Securities Act File No. 33-12213
Investment Company Act File No. 811-5037
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 24 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25 |X|
(Check appropriate box or boxes)
PROFESSIONALLY MANAGED PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
479 West 22nd Street
New York, NY 10011
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(212) 633-9700
Steven J. Paggioli
Professionally Managed Portfolios
479 West 22nd Street
New York, NY 10011
(Name and Address of Agent for Service)
Copy to: Julie Allecta, Esq.
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, CA, 94104
_________________________________________________________________
It is proposed that this filing will become effective:
__ Immediately upon filing pursuant to paragraph (b)
__ On pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
__ On pursuant to paragraph (a)(1)
XX 75 days after filing pursuant to paragraph (a)(2)
__ 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.
______________________________________________________________
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has elected to register an indefinite number of shares of beneficial interest,
no par value. The most recent notice required by Rule 24f-2 was filed on October
25, 1995.
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CROSS REFERENCE SHEET
(as required by Rule 495)
N-1A Item No. Location
Part A
Item 1. Cover Page........................... Cover Page
Item 2. Synopsis............................. Expense
Table
Item 3. Financial Highlights................. N/A
Item 4. General Description of Registrant.... Objective and
Investment
Approach of
the Fund;
Item 5. Management of the Fund............... Management
of the Fund
Item 5A Management's Discussion of Fund See Annual
Performance Reports to
Shareholders
Item 6. Capital Stock and Other Securities. . . Distributions
and Taxes;
How the
Fund's Per
Share Value
is Determined
Item 7. Purchase of Securities Being Offered . . How to Invest
in the Fund;
How the
Fund's Per
Share Value
is Determined
Item 8. Redemption or Repurchase. . . . . . . . How to Redeem
an Investment
in the Fund
Item 9. Pending Legal Proceedings . . . . . . . N/A
Part B
Item 10. Cover Page ............................. Cover Page
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Item 11. Table of Contents....................... Table of
Contents
Item 12. General Information and History . . . . The Trust;
General
Information
Item 13 Investment Objectives and Policies .... Investment
Objective and
Policies;
Investment
Restrictions;
Item 14. Management of the Fund................... Management
Item 15. Control Persons and Principal Holders
of Securities............................ Management
Item 16. Investment Advisory and Other Services.... Management
Item 17. Brokerage Allocation...................... Execution of
Portfolio
Transactions
Item 18. Capital Stock and Other Securities........ General
Information
Item 19. Purchase, Redemption and Pricing of
Shares Being Offered.............. Additional
Purchase &
Redemption
Information
Item 20. Tax Status.............................. Distributions
& Tax Infor-
mation
Item 21. Underwriters............................ The Fund's
Distributor
Item 22. Performance Information.................. Performance
Information
Item 23. Financial Statements.................... N/A
Part C
Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C to this Registration
Statement
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PRELIMINARY PROSPECTUS DATED
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. Information
contained herein is subject to completion or amendment. These securities may not
be sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any sale of these
securities in an jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such jurisdiction.
Harris Bretall Sullivan & Smith Growth Equity Fund
One Sansome Street. Suite 3300
San Francisco, CA 94104
800-685-4277
The Harris Bretall Sullivan & Smith Growth Equity Fund (the "Fund") is a
mutual fund with the investment objective of seeking growth of capital. The Fund
seeks to achieve its objective by investing primarily in equity securities
(common and preferred stocks). Harris Bretall Sullivan & Smith, Inc. (the
"Advisor") serves as investment advisor to the Fund.
This Prospectus sets forth basic information about the Fund that prospective
investors should know before investing. It should be read and retained for
future reference. A Statement of Additional Information dated March , 1996, as
may be amended from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available without charge upon written request to the
Fund at the address given above.
TABLE OF CONTENTS
Expense Table............................................ __
Objective and Investment Approach of the Fund............ __
Management of the Fund................................... __
Distribution Plan........................................ __
How To Invest in the Fund................................ __
How To Redeem an Investment in the Fund.................. __
Services Available to the Fund's Shareholders............ __
How the Fund's Per Share Value Is Determined............. __
Distributions and Taxes.................................. __
General Information...................................... __
1
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.
Prospectus dated March___, 1996
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EXPENSE TABLE
Expenses are one of several factors to consider when investing in the Fund. The
purpose of the following fee table is to provide an understanding of the various
costs and expenses which may be borne directly or indirectly by an investment in
the Fund. Actual expenses may be more or less than those shown. The Fund has
adopted a plan of distribution under which the fund will pay the Advisor as
Distribution Coordinator a fee at the annual rate of up to 0.25% of the Fund's
net assets. A long-term shareholder may pay more, directly and indirectly, in
such fees than the maximum sales charge permitted under the rules of the
National Association of Securities Dealers. Shares will be redeemed at net asset
value per share.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases . . . . None
Maximum Sales Load Imposed on Reinvested
Dividends............................. None
Deferred Sales Load ........................... None
Redemption Fees................................ None*
Annual Fund Operating Expenses
(As a percentage of average net assets)
Advisory Fees 0.75%
Fee to Administrative Manager 0.12%
12b-1 Expenses 0.25%
Other Expenses 0.17%*
Total Fund Operating Expenses 1.29%*
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*The Advisor has undertaken to reduce its fees or make payments to assure that
the Fund's ratio of operating expenses to average net assets will not exceed
1.29% for the current fiscal year. It is estimated that the annual ratio of
operating expenses to average net assets of the Fund during its initial fiscal
year in the absence of this undertaking would be 1.60%.
Example
1 year 3 years
This table illustrates the net transaction
and operating expenses that would be incurred
for an investment in the Fund over different $13 $41
time periods assuming a $1,000 investment,
a 5% annual return, and redemption at the
end of each time period.
The Example shown above should not be considered a representation of past or
future expenses and actual expenses may be greater or less than 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. See "Management of the
Fund."
The Fund is a diversified series of Professionally Managed Portfolios (the
"Trust"), an open-end management investment company offering redeemable shares
of beneficial interest. Shares of the Fund may be purchased at their net asset
value per share. The minimum initial investment is $10,000 with subsequent
investments of $1,000 or more. Shares will be redeemed at net asset value per
share.
OBJECTIVE AND INVESTMENT APPROACH OF THE FUND; RISK FACTORS
The investment objective of the Fund is to seek growth of capital. The Fund
seeks to achieve its objective by investing primarily in equity securities, and
under normal circumstances at least 65% of the Fund's total assets will be
invested in equity securities with capital growth potential. Equity securities
in which the Fund invests include common stocks and securities having the
characteristics of common stocks, such as convertible preferred stocks,
convertible debt securities and warrants. There is, of course, no assurance that
the Fund's objective will be achieved. Because prices of securities held by the
Fund fluctuate, the value of an investment in the Fund will vary as the market
value of its investment portfolio changes, and when shares are redeemed, they
may be worth more or less than their original cost. The Fund is diversified,
which under applicable federal law means that as to 75% of its total assets, no
more than 5% may be invested in the securities of a single issuer and that no
more than 10% of its total assets may be invested in the voting securities of
such
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issuer.
Investment Approach. In selecting equity securities for purchase by the Fund,
the Advisor focuses on successful companies with consistently superior growth in
revenues and earnings, strong product lines and proven management ability
demonstrated over a variety of business cycles.
The Advisor's investment process is based on the establishment of an economic
framework within which fundamental analyses and strict quantitative disciplines
are consistently implemented. The Advisor views successful companies as those
with consistently superior growth in revenues and earnings, strong product lines
and proven management ability demonstrated in a variety of business cycles. The
process begins with a review of various overall investment factors, such as the
state of the economy, inflation, earnings and interest rate trends and momentum,
valuation/volatility of stocks and bonds, Federal Reserve policy, the
international and political environments and supply and demand. Evaluating these
factors creates a common economic framework to use when reviewing individual
companies.
The Advisor then develops a universe of high quality growth stocks by screening
companies for fundamental characteristics such as revenue growth, financial
strength, market leadership and quality management. The screening process
encompasses four broad areas. Qualitative screens such as organizational depth,
success of management, stability versus cyclical characteristics, and
competitive positions are applied. Balance sheet and income statement aspects
are also screened, involving an evaluation of factors such as book value,
debt/equity ratios, current assets and their condition, capital structure, cash
flow, earnings per share growth, dividend record, return on equity.
Characteristics of the stocks are also screened by examining stock volatility,
trading characteristics, market capitalization and institutional ownership. This
screening process yields a stock universe of approximately 300 successful
companies with attractive fundamental characteristics and a minimum market
capitalization of $1 billion.
Companies within the universe are then ranked for selection from three
analytical vantage points. First, companies are ranked based on their intrinsic
present value using the Advisor's proprietary earnings and growth rate outlook.
Second, recent quarterly earnings experience is evaluated. Finally, companies
are ranked based on relative price performance of their stocks against all the
stocks in the universe and the general market. Once an overall ranking based on
these factors is determined, stocks are selected for purchase from the upper
range of the universe.
