed by all owners and with signatures
guaranteed. If the shares are represented by a negotiable stock certificate, the
certificate must be returned with your transfer instructions.
-------------------------------
BACKUP WITHHOLDING INSTRUCTIONS
Shareholders are required by law to provide FAM with their correct Social
Security or other Taxpayer Identification Number ("TIN"), regardless of whether
they file tax returns. Failure to do so may subject a shareholder to penalties.
Failure to provide a correct TIN or to check the appropriate boxes on the
Account Application and to sign the shareholder's name could result in backup
withholding by the Funds of an amount of income tax equal to 31% of
distributions, redemptions, exchanges and other payments made to a shareholder's
account. Any tax withheld may be credited against taxes owed on a shareholder's
federal income tax return.
If a shareholder does not have a TIN, the shareholder should apply for one
immediately by contacting the local office of the Social Security Administration
or the IRS. Backup withholding could apply to payments made to a shareholder's
account while awaiting receipt of a TIN. Special rules apply for certain
entities. For example, for an account established under the Uniform Gift to
Minors Act, the TIN of the minor should be furnished.
If a shareholder has been notified by the IRS that the shareholder is subject to
backup withholding because the shareholder failed to report all interest and
dividend income on his, her or its return, and the shareholder has not been
notified by the IRS that such withholding should cease, the shareholder should
complete the Account Application accordingly.
If a shareholder is exempt from backup withholding, the shareholder should
provide proof of such exemption in a form acceptable to FAM. Exempt recipients
include: certain corporations, certain tax-exempt entities, certain tax-exempt
pension plans and IRAs, governmental agencies, financial institutions,
registered securities and commodities dealers and others.
Payments reported by FAM Funds that omit your Social Security or Tax
Identification Number will subject the Funds to a penalty of $50. This $50
charge will be deducted from your account if you fail to provide the
certification by the time the report is filed. The penalty charge is not
refundable.
-----------------------
PERFORMANCE INFORMATION
FAM may include the yield and total return of its Funds in advertisements or
reports to shareholders or prospective investors. Quotations of average returns
will be expressed in terms of average annual compounded rate of return on a
hypothetical investment in each Fund over periods of one, five, and ten years
(up to the life of the Fund), and will assume that all dividends and
distributions are reinvested when paid. Total return may be expressed in terms
of the cumulative value of an investment in each Fund at the end of a defined
period of time. Quotations of yield for the Funds will be based on the
investment income per share during a particular 30-day (or one month) period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period.
15
<PAGE>
--------------------------------------
FEDERAL INCOME TAX CONSIDERATIONS
It is intended that each year each Fund will qualify and elect to be treated as
a "regulated investment company" under Subchapter M of the Internal Revenue
Code. To qualify, each Fund must, among other things, meet certain distribution
and asset diversification requirements. A regulated investment company generally
is not subject to federal income or excise tax on income and gains distributed
in a timely manner to its shareholders. Each Fund intends to make timely
distributions of substantially all income and gains.
A Fund's dividends of net ordinary income and distributions of net short-term
capital gains are generally taxable to shareholders as ordinary income, whether
received in cash or reinvested in Fund shares. Dividends from net ordinary
income may be eligible for the corporate dividends-received deduction. The
excess of net long-term capital gains over net short-term capital losses
realized and distributed by a Fund to its shareholders as capital gains
distributions, whether received in cash or reinvested in Fund shares, is
generally taxable to shareholders as long-term capital gain, regardless of the
length of time a shareholder has held the Fund shares. The rate of tax, however,
will depend on the distributing Fund's holding period for the assets whose sale
produces the gains.
The amount of an income dividend or capital gains distribution declared by a
Fund during October, November or December to shareholders of record as of a
specified date in that month and paid during January of the following year will
be deemed to be received by shareholders on December 31 of the prior year.
Any dividend or distribution paid by a Fund has the effect of reducing the
Fund's net asset value per share. Investors should be careful to consider the
tax effect of buying shares shortly before a distribution by a Fund. The price
of shares purchased at that time will include the amount of the forthcoming
distribution, but the distribution will be taxable to the shareholder.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gains distributions made by the Funds for the preceding year.
Distributions by the Funds generally will also be subject to state and local
taxes.
For additional information relating to taxes, see "Certain Federal Income Tax
Considerations" in the Statement of Additional Information.
-------------------------------
GENERAL INFORMATION AND CAPITAL
FAM Value Fund and FAM Equity-Income Fund are series of Fenimore Asset
Management Trust, which was organized as a Massachusetts Business Trust under
the laws of the Commonwealth of Massachusetts on June 18, 1986. The
capitalization of Fenimore Asset Management Trust consists of an unlimited
number of shares of beneficial interest. When issued, each share or fraction
thereof is fully paid, non-assessable, transferable without restriction, and
redeemable. As a Massachusetts business trust, the Funds are not required to
hold annual meetings of shareholders. Trustees, however, will hold special
meetings as required or as deemed desirable for the election of trustees or the
possible change of fundamental policies. Under the provisions of the Funds'
Declaration of Trust all shares are of the same class, and each full share has
one vote. All shareholder inquiries should be directed to FAM Funds, at the
address and telephone number listed on the cover of this Prospectus.
--------------
FUND AUDITORS
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, NY 10017 has been appointed
as the independent certified public accountant and auditor for FAM Funds.
16
<PAGE>
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DISTRIBUTOR AND TRANSFER AGENT
Fenimore Asset Management Trust, 111 North Grand Street, P.O. Box 399,
Cobleskill, NY 12043, telephone number (800) 932-3271, acts as distributor of
all shares issued and acts as transfer agent for all shares outstanding of FAM
Funds.
--------------------------
SHAREHOLDER SERVICING AGENT
FAM Shareholder Services, Inc. serves as FAM's shareholder servicing agent and,
as such, provides various services in connection with the establishment and
maintenance of shareholder accounts. For its services, FAM Shareholder Services,
Inc. receives a monthly fee of $1.75 per shareholder account. FAM Shareholder
Services, Inc. also serves as fund administrative agent for each of the Funds
and provides various administrative and accounting services to the Funds at an
annual rate of 0.025% of each Fund's average daily net assets.
