As filed with the Securities and Exchange Commission on
November 30, 1998
File No. 33-11636
File No. 811-5020
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
________________________
FORM N-1A
MARKED TO
SHOW CHANGES
REGISTRATION STATEMENT X
UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 13
and
REGISTRATION STATEMENT X
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15
_______________________
PATHFINDER TRUST
(Exact Name of Registrant as Specified in Charter)
4023 West Sixth Street
Los Angeles, California 90020
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(213) 386-4049
EDWIN R. BERNSTEIN
Pathfinder Trust
4023 West Sixth Street
Los Angeles, California 90020
(Name and Address of Agent for Services)
_________________________
It is proposed that this filing will become effective:
_X_ immediately upon filing pursuant to paragraph (b) of
Rule 485
___ on _______________ pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1)of Rule 485
___ on _______________ pursuant to paragraph (a)(1) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(2)of Rule 485
___ on _______________ pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
___ This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
_________________________
Please Send Copy of Communications to:
J. JEFFREY BROWN, ESQ
Baker & Daniels
300 North Meridian Street, Suite 2700
Indianapolis, Indiana 46204
(317) 237-0300
Total Number of pages ___ Exhibit Index appears at page ___
PATHFINDER TRUST
CROSS REFERENCE SHEET
Location in
N-1A Registration
Item No. Item Statement
Part A: Information Required in Prospectus
1. Cover Page. . . . . . . . . . . . . . . Cover Page
2. Synopsis. . . . . . . . . . . . . . . . "Introduction";
"Fund Expenses"
3. Condensed Financial Information.. . . . "Introduction"
"Condensed Financial Information";
"Performance Information"
4. General Description of Registrant . . . "Introduction";
"The Manager"; "Objectives and Policies of the Fund";
"General Information"
5. Management of the Fund. . . . . . . . . "Management of the
Fund"; "The Manager"
5a. Management's Discussion of Fund
Performance. . . . . . . . . . . . . . ."Growth of $10,000"
6. Capital Stock and Other Securities. . . Cover Page;
"Introduction"; "Dividends, Distributions and
Taxes";"General Information"
7. Purchase of Securities Being Offered. . "How to Purchase
Shares"; "Net Asset Value"; "Shareholder Services"
8. Redemption or Repurchase. . . . . . . . "How to Redeem
Shares"
9. Pending Legal Proceedings . . . . . . . Not Applicable
Part B: Information Required in Statement of
Additional Information
10. Cover Page. . . . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . . . . "Table of Contents"
12. General Information and History . . . . Prospectus --
"Introduction"
13. Investment Objectives and Policies. . . "Objectives and
Policies of the Fund"
14. Management of the Fund . . . . . . . . ."Management of the
Fund"
15. Control Persons and Principal Holders
of Securities. . . . . . . . . . . "Management of the
Fund"
16. Investment Advisory and Other
Services . . . . . . . . . . . . . "Management of the Fund"
17. Brokerage Allocation and Other
Practices. . . . . . . . . . . . . "Management of the
Fund"
18. Capital Stock and Other Securities. . . Prospectus --
"General Information"
19. Purchase, Redemption and Pricing
of Securities Being Offered. . . . Prospectus --
"How to Purchase Shares;" "How to Redeem Shares"
20. Tax Status. . . . . . . . . . . . . . . "Taxes"
21. Underwriters. . . . . . . . . . . . . . Not Applicable
22. Calculations of Performance Data. . . . "Performance
Information"
23. Financial Statements. . . . . . . . . . "Financial
Statements"
____________
PART A
____________
PATHFINDER FUND
November 30, 1998
Table of Contents
Fund Expenses. . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . .
The Manager. . . . . . . . . . . . . . .
Objective and Policies of the fund . . .
Management of the Fund . . . . . . . . .
Net Asset Value. . . . . . . . . . . . .
How to Purchase Shares . . . . . . . . .
Shareholder Services . . . . . . . . . .
Dividends, Distributions and Taxes . . .
How to Redeem Shares . . . . . . . . . .
Performance Information. . . . . . . . .
General Information. . . . . . . . . . .
Performance Line Graph . . . . . . . . .
MANAGER
Pathfinder Advisers
P. O. Box 75231
Los Angeles, California 90075-0231
800-444-4778
FAX: 213-386-4050
SYMBOL: PSLFX
CIK: 0000810129
SHAREHOLDER SERVICING AGENT
Unified Fund Services, Inc.
P. O. Box 6110
Indianapolis, Indiana 46206-6110
800-207-0760
CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45264
INDEPENDENT ACCOUNTANTS
Tait, Weller & Baker
8 Penn Center, Suite 800
Philadelphia, Pennsylvania 19103-2108
PATHFINDER FUND
PROSPECTUS P. O. Box 75231
NOVEMBER 30, 1998 Los Angeles, California 90075-0231
Telephone: 800-444-4778
FAX: 213-386-4050
PATHFINDER FUND ("the Fund") is a mutual fund which has the
investment objective of long-term capital growth. The Fund seeks
to achieve that objective by investing substantially all of its
assets in a diversified portfolio of common stocks which the
Fund's Manager believes are significantly undervalued and which
it expects to appreciate in value generally over a period of
three to five years.
The Fund [which is a series of Pathfinder Trust (the
"Trust")] invests primarily in the stocks of smaller companies
("small caps").
The Manager of the Fund is Pathfinder Advisers.
The Fund has adopted a Plan of Distribution (12b-1) under
which it may pay at an annual rate of 0.25% of its daily net
assets for activities primarily intended to result in the sale of
its shares. The Manager has undertaken not to seek reimbursement
for distribution expenses of the Fund until at least November 30,
1999, and the Fund has undertaken to suspend payments under the
Plan at least until that date.
This Prospectus sets forth concise information about the
Trust and the Fund that a prospective investor should know before
investing. Investors should read this Prospectus and retain it
for future reference. Additional information about the Trust and
the Fund is contained in a Statement of Additional Information
dated the same date as this Prospectus which has been filed with
the Securities and Exchange Commission and is incorporated into
this Prospectus by reference. For a free copy of the Statement
of Additional Information or for any other assistance, call the
Trust at 800-444-4778.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------
FUND EXPENSES
Table of Fees and Expenses
The following table of fees and expenses is provided to
assist investors in understanding the various costs and expenses
which may be borne directly or indirectly by an investment in the
Fund.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Maximum Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annualized Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.875 % *
12b-1 fees 0.000 % *
Other Expenses 1.625 %
Total Fund Operating Expenses 2.500 %**
=======
Pursuant to its agreement with the Trust, the Manager
receives a quarterly fee at an annual rate of .875% of the Fund's
average daily net assets as compensation for its services to the
Fund. This rate of fee is higher than that charged most
investment companies.
* For the fiscal year ended October 31, 1998, management
fees after expense reimbursements were $0. The Manager is
waiving reimbursement under the 12b-1 Plan until at least
November 30, 1999. For the year ended October 31, 1998, there
were no 12b-1 fees.
** For the fiscal year ended October 31, 1998, total
expenses were 2.11% of annualized average net assets; absent
expense reimbursements, total expenses would have been 4.25%.
The Manager is currently reimbursing Fund expenses to maintain an
expense ratio no greater than 2.50%. This undertaking is
voluntary and may cease at any time.
Example:
This table illustrates the net transaction and operating
expenses that would be incurred by an investment in the Fund over
different time periods, assuming a $1,000 investment, a 5% annual
return and redemption at the end of each time period.
Year 1 $ 25
Year 3 $ 78
Year 5 $ 133
Year 10 $ 284
The Example shown above should not be considered a
representation of past or future expenses, and actual expenses
may be greater or less than those shown. In addition, federal
regulations require the example to assume a 5% annual return, but
the Fund's actual return may be higher or lower.
PATHFINDER FUND
_________________________________________________________________
FINANCIAL HIGHLIGHTS
_________________________________________________________________
The following information has been examined by Tait, Weller and
Baker, independent public accountants, whose reports thereon
appear in PATHFINDER FUND's Annual Reports to Shareholders for
the periods below, and is incorporated by reference in this
Prospectus. The Fund's Annual Report can be obtained by calling
or writing the Fund.