In general, securities held by the Fund become sell candidates if they become
fundamentally overvalued versus other companies in the
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Advisor's universe due to rapid appreciation or suffer changes in their
long-term fundamentals (growth rates or earnings expectations).
Short-Term Investments. At times, the Fund may invest in short-term
cash-equivalent securities either for temporary, defensive purposes, or when it
views the market as significantly overvalued. These consist of high quality debt
obligations maturing in one year or less from the date of purchase, such as
securities issued by the U.S. Government, its agencies and instrumentalities,
certificates of deposit, bankers' acceptances and commercial paper. High quality
means that the obligations have been rated at least A-1 by Standard & Poor's
Corporation ("S&P") or Prime-1 by Moody's Investor's Service, Inc. ("Moody's"),
have an outstanding issue of debt securities rated at least AA by S & P or Aa by
Moody's, or are of comparable quality in the opinion of the Advisor. The Advisor
expects that under normal market conditions, the Fund will stay fully invested,
and cash levels typically would not exceed 5% of total assets.
Repurchase Agreements. The Fund may enter into repurchase agreements in order to
earn additional income on available cash, or as a defensive investment in
periods when the Fund is primarily in short-term securities. A repurchase
agreement is a short-term investment in which the purchaser (i.e., the Fund)
acquires ownership of a U.S. Government security (which may be of any maturity)
and the seller agrees to repurchase the obligation at a future time at a set
price, thereby determining the yield during the purchaser's holding period
(usually not more than seven days from the date of purchase). Any repurchase
transaction in which the Fund engages will require full collateralization of the
seller's obligation during the entire term of the repurchase agreement. In the
event of a bankruptcy or other default of the seller, the Fund could experience
both delays in liquidating the underlying security and losses in value. However,
the Fund intends to enter into repurchase agreements only with banks with assets
of $500 million or more that are insured by the Federal Deposit Insurance
Corporation and the most creditworthy registered securities dealers pursuant to
procedures adopted and regularly reviewed by the Trust's Board of Trustees. The
Advisor monitors the creditworthiness of the banks and securities dealers with
whom the Fund engages in repurchase transactions.
When-Issued Securities. The Fund may purchase securities on a when-issued basis,
for payment and delivery at a later date, generally within one month. The price
and yield are generally fixed on the date of commitment to purchase, and the
value of the security is thereafter reflected in the Fund's net asset value.
During the period between purchase and settlement, no payment is made by the
Fund and no interest accrues to the Fund. At the time
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of settlement, the market value of the security may be more or less than the
purchase price. The Fund limits its investments in when-issued securities to
less than 5% of its total assets. When the Fund purchases securities on a
when-issued basis, it maintains liquid assets in a segregated account with its
Custodian in an amount equal to the purchase price as long as the obligation to
purchase continues.
Portfolio Turnover. The annual rate of portfolio turnover is anticipated to be
approximately 25%. In general, the Advisor will not consider the rate of
portfolio turnover to be a limiting factor in determining when or whether to
purchase or sell securities in order to achieve the Fund's objective.
Risk Factors. Securities in which the Fund invests, and its share price and
returns, are subject to fluctuation. Investments in equity securities in general
are subject to market risks that may cause their prices to fluctuate over time.
In addition, there may be a substantial time period before stocks held by the
Fund realize the appreciation potential the Advisor believes them to have. An
investment in the Fund therefore is more suitable for longer term investors who
can bear the risk of short-term fluctuation in principal and net asset value
that are inherent in investing in equity securities for a growth objective.
The Fund has adopted certain investment restrictions, which are described fully
in the Statement of Additional Information. Like the Fund's investment
objective, certain of these restrictions are fundamental and may be changed only
by a majority vote of the Fund's outstanding shares.
Advisor Investment Returns
Set forth in the table below are certain performance data provided by the
Advisor relating to its individually managed equity accounts. These accounts had
substantially the same investment objective as the Fund and were managed using
substantially similar investment strategies and techniques as those contemplated
for use by the Fund. See "Objective and Investment Approach of the Fund" above.
The Portfolio Management for these accounts will also manage the Fund. The
results presented are not intended to predict or suggest the return to be
experienced by the Fund or the return an investor might achieve by investing in
the Fund. Results may differ because of, among other things, differences in
brokerage commissions paid, account expenses, including investment advisory fees
(which expenses and fees maybe higher for the Fund than for the accounts), the
size of positions taken in relation to account size, diversification of
securities, timing of purchases and sales, timing of cash additions and
withdrawals, the private character of the composite accounts compared with the
public character of the
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Fund, and the tax-exempt status of some of the account holders compared with
shareholders in the Fund. Investors should be aware that the use of different
methods of determining performance could result in different performance
results. Investors should not rely on the following performance data as an
indication of future performance of the Advisor or the Fund.
Average Annual Total Returns (%)
(for periods ended Sept. 30, 1995)
Advisor Growth Standard & Poor's
Equity Accounts 500 Index
1995: through 9/30 33.29% 29.71%
One year 35.87% 29.68%
Three years 17.36% 14.95%
Five years 19.54% 17.22%
Seven years 15.40% 15.04%
1. Results account for both income and capital appreciation or depreciation
(Total Return). Returns are time-weighted and calculated in compliance with the
Association of Investment Management and Research ("AIMR") performance
presentation standards, reduced for investment advisory fees.
2. Investors should note that the Fund will compute and disclose its average
annual compounded rate of return using the standard formula set forth in SEC
rules, which differs in certain respects from returns calculated under the AIMR
standards noted above. Unlike the AIMR performance presentation standards that
link quarterly rates of return, the SEC total return calculation method calls
for computation and disclosure of an average annual compounded rate of return
for one, five and ten year periods or shorter periods from inception. The
calculation provides a rate of return that equates a hypothetical initial
investment of $1000 to an ending redeemable value. While the returns shown for
the Advisor are net of advisory fees, the SEC calculation formula requires that
returns to be shown for the Portfolios will be net of advisory fees as well as
any maximum applicable sales charges and all other Portfolio operating expenses
. See "Performance Information" at page __.
3. The Growth Equity Account Composite shown includes all accounts
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managed by the Advisor that meet the criteria for inclusion in the composite for
each period presented.
4. The Standard & Poor's 500 Index is an unmanaged index composed of 500
industrial, utility, transportation and financial companies traded in the U.S.
markets. The index represents about 75% of New York Stock Exchange ("NYSE")
market capitalization and 30% of NYSE issues. It is a capitalization-weighted
index calculated on a total return basis with dividends reinvested.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust establishes the Fund's policies and
supervises and reviews the management of the Fund. The Advisor is located at One
Sansome Street, Suite 3300 San Francisco, CA 94104. The Advisor was founded in
1971 and is controlled by Mr. Graeme Bretall, Mr. John J. Sullivan and Mr. Henry
B.D. Smith. The Advisor provides investment advisory and sub-advisory services
to individual and institutional investors and investment companies with assets
of approximately $2.8 billion . Mr. John J. Sullivan, Executive Vice President,
Treasurer and Director of the Advisor, and Mr. Gordon J. Ceresino, Executive
Vice President and Director of the Advisor, are responsible for management of
the Fund's portfolio.
The Advisor provides the Fund with advice on buying and selling securities,
manages the investments of the Fund, furnishes the Fund with office space and
certain administrative services, and provides most of the personnel needed by
the Fund. As compensation, the Fund pays the Advisor a monthly management fee
(accrued daily) based upon the average daily net assets of the Fund at the rate
of 0.75% annually. Southampton Investment Management Company (the
"Administrative Manager") acts as the Fund's Administrative Manager under a
Management Agreement. Under that agreement, the Administrative Manager prepares
various federal and state regulatory filings, reports and returns for the Fund,
prepares reports and materials to be supplied to the trustees, monitors the
activities of the Fund's custodian, transfer agent and accountants, and
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrative Manager receives an
annual fee equal to 0.12% of the Fund's average daily net assets up to $25
million, 0.07% of the next $25 million of net assets, 0.05% of the next $50
million of net assets and 0.03% on assets over $100 million, with a minimum fee
of $30,000.
The Fund is responsible for its own operating expenses. The Advisor has agreed
to limit the Fund's operating expenses to assure that the Fund's ratio of
operating expenses to average net assets will not exceed the limit imposed by
the most restrictive applicable state regulation, currently 2.50%. The Advisor
also may
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reimburse additional amounts to the Fund at any time in order to reduce the
Fund's expenses, or to the extent required by applicable securities laws. The
Advisor is currently undertaking to limit the Fund's ratio of operating expenses
to average net assets to 1.29% for the Fund's initial fiscal year. To the extent
the Advisor performs a service for which the Fund is obligated to pay, the Fund
shall reimburse the Advisor for its costs incurred in rendering such service.