------------------
BROKER ALLOCATIONS
The placement of orders for the purchase and sale of portfolio securities will
be made under the control of the Advisor, subject to the overall supervision of
the Board of Trustees. All orders are placed at the best price and best
execution obtainable, except that the Advisor shall be permitted to select
brokers who provide economic, corporate and investment research services if in
the opinion of FAM's management and Board of Trustees, such placement serves the
best interests of shareholders. Commissions paid to firms supplying such
research may include the cost of such services. It is the policy of Fenimore
Asset Management Trust, as approved by the Board of Trustees, to combine orders
of the FAM Funds with those of the Advisor's clients, where possible and in a
manner designed to be equitable to each party.
-------------------
THE YEAR 2000 ISSUE
The Funds rely extensively on various computer systems in carrying out their
business activities, including the computer systems employed by their service
providers, such as Fenimore Asset Management, Inc. as the investment adviser and
manager of the Funds, FAM Shareholder Services, Inc. as the shareholder
servicing agent and Chase Manhattan Bank, N.A. as custodian (collectively, the
"Service Providers"). In this connection, the Funds are aware of the so-called
"Year 2000 Issue" which involves the potential problems that may be confronted
by computer systems users the day after December 31, 1999, when computers using
date-sensitive software must be able to properly identify the Year 2000 in their
systems. In the event that a computer system fails to make the proper
identification of the Year 2000, this could result in a system failure or
miscalculations causing disruptions of operations such as pricing errors and
account maintenance failures. The Funds are working with the Service Providers
to take steps that are reasonably designed to address the Year 2000 Issue with
respect to the computer systems relied upon by the Funds. A project team has
been established to proactively address these issues. The Funds have no reason
to believe that these steps will not be sufficient to avoid any material adverse
impact on the Funds, although there can be no assurances of this. The costs or
consequences of incomplete or untimely resolution of the Year 2000 Issue are
unknown to the Funds and the Service Providers at this time but could have a
material adverse impact on the operations of the Funds and the Service
Providers.
17
<PAGE>
FAM
VALUE FUND
INVESTMENT ADVISOR EQUITY - INCOME FUND
Fenimore Asset Management, Inc. PROSPECTUS
Cobleskill, NY May 1, 1998
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
Each
INDEPENDENT AUDITORS a
McGladrey & Pullen, LLP 100%
New York, NY No-Load
Fund
TRUSTEES
Roger A. Hannay
John W. Krueger, CLU
Thomas O. Putnam
Diane C. Van Buren
Bernard H. Zais, CLU
Dr. Joseph J. Bulmer
Fred "Chico" Lager
LEGAL COUNSEL
Dechert Price & Rhoads
Washington, DC
SHAREHOLDER SERVICING AGENT
FAM Shareholder Services, Inc.
Cobleskill, NY
FAM FUNDS
111 North Grand Street
P.O. Box 399
Cobleskill, NY 12043
(800) 932-3271
FAM FUNDS
P.O. Box 399
Cobleskill, NY 12043
(800) 932-3271
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
FAM FUNDS
- -------------------------------------------------------------------------------
111 North Grand Street, P.O. Box 399, Cobleskill, NY 12043
Telephone Number (800)-932-3271
A "FAM"ILY of NO-LOAD FUNDS
May 1, 1998
- -------------------------------------------------------------------------------
FAM FUNDS ["FAM"], a family of no-load mutual funds, currently offers two
diversified open-end, no-load mutual funds. Each Fund is a separate investment
series of Fenimore Asset Management Trust which is registered with the
Securities and Exchange Commission ( SEC ) as an open-end management inestment
company.
This Statement of Additional Information is not a Prospectus but rather should
be read in conjunction with the Prospectus dated the same date. A copy may be
obtained without charge from FAM by calling or writing its corporate offices at
the address and telephone number herein noted.
Table of Contents
Investment Objective and Policies 2
Investment Restrictions 3
History and Background of Investment Advisor 5
Board of Trustees and Officers 7
Brokerage Allocations 8
Net Asset Value Calculation 8
Purchase of Shares 9
Redemption of Shares 10
Performance Information 11
Financial Statements 11
Certain Federal Income Tax Considerations 12
Appendix 13
Investment Advisor:
Fenimore Asset Management, Inc.
118 North Grand Street
Cobleskill, NY 12043
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
FAM offers two mutual funds with distinctly different investment objectives. FAM
Value Fund has an investment objective to maximize long term total return on
capital. FAM Equity-Income has an investment objective of providing current
income as well as long term capital appreciation by investing primarily (at
least 65% of it total assets) in income-producing equity securities. Normally
investments will be concentrated in common stocks unless the stock market
environment has risen to a point where the advisor to the Fund, Fenimore Asset
Management, Inc., ("Fenimore"), can no longer find securities that have been
determined by FAM to be undervalued. During such periods investments will be
made in fixed-income investments until such time as more attractive common
stocks can be found for purchase.
It is the opinion of FAM that the objectives of its funds are achievable when
common stocks can be purchased near to, or at, a discount from their true
business worth. Specifically, FAM will be seeking to invest assets in companies
that may have some or all of the following characteristics: (a) low
price-to-earnings multiples relative to the market as a whole, based upon
current and/or potential future earnings of the company; (b) high total returns
on capital and with low debt structures; and (c) sell at a market price per
share that is near or at a discount to the per share book value -- an accounting
measure of economic worth. Although the objective is to select stocks with these
characteristics, FAM is aware that it is unrealistic to assume that each
selection will have all or even several of the above characteristics.
FAM believes that the success of a stock that has some of the above
characteristics is dependent upon and invariably a reflection of the quality of
management. Therefore, FAM spends time in an attempt to assess management's
ability prior to making a commitment to its shares with Fund assets. The
assessment may include an analysis of historical financial achievements of the
company, direct discussions with management by telephone or in person,
visitations to the company, conversations with security analysts who actively
follow the company for investment brokerage firms, and discussions with
competitors, suppliers, and customers of the company. While FAM feels this
assessment technique to be clearly instrumental to the success of the
investment, it should be recognized that judgments made by FAM are purely
subjective in nature. Therefore, there can be no assurance that FAM will be
successful in achieving its investment objectives for the Funds.