Year Ended
October 31,1998
PER SHARE DATA
Net asset value at beginning of year. . . . . $ 10.12
-----
Income from investment operations
Net investment income (loss). . . . . . . . . (.09)
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . (2.78)
-----
Total from investment operations. . . . . (2.87)
-----
Less distributions
Distributions from realized gains . . . . . . ( .43)
Distributions from paid-in capital. . . . . . --
-----
Total dividends and distributions. . . . . ( .43)
-----
Net asset value at end of year. . . . . . . . $ 6.82
=====
TOTAL RETURN (29.22)%
RATIOS / SUPPLEMENTAL DATA
Net assets at end of year
(000's omitted) . . . . . . . . . . . . . . 1,984
Ratio of expenses to average
net assets (a). . . . . . . . . . . . . . . 2.11 %
Ratio of expenses-net (b) . . . . . . . . . . 2.09 %
Ratio of net investment income
(loss) to average net assets (c) . . . . . . (0.95)%
Portfolio turnover rate . . . . . . . . . . . 44.71 %
Average commission rate per share . . . . . . $ --
Borrowings for the period:
Amount of debt outstanding
at the end of period
(000's omitted). . . . . . . . . . . . . . $ 17
Average amount of debt
outstanding during the period
(000's ommitted) (d) . . . . . . . . . . . $ 151
Average number of shares
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . 325
Average amount of debt per
share during the period (d) . . . . . . . $ 0.46
Year Ended
October 31, 1997
PER SHARE DATA
Net asset value at beginning of year. . . . . $ 9.01
-----
Income from investment operations
Net investment income (loss). . . . . . . . . (.10)
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . 2.39
-----
Total from investment operations. . . . . 2.29
-----
Less distributions
Distributions from realized gains . . . . . . (1.18)
Distributions from paid-in capital. . . . . . --
-----
Total dividends and distributions. . . . . (1.18)
-----
Net asset value at end of year. . . . . . . . $ 10.12
=====
TOTAL RETURN 30.26 %
RATIOS / SUPPLEMENTAL DATA
Net assets at end of year
(000's omitted) . . . . . . . . . . . . . . 3,816
Ratio of expenses to average
net assets (a). . . . . . . . . . . . . . . 1.37 %
Ratio of expenses-net (b) . . . . . . . . . . 1.28 %
Ratio of net investment income
(loss) to average net assets (c) . . . . . . (1.08)%
Portfolio turnover rate . . . . . . . . . . . 130.56 %
Average commission rate per share . . . . . . $ .0327
Borrowings for the period:
Amount of debt outstanding
at the end of period
(000's omitted) . . . . . . . . . . . . . $ 1,096
Average amount of debt
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . $ 57
Average number of shares
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . 387
Average amount of debt per
share during the period (d) . . . . . . . $ 0.15
Year ended
October 31, 1996
PER SHARE DATA
Net asset value at beginning of year. . . . . $ 8.41
----
Income from investment operations
Net investment income (loss). . . . . . . . . (.07)
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . 1.29
----
Total from investment operations. . . . . 1.22
----
Less distributions
Distributions from realized gains . . . . . . (.62)
Distributions from paid-in capital. . . . . . --
----
Total dividends and distributions. . . . . (.62)
---
Net asset value at end of period. . . . . . . $ 9.01
====
TOTAL RETURN 15.60 %
RATIOS / SUPPLEMENTAL DATA
Net assets at end of year
(000's omitted) . . . . . . . . . . . . . . 3,240
Ratio of expenses to average
net assets (a). . . . . . . . . . . . . . . .99 %
Ratio of expenses-net (b) . . . . . . . . . . .99 %
Ratio of net investment income
(loss) to average net assets (c) . . . . . . (0.74)%
Portfolio turnover rate . . . . . . . . . . . 118.55 %
Average commission rate per share . . . . . . $ .0297
Borrowings for the period:
Amount of debt outstanding
at the end of period. . . . . . . . . . . --
Average amount of debt
outstanding during the period (d) . . . . --
Average number of shares
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . 317
Average amount of debt per
share during the period (d) . . . . . . . --
Year ended
October 31, 1995
PER SHARE DATA
Net asset value at beginning of year. . . . . $ 6.87
----
Income from investment operations
Net investment income (loss). . . . . . . . . (.05)
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . 1.59
----
Total from investment operations. . . . . 1.54
----
Less distributions
Distributions from realized gains . . . . . . --
Distributions from paid-in capital. . . . . . --
----
Total dividends and distributions. . . . . --
----
Net asset value at end of year. . . . . . . . $ 8.41
====
TOTAL RETURN 22.42 %
RATIOS / SUPPLEMENTAL DATA
Net assets at end of year
(000's omitted) . . . . . . . . . . . . . . 2,183
Ratio of expenses to average
net assets (a). . . . . . . . . . . . . . . 1.19 %
Ratio of expenses-net (b) . . . . . . . . . . 1.19 %
Ratio of net investment income
(loss) to average net assets (c) . . . . . . (0.72)%
Portfolio turnover rate . . . . . . . . . . . 59.89 %
Average commission rate per share . . . . . . --
Borrowings for the period:
Amount of debt outstanding
at the end of period. . . . . . . . . . . --
Average amount of debt
outstanding during the period (d) . . . . --
Average number of shares
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . 327
Average amount of debt per
share during the period (d) . . . . . . . --
Year ended
October 31, 1994
PER SHARE DATA
Net asset value at beginning of year. . . . . $ 7.34
----
Income from investment operations
Net investment income (loss). . . . . . . . . (.39)
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . .27
---
Total from investment operations. . . . . (.12)
---
Less distributions
Distributions from realized gains . . . . . . --
Distributions from paid-in capital. . . . . . (.35)
-----
Total dividends and distributions. . . . . (.35)
-----
Net asset value at end of period. . . . . . . $ 6.87
====
TOTAL RETURN (1.57)%
RATIOS / SUPPLEMENTAL DATA
Net assets at end of year
(000's omitted) . . . . . . . . . . . . . . 2,632
Ratio of expenses to average
net assets (a). . . . . . . . . . . . . . . 6.19 %
Ratio of expenses-net (b) . . . . . . . . . . 6.19 %
Ratio of net investment income
(loss) to average net assets (c) . . . . . . (5.56)%
Portfolio turnover rate . . . . . . . . . . . 89.62 %
Average commission rate per share . . . . . . --
Borrowings for the period:
Amount of debt outstanding
at the end of period. . . . . . . . . . . --
Average amount of debt
outstanding during the period (d) . . . . --
Average number of shares
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . 456
Average amount of debt per
share during the period (d) . . . . . . . --
Year ended
October 31, 1993
PER SHARE DATA
Net asset value at beginning of year. . . . . $ 6.29
Income from investment operations
Net investment income (loss). . . . . . . . . (.29)
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . 1.65
Total from investment operations. . . . . 1.36
Less distributions
Dividends from net investment income. . . . . --
Distributions from realized gains . . . . . . --
Distributions from paid-in capital. . . . . . (.31)
Total dividends and distributions. . . . . (.31)
Net asset value at end of year. . . . . . . . $ 7.34
====
TOTAL RETURN 21.80 %
RATIOS / SUPPLEMENTAL DATA
Net assets at end of year
(000's omitted) . . . . . . . . . . . . . . 4,002
Ratio of expenses to average
net assets (a). . . . . . . . . . . . . . . 4.41 %
Ratio of expenses-net (b) . . . . . . . . . . 4.41 %
Ratio of net investment income
(loss) to average net assets (c) . . . . . . (4.15)%
Portfolio turnover rate . . . . . . . . . . . 71.02 %
Average commission rate per share . . . . . . --
Borrowings for the period:
Amount of debt outstanding
at the end of period. . . . . . . . . . . --
Average amount of debt
outstanding during the period . . . . . .
(000's omitted) (d) . . . . . . . . . . . 450
Average number of shares
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . 945
Average amount of debt per
share during the period (d) . . . . . . . $ 0.48
Year ended
October 31, 1992
PER SHARE DATA
Net asset value at beginning of year. . . . . $ 7.42
Income from investment operations
Net investment income (loss). . . . . . . . . (.25)
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . (.88)
Total from investment operations. . . . . (1.13)
Less distributions
Dividends from net investment income. . . . . --
Distributions from realized gains . . . . . . --
Distributions from paid-in capital. . . . . . --
Total dividends and distributions. . . . . --
Net asset value at end of year. . . . . . . . $ 6.29
====
TOTAL RETURN (15.23)%
RATIOS / SUPPLEMENTAL DATA
Net assets at end of year
(000's omitted) . . . . . . . . . . . . . . 8,913
Ratio of expenses to average
net assets (a). . . . . . . . . . . . . . . 3.83 %
Ratio of expenses-net (b) . . . . . . . . . . 3.83 %
Ratio of net investment income
(loss) to average net assets (c) . . . . . . (3.48)%
Portfolio turnover rate . . . . . . . . . . . 81.32 %
Average commission rate per share . . . . . . --
Borrowings for the period:
Amount of debt outstanding
at the end of period
(000's omitted) (d) . . . . . . . . . . . $ 1,740
Average amount of debt
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . $ 2,099
Average number of shares
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . 1,728
Average amount of debt per
share during the period (d) . . . . . . . $ 1.21
Year ended
October 31, 1991
PER SHARE DATA
Net asset value at beginning of year. . . . . $ 3.81
Income from investment operations
Net investment income (loss). . . . . . . . . (.21)
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . 3.82
Total from investment operations. . . . . 3.61
Less distributions
Dividends from net investment income. . . . . --
Distributions from realized gains . . . . . . --
Distributions from paid-in capital. . . . . . --
Total dividends and distributions. . . . . --
Net asset value at end of year. . . . . . . . $ 7.42
====
TOTAL RETURN 94.75 %
RATIOS / SUPPLEMENTAL DATA
Net assets at end of year
(000's omitted) . . . . . . . . . . . . . . 16,469
Ratio of expenses to average
net assets (a). . . . . . . . . . . . . . . 4.09 %
Ratio of expenses-net (b) . . . . . . . . . . 4.09 %
Ratio of net investment income
(loss) to average net assets (c) . . . . . . (3.20)%
Portfolio turnover rate . . . . . . . . . . . 106.60 %
Average commission rate per share . . . . . . --
Borrowings for the period:
Amount of debt outstanding
at the end of period
(000's omitted) . . . . . . . . . . . . . $ 1,105
Average amount of debt
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . $ 1,622
Average number of shares
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . 1,737
Average amount of debt per
share during the period (d) . . . . . . . $ 0.93
Year ended
October 31, 1990
PER SHARE DATA
Net asset value at beginning of year. . . . . $ 7.36
Income from investment operations
Net investment income (loss). . . . . . . . . (.43)
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . (3.12)
Total from investment operations. . . . . (3.55)
Less distributions
Dividends from net investment income. . . . . --
Distributions from realized gains . . . . . . --
Distributions from paid-in capital. . . . . . --
Total dividends and distributions. . . . . --
Net asset value at end of year. . . . . . . . $ 3.81
====
TOTAL RETURN (48.23) %
RATIOS / SUPPLEMENTAL DATA
Net assets at end of year
(000's omitted) . . . . . . . . . . . . . . 3,562
Ratio of expenses to average
net assets (a). . . . . . . . . . . . . . . 7.42 %
Ratio of expenses-net (b) . . . . . . . . . . 7.42 %
Ratio of net investment income
(loss) to average net assets (c) . . . . . . (5.90)%
Portfolio turnover rate . . . . . . . . . . . 108.02 %
Average commission rate per share . . . . . . --
Borrowings for the period:
Amount of debt outstanding
at the end of period. . . . . . . . . . .
(000's omitted) . . . . . . . . . . . . . $ 440
Average amount of debt
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . $ 2,311
Average number of shares
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . 1,005
Average amount of debt per
share during the period (d) . . . . . . . $ 2.30
Year ended
October 31, 1989
PER SHARE DATA
Net asset value at beginning of year. . . . . $ 7.54
Income from investment operations
Net investment income (loss). . . . . . . . . (.12)
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . (.02)
Total from investment operations. . . . . (.14)
Less distributions
Dividends from net investment income. . . . . (.04)
Distributions from realized gains . . . . . . --
Distributions from paid-in capital. . . . . . --
Total dividends and distributions. . . . . (.04)
Net asset value at end of year. . . . . . . . $ 7.36
====
TOTAL RETURN (1.78) %
RATIOS / SUPPLEMENTAL DATA
Net assets at end of year
(000's omitted) . . . . . . . . . . . . . . 7,959
Ratio of expenses to average
net assets (a). . . . . . . . . . . . . . . 4.26 %
Ratio of expenses-net (b) . . . . . . . . . . 4.26 %
Ratio of net investment income
(loss) to average net assets (c) . . . . . . (1.37)%
Portfolio turnover rate . . . . . . . . . . . 87.53 %
Average commission rate per share . . . . . . --
Borrowings for the period:
Amount of debt outstanding
at the end of period
(000's omitted) . . . . . . . . . . . . . $ 3,620
Average amount of debt
outstanding during the period (d) . . . . $ 2,007
Average number of shares
outstanding during the period
(000's omitted) (d) . . . . . . . . . . . 1,141
Average amount of debt per
share during the period (d) . . . . . . . $ 1.76
(a) Ratio of expenses to average net assets prior to fee waiver
and expense reimbursement by the Adviser was 4.25%, 4.14%,
3.62%, 3.29%, 7.06%, 4.42%, 3.83%, 4.09%, 7.47%, and 4.54%,
respectively.
(b) Ratio of expenses-net includes the effect of custody
credits.
(c) Ratio of net investment income (loss) to average net assets
prior to fee waiver and expense reimbursement by the Adviser
was (3.11)%, (3.94)%, (3.37)%, (2.83)%, (6.44)%, (4.16)%,
(3.48)%, (3.20)%, (5.94)%, and (1.65)%, respectively.
(d) Averages computed on a daily basis.