The Advisor considers a number of factors in determining which brokers or
dealers to use for the Fund's portfolio transactions. While these are more fully
discussed in the Statement of Additional Information, the factors include, but
are not limited to, the reasonableness of commissions, quality of services and
execution, and the availability of research which the Advisor may lawfully and
appropriately use in its investment management and advisory capacities. Provided
the Fund receives prompt execution at competitive prices, the Advisor may also
consider the sale of Fund shares as a factor in selecting broker-dealers for the
Fund's portfolio transactions.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan pursuant to Rule 12b-1. The Plan
provides that the Fund may pay for distribution and related expenses of up to an
annual rate of 0.25% of the Fund's average net assets to the Advisor as
distribution coordinator. Expenses permitted to be paid by the Fund under its
Plan include: preparation, printing and mailing of prospectuses; shareholder
reports such as semiannual and annual reports, performance reports and
newsletters; sales literature and other promotional material to prospective
investors; direct mail solicitation; advertising; public relations; compensation
of sales personnel, advisors or other third parties for their assistance with
respect to the distribution of the Fund's shares; payments to financial
intermediaries for shareholder support; administrative and accounting services
with respect to the shareholders of the Fund; and such other expenses as may be
approved from time to time by the Board of Trustees.
The Rule 12b-1 Distribution Plan allows excess distribution expenses to be
carried forward by the Advisor, as Distribution Coordinator, and resubmitted in
a subsequent fiscal year provided that (i) distribution expenses cannot be
carried forward for more than three years following initial submission; (ii) the
Board of Trustees has made a determination at the time of initial submission
that the distribution expenses are appropriate to be carried forward; and (iii)
the Board of Trustees makes a further determination, at the time any
distribution expenses which have been carried forward are resubmitted for
payment, to the effect that payment at the time is appropriate, consistent with
the objectives of the Plan and in the current best interests of
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shareholders.
HOW TO INVEST IN THE FUND
The minimum initial investment in the Fund is $10,000. Subsequent investments
must be at least $1,000. First Fund Distributors, Inc. (the "Distributor"), acts
as Distributor of the Fund's shares. The Distributor may, at its discretion,
waive the minimum investment requirements for purchases in conjunction with
certain group or periodic plans. In addition to cash purchases, shares may be
purchased by tendering payment in kind in the form of shares of stock, bonds or
other securities, provided that any such tendered security is readily
marketable, its acquisition is consistent with the Fund's objective and it is
otherwise acceptable to the Advisor.
Shares of the Fund are offered continuously for purchase at their net asset
value per share next determined after a purchase order is received. The public
offering price is effective for orders received by the Fund prior to the time of
the next determination of the Fund's net asset value. Orders received after the
time of the next determination of the applicable Fund's net asset value will be
entered at the next calculated public offering price.
Investors may purchase shares of the Fund by check or wire:
By Check: For initial investments, an investor should complete the Fund's
Account Application (included with this Prospectus). The completed application,
together with a check payable to "Harris Bretall Sullivan & Smith Growth Equity
Fund," should be mailed to the Fund's Transfer Agent: Harris Bretall Sullivan &
Smith Growth Equity Fund, American Data Services, P.O. Box ____, Huntington, NY
.
A stub is attached to the account statement sent to shareholders after each
transaction. For subsequent investments the stub should be detached from the
statement and, together with a check payable to "Harris Bretall Sullivan & Smith
Growth Equity Fund," mailed to the Transfer Agent in the envelope provided at
the address indicated above. The investor's account number should be written on
the check.
By Wire: For initial investments, before wiring funds, an investor should call
the Transfer Agent at (800) ___-____ between the hours of 9:00 a.m. and 4:00
p.m. Eastern time, on a day when the NYSE is open for trading in order to
receive an account number. The Transfer Agent will request the investor's name,
address, taxpayer identification number, amount being wired and wiring bank. The
investor should then instruct the wiring bank to transfer funds by wire to :
Star Bank, Cincinnati, OH, ABA #---------, DDA #--------- , for credit to Harris
Bretall Sullivan & Smith Growth Equity Fund, for further credit to [investor's
name and account number]. The
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investor should also ensure that the wiring bank includes the name of the Fund
and the account number with the wire. If the funds are received by the Transfer
Agent prior to the time that the Fund's net asset value is calculated, the funds
will be invested on that day; otherwise they will be invested on the next
business day. Finally, the investor should write the account number provided by
the Transfer Agent on the Application Form and mail the Form promptly to the
Transfer Agent.
For subsequent investments, the investor's bank should wire funds as indicated
above. It is not necessary to contact the Transfer Agent prior to making
subsequent investments by wire, but it is essential that complete information
regarding the investor's account be included in all wire instructions in order
to facilitate prompt and accurate handling of investments. Investors may obtain
further information from the Transfer Agent about remitting funds in this manner
and from their own banks about any fees that may be imposed.
General. Investors will not be permitted to redeem any shares purchased with an
initial investment made by wire until one business day after the completed
Account Application is received by the Fund. All investments must be made in
U.S. dollars and, to avoid fees and delays, checks should be drawn only on U.S.
banks and should not be made by third party check. A charge may be imposed if
any check used for investment does not clear. The Fund and the Distributor
reserve the right to reject any purchase order in whole or in part. If an order,
together with payment in proper form, is received by the Transfer Agent by the
close of trading on the NYSE (currently 4:00 p.m., New York City time), Fund
shares will be purchased at the offering price determined as of the close of
trading on that day. Otherwise, Fund shares will be purchased at the offering
price determined as of the close of trading on the NYSE on the next business
day. Federal tax law requires that investors provide a certified taxpayer
identification Number and certain other required certifications upon opening or
reopening an account in order to avoid backup withholding of taxes at the rate
of 31% on taxable distributions and proceeds of redemptions. See the Fund's
Account Application for further information concerning this requirement.
The Fund is not required to issue share certificates. All shares are normally
held in non-certificated form registered on the books of the Fund and the Fund's
Transfer Agent for the account of the shareholder.
HOW TO REDEEM AN INVESTMENT IN THE FUND
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A shareholder has the right to have the Fund redeem all or any portion of his
outstanding shares at their current net asset value on each day the NYSE is open
for trading. The redemption price is the net asset value per share next
determined after the shares are validly tendered for redemption. Direct
Redemption. A written request for redemption must be received by the Fund's
Transfer Agent in order to constitute a valid tender for redemption. To protect
the Fund and its shareholders, a signature guarantee is required for certain
transactions, including redemptions. Signature(s) on the redemption request must
be guaranteed by an "eligible guarantor institution" as defined in the federal
securities laws. These institutions include banks, broker-dealers, credit unions
and savings institutions. A broker-dealer guaranteeing signatures must be a
member of a clearing corporation or maintain net capital of at least $100,000.
Credit unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program. A notary public is not an
acceptable guarantor.
Telephone Redemption. Shareholders who complete the Redemption by Telephone
portion of the Fund's Account Application may redeem shares on any business day
the NYSE is open by calling the Fund's Transfer Agent at (800) _____________
between the hours of 9:00 a.m. and 4:00 p.m. Eastern time. Redemption proceeds
will be mailed to the address of record or wired at the shareholder's direction
the next business day to the predesignated account. The minimum amount that may
be wired is $1,000 (wire charges, if any, will be deducted from redemption
proceeds). By establishing telephone redemption privileges, a shareholder
authorizes the Fund and its Transfer Agent to act upon the instruction of any
person by telephone to redeem from the account for which such service has been
authorized and send the proceeds to the address of record on the account or
transfer the proceeds to the bank account designated in the Authorization. The
Fund and the Transfer Agent will use procedures to confirm that redemption
instructions received by telephone are genuine, including recording of telephone
instructions and requiring a form of personal identification before acting on
such instructions. If these identification procedures are not followed, the Fund
or its agents could be liable for any loss, liability or cost which results from
acting upon instructions of a person believed to be a shareholder with respect
to the telephone redemption privilege. The Fund may change, modify, or terminate
these privileges at any time upon at least 60 days' notice to shareholders.
Shareholders may request telephone redemption after an account is opened;
however, the authorization form will require a separate signature guarantee.
Shareholders may experience delays in exercising telephone redemption privileges
during periods of
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abnormal market activity.
General. Payment of redemption proceeds will be made promptly, but not later
than seven days after the receipt of all documents in proper form, including a
written redemption order with appropriate signature guarantee in cases where
telephone redemption privileges are not being utilized. The Fund may suspend the
right of redemption under certain extraordinary circumstances in accordance with
the Rules of the SEC. In the case of shares purchased by check and redeemed
shortly after purchase, the Fund will not mail redemption proceeds until it has
been notified that the check used for the purchase has been collected, which may
take up to 15 days from the purchase date. To minimize or avoid such delay,
investors may purchase shares by certified check or federal funds wire. A
redemption may result in recognition of a gain or loss for federal income tax
purposes. Due to the relatively high cost of maintaining smaller accounts, the
Fund reserves the right to redeem shares in any account, other than retirement
plan or Uniform Gift to Minors Act accounts, if at any time, due to redemptions
by the shareholder, the total value of a shareholder's account does not equal at
least $5,000. If the Fund determines to make such an involuntary redemption, the
shareholder will first be notified that the value of his account is less than
$5,000 and will be allowed 30 days to make an additional investment to bring the
value of his account to at least $5,000 before the Fund takes any action.