It is FAM's belief that the objectives of its funds can only be achieved
consistently over a long investment horizon. Typically, this will mean that a
stock may be held for a three-to-five year period or longer if FAM, by its own
determination, feels that the recognition of true business worth has not yet
been attained in the stock's current market quotation. Thus, the Funds serve
little purpose for investors who wish to take advantage of short term
fluctuations in net asset values per share.
From time to time, FAM may also choose to invest some or all of its assets in
fixed-income investments of the types more fully described in the Funds
Prospectus dated this same date. Such investments will be purchased and held
during periods when FAM is unable to find stocks that it believes have return
expectations commensurate with the risks that must be assumed by their continued
retention.
2
<PAGE>
FAM recognizes that while the Funds remain small in size FAM may have greater
flexibility in achieving its objectives. However, as the Funds grows in size, it
may become more difficult for FAM to find securities to invest in that meet the
objectives of the Funds. This may also occur during periods when the stock
market in general has been rising for a long period of time. Therefore, FAM
reserves unto itself the right to limit the asset size of its Funds by
discontinuing sales of its shares at any time. The Board of Trustees of FAM
Funds may suspend sales whenever, in its collective wisdom, it believes it
necessary in order for FAM to continue to adhere to its stated objectives, or
that for other reasons it would be in the best interests of Fund shareholders to
do so. While sales are suspended, existing shareholder accounts will be able to
continue to reinvest their dividends and will be able to continue to redeem
their shares.
It should be clear to investors in FAM Funds that FAM believes income is an
important factor in achieving its objecives. Fenimore is aware that annual
distributions of capital gains and dividend/interest income earned on shares may
result in a shareholder paying additional federal, state and/or local income
taxes. (See Certain Federal Income Tax Considerations on Page 15). Tax deferred
portfolios, like IRA and pension monies, are ideally suited for investment in
shares of FAM Funds for these reasons.
At the present time FAM has no authority to write, buy or sell options or
futures against its share positions and any change in this investment approach
would be considered a material change and must first be obtained from
shareholders by consent of a majority of the votes cast. It has no plans at this
time to deal in the options markets or to seek authorization from shareholders
to do so.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain investment restrictions which cannot be changed or
amended unless approved by the vote of a majority of its outstanding shares in
accordance with requirements under the Investment Company Act of 1940.
Accordingly, no FAM Fund will:
(A) Invest in the purchase and sale of real estate.
(B) Invest in commodities or commodity contracts, restricted
securities, mortgages, or in oil, gas, mineral or other exploration or
development programs.
(C) Borrow money, except for temporary purposes, and then only in
amounts not to exceed in the aggregate 5% of the market value of its
total assets taken at the time of such borrowing.
3
<PAGE>
(D) Invest more of its assets than is permitted under regulations in
securities of other registered investment companies, which restricts
such investments to a limit of 5% of Fund assets in any one registered
investment company, and 10% overall in all registered investment
companies, in no event to exceed 3% of the outstanding shares of any
single registered investment company.
(E) Invest more than 5% of its total assets at the time of purchase in
securities of companies that have been in business or been in continuous
operation less than 3 years, including the operations of any
predecessor.
(F) Invest or deal in securities which do not have quoted markets.
(G) Own more than 10% of the outstanding voting securities of any one
issuer or company, nor will it, with at least 75% of its total assets,
invest more than 5% of its assets in any single issue, valued at the
time of purchase. This restriction shall not be applicable for
investments in U.S. government or agency securities.
(H) Invest more than 25% of its assets valued at the time of purchase in
any one industry or similar group of companies, except U.S. government
securities.
(I) Maintain margin accounts, will not purchase its investments on
credit or margin, and will not leverage its investments, except for
normal transaction obligations during settlement periods.
(J) Make any investment for the purpose of obtaining, exercising or for
planning to exercise voting control of subject company.
(K) Sell securities short.
(L) Underwrite or deal in offerings of securities of other issuers as a
sponsor or underwriter in any way. (Note: FAM may be deemed an
underwriter of securities when it serves as distributor of its own
shares for sale to or purchase from its shareholders.)
(M) Make loans to others or issue senior securities. For these purposes
the purchase of publicly distributed indebtedness of any kind is
excluded and not considered to be making a loan.
In regard to the restriction marked as item (D) above, FAM plans to utilize
computerized cash management services offered by its custodian, which services
presently include reinvesting overnight and short term cash balances in shares
of other registered investment companies, better known as "money market funds",
whose primary objective is safety of principal and maximum current income from
holding highly liquid, short term, fixed investments, principally U.S.
government and agency issues. FAM will not be acquiring such shares as permanent
investments but rather will be utilizing such services solely for convenience
and efficiency as it tries to keep short term monies invested at interest only
until such time as more permanent reinvestment can practically be made in the
ordinary course of business. In any case, FAM shall not invest a greater
percentage of its assets than is permitted by regulation, which is presently 5%
of its total assets in any single fund nor more than
4
<PAGE>
10% of its total assets in funds overall.
HISTORY AND BACKGROUND OF INVESTMENT ADVISOR
The investment advisor to the FAM Funds is Fenimore Asset Management, Inc.,
("Fenimore"). The company is a New York corporation presently in business and
practicing as an "Investment Advisor" and registered under the Investment
Advisors Act of 1940 with the Securities and Exchange Commission and with the
New York State Attorney General. Fenimore is majority owned by Mr. Thomas O.
Putnam, its principal officer, who is also the principal officer and a trustee
of FAM Funds. FAM was incorporated November 20, 1974, and has been continuously
offering investment advisory services since the date of its formation under the
direction and control of Mr. Putnam. The principal activity of Fenimore since
1974 has been to provide investment advisory and consulting services under
contract to individuals, pension, profit-sharing, IRA and Keogh retirement
plans, corporations, and non-profit organizations generally located in the
service area that includes the continental U.S.