THE MANAGER
Pathfinder Advisers, 4023 West 6th Street, Los Angeles, CA
90020 (the "Manager") supervises all services in connection with
the business of the Fund (see "Management of the Fund"). The
Manager, which is controlled by the President of the Trust,
Edwin R. Bernstein, may provide management to other registered
investment companies and individual and institutional clients and
may also acquire interests in other financial service companies.
The Fund's Portfolio Manager is Edwin R. Bernstein.
Mr. Bernstein has been the Portfolio Manager since May 1989.
Mr. Bernstein is President of the Manager and is President and
Trustee of the Fund. For the past 30 years Mr. Bernstein has
owned and managed, either individually or in partnership,
apartment houses and commercial properties in Los Angeles.
The Fund generally seeks to purchase common stocks that can
be held for appreciation in value over the long term (three to
five years). In selecting stocks the Manager relies principally
on fundamental analysis of issuers' financial statements and
other published information regarding their businesses to
identify stocks which it believes are significantly undervalued
in terms of their future potential trading price, with the
objective of buying and holding those stocks until they are what
it believes to be fully valued. The Manager generally seeks to
identify common stocks of companies which it believes are
financially sound and have a record of at least three years of
continuous operations, but which, in its opinion, trade at lower-
than-average price/earnings, price/book-value, price/cash-flow
or price/sales ratios while displaying patterns of generally
increasing revenues and earnings.
In order to reduce investment risk, the Manager seeks to
diversify the Fund's portfolio among at least 50 stocks. In
addition, it may utilize strategies based on covered call options
and stock index options, discussed below under "Objectives and
Policies of the Fund" to hedge against general market declines or
short-term declines in the prices of specific securities.
At least 85% of the value of the Fund's common stock
investments (measured at the time of purchase) is comprised of
stocks which are listed on the New York Stock Exchange, the
American Stock Exchange or the National Association of Securities
Dealers Automated Quotation System, or which meet the
requirements for such listing, the issuers of which have operated
profitably over the 12-month period preceding the Fund's purchase
or are anticipated by the Manager to so operate over 12 months
following such purchase.
The Fund's transfer agent and dividend paying agent is
Unified Fund Services, Inc., P. O. Box 6110, Indianapolis,
Indiana 46206-6110.
OBJECTIVE AND POLICIES OF THE FUND
The Fund has the investment objective of long-term capital
growth. Under normal market conditions, the Fund seeks to
achieve that objective by investing at least 80% of its assets in
a diversified portfolio of common stocks which the Manager
believes are significantly undervalued and which the Manager
expects to appreciate in value generally over a period of three
to five years. Receipt of dividends and current income is
incidental and is not an investment objective of the Fund.
The investment objective of the Fund is a fundamental policy
that cannot be changed without approval of a majority of its
outstanding shares. No assurance exists that the Fund will
achieve its investment objective.
Investments
The Fund invests primarily in the stocks of smaller
companies with total market capitalizations of less than
$500 million ("small caps"). Specifically, the Fund commonly
invests in over-the-counter traded stock of companies with market
capitalizations of less than $100 million ("micro caps") and
which have an average price of less than five dollars per share.
In general, the securities of smaller companies traded over-the-
counter are not as broadly traded as securities of large
companies listed on national securities exchanges, and,
therefore, prices of the securities of the smaller companies may
fluctuate more widely and abruptly. Investments in smaller
companies tend to be more volatile and somewhat more speculative
than investments in larger companies. Smaller companies may be
subject to intense competition from larger or more established
companies and may be more likely to be adversely affected by poor
economic or market conditions. Because smaller company
securities may not be widely traded and the Fund's position in
such securities may be substantial, at times it could be
difficult for the Fund to dispose of such shares at prevailing
market prices without further depressing prices in order to meet
redemptions or other cash needs. In addition, small-cap
companies may lack depth of management and may be more reliant on
the skills of management and their continued tenure. Investing
in small-cap companies may require shareholders to assume more
risk and to have more patience than investing in securities of
larger, more established companies.
While the Fund does not engage in short-term trading of
investments, portfolio stocks may be held for shorter periods as
a result of developments occurring after their purchase, such as
buyouts, mergers, fundamental changes in the issuer's business
and changing overall market conditions. The Fund will not invest
in warrants to purchase common stocks. The Fund's turnover rate
is not a limiting factor when the Manager deems it appropriate to
buy or sell portfolio securities. Short-term trading will
increase the amount of brokerage commissions paid by the Fund and
the amount of possible short-term capital gains. For the fiscal
years ending October 31, 1998 and October 31, 1997, the turnover
rate of the Fund was 44.71% and 130.56%, respectively.
The Fund's investments are subject to certain risks. The
Fund's net asset value may be subject to above-average
fluctuations compared to the net asset values of other investment
companies because risk which in the Manager's opinion is greater
than average will be assumed in investing in companies for the
purpose of seeking to achieve higher than average appreciation
and because the Fund may hold its investments for long-term
growth despite short-term fluctuations in value.
A portion of the Fund's assets may be held from time to time
in cash, certificates of deposit or commercial paper to meet cash
requirements, pending investment or when the Manager believes a
temporary defensive position is advisable because of economic or
market conditions. Certificates of deposit are generally short-
term, interest-bearing negotiable certificates issued against
funds deposited in the issuing institution. Commercial paper is
a short-term, unsecured promissory note issued by a corporation
to finance short-term credit needs; it is usually sold at a
discount and has a maturity at the time of issuance not exceeding
nine months. Under normal market conditions, no more than 20% of
the total assets of the Fund are so held, but this may increase
up to any amount during periods when a temporary defensive
position is maintained. The Fund invests only in certificates of
deposit issued by commercial banks or savings and loan
associations which are organized and operating in the United
States and whose deposits are insured by the Bank Insurance Fund
or the Savings Association Insurance Fund, both of which are
administered by the Federal Deposit Insurance Corporation; in
addition, if the amount of such certificate exceeds the amount
insured by FDIC or SAIF, the issuing institution must have total
assets of at least $500 million. The Fund invests only in
commercial paper rated A-1 by Standard & Poor's Corporation or
Prime-1 by Moody's Investor's Service, which are their highest
ratings.
Borrowing by the Fund
The Fund may borrow as a temporary measure for extraordinary
or emergency purposes. The Fund may also borrow money to enable
it to fulfill shareholder redemption requests. In connection
with such redemptions, the Fund frequently incurs overdrafts in
its custodian bank account which are covered by temporary
advances of funds from the custodian bank. As a matter of
fundamental policy, the Fund must maintain coverage (total
assets, including assets acquired with borrowed funds, less
liabilities exclusive of borrowings) of 300% of all amounts
borrowed. The Fund will borrow only from banks and only to the
extent that it meets the 300% coverage test described above. If
at any time the value of the Fund's assets should fail to meet
this 300% coverage, the Fund will, within three days, reduce its
borrowings to the extent necessary. The Fund may pledge
portfolio securities as the Manager deems appropriate in
connection with borrowings as described above.
Although the Fund is permitted to use leverage (borrow to
purchase or carry securities), the Manager has undertaken not to
use leverage as an investment strategy.
Special Risk Considerations
Covered Call Options
The Fund may write covered call options on the common stock
in its portfolio to partially offset an expected decline in the
price of such securities. The purchaser of such a covered call
option pays the Fund a premium, in return for which the purchaser
acquires the right to buy the underlying security from the Fund
at the exercise price specified in the option at any time during
the option period. If the option expires unexercised, the Fund
will realize income to the extent of the premium received for the
option. If the option is exercised, a decision over which the
Fund has no control, the Fund must sell the underlying security
to the option holder at the exercise price. All call options
written by the Fund must remain fully covered throughout the life
of the option by the Fund's ownership of the underlying
securities or by its purchase of an identical call option written
by another person. The aggregate value of the Fund's portfolio
securities on which it may write covered call options may not
exceed 25% of the value of the Fund's total net assets as of the
date any such option is written.
The Fund's ability to engage in the hedging transactions
described above may be limited by the tax requirement that the
Fund derive less than 30% of its gross income from the sale or
other disposition of stock or securities held for less than three
months. The Manager does not believe that the writing of covered
call options significantly affects the portfolio turnover rate of
the Fund. Additional information regarding covered call options
is contained in the Statement of Additional Information.
Stock Index Options
The Fund may purchase "puts" on stock indexes as a hedge
against declines in the overall stock markets. A "stock index"
is a numerical average of the prices of a large number of stocks.
For example, the Standard & Poor's 500 Index measures the value
of 500 stocks, most of which are listed on the New York Stock
Exchange, weighted to reflect the total market value of each
component stock. These stocks represent about 80% of the market
value of the issues traded on the New York Stock Exchange.
Different stock indexes increase and decrease in value somewhat
differently depending on the stock prices they measure and the
way those prices are aggregated.
The protection provided by a stock index option is effective
only against a change in the level of the stock index, not
necessarily against a change in the value of portfolio securities
held by the Fund. No assurance exists that the performance of an
index will closely "mirror" the performance of the Fund's
portfolio, thereby creating an exact or substantially exact
"hedge." The Manager believes, however, that puts on indexes can
be purchased in a manner that will effectively hedge the Fund's
potential losses. The aggregate premiums paid by the Fund on all
stock index put options held by the Fund at any time may not
exceed 2% of its net assets. Additional information regarding
stock index options including certain risks associated with the
use of such options is contained in the Statement of Additional
Information.
Foreign Issuers
The Fund may invest up to 20% of its assets in U.S. dollar
denominated American depository receipts ("ADR's") for securities
of foreign issuers. ADR's are securities issued by domestic
banks representing indirect interests in foreign securities
deposited with the banks. Although ADR's are publicly traded in
the United States, the Fund may be subject to additional
investment risks for these securities that are different in some
respects from the risks arising in connection with investments in
securities of U.S. domestic issuers. Such risks include, for
example, future foreign political and economic developments,
exchange rate fluctuations, imposition or increase of foreign
withholding taxes on interest or dividend income payable on the
securities, establishment of exchange controls, nationalization
or the adoption of other foreign governmental restrictions which
might adversely affect the foreign issuer or its securities. In
addition, less information may be publicly available about a
foreign issuer than about a domestic issuer, foreign corporations
are not subject to the same governmental supervision and
regulation as domestic issuers and foreign issuers may not be
subject to the same accounting, auditing and financial record-
keeping standards and requirements as domestic issuers.
Investment Restrictions
The Fund is subject to certain investment restrictions which
are fundamental policies and may not be changed without approval
of the shareholders of the Fund. These restrictions include the
following:
1. The Fund may not purchase the securities of any
issuer (other than the U. S. Government or
Government agencies) if as a result more than 5%
of the Fund's total assets would be invested in
the securities of any one company or the Fund
would own more than 10% of the outstanding voting
securities of any one company, except that up to
25% of the value of the Fund's total assets may be
invested without regard to these limitations.
2. The Fund may borrow only as set forth above under
"Borrowing by the Fund."
A description of certain other fundamental investment
restrictions is contained in the Statement of Additional
Information.