SERVICES AVAILABLE TO THE FUND'S SHAREHOLDERS
Retirement Plans. The Fund offers a prototype Individual Retirement Account
("IRA") plan and information is available from the Distributor or from your
securities dealer with respect to Keogh, Section 403(b) and other retirement
plans offered. Investors should consult a tax adviser before establishing any
retirement plan. Automatic Investment Plan. For the convenience of shareholders,
the Fund offers a preauthorized check service under which a check is
automatically drawn on the shareholder's personal checking account each month
for a predetermined amount (but not less than $100), as if the shareholder had
written it himself. Upon receipt of the withdrawn funds, the Fund automatically
invests the money in additional shares of the Fund at the current offering
price. Applications for this service are available from the Distributor. There
is no charge by the Fund for this service. The Distributor may terminate or
modify this privilege at any time, and shareholders may terminate their
participation by notifying the Transfer Agent in writing, sufficiently in
advance of the next scheduled withdrawal.
Automatic Withdrawals. As another convenience, the Fund offers a
Systematic Withdrawal Program whereby shareholders may request that
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<PAGE>
a check drawn in a predetermined amount be sent to them each month or calendar
quarter. A shareholder's account must have Fund shares with a value of at least
$10,000 in order to start a Systematic Withdrawal Program, and the minimum
amount that may be withdrawn each month or quarter under the Systematic
Withdrawal Program is $100. This Program may be terminated or modified by a
shareholder or the Fund at any time without charge or penalty.
A withdrawal under the Systematic Withdrawal Program is treated as a redemption
of shares, and may result in a gain or loss for federal income tax purposes. In
addition, if the amounts withdrawn exceed the dividends credited to the
shareholder's account, the account ultimately may be depleted.
HOW THE FUND'S PER SHARE VALUE IS DETERMINED
The net asset value of a Fund share is determined once daily as of the close of
public trading on the NYSE (currently 4:00 p.m. Eastern time) on each day the
NYSE is open for trading. Net asset value per share is calculated by dividing
the value of the Fund's total assets, less its liabilities, by the number of
Fund shares outstanding.
Portfolio securities are valued using current market values, if available.
Securities for which market quotations are not readily available are valued at
fair values as determined in good faith by or under the supervision of the
Trust's officers in accordance with methods which are specifically authorized by
the Board of Trustees. Short-term obligations with remaining maturities of 60
days or less are valued at amortized cost as reflecting fair value.
DISTRIBUTIONS AND TAXES
Dividends and Distributions. Any dividends from net investment income (which
includes realized short term capital gains) are declared and paid at least
annually, typically at the end of the Fund's fiscal year (March 31). Any
undistributed long term net capital gains realized during the 12-month period
ended each October 31, as well as any additional undistributed capital gains
realized during the Fund's fiscal year, will also be distributed to shareholders
on or about December 31 of each year.
Dividends and capital gain distributions (net of any required tax withholding)
are automatically reinvested in additional shares of the Fund at the net asset
value per share on the reinvestment date unless the shareholder has previously
requested in writing to the Transfer Agent that distributions be made in cash.
Any dividend or distribution paid by the Fund has the effect of reducing the net
asset value per share on the reinvestment date by the amount of the dividend or
distribution. Investors should note that a dividend or distribution paid on
shares purchased shortly
14
<PAGE>
before such dividend or distribution was declared will be subject to income
taxes as discussed below even though the dividend or distribution represents, in
substance, a partial return of capital to the shareholder. Taxes. The Fund
intends to qualify and elect to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As long as the fund continues to so qualify, and as long as the Fund
distributes all of its income each year to the shareholders, the Fund will not
be subject to any federal income tax or excise taxes based on net income.
Distributions made by the Fund will be taxable to shareholders whether received
in shares (through dividend reinvestment) or in cash. Distributions derived from
net investment income, including net short-term capital gains, are taxable to
shareholders as ordinary income. A portion of these distributions may qualify
for the intercorporate dividends-received deduction. Distributions designated as
capital gains dividends are taxable as long-term capital gains regardless of the
length of time shares of the Fund have been held. Although distributions are
generally taxable when received, certain distributions made in January are
taxable as if received the prior December. Shareholders will be informed
annually of the amount and nature of the Fund's distributions. Additional
information about taxes is set forth in the Statement of Additional Information.
Shareholders should consult their own advisers concerning federal, state and
local tax consequences of investing in from the Fund.
GENERAL INFORMATION
The Trust. The Trust was organized as a Massachusetts business trust on February
17, 1987. The Agreement and Declaration of Trust permits the Board of Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest, without par value, which may be issued in any number of series. The
Board of Trustees may from time to time issue other series, the assets and
liabilities of which will be separate and distinct from any other series.
Shareholder Rights. Shares issued by the Fund have no preemptive, conversion, or
subscription rights. Shareholders have equal and exclusive rights as to
dividends and distributions as declared by the Fund and to the net assets of the
Fund upon liquidation or dissolution. The Fund, as a separate series of the
Trust, votes separately on matters affecting only the Fund (e.g., approval of
the Management and Advisory Agreements); 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). Voting rights are not cumulative, so
that the holders of more than 50% of the shares voting in any election of
Trustees can, if they so choose, elect all of the Trustees. While the Trust is
not required and does not intend to hold annual meetings of
15
<PAGE>
shareholders, such meetings may be called by the Trustees in their discretion,
or upon demand by the holders of 10% or more of the outstanding shares of the
Trust for the purpose of electing or removing Trustees.
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 four calendar quarters and over 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 total return will
be based upon the value of the shares acquired through a hypothetical $1,000
investment at the beginning of the specified period and the net asset value of
such shares at the end of the period, assuming reinvestment of all
distributions. Total return figures will reflect all recurring charges against
Fund 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. Custodian and Transfer Agent;
Shareholder Inquiries. Star Bank, N.A., 425 Walnut St., Cincinnati, OH 45202,
serves as custodian of the Fund's assets. American Data Services, Inc., 24 West
Carver St., Huntington, NY 11743 is the Fund's Transfer and Dividend Disbursing
Agent. Shareholder inquiries should be directed to the Transfer Agent at (800)
____________.
16
<PAGE>
Advisor
Harris Bretall Sullivan & Smith, Inc.
One Sansome Street, Suite 3300
San Francisco, CA 94104
(800) 685-4277
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Rd., Ste. 261E
Phoenix, AZ 85018
Custodian
Star Bank, N.A.
425 Walnut St.
Cincinnati, Ohio 45202
Transfer and Dividend Disbursing Agent
American Data Services, Inc.
24 West Carver St.
Huntington, NY 11743
(800)_____________.
Auditors
Ernst & Young
515 South Flower St.
Los Angeles, CA 90071
Legal Counsel
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, CA 94104
17
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARRIS BRETALL SULLIVAN & SMITH GROWTH EQUITY FUND a series of
Professionally Managed Portfolios
One Sansome Street, Suite 3300
San Francisco, CA 94104
(800) 685-4277
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of the Harris Bretall Sullivan & Smith Growth
Equity Fund (the "Fund"). A copy of the prospectus of the Fund dated March__,
1996 is available by calling the number listed above or (212) 633-9700.
TABLE OF CONTENTS
Page
The Trust . . . . . . . . . . . . . . . . . . . . . . . . B-2
Investment Objective and Policies . . . . . . . . . . . . B-2
Investment Restrictions . . . . . . . . . . . . . . . . . B-6
Distributions and Tax Information . . . . . . . . . . . . B-8
Management . . . . . . . . . . . . . . . . . . . . . . . B-11
Execution of Portfolio Transactions . . . . . . . . . . . B-14
Additional Purchase and Redemption Information . . . . . B-17
Determination of Share Price . . . . . . . . . . . . . . B-18
Performance Information . . . . . . . . . . . . . . . . . B-18
General Information . . . . . . . . . . . . . . . . . B-19
<PAGE>
THE TRUST
Professionally Managed Portfolios (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust. The Trust
consists of various series which represent separate investment portfolios. This
Statement of Additional Information relates only to the Harris Bretall Sullivan
& Smith Growth Equity Fund series (the "Fund").
INVESTMENT OBJECTIVE AND POLICIES
The Fund is a mutual fund with the investment objective of seeking growth of
capital. The following discussion supplements the discussion of the Fund's
investment objective and policies as set forth in the Prospectus. There can be
no assurance the objective of the Fund will be attained.
Repurchase Agreements
The Fund may enter into repurchase agreements as discussed in the Prospectus.