Mr. Thomas O. Putnam, Fenimore's principal investment professional, has been
employed or active as an investment advisor since 1974, managing investment
accounts for clients. He has held responsibilities as President and Director of
Fenimore's investment management and research activities. Mr. Putnam completed
his undergraduate studies at the University of Rochester, Rochester, NY, from
which he earned a Bachelor of Arts Degree in Economics in 1966. He completed
graduate work at Tulane University, New Orleans, Louisiana, from which he
received an MBA in 1968. Diane C. Van Buren, co-manager of FAM Value Fund, is
employed by Fenimore as Investment Management Associate. She has been actively
involved in investment and portfolio management and research activities since
1980. Paul C. Hogan, CFA, co-manager of FAM Equity-Income, is also employed by
Fenimore as Investment Research Analyst. He has been actively involved in
investment research activities since 1991. Fenimore employs a staff of
experienced investment professionals to manage assets for other corporate and
individual clients.
Since 1974, Fenimore, under the control and supervision of Mr. Putnam, has
utilized a value investment approach for each client and/or each account. In the
opinion of Fenimore, the objectives of FAM Funds can only be met if companies
can be purchased at a significant discount from what Fenimore views as their
true business worth. In this regard a company is researched almost as if the
entire company could be purchased at current stock market prices. Although it
will never be the intention of FAM to purchase controlling interests in any such
company, it is Fenimore s belief that this fundamental valuation approach
removes emotionality from the investment decision-making process and minimizes
the long term risk of the investment. Fundamental to this approach is the
seeking of securities of companies that have: (1) demonstrated records of
above-average growth of sales and earnings over the past 5 to 10 year span and
are selling at a price which Fenimore believes is at a discount from the true
business worth of the company; (2) become severely depressed in the market
because of adverse publicity and are thus selling at a deep discount to the
perceived future potential value of the company; (3) the capability of achieving
accelerated growth of earnings and the current price understates this potential.
Future values may be 100% or more of the current price of the stock and
recognition of these values may take two to five years or longer to be realized
5
<PAGE>
in the stock market.
It is the intention of Fenimore to advise FAM to attempt to follow a similar,
though not exactly identical, approach. The primary difference is expected to be
that FAM will be freer to sell shares of issues that have achieved price targets
and intends to do so, regardless of tax implications. Investment portfolios for
individuals tend to be more constrained by such tax considerations under
existing tax laws, thus turnover is most often at a rate that is well below
published investment industry averages.
Fenimore will not invest assets of any other managed account in shares of FAM
Funds except as directed in writing by a person unaffiliated to the Funds or to
Fenimore, having authority to make such direction. Fenimore, as investment
advisor to the FAM Funds, renders such services under contract that provides for
payment to Fenimore of a fee, calculated daily and paid monthly, at the rate of
1% per annum of each Funds net assets, which rate is consistent with that being
charged by Fenimore to manage its other client accounts but which is higher than
the fee charged by most other investment companies. This contract is subject to
the approval annually by FAM Fund's Board of Trustees and is terminable upon 30
days written notice, one party to the other. With respect to FAM Value Fund, the
total investment advisory fees paid by FAM Value Fund to Fenimore during each of
the last three fiscal years is as follows: $2,395,056 in investment advisory
fees were paid by FAM Value Fund for the fiscal year ended December 31, 1995;
$2,578,433 in investment advisory fees were paid by FAM Value Fund for the
fiscal year ended December 31, 1996 and $2,687,138 in investment advisory fees
were paid by FAM Value Fund for the fiscal year ended December 31, 1997. With
respect to FAM Equity-Income Fund, the total investment advisory fees paid by
FAM Equity-Income Fund to Fenimore for the period from April 1, 1996
(commencement of operations) to December 31, 1996, was $12,076 and $33,560 in
investment advisory fees were paid by FAM Equity-Income Fund for the fiscal year
ended December 31, 1997.
Each FAM Fund is responsible for the fees of independent accountants, brokerage
fees and the cost of a surety bond, as required by the Investment Company Act of
1940. Expenses of "interested" trustees shall always remain the responsibility
of the investment advisor. FAM is responsible for the cost of its operation,
including routine administrative expenses of mailing proxies and shareholder
notices/reports, computer services and for record-keeping the shareholder
ledgers and books. All employees of the investment advisor who perform duties
for FAM shall remain employees of the investment advisor, who shall bear all
employment costs of such staff. If Fenimore ceases to operate for any reason or
assigns the contract, such contract is automatically terminated.
6
<PAGE>
BOARD OF TRUSTEES
The names of Board of Trustees of the FAM Funds, and their respective duties and
affiliations are as follows:
Primary Occupation;
Name, Address, and Age Business Affiliations Position with the Fund
- -------------------------------------------------------------------------
Thomas O. Putnam* Chairman, Treasurer Chairman of Board
P.O. Box 310 Fenimore Asset Mgmt. President
Cobleskill, NY 12043
Age: 53
Diane C. Van Buren* Investment Management Secretary
P. O. Box 310 Associate, Fenimore Trustee
Cobleskill, NY 12043 Asset Mgmt.
Age: 40
John W. Krueger, CLU* General Agent, Trustee
P.O. Box 389 Krueger Ross Agency:
Albany, NY 12201 Director, Fenimore Asset Mgmt.
Age: 59
Bernard H. Zais, CLU President, Zais Group Trustee
PO Box 630
Colchester, VT 05446
Age: 82
Roger A. Hannay President, Trustee
2440 Airport Road Hannay Reels, Inc.
Westerlo, NY 12193
Age: 56
Joseph J. Bulmer Retired President, Trustee
7 Sultana Street Hudson Valley Community
Saratoga Springs, College
NY 12866
Age: 69
Fred "Chico" Lager Business Consultant; Trustee
831 Williston Road Director, Whole Foods
Williston, VT 05495 Market, Inc., Austin, TX;
Age: 43 Retired President
and Chief Executive
Officer of Ben & Jerry's
Homemade, Inc.