MANAGEMENT OF THE FUND
The management and affairs of the Trust are supervised by
its Board of Trustees. The Manager is responsible for managing
the day-to-day business of the Fund, subject to the general
supervision of the Trustees.
Investment Advisory Agreement
Pursuant to its agreement with the Trust, the Manager
receives a quarterly fee at an annual rate of .875% of the Fund's
average daily net assets as compensation for its services to the
Fund. While this rate of fee is higher than that charged most
investment companies, the Manager believes it is in line with
that of comparable mutual funds.
Pursuant to the investment advisory agreement, the Manager
(i) provides investment advice and recommendations with respect
to the investment policies of the Fund and specific investments
for the Fund, (ii) supervises the investment program of the Fund,
(iii) arranges for the purchase and sale of securities for the
Fund and (iv) supervises the performance of all administrative
services in connection with management of the Fund. These
include without limitation coordination of all matters relating
to the functions of the custodian, shareholder service agents,
accountants, attorneys and other parties performing services or
operational functions for the Fund and such administrative and
clerical functions as are necessary in order to provide effective
administration of the Fund.
In the event the operating expenses of the Fund (including
the fees payable to the Manager but excluding taxes, interest,
fees payable under the Fund's Plan of Distribution, brokerage and
extraordinary expenses) for any fiscal year exceed the expense
limitations imposed on the Fund by state securities laws or any
regulations thereunder, the Manager will reduce its fees to the
extent of such excess. Any such reductions or reimbursements may
not be repaid to the Manager in subsequent fiscal years.
For the fiscal year ended October 31, 1998, the Fund paid
2.11% of its annualized average net assets for total expenses.
Management fees after expense reimbursements were $0. Without
reimbursements, the expenses would have been 4.25%.
Portfolio Transactions
Subject to supervision by the Board of Trustees, the Manager
is responsible for the selection of brokers and dealers to
purchase and sell portfolio securities on behalf of the Fund.
The Manager considers a number of factors in determining which
brokers or dealers to use for the Fund's portfolio transactions.
The factors include, but are not limited to, the reasonableness
of commissions, quality of services and execution and the
availability of research which the Manager may lawfully and
appropriately use in its investment management and advisory
capacities. Provided the Fund receives prompt execution at
competitive prices, the Manager may also consider the sale of the
Fund's shares as a factor in selecting broker-dealers for
portfolio transactions. The Fund does not engage in "soft
dollar" arrangements with brokers. The allocation of orders among
brokers and the commission rates paid will be reviewed
periodically by the Manager and the Board of Trustees.
Securities in the Fund's portfolio may also be held by other
mutual funds which may be organized by the Trust as separate
series of its shares, by other investment advisory clients of the
Manager or by its officers and employees. If purchases or sales
of securities for one of the Trust's portfolios and for such
other mutual funds or persons occur at or about the same time,
transactions in such securities will be made, insofar as
feasible, for the Trust's portfolios and such other persons in a
manner deemed equitable. The Manager may aggregate orders for
purchases and sales of securities of the same issuer on the same
day among the Trust's portfolios and its other accounts, and, in
such event, the price to be paid or received by the Trust's
portfolios and those accounts, will be the average obtained in
those orders. To the extent that transactions on behalf of the
Trust's portfolios and such other persons during the same period
may increase the demand for securities being purchased or the
supply of securities being sold, an adverse effect on price or
volume may occur.
Total brokerage commissions paid by the Fund for the fiscal
year ended October 31, 1998 were $36,000.
NET ASSET VALUE
The net asset value of the shares of the Fund for purposes
of both purchases and redemptions is determined daily promptly
after market close on each day that the New York Stock Exchange
is open for trading. The holidays on which the New York Stock
Exchange is currently closed are New Year's Day, Martin Luther
King, Jr. Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Fund's net asset value per share is determined by
dividing the total value of its investments and other assets,
less its liabilities, by the total number of its outstanding
shares and adjusting the result to the nearest cent per share.
Securities listed on a securities exchange and over-the-counter
securities traded on The Nasdaq Stock Market are valued at the
closing sales price on the date as of which net asset value is
being determined. Securities that are not traded on a particular
day, and other securities regularly traded in the over-the-
counter market, are valued at the mean between the latest bid and
ask prices. The current market value of any option held by the
Fund is its last sales price on the applicable exchange prior to
the time when assets are valued; lacking any sales that day, the
options will be valued at the mean between the current closing
bid and ask prices. Short-term debt instruments with maturities
of sixty days or less at the date of purchase are valued at
amortized cost, which approximates market value. Securities for
which market quotations are not readily available and all other
assets of the Fund are valued at fair value as the Board of
Trustees may determine in good faith.
HOW TO PURCHASE SHARES
Shares of the Fund are sold continuously at net asset value
per share next calculated after receipt of a purchase order.
Minimum and subsequent orders for each type of account are set
forth below:
Type of Account Initial Minimum Subsequent
Regular $1 $25
Gifts to Minors $1 $25
Retirement Plans
IRA $1 $25
Minor IRA $1 $25
To purchase shares of the Fund, send the Shareholder
Servicing Agent a completed application form and a check made
payable to PATHFINDER FUND. Upon receipt of the completed
purchase application and a check, the Shareholder Servicing Agent
will invest your monies in full and fractional shares (to three
decimal places) of the Fund at its net asset value per share next
computed after your check is received and will confirm the
investment to you. You can make subsequent investments by
attaching a check to the stub on the confirmation slip. You can
also arrange to purchase shares by wire by calling the Fund's
Shareholder Servicing Agent for instructions at 800-207-0760.
You may arrange to purchase or redeem shares through a
broker-dealer. Such broker-dealers, who must be members of the
National Association of Securities Dealers, Inc., may charge you
a service fee. Neither the Fund nor the Manager receives any
part of such fees, which can be avoided by dealing directly with
the Shareholder Servicing Agent.
The Fund reserves the right to reject any order, in whole or
in part, or to cancel the same due to nonpayment. No order is
binding on the Fund until such order is confirmed by the
Shareholder Servicing Agent. If your order is cancelled because
your check does not clear, you will be responsible for any loss
incurred by the Fund, and you will be charged a fee. If you are
a shareholder at the time, the Fund may redeem shares in your
account to reimburse the Fund for the loss incurred. The Fund
also reserves the right to suspend the sale of shares to the
public at any time, in response to conditions in the securities
markets or otherwise.
Tax Sheltered Retirement Plans
Retirement plans are among the best tax breaks available to
individuals. The Trust can set up a new plan or accept a
transfer directly from your present custodian. These plans let
you save for retirement and shelter your investment income from
current taxes.
Individual Retirement Accounts (IRA's): open to anyone
who works. You can also make investments in the name
of your spouse, if your spouse has no earned income.
Simplified Employee Pension Plan (SEP/IRA): a pension
plan in which both employer and employee may contribute
to an IRA. The SEP/IRA is also available to self-
employed individuals.
Shares of the Fund may also be purchased by retirement plans
not established through the Shareholder Servicing Agent. Such
plans include IRA and Keogh Plans sponsored by dealers or other
financial organizations, referred to as "self-directed" plans.
You should consult with your own tax adviser regarding
adoption of these plans. For the necessary forms and information
on adopting these plans, call the Trust at 800-444-4778.
Distribution Plan
The Fund has adopted a Plan of Distribution pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "1940 Act"),
under which the Fund is authorized to pay for activities
primarily intended to result in the sale of its shares, at an
annual rate of 0.25% of the Fund's average daily net assets,
which activities include (but are not limited to) the following:
payments to securities dealers and others engaged in the sale of
shares; payment of compensation to and expenses of personnel who
engage in or support distribution of shares or who render
shareholder support services not otherwise provided by the
Shareholder Servicing Agent (including answering routine
inquiries and processing shareholder transactions); development
and implementation of direct mail promotions and advertising; and
preparation, printing and distribution of Prospectuses and
reports for recipients other than existing shareholders. The
Board of Trustees believes that the Plan broadens the Fund's
asset base, helps in developing a cash flow useful for portfolio
management and may lower its expense ratio by increasing the
number of shares outstanding. During any fiscal year, payments
under the Plan may not exceed 0.25% of the Fund's average daily
net assets during such year; however unreimbursed covered
distribution expenses may be carried forward for three years.
During the fiscal year ended October 31, 1998 the Fund paid 0.00%
of its annualized average net assets pursuant to the Plan. No
12b-1 payments have been made to date to brokers for selling Fund
shares.
The Manager has undertaken not to seek reimbursement for
distribution expenses of the Fund until at least November 30,
1999, and the Trustees of the Fund have undertaken to suspend
payments under the Plan until at least that date.
Payments under the Plan may include payments to banks which
render shareholder support services. The Glass-Steagall Act
prohibits banks from engaging in certain securities-related
activities, including the distribution of securities. The
Manager does not believe that payments to banks under the Plan,
if any, will violate the Glass-Steagall Act or any other
applicable banking statutes or regulations. However, future
changes in federal or state statutes or regulations or in
judicial or administrative interpretations of present or future
statutes or regulations might prevent such payments, in which
event the Fund would terminate any such payments, and our
Trustees would consider other appropriate actions under the Plan.
SHAREHOLDER SERVICES
Account Statements
Each time you purchase or redeem shares of the Fund the
Shareholder Servicing Agent will send you a confirmation showing
the date of the transaction, the number of shares purchased or
redeemed, the price at which each transaction was effected and
the total purchase price or redemption proceeds. We will advise
you annually how any dividends or distributions are to be
characterized for federal income tax purposes.
Automatic Investment Plan
After you make an initial investment in shares of the Fund,
you can arrange to have regular monthly investments of $25 or
more deducted automatically from your checking account and
applied to the purchase of shares of the Fund. You can change
the authorized amount or terminate your investment plan at any
time. An authorization form for this service is available from
the Trust. There is presently no charge for this service.
Systematic Withdrawal Plan
If your account balance with the Fund has a current value of
$10,000 or more, you can arrange to have shares of the Fund
automatically redeemed from your account to provide you with cash
payments in fixed amounts at monthly or quarterly intervals (the
minimum withdrawal is $25). You can change the authorized amount
or terminate your withdrawal plan at any time. This service is
not available to you if you elect to have regular dividends or
capital distributions mailed to you rather than reinvested in
shares of the Fund. An authorization form may be obtained from
the Trust. There is presently no charge for this service.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to distribute any net investment income and
net realized capital gains of the Fund to the shareholders of the
Fund in or shortly after December of each year. Your income
dividends and capital gains distributions will be automatically
reinvested in additional shares of the Fund at net asset value
unless you have requested otherwise.