Under such agreements, the seller of the security agrees to repurchase it at a
mutually agreed upon time and price. The repurchase price may be higher than the
purchase price, the difference being income to the Fund, or the purchase and
repurchase prices may be the same, with interest at a stated rate due to the
Fund together with the repurchase price on repurchase. In either case, the
income to the Fund is unrelated to the interest rate on the U.S. Government
security itself. Such repurchase agreements will be made only with banks with
assets of $500 million or more that are insured by the Federal Deposit Insurance
Corporation or with Government securities dealers recognized by the Federal
Reserve Board and registered as broker-dealers with the Securities and Exchange
Commission ("SEC") or exempt from such registration. The Fund will generally
enter into repurchase agreements of short durations, from overnight to one week,
although the underlying securities generally have longer maturities. The Fund
may not enter into a repurchase agreement with more than seven days to maturity
if, as a result, more than 15% of the value of the Fund's total assets would be
invested in illiquid securities including such repurchase agreements.
For purposes of the Investment Company, however, Act of 1940 (the "1940 Act"), a
repurchase agreement is deemed to be a loan from the Fund to the seller of the
U.S. Government security subject to the repurchase agreement. It is not clear
whether a court would consider the U.S. Government security acquired by the Fund
subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the U.S. Government security before its repurchase under a repurchase
agreement, the Fund may encounter delays and incur costs before being able to
sell the security.
B-2
<PAGE>
Delays may involve loss of interest or a decline in value of the U.S. Government
security. If a court characterizes the transaction as a loan and the Fund has
not perfected a security interest in the U.S. Government security, the Fund may
be required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, the Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt instrument purchased for the Fund, the
investment manager seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligor, in this case the
seller of the U.S. Government security.
Apart from the risk of bankruptcy or insolvency proceedings, there is also the
risk that the seller may fail to repurchase the security. However, the Fund will
always receive as collateral for any repurchase agreement to which it is a party
securities acceptable to it, the market value of which is equal to at least 100%
of the amount invested by the Fund plus accrued interest, and the Fund will make
payment against such securities only upon physical delivery or evidence of book
entry transfer to the account of its Custodian. If the market value of the U.S.
Government security subject to the repurchase agreement becomes less than the
repurchase price (including interest), the Fund will direct the seller of the
U.S. Government security to deliver additional securities so that the market
value of all securities subject to the repurchase agreement will equal or exceed
the repurchase price. It is possible that the Fund will be unsuccessful in
seeking to impose on the seller a contractual obligation to deliver additional
securities, or that the seller will fail to meet its contractual obligation to
do so.
When-Issued Securities
The Fund may from time to time purchase securities on a "when-issued" basis. The
price of such securities is fixed at the time the commitment to purchase is
made, but delivery and payment for the when-issued securities take place at a
later date. Normally, the settlement date occurs within one month of the
purchase; during the period between purchase and settlement, no payment is made
by the Fund to the issuer and no interest accrues to the Fund. To the extent
that assets of the Fund are held in cash pending the settlement of a purchase of
securities, the Fund would earn no income; however, it is the Fund's intention
to be fully invested to the extent practicable and subject to the policies
stated above. While when-issued securities may be sold prior to the settlement
date, the Fund intends to purchase such securities with the purpose of actually
acquiring them unless a sale appears desirable for investment reasons. At the
time the Fund makes the commitment to purchase a security on a when-issued
basis, it will record the transaction and reflect the value of the security in
determining its net asset value. The market value of the when-issued
B-3
<PAGE>
securities may be more or less than the purchase price. The Fund does not
believe that its net asset value or income will be adversely affected by its
purchase of securities on a when-issued basis. The Fund will establish a
segregated account with its Custodian in which it will maintain cash and
marketable securities equal in value to commitments for when-issued securities.
Such segregated securities either will mature or, if necessary, be sold on or
before the settlement date.
Short-Term Investments; U.S. Government and Mortgage Related
Securities
As indicated in the prospectus, the Advisor expects that under normal market
conditions, the Fund will stay fully invested and cash levels typically will not
exceed 5% of total assets. However, at times the Fund may invest in short-term
cash equivalent securities either for temporary, defensive purposes or when the
Advisor views the market as significantly overvalued.
These securities may include U.S. Government securities. U.S. Government
securities include direct obligations issued by the U.S. Treasury, such as
Treasury bills, certificates of indebtedness, notes and bonds. U.S. Government
agencies and instrumentalities that issue or guarantee securities include, but
are not limited to, the Federal National Mortgage Association ("FNMA"), Federal
Home Loan Banks, Federal Financing Bank and Student Loan Marketing Association.
All Treasury securities are backed by the full faith and credit of the United
States. Obligations of U.S. Government agencies and instrumentalities may or may
not be supported by the full faith and credit of the United States. Some, such
as the Federal Home Loan Banks, are backed by the right of the agency or
instrumentality to borrow from the Treasury. Others, such as securities issued
by the FNMA, are supported only by the credit of the instrumentality and not by
the Treasury. If the securities are not backed by the full faith and credit of
the United States, the owner of the securities must look principally to the
agency issuing the obligation for repayment and may not be able to assert a
claim against the United States in the event that the agency or instrumentality
does not meet its commitment.
Short-term securities may also include mortgage pass-through securities.
Mortgage pass-through securities are securities representing interests in pools
of mortgages in which payments of both interest and principal on the securities
are generally made monthly, in effect "passing through" monthly payments made by
the individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the securities).
Early repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to the sale of underlying property, refinancing, or
B-4
<PAGE>
foreclosure, net of fees and costs which may be incurred) may expose the Fund to
a lower rate of return upon reinvestment of principal. Also, if a security
subject to repayment has been purchased at a premium, in the event of prepayment
the value of the premium would be lost.
As noted above, payment of principal and interest on some mortgage-related
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U. S. Government (in the case of
securities guaranteed by the Government National Mortgage Association ("GNMA")
or by agencies or instrumentalities of the U.S. Government (in the case of
securities guaranteed by FNMA or the Federal Home Loan Mortgage Corporation
("FHLMC"), which are supported only by the discretionary authority of the U.S.
Government to purchase the agency's obligations). Mortgage pass-through
securities created by non-governmental issuers (such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers) may be supported by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance, and letters of credit, which may be issued by governmental entities,
private insurers or the mortgage poolers.
Collateralized mortgage obligations ("CMO's") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal on a CMO are paid,
in most cases, semi-annually. CMO's may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC, or FNMA. CMO's are structured
into multiple classes, with each class bearing a different stated maturity.
Monthly payments of principal, including prepayments, are first returned to
investors holding the shortest maturity class. Investors holding the longer
maturity classes receive principal only after the first class has been retired.
Other mortgage-related securities include those that directly or indirectly
represent a participation in or are secured by and payable from mortgage loans
on real property, such as CMO residuals or stripped mortgage-backed securities,
and may be structured in classes with rights to receive varying proportions of
principal and interest.
In certain mortgage-related securities, all interest payments go to one class of
holders--"interest only" or "IO"--and all of the principal goes to a second
class of holders--"principal only" or "PO". The yield to maturity on an IO class
is extremely sensitive to the rate of principal prepayments on the related
underlying mortgage assets, and a rapid rate of principal payments will have a
material adverse effect on yield to maturity. If the underlying mortgage assets
experience greater than anticipated prepayments of principal, the Fund may fail
to fully recoup its initial investment in these securities, even when the
securities are rated AA or the
B-5
<PAGE>
equivalent. Conversely, if the underlying mortgage assets experience less than
anticipated prepayments of principal, the yield on a PO class would be
materially adversely affected. As interest rates rise and fall, the value of
IO's tends to move in the same direction as interest rates. The value of the
other mortgage-related securities described herein, like other debt instruments,
will tend to move in the opposite direction from interest rates. In general, the
Fund treats IO's and PO's as subject to the restriction on investments in
illiquid instruments except that IO's and PO's issued by the U.S. Government,
its agencies and instrumentalities and backed by fixed-rate mortgages may be
excluded from this limit if, in the judgment of the Advisor and subject to the
oversight of the Trustees such IO's and PO's are readily marketable.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by the Fund
and (unless otherwise noted) are fundamental and cannot be changed without the
affirmative vote of a majority of the Fund's outstanding voting securities as
defined in the 1940 Act. The Fund may not:
1. Make loans to others, except (a) through the purchase of debt securities in
accordance with its investment objectives and policies and (b) to the extent the
entry into a repurchase agreement is deemed to be a loan.
2. (a) Borrow money, except as stated in the Prospectus and this
Statement of Additional Information. Any such borrowing will be
made only if immediately thereafter there is an asset coverage of
at least 300% of all borrowing.
(b) Mortgage, pledge or hypothecate any of its assets except
in connection with any such borrowing.