*Interested persons as defined under the 1940 Act.
Officers and Trustees of the FAM Funds own less than 1% of each Fund s shares
outstanding.
Trustees of the FAM Funds not employed by Fenimore receive from FAM Funds a fee
of $800 for each Board of Trustees meeting, $4,000 annual retainer, $500 for
each committee meeting, and are reimbursed for all out-of-pocket expenses
relating to attendance at such meetings. The $4,000 annual retainer is paid
exclusively with shares of each Fund such that the Trustees receive on an annual
basis $2,000 in FAM Value Fund shares and $2,000 in FAM Equity-Income shares.
Trustees who are employees of Fenimore do not receive compensation from FAM
Funds.
7
<PAGE>
For the fiscal year ended December 31, 1997, the Trustees received the following
compensation from the Funds and from certain other investment companies (if
applicable) that have the same investment advisor as the Fund or an investment
advisor that is an affiliated person of the Fund's investment advisor:
Name of Aggregate Pension or Est. Annual Total
Trustee Compensation Retirement Benefits upon Compensation
from the Fund Benefits Retirement from Registrant
Accrued as Part and Fund
of Fund Complex Paid to
Expenses Trustees
- ------- ------------- --------------- ------------- --------------
Thomas O. $0 $0 $0 $0
Putnam
John W. $6,400 $0 $0 $6,400
Krueger
Bernard H. $3,600 $0 $0 $3,600
Zais
Roger A. $6,100 $0 $0 $6,100
Hannay
Joseph J. $6,400 $0 $0 $6,400
Bulmer.
Diane C. $0 $0 $0 $0
Van Buren
Fred $0 $0 $0 $0
Lager*
* Mr. Lager became a Trustee in November 1997.
BROKERAGE ALLOCATIONS
It is Fenimore's policy to allocate brokerage business to the best advantage and
benefit of its shareholders. All securities transactions are made so as to
obtain the most efficient execution at the lowest transaction cost. Nothing in
this policy, however, is to be construed to prohibit Fenimore from allocating
transactions to firms whose brokerage charges may include the cost of providing
investment advisory or research or other legally permitted services which
Fenimore deems to be necessary and/or valuable to the successful management of
its assets. Each buy or sell order will be placed according to the type, size
and kind of order involved and as each condition may demand, so as to attempt to
secure the best result for Fenimore and Fund shareholders, all factors
considered. For the fiscal years ending December 31, 1997, 1996, and 1995
respectively, aggregate commissions paid totalled $100,098, $119,849 and
$28,512, for FAM Value Fund. With respect to FAM Equity-Income, for the fiscal
year ending December 31, 1996, aggregate commissions paid totalled $3,217, and
for the fiscal year ending December 31, 1997, aggregate commissions paid
totalled $2,124.
8
<PAGE>
NET ASSET VALUE CALCULATION
The net asset value per share is computed by dividing the aggregate market value
of a Fund s assets daily, less its liabilities, by the number of portfolio
shares outstanding. Portfolio securities are valued and net asset value per
share is determined as of the close of business on the New York Stock Exchange
("NYSE"), which currently is 4:00 p.m. (New York City time), on each day the New
York Stock Exchange is open and on any other day in which there is a sufficient
degree of trading in Fund portfolio securities that the current net asset value
per share might be materially affected by changes in portfolio securities
values. NYSE trading is closed weekends and holidays, which are listed as New
Years Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
Portfolio securities listed on an organized exchange are valued on the basis of
the last sale on the date the valuation is made. Securities that are not traded
on that day, and for which market quotations are otherwise readily available,
and over-the-counter securities for which market quotations are readily
available, are valued on the basis of the bid price at the close of business on
that date. Securities and other assets for which market quotations are not
readily available or have not traded are valued at fair value as determined by
procedures established by the Board of Trustees. Notwithstanding the above,
bonds and other fixed-income securities may be valued on the basis of prices
determined by procedures established by the Board of Trustees if it is the
belief of the Board of Trustees that such price determination more fairly
reflects the fair value of such securities. Money market instruments are valued
at amortized cost which approximates market value unless the Board of Trustees
determines that such is not a fair value.
The sale of shares of FAM Funds will be suspended during periods when the
determination of its net asset value is suspended pursuant to rules or orders of
the Securities and Exchange Commission, or may be suspended by the Board of
Trustees whenever in its sole judgment it believes it is in the best interest of
shareholders to do so.
9
<PAGE>
PURCHASE OF SHARES
To begin an investment in FAM Funds the following minimum initial investments
must be met. All subsequent investments to an existing account require a minimum
of $50.
<TABLE>
<S> <C> <C>
FAM Value Fund FAM Equity-Income Fund*
- -------------------------------------------------------------------------------
To open a new account $2,000 $10,000
To open a new retirement account
{IRA, SEP, or 403(b)(7)} $ 100 $2,000
To open a Uniform Transfer to Minors (UTMA) or
Uniform Transfer to Minors (UGMA) account $ 500 $10,000
To open a new account with FAMVest** $ 500 $10,000
<FN>
*Due to the investment objective of FAM Equity-Income Fund, minimum
investments in this Fund are higher than those of FAM Value Fund.
**FAMVest is FAM Fund's Automatic Investment Plan which requires the
systematic addition of at least $50 per month, as described below. Please refer
to "Redemption of Shares" on page 13. To begin an investment in the Fund the
following minimum initial investments must be met depending on account type. All
subsequent investments to an existing account require a minimum of $50.
</FN>
</TABLE>
To establish an account, complete and sign the appropriate application and mail
it, along with your check to FAM Funds, P.O. Box 399, Cobleskill, NY 12043.
Checks should be made payable to the appropriate fund. A copy of the application
form is available to prospective investors upon request to FAM Funds, which is
the sole distributor of Fund shares. The offering price of such purchases will
be at the net asset value per share next determined after receipt by FAM of a
valid purchase order. The date on which the application is accepted by FAM and
the net asset value determination at the close of business on that date shall
determine the purchase price and shall normally be the purchase date for shares.