The Fund has qualified and has elected to be treated as a
regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). As such, as long
as the Fund distributes all of its net investment income and net
realized capital gains for each fiscal year in accordance with
the timing requirements imposed by the Code, the Fund will not be
subject to any federal income or excise taxes. Distributions of
the Fund will be taxable to shareholders (other than tax-exempt
entities), whether received in shares or in cash. Distributions
of net investment income and short-term capital gains are taxable
to shareholders as ordinary income. Distributions of net long-
term capital gains are taxable to shareholders as long-term
capital gains regardless of how long a shareholder has held
shares of the Fund. Distributions declared in October, November
and December to shareholders of record in such a month and paid
in January are taxable as if received in December. After the end
of each calendar year, each shareholder will receive information
for tax purposes on the dividends and capital gains distributions
received, if any, during that year, including the portion taxable
as ordinary income, the portion taxable as capital gains and the
amount of any dividends eligible for the dividends-received
deduction for corporate shareholders. Borrowing by the Fund may
cause some of its portfolio securities to be treated as "debt-
financed" and dividends paid to corporate shareholders from
earnings on such securities to be ineligible for the dividends-
received deduction. Availability of the deduction to Fund
shareholders is also subject to other restrictions.
The Code also imposes a 4% excise tax on ordinary income or
realized securities gains which are not distributed by the Fund
pursuant to provisions requiring distributions to be made on a
system closely approximating a calendar year basis. In general,
at least 98% of the Fund's calendar year ordinary income and at
least 98% of the Fund's capital gain net income determined on the
basis of a fiscal year ended October 31, must be distributed (or
deemed distributed) by December 31 of each year. The Fund
intends to meet such requirements.
You should consult your own tax adviser regarding specific
questions as to federal, state or local taxes.
HOW TO REDEEM SHARES
You may redeem shares of the Fund at any time at its net
asset value per share next determined after a redemption request
in proper form is received by the Shareholder Servicing Agent.
To redeem your shares, send the Shareholder Servicing Agent:
(1) a written request for redemption, signed by you and any other
registered owners exactly as the shares are registered,
indicating how many shares or the dollar amount you wish to
redeem; (2) if the Fund has issued share certificates for any
shares you want redeemed, the share certificates; and (3) if you
are a corporation, partnership, executor, trustee or guardian,
the documents evidencing your authority to act. All signatures
must be guaranteed by an eligible signature guarantor such as a
member firm of a U.S. stock exchange, or a commercial bank or
trust company. Your shares can also be redeemed through your
securities dealer, who may charge you a fee. Redemptions are
taxable events on which a shareholder may realize a gain or loss.
Shareholders who have an IRA or other retirement plan must
indicate on their redemption request whether or not to withhold
federal income tax. Redemption requests which do not indicate an
election cannot be processed.
The Shareholder Servicing Agent will mail a check to you for
your redemption proceeds within three days after it receives your
request in proper form, except under the circumstances described
below. If you specified wire instructions on your account-
opening application and are redeeming more than $1,000 of shares,
you can request the Shareholder Servicing Agent to wire the
proceeds to your account at any commercial bank or savings and
loan association which is a member of the Federal Reserve System.
Requests for wire transfer of redemptions proceeds of more than
$5,000 must be made in writing, as specified in the previous
paragraph, with all signatures guaranteed. The Agent will deduct
a service charge for each wire transfer. If you are redeeming
shares you paid for by check, the Shareholder Servicing Agent
may delay sending your redemption proceeds until the check has
cleared, but will not delay more than 15 days after it received
the check. If you anticipate redeeming shares before 15 days
have elapsed, we suggest that you pay for your shares by wire
transfer.
The Fund may suspend your right to redeem only if the New
York Stock Exchange is closed or trading on the Exchange is
restricted or if the Securities and Exchange Commission
determines that an emergency exists or that we should be
permitted to do so for the protection of our shareholders.
The Trust's Master Trust Agreement authorizes redemption of
shares at any time if the Trustees determine by majority vote
that failure to do so may have materially adverse consequences to
the shareholders of the Fund or the Trust.
In addition to the regular redemption procedures set forth
above, shareholders who have elected the Telephone Redemption
Privilege may redeem shares by telephone. The redemption check
must be payable to the owner(s) of record of the shares and may
only be sent to the address of record for the account. If an
account has multiple owners, the Shareholder Servicing Agent and
the Fund may rely on the instructions of any one owner.
Telephone redemptions are generally not available for Fund-
sponsored retirement plans or for newly-purchased (within the
prior 15 days) shares or for shares represented by certificates.
To place a telephone redemption request, please call the
Shareholder Servicing Agent at 800-207-0760. The Shareholder
Servicing Agent and the Fund may record any calls. Requests
received by the Shareholder Servicing Agent prior to market close
on each day that the New York Stock Exchange is open for trading,
will be processed at the net asset value per share determined
that day. The Fund may amend or cease to offer this privilege at
any time without prior notice. For a more detailed discussion of
the liability of the Shareholder Servicing Agent and the Fund
when acting on instructions under the Telephone Redemption
Privilege, see "Limitation of Liability Regarding the Telephone
Redemption Privilege" below.
Limitation of Liability Regarding the Telephone Redemption
Privilege
Shareholders who have elected the Telephone Redemption
Privilege authorize and direct the Shareholder Servicing Agent to
accept and act upon telephone, telex, fax or telegraph
instructions believed by it to be genuine. Such shareholders
further agree to release and indemnify the Shareholder Servicing
Agent and the Fund and their respective officers and employees
from any and all liability for so acting. Although the Fund
believes the limitation of liability associated with Telephone
Privileges satisfies applicable requirements under the federal
securities laws, the Securities and Exchange Commission has
indicated it is considering the appropriateness of such
provisions.
PERFORMANCE INFORMATION
From time to time, the Fund may publish its total return in
advertisements and communications to investors. Total return
information will include the Fund's average annual compounded
rate of return over the most recent one-, five-, and ten-year
periods. The Fund may also advertise aggregate and average total
return information over different periods of time. The Fund's
total return will be based upon the value of the shares acquired
though a hypothetical $1,000 investment (at the net asset value
per share at the beginning and at the end of the specified
period, assuming reinvestment of all distributions at net asset
value per share). The Fund may also publish a distribution rate
in prospective investor communications preceded or accompanied by
a copy of the current Prospectus. The current distribution rate
for the Fund will be calculated by dividing the net asset value
per share into the annualization of the total distributions made
by the Fund during the stated period. In each case, distribution
rates and total return figures will reflect all recurring charges
against the Fund's income.
Investors should note that the investment results of the
Fund will fluctuate over time, and any presentation of the Fund's
total return for any prior period should not be considered as a
representation of what an investor's total return may be in any
future period. For further information, including the formula
and an example of the total return calculation, see the Statement
of Additional Information. Further information about the
performance of the Fund is also contained in the Fund's Annual
Report to Shareholders which may be obtained without charge by
calling or writing the Fund.
GENERAL INFORMATION
The Fund is a series of Pathfinder Trust, a Massachusetts
business trust established by a Master Trust Agreement dated
January 21, 1987 and registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company.
The Trust is authorized to issue an unlimited number of
shares of beneficial interest in separate classes or "funds,"
without par value. As of the date of this Prospectus, the Trust
has authorized and outstanding one such fund, PATHFINDER FUND.
Under the Trust's Master Trust Agreement, the Trustees are
authorized to create additional funds without the approval of the
Trust's shareholders. Although the Trust may create additional
funds in the future, the Trustees have not yet made any decisions
with respect to such funds.
The Trust is not required to hold annual shareholders
meetings and will not normally do so. However, special meetings
may be called for a specific fund or the Trust as a whole for
purposes such as electing or removing Trustees, changing
fundamental investment policies or approving certain contracts.
Each fund share is entitled to one vote (with proportionate
voting for fractional shares), irrespective of the relative net
asset value of the funds' shares. Each fund, as a separate
series of the Trust, votes separately on matters affecting only
that fund (e.g., approval of the management agreement); all
series of the Trust vote as a single class on matters affecting
all series jointly or the Trust as a whole (e.g., election or
removal of Trustees). Shares of each fund participate equally in
dividends and distributions declared by the Board of Trustees
with respect to that fund and in assets on liquidation or
dissolution of that fund remaining after satisfaction of
outstanding liabilities. When issued, shares are fully paid and
nonassessable, have no preference, preemptive, conversion,
exchange or similar rights and are freely transferable. Shares
do not have cumulative voting rights, and the holders of more
than 50% of the shares of the Trust voting for the election of
Trustees can elect all of the Trustees of the Trust if they
choose to do so.
The Trust no longer issues certificates for its shares.
Under Massachusetts law, the shareholders of the Trust
could, under certain circumstances, be held personally liable for
the obligations of the Trust. However, the Master Trust
Agreement disclaims shareholder liability for acts or obligations
of the Trust and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or
executed by the Trust or a Trustee. The Master Trust Agreement
provides for indemnification from the Trust property for all
losses and expenses of any shareholder held personally liable for
the obligations of the Trust. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be
unable to meet its obligations.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The Fund was down 29.22% in fiscal year 1998 (November 1,
1997 - October 31, 1998).
Large capitalization stocks generally outperformed small
caps and this underperformance by small caps was further
exacerbated by the crushing "Mini-Bear Market" of 1998.
The Fund's Manager continued to identify and buy micro caps
which it believes are significantly undervalued, as yet unnoticed
by institutional investors, and have exceptional potential for
significant increases in their trading prices.
GROWTH OF $10,000
Y-axis: PATHFINDER FUND RUSSELL 2000
INDEX (1)
($ in thousands)
X-axis:
10/31/88 10.0 $ 10.0
10/31/89 9.8 11.4
10/31/90 5.1 8.1
10/31/91 9.9 12.6
10/31/92 8.4 13.5
10/31/93 10.2 17.6
10/31/94 10.1 17.2
10/31/95 12.3 20.1
10/31/96 14.2 23.1
10/31/97 18.6 29.4
10/31/98 13.1 25.7
Average Annual Total Return
1 year 5 years 10 years
Fund (29.22)% 5.13% 2.75%
(1) The Russell 2000 Index is an unmanaged index of stocks
representative of the small cap market.
Note: Past performance is not predictive of future
results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
____________
PART B
____________
PATHFINDER FUND
P.O. Box 75231
Los Angeles, California
90075-0231
STATEMENT OF ADDITIONAL INFORMATION
November 30, 1998
This Statement of Additional Information sets forth
information about PATHFINDER FUND, (the "Fund"), which is a
series of Pathfinder Trust (the "Trust"), a diversified, open-end
management investment company. The investment objective of the
Fund is long-term capital growth. The Fund invests primarily in
a diversified portfolio of common stocks of smaller companies
("small caps"). Although the Fund is permitted to use leverage
(borrow to purchase or carry securities), the Manager has
undertaken not to use leverage as an investment strategy.
This Statement of Additional Information is not a prospectus
and should be read in conjunction with the Prospectus of the Fund
dated the same date, which has been filed with the Securities and
Exchange Commission (the "Commission") and is available upon
request without charge. This Statement of Additional Information
has been incorporated by reference into the Prospectus. Copies
of the Prospectus and an Account Application can be obtained by
writing the Fund at the address set forth above or by calling
800-444-4778.
TABLE OF CONTENTS
Page
OBJECTIVES AND POLICIES OF THE FUND. . . . . . . . . . . .
Covered Call and Stock Index Options . . . . . . . . . .