3. Purchase securities on margin, participate on a joint or joint and several
basis in any securities trading account, or underwrite securities. (Does not
preclude the Fund from obtaining such short-term credit as may be necessary for
the clearance of purchases and sales of its portfolio securities.)
4. Purchase or sell commodities or commodity contracts (the Board of Trustees
may in the future authorize the Fund to engage in certain activities regarding
futures contracts for bona fide hedging purposes; any such authorization will be
accompanied by appropriate notification to shareholders).
5. Invest 25% or more of the market value of its assets in the
securities of companies engaged in any one industry. (Does not
apply to investment in the securities of the U.S. Government, its
agencies or instrumentalities.)
B-6
<PAGE>
6. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (a) making any
permitted borrowing, mortgages or pledges, or (b) entering into options, futures
or repurchase transactions.
7. Invest in any issuer for purposes of exercising control or
management.
The Fund observes the following policies, which are not deemed
fundamental and which may be changed without shareholder vote. The
Fund may not:
8. Purchase or hold securities of any issuer, if, at the time of purchase or
thereafter, any of the Trustees or officers of the Trust or the Advisor owns
beneficially more than 1/2 of 1%, and all such Trustees or officers holding more
than 1/2 of 1% together own beneficially more than 5% of the issuer's
securities.
9. Invest in securities of other investment companies which would result in the
Fund owning more than 3% of the outstanding voting securities of any one such
investment company, the Fund owning securities of another investment company
having an aggregate value in excess of 5% of the value of the Fund's total
assets, or the Fund owning securities of investment companies in the aggregate
which would exceed 10% of the value of the Fund's total assets.
10. Invest, in the aggregate, more than 15% of its total assets in securities
with legal or contractual restrictions on resale, securities which are not
readily marketable and repurchase agreements with more than seven days to
maturity.
11. Buy or sell interests in oil, gas or mineral exploration or development
programs or related leases or real estate. (Does not preclude investments in
marketable securities of issuers engaged in such activities.)
Under applicable provisions of Texas law, any investment by the Fund in warrants
may not exceed 5% of the value of the Fund's net assets. Included within that
amount, but not to exceed 2% of the value of the Fund's net assets, may be
warrants which are not listed on the New York or American Stock Exchange. Also,
as provided for under Texas law, the Fund may not purchase real estate limited
partnership interests.
If a percentage restriction is adhered to at the time of investment, a
subsequent increase or decrease in a percentage resulting from a change in the
values of assets will not constitute a violation of that restriction, except as
otherwise noted.
B-7
<PAGE>
DISTRIBUTIONS AND TAX INFORMATION
Distributions
Any dividends from net investment income (including realized short term capital
gains) are declared and paid at least annually, typically at the end of the
Fund's fiscal year (March 31). Any undistributed long term net capital gains
realized during the 12- month period ended each October 31, as well as any
additional undistributed long term capital gains realized during the Fund's
fiscal year, will also be distributed to shareholders on or about December 31 of
each year.
Each distribution by the Fund is accompanied by a brief explanation of the form
and character of the distribution. In January of each year the Fund will issue
to each shareholder a statement of the federal income tax status of all
distributions.
Tax Information
The Fund is treated as a separate entity for federal income tax purposes. The
Fund intends to qualify and elect to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). In order to so qualify, the Fund must comply with all applicable
requirements regarding the source of its income, diversification of its assets
and timing of its distributions. The Fund's policy is to distribute to its
shareholders all of its investment company taxable income and any net realized
long-term capital gains for each fiscal year in a manner that complies with the
distribution requirements of the Code, so that the Fund will not be subject to
any federal income tax or excise taxes based on net income. The Fund will
generally be subject to federal income tax on its undistributed net investment
income and capital gains. In addition, to avoid federal excise taxes based on
its net income, the Fund must distribute (or be deemed to have distributed) by
December 31 of each calendar year (I) at least 98% of its ordinary income for
such year, (ii) at least 98% of the excess of its realized capital gains over
its realized capital losses for the 12-month period ending on October 31 during
such year, and (iii) any amounts from the prior calendar year that were not
distributed.
Net investment income consists of interest and dividend income and foreign
currency gain, less expenses. Net realized capital gains for a fiscal period are
computed by taking into account any capital loss carry forward of the Fund.
Distributions of net investment income and the excess of net short-term capital
gain over net long-term capital loss are taxable to shareholders as ordinary
income. In the case of corporate shareholders, a portion of the distributions
may qualify for the intercorporate dividends-received deduction to the extent
the Fund
B-8
<PAGE>
designates the amount distributed as a qualifying dividend. The aggregate amount
so designated cannot, however, exceed the aggregate amount of qualifying
dividends received by the Fund for its taxable year. In view of the Fund's
investment policy, it is expected that dividends from domestic corporations will
be part of the Fund's gross income and that, accordingly, part of the
distributions by the Fund may be eligible for the dividends-received deduction
for corporate shareholders. However, the portion of the Fund's gross income
attributable to qualifying dividends is largely dependent on the Fund's
investment activities for a particular year and therefore cannot be predicted
with any certainty. The deduction may be reduced or eliminated if Fund shares
held by a corporate investor are treated as debt-financed or are held for less
than 46 days.
Distributions of the excess of net long-term capital gains over net short-term
capital losses are taxable to shareholders as long-term capital gains,
regardless of the length of time the shareholders have held their shares.
Capital gains distributions are not eligible for the dividends-received
deduction referred to in the previous paragraph. Distributions of any net
investment income and net realized capital gains will be taxable as described
above, whether received in shares or in cash. Shareholders electing to receive
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share so received equal to the net asset
value of a share on the reinvestment date. Distributions are generally taxable
when received. However, distributions declared in October, November or December
to shareholders of record on a date in such a month and paid the following
January are taxable as if received on December 31. Distributions are includable
in alternative minimum taxable income in computing a shareholder's liability for
the alternative minimum tax.
One of the requirements for qualification as a regulated investment company is
that less than 30% of the Fund's gross income must be derived from gains from
the sale or other disposition of securities held for less than three months.
Accordingly, the Fund may be restricted in effecting closing transactions within
three months after entering into an option contract.
A redemption of Fund shares may result in recognition of a taxable gain or loss.
Any loss realized upon a redemption of shares within six months from the date of
their purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gains during such
six-month period. Any loss realized upon a redemption of Fund shares may be
disallowed under certain wash sale rules to the extent shares of the Fund are
purchased (through reinvestment of distributions or otherwise) within 30 days
before or after the redemption.
B-9
<PAGE>
Under the Code, the Fund will be required to report to the Internal Revenue
Service all distributions of taxable income and capital gains and gross proceeds
from the redemption or exchange of Fund shares, except in the case of exempt
shareholders (including most corporations). Pursuant to the backup withholding
provisions of the Code, distributions of any taxable income and capital gains
and proceeds from the redemption of Fund shares may be subject to withholding of
federal income tax at the rate of 31 percent in the case of non-exempt
shareholders who fail to furnish the Fund with their taxpayer identification
numbers and with required certifications regarding their status under the Code.
If the backup withholding provisions are applicable, any such distributions and
proceeds, whether taken in cash or reinvested in additional shares, will be
reduced by the amounts required to be withheld. Corporate and other exempt
shareholders should provide the Fund with their taxpayer identification numbers
or certify their exempt status in order to avoid possible erroneous application
of backup withholding. The Fund reserves the right to refuse to open an account
for any person failing to certify the person's taxpayer identification number.
The Fund will not be subject to tax in The Commonwealth of Massachusetts as long
as it qualifies as a regulated investment company for federal income tax
purposes. Distributions and the transactions referred to in the preceding
paragraphs may be subject to state and local income taxes, and the tax treatment
thereof may differ from the federal income tax treatment. Moreover, the above
discussion is not intended to be a complete discussion of all applicable tax
consequences of an investment in the Fund. Shareholders are advised to consult
with their own tax advisers concerning the application of federal, state and
local taxes to an investment in the Fund.
The foregoing discussion of the Code relates solely to the
application of that law to U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and
foreign tax consequences of ownership of shares of the Fund,
including the possibility that such a shareholder may be subject to
a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on amounts constituting
ordinary income.
This discussion and the related discussion in the prospectus have been prepared
by Fund management, and counsel to the Fund has expressed no opinion in respect
thereof.
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<PAGE>
MANAGEMENT
Trustees
The Trustees of the Trust, who were elected for an indefinite term by the
initial shareholders of the Trust, are responsible for the overall management of
the Trust, including general supervision and review of the investment activities
of the Fund. The Trustees, in turn, elect the officers of the Trust, who are
responsible for administering the day-to-day operations of the Trust and its
separate series. The current Trustees and officers and their affiliations and
principal occupations for the past five years are set forth below.