FAM reserves the right to withhold or reject requests for purchases for any
reason, including uncollectible funds. Cash will not be accepted. In the event
of a cancellation of any purchase due to uncollectible funds, the purchaser
shall be liable for all administrative costs incurred and for all other losses
or charges for such invalid transfer and/or purchase.
Subsequent Purchases: Purchases of shares made subsequent to an initial purchase
may be made by mail to FAM at its current address. All subsequent purchases must
be made in amounts of no less than $50, and such amounts shall be due and
payable in good funds to FAM on the purchase date.
Reinvestment: FAM Funds will automatically reinvest all dividend distributions
to shareholders in additional shares of the Fund at net asset value as next
determined as of the close of business on the payment date of such dividend
distribution, unless otherwise instructed by the shareholder in writing prior to
the record date for such distributions.
Fractional Shares: When share purchases or redemptions are made or when cash is
requested by
10
<PAGE>
a shareholder, shares will be issued or redeemed respectively, in fractions of
a share, calculated to the third decimal place. (Example: $2,000 invested in
shares at a net asset value of $11.76 per share will purchase 170.068 shares.)
REDEMPTION OF SHARES
Shareholders may sell all or a portion of their shares to FAM on any day that
NAV is calculated and such redemptions will be made in the manner as described
in detail in the Funds Prospectus. All redemptions are subject to the terms and
conditions as set forth therein. FAM shall have the right to refuse payment to
any registered shareholder until all legal documentation necessary for a
complete and lawful transfer is in the possession of FAM or its agents, to the
complete satisfaction of FAM Funds and its Board of Trustees.
PERFORMANCE INFORMATION
The Funds may, from time to time, include their total return in advertisements
or reports to Shareholders or prospective investors. Quotations of average
annual total return for each Fund will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in the Fund over
periods of one, five and ten years (up to the life of the Fund) calculated
pursuant to the following formula: P(1 + T)n = ERV (where P = a hypothetical
initial payment of $1,000, T = the average annual total return, n = the number
of years, and ERV = the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period). All total return figures reflect the
deduction of a proportional share of Fund expenses on an annual basis, and
assume that all dividends and distributions are reinvested when paid. FAM Value
Fund's average annual total return for the one-, five-, and ten-year periods
ended December 31, 1997 and for the period from commencement of operations on
January 2, 1987 through December 31, 1997 was 39.1%, 14.7%, 18.9% and 14.8%
respectively. FAM Equity-Income Fund's total return for the one year period
ended December 31, 1997 was 26.9% and its lifetime average annual total return
for the period from April 1, 1996 (inception) to December 31, 1997 was 21.8%.
11
<PAGE>
Quotations of yield for a FAM Fund will be computed by dividing the net
investment income per share earned by the Fund during a 30-day period by the
maximum offering price per share on the last day of the period, according to the
following formula:
6
Yield = 2[(a-b+1)-1]
--
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Shares outstanding during the
period that were entitled to receive dividends.
d = maximum offering price per Share on the last day of the period.
FAM Equity-Income Fund's yield for the 30-day period ended December 31, 1997 was
2.66%.
Performance information for any FAM Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, the Dow
Jones Industrial Average, or other unmanaged indices so that investors may
compare Fund results with those of a group of unmanaged securities widely
regarded by investors as representative of the securities market in general;
(ii) other groups of mutual funds tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall performance
or other criteria; and (iii) the Consumer Price Index (measure for inflation) to
assess the real rate of return from an investment in the Fund. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect deductions
for administrative and management costs and expenses.
Performance information for the Funds reflect only the performance of a
hypothetical investment in the Funds during the particular time period on which
the calculation are based. Performance information should be considered in light
of the Fund's investment objective and policies, characteristics and quality of
the portfolio and the market conditions during the given time period, and should
not be considered as a representation of what may be achieved in the future.
12
<PAGE>
FINANCIAL STATEMENTS
The Financial Statements of each Fund are included in the 1997 Annual Report to
Shareholders and are incorporated by reference into this Statement of Additional
Information. Copies of the Financial Statements may be obtained upon request and
without charge from FAM at the address and telephone provided on the cover of
this Statement of Additional Information.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Funds and the purchase, ownership, and disposition of Fund
shares. This discussion does not purport to be complete or to deal with all
aspects of federal income taxation that may be relevant to shareholders in light
of their particular circumstances. This discussion is based upon present
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated thereunder, and judicial and administrative ruling
authorities, all of which are subject to change, which change may be
retroactive. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase, ownership, or
disposition of Fund shares, as well as state, local and foreign tax
consequences.
TAX STATUS OF THE FUNDS
Each Fund intends to be taxed as a regulated investment company under Subchapter
M of the Code. Accordingly, each Fund must, among other things, (a) derive in
each taxable year at least 90% of its gross income from dividends, interest,
payments with respect to certain securities loans, and gains from the sale or
other disposition of stock, securities or foreign currencies, or other income
derived with respect to its business of investing in such stock, securities or
currencies; and (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the value of the Fund's total assets is represented
by cash and cash items, U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other securities
limited, in respect of any one issuer, to an amount not greater than 5% of the
value of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities and the securities of other regulated investment companies).
As a regulated investment company, a Fund generally is not subject to U.S.
federal income tax on income and gains that it distributes to shareholders, if
at least 90% of the Fund's investment company taxable income (which includes,
among other items, dividends, interest and the excess of any net short-term
capital gains over net long-term capital losses) for the taxable year is
distributed. Each Fund intends to distribute substantially all of such income.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a nondeductible 4% excise tax at the
Fund level. To avoid the tax, each Fund must distribute during each calendar
year an amount equal to the sum of (1) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2)at
least 98% of its capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending on October 31 of
the calendar year, and (3) all ordinary income and capital gains for previous
years that were not distributed during such years. To avoid application of the
excise tax, each Fund intends to make distributions in accordance with the
calendar year distribution requirement.
A distribution will be treated as paid on December 31 of a calendar year if it
is declared by a Fund in October, November or December of that year with a
record date in such a month and paid by the Fund during January of the following
year. Such distributions will be taxable to shareholders in the calendar year
in which the distributions are declared, rather than the calendar year in which
the distributions are received.