Investment Restrictions. . . . . . . . . . . . . . . . .
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . .
Officers and Trustees. . . . . . . . . . . . . . . . . .
The Manager. . . . . . . . . . . . . . . . . . . . . . .
Transfer Agent . . . . . . . . . . . . . . . . . . . . .
Custodian and Accountants. . . . . . . . . . . . . . . .
Portfolio Transactions . . . . . . . . . . . . . . . . .
Reports. . . . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . .
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . .
OBJECTIVES AND POLICIES OF THE FUND
Covered Call and Stock Index Options
Options written by the Fund normally have expiration dates
up to nine months from the date written. The exercise price of
an option may be below, equal to or above the current market
value of the underlying security at the time the option is
written. Transactions in options involve the payment of
commissions, which will reduce the income, if any, realized by
the Fund from writing options.
When the Fund writes a call, it is required to secure its
obligation to deliver the underlying security by depositing in
escrow the underlying security in accordance with the rules of
the Options Clearing Corporation (a corporation owned by the New
York Stock Exchange, the American Stock Exchange and certain
other exchanges, which provides facilities for the issuance of
options and the clearance and settlement of options transactions)
and the exchange on which the call options are traded. To
fulfill this obligation, at the time an option is written, the
Fund, in conformity with its custody agreement, will direct its
Custodian, or a securities depository acting for the custodian,
to act as the Fund's escrow agent by issuing an escrow or
depository receipt to the Clearing Corporation. The Clearing
Corporation will release the securities or other assets from this
escrow either at the expiration of the call option, when the Fund
enters into a closing purchase transaction or upon exercise of
the option. Prior to exercise, termination by a closing purchase
transaction or expiration of a call written by the Fund, the Fund
will not be able to sell the securities securing its obligation,
even if there is an adverse movement in the price of such
securities.
Put options on stock indexes are issued by The Options
Clearing Corporation, which is jointly owned by the New York,
American, Pacific and Philadelphia Stock Exchanges and the
Chicago Board Options Exchange. They represent the right to sell
an index at a multiple of a specified index value during a
specified period of time. They can be purchased for a premium
which varies from day to day. On the exercise of the option,
settlement can be made only in cash (in an amount equal to any
excess of the actual index value on the effective date over the
option index value, multiplied by the index multiplier); physical
delivery of the stocks comprising the underlying index is not
required. Thus, if a general decline in the stock market is
expected, the Fund could elect to purchase stock index "put"
options at the index value on the purchase date. If the value of
the Fund's portfolio securities declines, the Fund could then
exercise or sell its stock index put (thus recouping part or all
of the decrease in value of its shares during the period). If
the stock index value were to increase, the Fund might not
exercise its put, in which event it would lose the premium paid
for the option plus any transaction costs. An additional risk,
which the Manager does not consider substantial, is the
possibility of suspension of trading in or exercise of the
options. The use of stock index options requires skills
different from those needed to select common stocks.
Certain special rules may impact the Fund when dealing in
stock option or stock index option transactions. The federal
income tax consequences of option transactions entered into by
the Fund will vary depending on whether the option is purchased
or sold and whether the "straddle" or "short-sale" rules apply to
the transaction. These rules are intended to eliminate tax
advantages for short sale and straddle transactions; in general,
they convert long-term capital gain into short-term capital gain,
convert short-term capital loss into long-term capital loss and
defer both long-term and short-term capital losses. Stock index
options generally are "section 1256 contracts" for federal income
tax purposes. Gains or losses on section 1256 contracts are
generally considered 60% long-term and 40% short-term capital
gains or losses. Section 1256 contracts held by the Fund at the
end of each fiscal year are "marked-to-market," with the result
that unrealized gains or losses are treated as though they were
realized. The Fund will limit its activity involving stock
options and stock index options to the extent necessary to
maintain its qualification as a regulated investment company for
federal income tax purposes.
Investment Restrictions
The Prospectus sets forth certain investment restrictions of
the Fund which are fundamental policies that cannot be changed
without approval, at a duly called meeting of the Fund's
shareholders, of the lesser of (i) a majority of the outstanding
shares of the Fund, or (ii) at least 67% of the shares of the
Fund represented at the meeting, at which the holders of more
than 50% of the shares of the Fund are represented. In addition,
the following investment limitations also may not be changed
without such a vote of shareholders of the Fund. The Fund may
not:
(a) Issue senior securities (as defined in the Investment
Company Act of 1940 (the "1940 Act")) other than notes evidencing
its obligation to repay indebtedness to banks in connection with
permitted borrowings as described in the Prospectus.
(b) Mortgage, pledge, hypothecate or in any manner transfer
as security for indebtedness any securities owned or held by the
Fund, except as may be necessary in connection with borrowings
permitted by the Fund's fundamental policies.
(c) Invest more than 10% of the value of its total assets
in "restricted securities" (i.e. securities that must be
registered under the Securities Act of 1933 before they may be
offered or sold to the public) or in securities which are
illiquid (such as securities with legal or contractual
restrictions on resale or for which there are no readily
available market quotations), or underwrite securities of other
companies.
(d) Lend money (except in connection with the purchase of
a portion of debt securities which the Fund's investment policies
and restrictions permit it to purchase) or portfolio securities
to any person.
(e) Purchase securities of any company organized under the
laws of any foreign country, except that the Fund may invest up
to 20% of its assets in American depository receipts for
securities of foreign issuers.
(f) Invest for the purpose of exercising control or
management of another company.
(g) Invest in securities of any issuer with a record of
less than three years of continuous operation, including
predecessors, except obligations issued or guaranteed by the
United States Government or its agencies.
(h) Purchase or retain the securities of any issuer if the
officers, directors, advisers or managers of the Fund who own
beneficially more than 1/2% of such securities together own
beneficially more than 5% of such securities.
(i) Invest 25% or more of the value of its total assets in
the securities of issuers in any particular industry (other than
securities of the U.S. Government or its agencies), based on the
industry classifications in the Directory of Companies Filing
Annual Reports with the Securities and Exchange Commission,
published by the Commission.
(j) Sell securities short, purchase securities on margin,
engage in arbitrage transactions or purchase or write put or call
options, except that the Fund: (i) may purchase stock index put
options, provided that the aggregate premiums on such options
held by the Fund at any time may not exceed 2% of its total net
assets as of the date any such premium is paid; and (ii) may
write covered call options on its portfolio securities, provided
that the aggregate value of its portfolio securities with respect
to which such options are written does not exceed 25% of its
total net assets as of the date any such option is written.
(k) Purchase or sell real estate or real estate mortgage
loans, or limited partnership interests in partnerships which
invest in such real estate interests, although the Fund may
invest in readily marketable securities of companies the business
of which involves such real estate interests and may own or lease
real estate used principally for its own office space.
(l) Except as provided in (j) above, purchase or sell
commodities, commodity contracts, stock index futures, financial
futures, options on futures or oil, gas or other mineral lease,
exploration or development programs, although the Fund may invest
in securities of companies the business of which involves such
commodities, contracts or programs.
(m) Purchase or retain securities of any other open-end
investment company.
MANAGEMENT OF THE FUND
Officers and Trustees
The Trustees are responsible for the oversight of the Trust;
they set policies for the Fund and regularly review the actions
of the Trust's officers. To reduce conflicts of interest in
making business decisions affecting the Trust or the Fund, an
equal or greater number of the Trustees must not be "interested
persons" of the Trust as defined by the 1940 Act.
The addresses and principal occupations during the past five
years of the current Trustees and officers of the Trust are as
follows:
Edwin R. Bernstein* President and Trustee - 4023 West Sixth
Street, Los Angeles, California 90020. Mr. Bernstein is
President and a director of the Manager. He has been in the real
estate investment business since 1962, individually and through
Lange Development Corp., a wholly owned California corporation.
Werner Lange Trustee of the Trust - 4023 West Sixth Street,
Los Angeles, California 90020. Mr. Lange is a retired general
contractor. During the previous ten years, Mr. Lange has
invested in real estate including the management and ownership of
five apartment buildings.
H. Randolph Moore, Jr. Trustee of the Trust - 4023 West
Sixth Street, Los Angeles, California 90020. Mr. Moore, now
retired, was a Judge of the Superior Court of Los Angeles County
from 1982 to 1997.
Patricia C. Nagle Trustee of the Trust - 4023 West Sixth
Street, Los Angeles, California 90020. Ms. Nagle has been a
marketing and political consultant since 1980. She has
coordinated, implemented, and supervised marketing programs for a
variety of national firms. Ms. Nagle has also served on various
civic boards and committees including the California Colorado
River Board and the Governor's Committee on Native American
Affairs.
Patricia L. Stephan* Trustee, Vice President and Secretary
- - 4023 West Sixth Street, Los Angeles, California 90020. Ms.
Stephan is Director of Management Information Systems and
Operations Manager of the Manager. During the past five years
she has also worked as a consultant to business and non-profit
organizations.
_______________
* An "interested" Trustee as defined in the 1940 Act.
_______________
The Trustees are a self-perpetuating body and will continue
in their positions until they resign, die or are removed by a
written instrument signed by at least two-thirds of the Trustees,
by vote of the holders of at least two-thirds of the outstanding
shares of the Trust at a meeting called for that purpose by the
Trustees or by the holders of at least 10% of the outstanding
shares of the Trust or by a written declaration signed by the
holders of at least two-thirds of the outstanding shares of the
Trust. There will normally be no meetings of shareholders for
the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees holding office have been
elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of
Trustees.
Pursuant to the terms of the investment management agreement
of the Fund, the Manager pays all compensation of officers of the
Trust as well as the fees of all Trustees of the Trust who are
affiliated persons of the Manager. The Trust pays each
unaffiliated Trustee a fee per Trustees' meeting attended plus
the actual out-of-pocket expenses related to their attendance at
meetings. For the fiscal year ended October 31, 1998, total fees
and expenses amounted to $6,236. No officer or employee of the
Manager receives any compensation or expense reimbursements from
the Trust for acting as a Trustee or officer of the Trust.
As of October 31, 1998, the Manager beneficially owned 6,525
shares (approximately 2.24%) of the outstanding shares of the
Fund. In addition, Edwin R. Bernstein personally controlled
19,445 shares (approximately 6.68%) of the outstanding shares of
the Fund. As of that date, Richard H. Haber, 730 Coquina Court,
Boca Raton, FL 33432, owned of record approximately 10.48% of the
outstanding shares of the Fund. As of that date Jack White &
Co., through Donaldson, Lufkin & Jenrette, P. O. Box 2052, Jersey
City, NJ 07303, owned of record approximately 6.42% of the
outstanding shares of the Fund (77.64% of these are reported
above among those shares controlled personally by Edwin R.
Bernstein). At that date, all Trustees and officers of the Trust
owned and/or controlled approximately 26,405 shares of the Fund
(approximately 9.08%).
The Manager
The Trust's Manager, Pathfinder Advisers, is a California
corporation organized in April 1986, with offices at 4023 West
Sixth Street, Los Angeles, California 90020. The Manager is
controlled by Mr. Bernstein who owns through Lange Development
Corp., a corporation wholly owned by Mr. Bernstein, 66% of its
outstanding stock.