Steven J. Paggioli,* 45 President and Trustee
479 West 22nd Street, New York, New York 10011. Executive Vice
President, Robert H. Wadsworth & Associates, Inc. (consultants)
since 1986; Executive Vice President of Investment Company
Administration Corporation ("ICAC"; mutual fund administration),
President of Southampton Investment Management Company
("Southampton"; mutual fund administrator and the Fund's
Administrative Manager), and Vice President of First Fund
Distributors, Inc. ("FFD"; registered broker-dealer and the Fund's
Distributor) since 1990.
Dorothy A. Berry, 52 Trustee
Wildflower Hill, Ancram New York 12502. President, Talon Industries (venture
capital and business consulting); formerly Chief Operating Officer, Integrated
Asset Management (investment advisor and manager) and formerly President, Value
Line, Inc., (investment advisory and financial publishing firm).
Wallace L. Cook, 56 Trustee
30 Rockefeller Plaza, New York, New York 10112. Senior Vice
President, Rockefeller Trust Co. Financial Counselor, Rockefeller
& Co.
Carl A. Froebel, 57 Trustee
333 Technology Drive, Malvern, PA 19355. Managing Director,
Premier Solutions, Ltd. Formerly President, National Investor Data
Services, Inc. (investment related computer software).
Rowley W.P. Redington, 51 Trustee
260 Washington Street, Newark, New Jersey 07102. Vice President,
PRS of New Jersey, Inc. (management consulting); Chief Financial
B-11
<PAGE>
Officer, Jersey Electronics, Inc. (formerly ESI, Inc.) (consumer
electronics service and marketing); formerly President, Aveco Inc.
(consumer electronic service and marketing) and formerly Chief
Executive Officer, Rowley Associates (consultants).
Eric M. Banhazl*, 38 Treasurer
2025 E. Financial Way, Suite 101, Glendora, California 91741.
Senior Vice President, Robert H. Wadsworth & Associates, Inc.,
Senior Vice President of ICAC and Vice President of FFD since 1990.
Formerly Vice President, Huntington Advisors, Inc. (investment
advisors) 1988-90.
Robin Berger*, 39 Secretary
479 West 22nd St., New York, New York 10011. Vice President, Robert
H. Wadsworth & Associates, Inc. since June, 1993; formerly
Regulatory and Compliance Coordinator, Equitable Capital
Management, Inc. (1991-93), and Legal Product Manager, Mitchell
Hutchins Asset Management (1988-91).
Robert H. Wadsworth*, 56 Vice President
4455 E. Camelback Road, Suite 261E, Phoenix, Arizona 85018.
President of Robert H. Wadsworth & Associates, Inc. since 1982,
President of ICAC and FFD and Vice President of Southampton since
1990.
*Indicates an "interested person" of the Trust as defined in the
1940 Act.
The Trustees of the Trust who are not interested persons receive a total annual
retainer of $10,000 paid quarterly, and fees and expenses for each Board meeting
attended. These amounts are allocated among all series of the Trust. The Fund
has not yet paid any such trustees' fees or expenses. The officers of the Trust
receive no compensation directly from it for performing the duties of their
offices. However, those officers and Trustees of the Trust who are officers
and/or stockholders of those companies that render administrative services to
the Trust as noted below may receive remuneration indirectly because of fees
that these companies receive from the Trust. As of the date of this Statement of
Additional Information, the Trustees and officers of the Trust as a group did
not own more than 1% of the outstanding shares of any Fund. Trustees receive no
retirement benefits or deferred compensation from the Trust.
The Fund receives investment advisory services pursuant to agreements with the
Advisor and the Trust. Each such agreement, after its initial term, continues in
effect for successive annual periods so long as such continuation is approved at
least annually
B-12
<PAGE>
by the vote of (1) the Board of Trustees of the Trust (or a majority of the
outstanding shares of the Fund to which the agreement applies), and (2) a
majority of the Trustees who are not interested persons of any party to the
Agreement, in each case cast in person at a meeting called for the purpose of
voting on such approval. Any such agreement may be terminated at any time,
without penalty, by either party to the agreement upon 60 days' written notice
and is automatically terminated in the event of its "assignment," as defined in
the 1940 Act.
Investment Advisor
The Board of Trustees of the Trust establishes the Fund's policies and
supervises and reviews the management of the Fund. The Advisor is located at One
Sansome Street, Suite 3300, San Francisco, CA 94104. While the Advisor has not
previously advised a registered investment company, it provides investment
advisory services to individual and institutional investors with assets of
approximately $2.8 billion. Mr. John J. Sullivan, Executive Vice President,
Treasurer and Director of the Advisor and Mr. Gordon J. Ceresino, Executive Vice
President and Director of the Advisor are responsible for management of the
Fund's portfolio.
Under the Investment Advisory Agreement with the Fund, the Advisor provides the
Fund with advice on buying and selling securities, manages the investments of
the Fund, furnishes the Fund with office space and certain administrative
services, and provides most of the personnel needed by the Fund. As
compensation, the Fund pays the Advisor a monthly management fee (accrued daily)
based upon the average daily net assets of the Fund at the rate of 0.75%
annually.
The Investment Advisory Agreement continues in effect from year to year so long
as such continuation is approved at least annually by (1) the Board of Trustees
of the Trust or the vote of a majority of the outstanding shares of the Fund,
and (2) a majority of the Trustees who are not interested persons of any party
to the Agreement, in each case cast in person at a meeting called for the
purpose of voting on such approval. The Agreement may be terminated at any time,
without penalty, by either the Fund or the Advisor upon 60 days' written notice
and is automatically terminated in the event of its assignment as defined in the
1940 Act.
Administrator
The Fund has entered into an Administrative Management Agreement with
Southampton, a corporation owned in part and controlled by Messrs. Banhazl,
Paggioli and Wadsworth. The Agreement provides that Southampton will prepare and
coordinate reports and other materials supplied to the Trustees; prepare and/or
supervise the preparation and filing of all securities filings, periodic
financial reports, prospectuses, statements of additional
B-13
<PAGE>
information, marketing materials, tax returns, shareholder reports and other
regulatory reports or filings required of the Fund; prepare all required filings
necessary to maintain the Fund's qualification and/or registration to sell
shares in all states where the Fund currently does, or intends to do, business;
coordinate the preparation, printing and mailing of all materials (e.g., Annual
Reports) required to be sent to shareholders; coordinate the preparation and
payment of Fund related expenses; monitor and oversee the activities of the
Fund's servicing agents (i.e., transfer agent, custodian, fund accountants,
etc.); review and adjust as necessary the Fund's daily expense accruals; and
perform such additional services as may be agreed upon by the Fund and the
Manager. For its services, Southampton receives an annual fee equal to 0.12% of
the Fund's average daily net assets up to $25 million, 0.07% of the next $25
million of net assets, 0.05% of the next $50 million of net assets and 0.03% on
assets over $100 million, with a minimum fee of $30,000.
Distributor
First Fund Distributors (the "Distributor"), a corporation owned by Messrs.
Banhazl, Paggioli and Wadsworth, acts as the Fund's distributor and principal
underwriter in a continuous public offering of the Fund's shares. The
Distribution Agreement between the Fund and the Distributor continues in effect
from year to year if approved at least annually by (I) the Board of Trustees or
the vote of a majority of the outstanding shares of the Fund (as defined in the
1940 Act) and (ii) a majority of the Trustees who are not interested persons of
any such party, in each case cast in person at a meeting called for the purpose
of voting on such approval. The Distribution Agreement may be terminated without
penalty by the parties thereto upon 60 days' written notice, and is
automatically terminated in the event of its assignment as defined in the 1940
Act.
EXECUTION OF PORTFOLIO TRANSACTIONS
In all purchases and sales of securities for the Fund, the primary consideration
is to obtain the most favorable price and execution available. Pursuant to the
Investment Management Advisory, the Advisor determines which securities are to
be purchased and sold by the Fund and which broker-dealers are eligible to
execute the Fund's portfolio transactions, subject to the instructions of and
review by the Fund. Purchases and sales of securities in the over-the-counter
market will generally be executed directly with a "market-maker" unless, in the
opinion of the Advisor, a better price and execution can otherwise be obtained
by using a broker for the transaction.
Purchases of portfolio securities for the Fund also may be made directly from
issuers or from underwriters. Where possible, purchase and sale transactions
will be effected through dealers
B-14
<PAGE>
(including banks) which specialize in the types of securities which the Fund
will be holding, unless better executions are available elsewhere. Dealers and
underwriters usually act as principal for their own account. Purchases from
underwriters will include a concession paid by the issuer to the underwriter and
purchases from dealers will include the spread between the bid and the asked
price. If the execution and price offered by more than one dealer or underwriter
are comparable, the order may be allocated to a dealer or underwriter that has
provided research or other services as discussed below.