FUND INVESTMENTS
Certain debt securities acquired by a Fund may be treated as debt securities
that were originally issued at a discount. Very generally, original issue
discount is defined as the difference between the price at which a security was
issued and its stated redemption price at maturity. Although no cash income on
account of such discount is actually received by a Fund, original issue discount
that accrues on a debt security in a given year generally is treated for federal
income tax purposes as interest and, therefore, such income would be subject to
the regulated investment company distribution requirement. Some debt securities
may be purchased by a Fund at a discount that exceeds the original issue
discount on such debt securities, if any; this additional discount represents
market discount for federal income tax purposes.
If a Fund purchases a debt security at a price lower than the stated redemption
price of such debt security, the excess of the stated redemption price over the
purchase price is "market discount". The Fund may be required to include a
portion of such market discount as ordinary income in each taxable year in which
the Fund owns an interest in the debt security and receives a principal payment
on it. The Fund may be required to allocate the principal payment first to the
portion of the market discount on the debt security that has accrued but has not
previously been includable in income. In general, the amount of market discount
that must be included for each period is equal to the lesser of (i) the amount
of market discount accruing during such period (plus any accrued market discount
for prior periods not previously taken into account) or (ii) the amount of the
principal payment with respect to such period. Generally, market discount
accrues on a daily basis for each day the debt security is held by the Fund at a
constant rate over the time remaining to the debt security's maturity or, at the
election of the Fund, at a constant yield to maturity which takes into account
the semi-annual compounding of interest. Gain realized on the disposition of a
market discount obligation must be recognized as ordinary income (not capital
gain) to the extent of the "accrued market discount."
DISTRIBUTIONS
Distributions of investment company taxable income are taxable to a shareholder
as ordinary income, whether paid in cash or reinvested in Fund shares. Dividends
paid by a Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received by the Fund from U.S. corporations, may,
subject to limitation, be eligible for the dividends received deduction.
However, the alternative minimum tax applicable to corporations may reduce the
value of the dividends received deduction.
The excess of net long-term capital gains over the short-term capital losses
realized and distributed by a Fund, whether paid in cash or reinvested in Fund
shares, will generally be taxable to shareholders as either "20% Gain" or "28%
Gain," depending upon the Fund's holding period for the assets sold. "20% Gains"
arise from sales of assets held by a Fund for more than 18 months and are
subject to a maximum tax rate of 20%, "28% Gains" arise from sales of assets
held by a Fund for more than one year but no more than 18 months and are subject
to a maximum tax rate of 28%. Net capital gains from assets held for one year or
less will be taxed as ordinary income. Distributions will be subject to these
capital gains rates regardless of how long a shareholder has held Fund shares.
Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and shareholders receiving distributions in the form of newly
issued shares will receive a report as to the net asset value of the shares
received.
DISPOSITIONS
Upon a redemption, sale or exchange of Fund shares, a shareholder will realize a
taxable gain or loss depending upon his or her basis in the shares. A gain or
loss will be treated as capital gain or loss if the shares are capital assets in
the shareholder's hands, and the rate of tax will depend upon the shareholder's
holding period for the shares. Any loss realized on a redemption, sale or
exchange will be disallowed to the extent the shares disposed of are replaced
(including through reinvestment of dividends) within a period of 61 days,
beginning 30 days before and ending 30 days after the shares are disposed of. In
such a case the basis of the shares acquired will be adjusted to reflect the
disallowed loss. If a shareholder holds Fund shares for six months or less and
during that period receives a distribution taxable to the shareholder as
long-term capital gain, any loss realized on the sale of such shares during such
six-month period would be a long-term loss to the extent of such distribution.
13
<PAGE>
APPENDIX
Bond Rating Categories as Defined by Standard & Poor's (S & P) are quoted in
part and inserted herein for the information of potential investors in the FAM
Funds as a reference as follows:
An S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligers such as guarantors, insurers or
lessees.
The debt rating is not a recommendation to purchase, sell or hold a security
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. S&P does not perform any audit
in connection with any rating and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended or withdrawn as a result of
changes in, or availability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
II. Nature of and provisions of the obligor;
III. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors rights.
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
14
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Included in Part A:
Selected Financial Information for FAM Value Fund
and FAM Equity-Income Fund
(2) Incorporated by reference in Part B:
Financial Statements for FAM Value Fund and FAM
Equity-Income Fund
(b) Exhibits
(1) Declaration of Trust (1)
(2) By-Laws (1)
(3) Not Applicable
(4) Specimen Share Certificate(1)
(5)(a) Investment Advisory Agreement between Registrant
and Fenimore Asset Management, Inc. with respect to
FAM Value Fund(1)
(b) Investment Advisory Agreement between Registrant
and Fenimore Asset Management, Inc. with respect to
FAM Equity-Income Fund(1)
(6) Not Applicable
(7) Not Applicable
(8) Custodian Agreement between Registrant and the
Chase Manhattan Bank, N.A.(1)
(9)(a) Shareholder Services Agreement(1)
(b) Fund Accounting Agreement(1)
<PAGE>
(10) Not Applicable
(11) Consent of Independent Auditors
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16) Computation of Performance
(27) Financial Data Schedules
- ----------------------
(1) Filed previously and incorporated by reference herein.
Item 25. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Item 26. Number of Record Holders
As of April 1, 1998, the number of recordholders of
each Fund was as follows:
FAM Value Fund 13,332
FAM Equity-Income Fund 201
Item 27. Indemnification
Reference is made to Article IV, Section 4.3, of the Registrant's
Declaration of Trust.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to
the Declaration of Trust or otherwise, the Registrant is aware that in
the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and,
therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with the
successful defense of any act, suit or proceeding) is asserted by such
trustees, officers or controlling persons in connection with the
shares being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
C-2
<PAGE>
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issues.