The basic terms of the agreement between the Trust and its
Manager and the method of calculating the monthly fee payable by
the Fund to the Manager are summarized in the Prospectus.
The agreement between the Fund and the Manager dated
October 4, 1988 was approved on behalf of the Fund by a majority
of the outstanding voting shares of the Fund at a special
shareholder meeting held on that date. The agreement has been
approved and continued by the Board of Trustees and by a majority
of the Trustees who are not interested persons of the Trust or
the Manager at a meeting called for such purpose. Unless
terminated earlier as described below, the agreement will
continue in effect until October 4, 1999, and from year to year
thereafter if approved annually (i) by the Trustees (or by the
holders of a majority of the outstanding shares of the Fund) and
(ii) by the disinterested Trustees as set forth above. The
agreement terminates upon assignment (which under the 1940 Act
includes a change in control of the Manager) and may be
terminated without penalty on 60-days' written notice by the
party or by vote of the Fund's shareholders.
The agreement requires the Manager to pay all compensation
and expenses of the Trustees who are affiliated persons of the
Manager. The Fund pays all other expenses incurred in its
operations, including, but not limited to, telephone and
personnel expenses, taxes, interest, redemption expenses,
brokerage commissions and other expenses of portfolio
transactions, shareholder servicing costs, expenses of
registering shares under federal and state securities laws,
portfolio pricing costs, taxes, charges of our Custodian and
Shareholder Servicing Agent, independent Trustees' fees,
investment advisory fees, certain insurance premiums, accounting
expenses, outside legal and auditing expenses, costs of preparing
and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to
existing shareholders, costs of shareholder reports and meetings,
payments under the Fund's Plan of Distribution and any
extraordinary expenses.
During the fiscal year 1996, the Fund incurred $26,353 in
advisory fees, and the Manager reduced its advisory fee by
$26,353. During the fiscal year ended October 31, 1997, the Fund
incurred $29,317 in advisory fees, and the Manager reduced its
advisory fee by $29,317. During the fiscal year ended October
31, 1998, the Fund incurred $25,144 in advisory fees, and the
Manager reduced its advisory fee by $25,144.
Transfer Agent
Unified Fund Services, Inc., 431 N. Pennsylvania Street,
Indianapolis, Indiana 46204-1806, acts as the Transfer Agent for
the Fund. As Fund Accounting Agent, Unified calculates the
Fund's daily net asset value and performs certain other
accounting and administrative functions for the Fund. For its
Fund accounting services, Unified receives a fee equal to 0.05%
of the Fund's average net assets, subject to a minimum annual fee
of $18,000, plus reimbursement for certain expenses and optional
services.
Custodian and Accountants
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati,
Ohio 45263, acts as the Custodian of the securities and other
assets of the Fund. The Custodian does not participate in
decisions relating to the purchase and sale of assets of the
Fund.
Tait, Weller & Baker, Eight Penn Center, Suite 800,
Philadelphia, Pennsylvania 19103-2108, are the Trust's
independent accountants. During the fiscal year ended October
31, 1998, their audit services consisted of rendering an
unqualified opinion on the financial statements of the Fund.
Portfolio Transactions
The Manager selects the broker-dealers that effect brokerage
transactions for the Fund, subject to the overall direction and
review of the Board of Trustees. The initial criterion which
must be met by the Manager in selecting a broker-dealer to effect
securities transactions for the Fund is whether the broker-dealer
can obtain the most favorable combination of price and execution
for the transaction. This does not mean that the execution
decision must be based solely on whether the lowest possible
commission costs may be obtained. The Manager's objective is to
obtain the highest sales prices and lowest purchase prices at the
lowest commissions. In seeking to achieve the best combination
of price and execution, the Manager evaluates the overall quality
and reliability of the broker-dealer and the services it
provides. The Fund will not deal with the Manager or affiliates
as principals or agents in any transactions.
During the fiscal years ended October 31, 1996, 1997, and
1998, the Fund paid brokerage commissions totalling $49,214,
$65,000, and $36,000, repectively. While the average commission
rate per share remained stable at approximately $0.03 per share,
fluctuations in market conditions and concomitant shareholder
investments and redemptions contributed to an increase in the
Fund's portfolio turnover rate in 1996 and 1997.
The Manager or its affiliates, officers, directors or
employees may from time to time own securities which are also
held in the Fund's portfolio. The Manager has established rules
requiring quarterly reports with respect to securities
transactions by such persons for their own accounts in order to
avoid possible conflicts of interest.
Reports
The Fund will send its shareholders financial statements,
including a description of the Fund's investments, semi-annually.
The annual financial statements will be audited by independent
accountants.
DISTRIBUTION PLAN
The shareholders of the Fund at a meeting held October 4,
1988 adopted a Distribution Plan (the "Plan") under Rule 12b-1 of
the 1940 Act. Expenditures pursuant to the Plan will be treated
as expenses for the Fund in the year in which the expenses are
incurred.
The Plan will continue in effect indefinitely for the Fund
provided that the Plan is approved at least annually by a vote of
the Board of Trustees of the Trust (including a majority of the
Trustees who are not "interested persons" of the Trust as defined
by the 1940 Act and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related
to the Plan), cast in person at a meeting called for the purpose
of voting on the Plan. As long as the Plan is in effect, the
nomination of the Trustees who are not interested Trustees of the
Trust must be committed to the disinterested Trustees.
Under the Plan, the Trust must provide the Trustees, at
least quarterly, with a written report of the expenditures paid
or payable pursuant to the Plan on behalf of the Fund. The Plan
and any agreements implementing the Plan must be in writing. The
Plan may be terminated at any time by a vote of a majority of the
Trustees who are not "interested persons" of the Trust and who
have no direct or indirect financial interest in the operation of
the Plan or in any agreements related to the Plan or by a vote of
a majority of the outstanding shares of the Fund. Agreements
under the Plan are terminable at any time without payment of any
penalty by a vote of a majority of the Board of Trustees or by
vote of a majority of the outstanding shares of the Fund on not
more than 60 days' written notice. In addition, the agreements
must automatically terminate in the event of their assignment.
The Plan may not be amended to increase materially the
amounts payable thereunder unless approved by the Trustees in the
same manner as approval of the Plan and by a majority of the
outstanding shares of the Fund. In considering whether the Fund
should continue the Plan, the Trustees have the duty to request
and evaluate such information as may reasonably be necessary for
them to make an informed determination of whether the Plan should
be continued.
The Manager is waiving reimbursement under the 12b-1 Plan
until at least November 30, 1999. For the fiscal year ended
October 31, 1998, the Fund reimbursed the Manager $0.00 in
distribution costs under the Plan. Pursuant to the Plan the
Manager may carry over unreimbursed distribution expenses and
seek reimbursement for such expenses for up to three years from
the year incurred. The Manager waived reimbursement for all
distribution expenses under the Plan, including any accrued carry
forward's, for fiscal years 1996, 1997, and 1998 and has
undertaken to do so for fiscal year 1999.
TAXES
The Fund has elected and qualified during its last fiscal
year for the special tax treatment afforded regulated investment
companies under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). Under the Code, the Fund is not
subject to federal income tax on such part of its investment
company taxable income and net capital gains as is distributed to
shareholders. To qualify for such tax treatment the Fund must,
among other things, derive or continue to derive, in each taxable
year, at least 90% of its gross income from dividends, interest
and gains from the sale or other disposition of securities and
income from certain other sources and derive less than 30% of its
gross income in each taxable year from gains (without deduction
for losses other than those related to certain designated hedging
transactions) from the sale or other disposition of securities or
certain other investments held for less than three months. If in
any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income will be taxed to
the Fund at regular corporate rates and all distributions will be
taxed to the shareholders of the Fund as dividends to the extent
of the Fund's current and accumulated undistributed earnings and
profits.
The Fund may be subject to foreign withholding taxes on
income derived from foreign securities and will be unable to pass
through to shareholders any resulting foreign tax credits or
deductions except in a taxable year in which more than 50% of the
value of the Fund's assets at the close of the taxable year is
comprised of securities of foreign corporations. Foreign
exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currencies and payable and
receivables denominated in a foreign currency are subject to
special tax rules which may cause such gains and losses to be
treated as ordinary income and losses instead of capital gains
and losses.
Under the 1997 Act, the amount that the Fund may designate
as eligible for the dividends-received deduction will be reduced
or eliminated if the shares on which the dividends were earned by
the Fund were debt-financed or held by the Fund for less than a
46 day period during a 90 day period beginning 45 days before the
ex-dividend date of the corporate stock. Similarly, if your Fund
shares are debt-financed or held by you for less than this same
46 day period, then the dividends-received deduction may also be
reduced or eliminated. Even if designated as dividends eligible
for the dividends-received deduction, all dividends (including
the deducted portion) must be included in your alternative
minimum taxable income calculation.
Under the Code, any distributions designated as being made
from the Fund's net realized long-term capital gains are taxable
to shareholders of the Fund as long-term capital gains,
regardless of the holding period of such shareholder. Such
distributions of long-term capital gains are designated as a
capital gains distribution in a written notice to shareholders
which accompanies the distribution payment. Long-term capital
gains distributions are not eligible for the dividends-received
corporate deduction. Dividends and distributions are taxable as
described above, whether received in cash or reinvested in
additional shares of the Fund.
Any gain or loss recognized upon a redemption of Fund shares
by a shareholder who holds the shares as a capital asset will
generally be treated as long-term capital gain or loss if such
shares have been held for more than one year, and otherwise as
short-term capital gain or loss. However, any loss recognized
within six months of purchasing the shares will be treated as a
long-term capital loss to the extent of any long-term capital
gains distributions received by the shareholder. All or a
portion of a loss realized upon a redemption of shares of the
Fund within 30 days before or after a purchase of shares of the
Fund (including purchases made through reinvestment of
distributions) may be disallowed.
Some shareholders may be subject to a 31% withholding on
reportable dividend distributions, capital gains distributions
and redemption payments. Generally, shareholders subject to such
backup withholding are those for whom taxpayer identification
numbers are not on file with the Trust or who, to the Trust's
knowledge, have furnished an incorrect number. When establishing
an account, an investor must certify under penalties of perjury
that such number is correct and that he is not subject to backup
withholding. Foreign shareholders may also be subject to certain
withholding requirements and should furnish a completed Form W-8
to the Trust.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and Treasury Regulations
currently in effect. For the complete provisions, reference
should be made to the pertinent Code sections and Treasury
Regulations. The Code and Regulations are subject to change by
legislative or administrative action. Investors should consult
with their own advisers for the effect of any state or local
taxation and for more complete information on federal taxation.
PERFORMANCE INFORMATION
From time to time, the Fund may state its total return in
advertisements and investor communications. Total return may be
stated for any relevant period as specified in the advertisement
or communication. Any statements of total return or other
performance data on the Fund will be accompanied by information
on the Fund's average annual compounded rate of return over the
most recent four calendar quarters and the period from the Fund's
inception of operations. The Fund may also advertise aggregate
and average total return information over different periods of
time.
The Fund's average annual compounded rate of return is
determined by reference to a hypothetical $1,000 investment that
includes capital appreciation and depreciation for the stated
period, according to the following formula:
P(1+T)nth power = ERV
Where: P = a hypothetical initial purchase order of
$1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical
$1,000 purchase at the end of the period
Aggregate total return is calculated in a similar manner,
except that the results are not annualized. Each calculation
assumes that all dividends and distributions are reinvested at
net asset value per share on the reinvestment dates during the
period.
The average annual compounded rate of return, or total
return for the Fund, was (29.22)% for the one-year period ended
October 31, 1998, 5.13% for the five-year period ended
October 31, 1998, and 2.75% for the ten-year period ended
October 31, 1998.
The Fund may also, from time to time, include a reference to
its current distribution rate in investor communications and
sales literature preceded or accompanied by a Prospectus. Such
rate reflects the amounts actually distributed to shareholders
which could include capital gains and other items of income as
well as interest and dividend income received by the Fund. All
calculations of the Fund's distribution rate are based on the
distributions per share which are declared, but not necessarily
paid, during the fiscal year. The distribution rate is
determined by dividing the distributions declared during the
period by the net asset value per share on the last day of the
period and annualizing the resulting figure. The distribution
rate does not reflect capital appreciation or depreciation in the
price of the Fund's shares and should not be confused with yield
or considered to be a complete indicator of the return to the
investor on his investment.
The Fund's current distribution rate and total return may be
compared to relevant indices of comparable maturity and quality
structure, including Lipper Analytical Services, Inc., and
Standard & Poor's Indices.
From time to time, evaluations of the Fund's performance by
independent sources may also be used in advertisements and in
information furnished to present or prospective investors in the
Fund.
Investors should note that the investment results of the
Fund will fluctuate over time, and any presentation of the Fund's
current yield, total return or distribution rate for any period
should not be considered as a representation of what an
investment may earn or what an investor's total return, yield or
distribution rate may be in any future period.
FINANCIAL STATEMENTS
The Fund's audited financial statements, as contained in its
Annual Report to Shareholders for the period ended October 31,
1998 (the "Report"), are incorporated herein by reference to the
Report which has been filed with the Securities and Exchange
Commission. Any person not receiving the Report with this
Statement should call or write to obtain a free copy.
____________
PART C
____________
PATHFINDER TRUST
____________
FORM N-1A
PART C
____________
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
PATHFINDER FUND: Schedule of Investments as
of October 31, 1998; Statement of Assets and
Liabilities as of October 31, 1998; Summary
of Per Share Income and Capital Changes for the
years ended October 31, 1994, 1995, 1996, 1997 and
1998; Statement of Operations for the year ended
October 31, 1998; Statement of Changes in Net
Assets for the years ended October 31, 1997 and
1998; related Notes to Financial Statements; and
Report of Independent Public Accountants dated
November 20, 1998; are incorporated by reference
to the Registrant's Annual Report to Shareholders
for the fiscal year ended October 31, 1998.
(b) Exhibits:
(1) (a) Agreement and Declaration of Trust (1)
(b) First Amendment of the Prudent
Speculator Fund Master Trust Agreement
(7)
(c) Second Amendment of The Prudent
Speculator Fund Master Trust Agreement
(6)
(2) By-laws (1)
(3) None
(4) Specimen Share Certificate (2)
(5) Investment Management Agreement (3)
(6) None
(7) None
(8) Custodian Agreement (5)
(9) (a) Accounting Agreement (5)
(b) Transfer Agent Agreement (5)
(10) Opinion and Consent of Counsel (4)
(11) Consent of Independent Public
Accountants
(12) Not Applicable
(13) Form of Letter of Understanding relating
to initial capital (1)
(14) IRA Custodial Agreement (5)
(15) Distribution Plan (3)
(16) Performance Computation
(17) Financial Data Schedule
(18) None
(19) Power of Attorney
(1) Filed previously as an exhibit to the Registrant's
Registration Statement on Form N-1A.
(2) Filed previously as an exhibit to Pre-Effective Amendment
No. 2 to the Registrant's Registration Statement on Form
N-1A, filed June 5, 1987.
(3) Filed previously as an exhibit to Post-Effective Amendment
No. 2 to the Registrant's Registration Statement on Form
N-1A, filed December 30, 1988.
(4) Filed previously as an exhibit to Post-Effective Amendment
No. 4 to the Registrant's Registration Statement on Form
N-1A, filed December 31, 1990.
(5) Filed previously as an exhibit to Post-Effective Amendment
No. 9 to the Registrant's Registration Statement on Form
N-1A, filed February 28, 1995.
(6) Filed previously as an exhibit to Post-Effective Amendment
No. 11 to the Registrant's Registration Statment on Form
N-1A, filed February 28, 1997.
(7) Filed previously as an exhibit to Post-Effective Amendment
No. 12 to the Registrant's Registration Statment on Form
N-1A, filed February 28, 1998.
Item 25. Persons Controlled by or under
Common Control with Registrant
As of October 31, 1998, to the knowledge of the Registrant,
the Registrant did not control any other person, nor was it under
common control with another person.
Item 26. Number of Holders of Securities
Number of Shareholders
Title of Class of Record as of October 31, 1998
PATHFINDER FUND Appx. 1,100
Shares of Beneficial
Interest, without
par value.
Item 27. Indemnification
Article VI of the Registrant's Master Trust Agreement which
was previously filed as Exhibit No.1, contains the provision
concerning indemnification and is incorporated herein by
reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to the trustees, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable in the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser
Registrant's Investment Adviser, Pathfinder Advisers,
intends to act as the investment adviser to various individuals
and institutions. A list of each director and principal officer
of the Investment Adviser is set forth below indicating each
business, profession, vocation or employment of a substantial
nature in which each person has been engaged during the last two
fiscal years for his or her own account or in the capacity of
director, officer, partner or trustee:
Other Substantial
Position with Business, Profession,
Name Investment Adviser Vocation or Employment
Edwin R. Bernstein President Real Property owner and
and Director general partner
(individually or through
Lange Development Corp.,
a wholly owned
Corporation) of 14 real
estate investment
partnerships.
See Part B for further
information
Kenneth L. Wright Chairman of the Physician
Board and
Director
Patricia L. Stephan Vice President, See Part B for further
Secretary, and information
Director
Item 29. Principal Underwriter
Not applicable.
<PAGE>
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be
maintained by Section 31 (a) of the Investment Company Act of
1940 and the Rules thereunder are maintained either at the
offices of the Custodian, the Shareholder Services Agent, or the
Registrant, as applicable.
Item 31. Management Services
There are no management-related services contracts not
discussed in Part A or Part B.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom
a Prospectus is delivered with a copy of the Registrant's latest
Annual Report to Shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant certifies that it meets all the requirements for
effectiveness of the Post-Effective Amendment to the Registration
Statement pursuant to Rule 485 (b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los
Angeles and State of California on the 29th day of November,
1998.
PATHFINDER TRUST
By: /s/____________________________
Edwin R. Bernstein, President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to the Registration Statement has
been signed below by the following persons in the capacities and
on the dates indicated.
/s/_________________________________ November 29, 1998
Edwin R. Bernstein,
Trustee, Principal Executive Officer and
Principal Financial and Accounting Officer
/s/_________________*_______________ November 29, 1998
Werner Lange,
Trustee
/s/_________________*_______________ November 29, 1998
H. Randolph Moore, Jr.,
Trustee
/s/_________________*_______________ November 29, 1998
Patricia C. Nagle,
Trustee
/s/_________________________________ November 29, 1998
Patricia L. Stephan,
Trustee, Vice President and Secretary
*by Patricia L. Stephan as Attorney-in-Fact
/s/_________________________________ February 29, 1998
Patricia L. Stephan
EXHIBIT INDEX TO EXHIBITS FILED IN
POST-EFFECTIVE AMENDMENT NO. 13
EXHIBIT NO. PAGE NO.
(11) Consent of Independent Accountants . . . . _________
(16) Performance Computation. . . . . . . . . . _________
(17) Financial Data Schedule. . . . . . . . . . _________
(19) Power of Attorney. . . . . . . . . . . . . _________
Exhibit No. (11)
Consent of Independent Accountants
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated November 20, 1998
on the financial statements and financial highlights of
PATHFINDER FUND, a series of shares of Pathfinder Trust.
Such financial statements and financial highlights appear in the
1998 Annual Report to Shareholders which is incorporated by
reference in the Prospectus and in the Statement of Additional
Information filed in Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A of Pathfinder Trust. We also
consent to the references to our Firm in the Registration
Statement and Prospectus.
/s/
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 25, 1998
Exhibit No. (16)
Performance Computation
PATHFINDER FUND
STANDARDIZED TOTAL RATE OF RETURN CALCULATIONS
The standardized formula is as follows:
P(1+T)nth power = ERV
Where:
P = a hypothetical initial purchase order of $1,000
n = number of years over which return is being
measured
ERV = ending redeemable value of the hypothetical $1,000
purchase at the end of the period
T = average annual total return
Stated alternatively, the formula reads:
[(ERV/P)1/n power - 1] = T
Following are the Fund's average annual total returns for the
stated periods ended October 31, 1998:
One-Year:
[( 707.77/1,000)1st power - 1] =<.29223>(100)= <29.22>%
Five-Years:
[(1,284.17/1,000)1/5 power - 1] = .05130 (100) = 5.13 %
Ten-Years:
[(1,311.24/1,000)1/10 power - 1] = .02747 (100) = 2.75 %
Exhibit No. (19)
Power of Attorney
POWER OF ATTORNEY
Each of the undersigned Trustees and Officers of the Prudent
Speculator Fund (the "Trust") hereby appoints EDWIN R. BERNSTEIN
and PATRICIA L. STEPHAN (with full power to each of them to act
alone), his or her attorney-in-fact and agent, in all capacities,
to execute and to file any documents relating to the Trust's
Registration Statement on Form N-1A under the Investment Company
Act of 1940 and under the Securities Act of 1933, including any
and all amendments thereto, covering the registration and the
sale of shares by the Trust, including all exhibits and any and
all documents required to be filed with respect thereto with any
regulatory authority, including applications for exemptive orders
or rulings. Each of the undersigned grants to each of said
attorneys full authority to do every act necessary to be done in
order to effectuate the same as fully, to all intents and
purposes, as he could do if personally present, thereby ratifying
all that said attorneys-in-fact and agents may lawfully do or
cause to be done by virtue hereof.
The undersigned Trustees and Officers hereby execute this
Power of Attorney as of this 1st day of October, 1998.
/s/________________________________________
Edwin R. Bernstein,
Trustee, Principal Executive Officer and
Principal Financial and Accounting Officer
/s/________________________________________
Werner Lange,
Trustee
/s/________________________________________
H. Randolph Moore, Jr.,
Trustee
/s/________________________________________
Patricia C. Nagle,
Trustee
/s/________________________________________
Patricia L. Stephan
Trustee, Vice President and Secretary