Item 28. Business and Other Connections of Investment Adviser
Fenimore Asset Management, Inc. serves as the investment adviser for
the Registrant. The business and other connections of Fenimore Asset
Management, Inc. are set forth in the Uniform Application for
Investment Adviser Registration ("Form ADV") of Fenimore Asset
Management, Inc. as currently filed with the SEC which is incorporated
by reference herein.
Item 29. Principal Underwriter
Not Applicable.
Item 30. Location of Accounts and Records
The accounts, books, and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of
1940 and rules promulgated thereunder are in the possession of
Fenimore Asset Management, Inc., and FAM Shareholder Services, Inc.,
118 North Grand Street, Cobleskill, New York 12043.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings.
(a) Not Applicable.
(b) Registrant undertakes to furnish each
person to whom a prospectus is delivered a copy of
the Registrant's latest annual report to
shareholders, upon request and without charge, in the
event that the information called for by Item 5A of
Form N-1A has been presented in the Registrant's
latest annual report to shareholders.
(c) Registrant undertakes to call a meeting
of Shareholders for the purpose of voting upon the
question of removal of a Trustee or Trustees when
requested to do so by the holders of at least 10% of
the Registrant's outstanding shares of beneficial
interest and in connection with such meeting to
comply with the shareholders communications
provisions of Section 16(c) of the Investment Company
Act of 1940.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 22 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Washington in the District of Columbia on the 30th day of April, 1998.
FENIMORE ASSET MANAGEMENT TRUST
By: /s/Thomas O. Putnam
Thomas O. Putnam, President*
*By: /s/ Patrick W.D. Turley
Patrick W.D. Turley, as attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
Signature Title Date
- --------- ----- ----
/s/Thomas O. Putnam President and April 30, 1998
Thomas O. Putnam* Chairman of the
Board of Trustees
(Principal Executive
Officer)
/s/John W. Krueger Trustee April 30, 1998
John W. Krueger*
/s/Bernard H. Zais Trustee April 30, 1998
Bernard H. Zais*
/s/Roger A. Hannay Trustee April 30, 1998
Roger A. Hannay*
/s/Joseph J. Bulmer Trustee April 30, 1998
Joseph J. Bulmer**
/s/ Fred Lager Trustee April 30, 1998
Fred Lager***
/s/ Diane C. Van Buren Trustee and Treasurer April 30, 1998
Diane C. Van Buren* (Principal Financial
and Accounting Officer)
*By: /s/Patrick W.D. Turley
Patrick W.D. Turley
as attorney-in-fact
* Pursuant to power of attorney filed with Post-Effective Amendment No.12
as filed on April 29, 1994.
** Pursuant to power of attorney filed with Post-Effective Amendment No.21
as filed on May 1, 1997.
*** Pursuant to power of attorney filed herewith.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Diane C. Van Buren, Herbert L. Shultz, Jr., Allan S. Mostoff and
Patrick W.D. Turley, and each of them, his true and lawful attorney-in-fact and
agent with full power of substitution and resubstution for him in his name,
place, and stead, to sign any and all registration statements applicable to
Fenimore Asset Management Trust and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, or the securities
administrator of any jurisdiction, granting unto said attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to done by virtue hereof.
March 6, 1998 /s/ Fred Lager
Fred Lager
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
FILED
WITH
POST-EFFECTIVE AMENDMENT NO. 22
TO THE
REGISTRATION STATEMENT
OF
FENIMORE ASSET MANAGEMENT TRUST
<PAGE>
INDEX TO EXHIBITS
(FOR POST-EFFECTIVE AMENDMENT NO. 22)
-----------------------------------
EXHIBIT NO.
UNDER PART C
OF FORM N-1A NAME OF EXHIBIT
- ------------ ---------------
11 Consent of Independent Auditors
16 Calculation of Performance Data
27 Financial Data Schedules
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
<PAGE>
McGLAREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated January 20, 1998 on the
financial statements of FAM Value Fund and FAM Equity-Income Fund, series of
Fenimore Asset Management Trust referred to therein, which appear in the 1997
Annual Report to Shareholders and which is incorporated herein by reference, in
Post-Effective Amendment No. 22 to the Registration Statement on Form N-1A, File
No. 33-7190, as filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under
the caption "Fund Auditors".
McGLADREY & PULLEN, LLP
New York, New York
April 28, 1998
EXHIBIT 16
CALCULATION OF PERFORMANCE DATA
<PAGE>
COMPUTATION OF PERFORMANCE DATA
FAM Value Fund FAM Equity Income Fund
- ------------------------ -------------------------------
Total Return for One Year Total Return for One Year
ended December 31, 1997 ended December 31, 1997
- -------------------------- ----------------------------
P(1+T)N = ERV P(1+T)N = ERV
1,000 (1+T)1 = $1,390.62 1,000 (1+T)1 = $1,269.00
(1+T) = 1.3906 (1+T) = 1.2690
T = 0.3906 T = .2690
T = 39.06% T = 26.90%
Total Return for Five Years Total Return from April 1, 1996
ended December 31, 1997 (commencement of operations) through
- ------------------------- December 31, 1997
--------------------------
1,000 (1+T)5 = $1,982.88 1,000 (1+T)2 = $1,412.35
(1+T)5 = 1.9829 (1+T)2 = 1.4124
(1+T) = 1.1467 (1+T) = 1.2176
T = 0.1467 T = .2176
T = 14.67% T = 21.76%
Total Return for Ten Years Yield Quotation based on a
ended December 31, 1997 one month period ended
- ------------------------- December 31, 1997
--------------------------
1,000(1+T)10 = $5,648.62 Yield = 2[(a-b+1)6-1]
(1+T)10 = 5.6486 ---
(1+T) = 1.1890 cd
T = .1890 a-b = 9,146
T = 18.90% cd = 4,152.894
(a-b+1)6 = 1.01329
---
Total Return from January 2, 1987 cd
(commencement of operations) through
December 31, 1997 2[(a-b+1)6-1] = 0.02658
- ------------------------------------- ---
cd
1,000 (1+T)11 = $4,551.28
(1+T)11 = 4.5513 Yield = 2.66%
(1+T) = 1.1477
T = .1477
T = 14.77
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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