In placing portfolio transactions, the Advisor will use its best efforts to
choose a broker-dealer capable of providing the services necessary to obtain the
most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm's risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that more
than one broker-dealer can offer the services needed to obtain the most
favorable price and execution available, consideration may be given to those
broker-dealers which furnish or supply research and statistical information to
the Advisor that it may lawfully and appropriately use in its investment
advisory capacities, as well as provide other services in addition to execution
services. The Advisor considers such information, which is in addition to and
not in lieu of the services required to be performed by it under its Agreement
with the Fund, to be useful in varying degrees, but of indeterminable value. The
placement of portfolio transactions with broker-dealers who sell shares of the
Fund is subject to rules adopted by the National Association of Securities
Dealers, Inc. Provided the Trust's officers are satisfied that the Fund is
receiving the most favorable price and execution available, the Fund may also
consider the sale of its shares as a factor in the selection of broker-dealers
to execute its portfolio transactions.
While it is the Fund's general policy to seek first to obtain the most favorable
price and execution available, in selecting a broker-dealer to execute portfolio
transactions for the Fund, weight may also be given to the ability of a
broker-dealer to furnish brokerage and research services to the Fund or to the
Advisor, even if the specific services were not imputed just to the Fund and may
be useful to the Advisor in advising other clients. In negotiating any
commissions with a broker or evaluating the spread to be paid to a dealer, the
Fund may therefore pay a higher commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services, provided
that the amount of such commission or spread has been determined in good faith
by the Fund and the Advisor to be reasonable in relation to the value of the
brokerage and/or research services provided by such broker-dealer, which
services either produce a direct benefit
B-15
<PAGE>
to the Fund or assist the Advisor in carrying out its responsibilities to the
Fund. The standard of reasonableness is to be measured in light of the Advisor's
overall responsibilities to the Fund.
Investment decisions for the Fund are made independently from those of other
client accounts or mutual funds ("Funds") managed or advised by the Advisor.
Nevertheless, it is possible that at times identical securities will be
acceptable for both the Fund and one or more of such client accounts or Funds.
In such event, the position of the Fund and such client account(s) or Funds in
the same issuer may vary and the length of time that each may choose to hold its
investment in the same issuer may likewise vary. However, to the extent any of
these client accounts or Funds seeks to acquire the same security as the Fund at
the same time, the Fund may not be able to acquire as large a portion of such
security as it desires, or it may have to pay a higher price or obtain a lower
yield for such security. Similarly, the Fund may not be able to obtain as high a
price for, or as large an execution of, an order to sell any particular security
at the same time. If one or more of such client accounts or Funds simultaneously
purchases or sells the same security that the Fund is purchasing or selling,
each day's transactions in such security will be allocated between the Fund and
all such client accounts or Funds in a manner deemed equitable by the Advisor,
taking into account the respective sizes of the accounts and the amount being
purchased or sold. It is recognized that in some cases this system could have a
detrimental effect on the price or value of the security insofar as the Fund is
concerned. In other cases, however, it is believed that the ability of the Fund
to participate in volume transactions may produce better executions for the
Fund.
Because the Fund's Distributor is a member of the National Association of
Securities Dealers, it is sometimes entitled to obtain certain fees when the
Fund tenders portfolio securities pursuant to a tender-offer solicitation. As a
means of recapturing brokerage for the benefit of the Fund, any portfolio
securities tendered by the Fund will be tendered through the Distributor if it
is legally permissible to do so.
The Fund does not effect securities transactions through brokers in accordance
with any formula, nor does it effect securities transactions through brokers
solely for selling shares of the Fund, although the Fund may consider the sale
of shares as a factor in allocating brokerage. However, as stated above,
broker-dealers who execute brokerage transactions may effect purchase of shares
of the Fund for their customers. The Fund does not use the Distributor to
execute its portfolio transactions.
B-16
<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Trust reserves the right in its sole discretion (I) to suspend the continued
offering of the Fund's shares, (ii) to reject purchase orders in whole or in
part when in the judgment of the Advisor or the Distributor such rejection is in
the best interest of the Fund, and (iii) to reduce or waive the minimum for
initial and subsequent investments for certain fiduciary accounts or under
circumstances where certain economies can be achieved in sales of the Fund's
shares.
Payments to shareholders for shares of the Fund redeemed directly from the Fund
will be made as promptly as possible but no later than seven days after receipt
by the Fund's Transfer Agent of the written request in proper form, with the
appropriate documentation as stated in the Prospectus, except that the Fund may
suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the New York Stock Exchange is restricted as
determined by the SEC or such Exchange is closed for other than weekends and
holidays; (b) an emergency exists as determined by the SEC making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable; or (c)for such other period as the SEC may permit for the
protection of the Fund's shareholders. At various times, the Fund may be
requested to redeem shares for which it has not yet received confirmation of
good payment; in this circumstance, the Fund may delay the redemption until
payment for the purchase of such shares has been collected and confirmed to the
Fund.
The Fund intends to pay cash (U.S. dollars) for all shares redeemed, but, under
abnormal conditions which make payment in cash unwise, the Fund may make payment
partly in securities with a current market value equal to the redemption price.
Although the Fund does not anticipate that it will make any part of a redemption
payment in securities, if such payment were made, an investor may incur
brokerage costs in converting such securities to cash. The Fund has elected to
be governed by the provisions of Rule 18f-1 under the 1940 Act, which contains a
formula for determining the minimum redemption amounts that must be paid in
cash.
The value of shares on redemption or repurchase may be more or less than the
investor's cost, depending upon the market value of the Fund's portfolio
securities at the time of redemption or repurchase.
As discussed in the Prospectus, the Fund provides an Automatic Investment Plan
for the convenience of investors who wish to purchase shares of the Fund on a
regular basis. All record keeping and custodial costs of this Plan are paid by
the Fund. The market value of the Fund's shares is subject to fluctuation, so
before undertaking any plan for systematic investment, an investor should
B-17
<PAGE>
keep in mind that this plan does not assure a profit nor protect against
depreciation in declining markets.
DETERMINATION OF SHARE PRICE
As noted in the Prospectus, the net asset value and offering price of shares of
the Fund will be determined once daily as of 4:00 p.m., New York City time, on
each day the New York Stock Exchange is open for trading. It is expected that
the Exchange will be closed on Saturdays and Sundays and on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas. The Fund does not expect to determine the net
asset value of its shares on any day when the Exchange is not open for trading
even if there is sufficient trading in its portfolio securities on such days to
materially affect the net asset value per share.
In valuing the Fund's assets for calculating net asset value, readily marketable
portfolio securities listed on a national securities exchange or on NASDAQ are
valued at the last sale price on the business day as of which such value is
being determined. If there has been no sale on such exchange or on NASDAQ on
such day, the security is valued at the closing bid price on such day. Readily
marketable securities traded only in the over-the-counter market and not on
NASDAQ are valued at the current or last bid price. If no bid is quoted on such
day, the security is valued by such method as the Board of Trustees of the Trust
shall determine in good faith to reflect the security's fair value. All other
assets of the Fund are valued in such manner as the Board of Trustees in good
faith deems appropriate to reflect their fair value.
The net asset value per share of the Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
(which includes accrued but undistributed income); the resulting net assets are
divided by the number of shares of the Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
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
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.
B-18
<PAGE>
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)n = ERV
Where: P = a hypothetical initial purchase order of $1,000
from which the maximum sales load is deducted
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 on the reinvestment dates during
the period and gives effect to the maximum applicable sales charge.
The Fund's total return may be compared to relevant indices, including Standard
& Poor's 500 Composite Stock Index and indices published by Lipper Analytical
Services, Inc. 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 total return for any period should
not be considered as a representation of what an investment may earn or what an
investor's total return may be in any future period.
GENERAL INFORMATION
Investors in the Fund will be informed of the Fund's progress through periodic
reports. Financial statements certified by independent public accountants will
be submitted to shareholders at least annually.
Star Bank N.A., 425 Walnut Street, Cincinnati, OH 45202 acts as Custodian of the
securities and other assets of the Fund. The Custodian does not participate in
decisions relating to the purchase and sale of securities by the Fund. American
Data Services, Inc., 24 West Carver St., Huntington, NY 11743 is the Fund's
Transfer and Dividend Disbursing Agent.
B-19
<PAGE>
Ernst & Young, 515 S. Flower St., Los Angeles, CA 90071 are the independent
auditors for the Fund.
Heller, Ehrman, White & McAuliffe, 333 Bush Street, San Francisco, California
94104, are legal counsel to the Fund.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Trust's Agreement and Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust. The
Agreement and Declaration of Trust also provides for indemnification and
reimbursement of expenses out of the Fund's assets for any shareholder held
personally liable for obligations of the Fund or Trust. The Agreement and
Declaration of Trust provides that the Trust shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the Fund or Trust and satisfy any judgment thereon. All such rights are limited
to the assets of the Fund. The Agreement and Declaration of Trust further
provides that the Trust may maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its shareholders, trustees, officers, employees and agents to cover
possible tort and other liabilities. Furthermore, the activities of the Trust as
an investment company would not likely give rise to liabilities in excess of the
Trust's total assets. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances in which both
inadequate insurance exists and the Fund itself is unable to meet its
obligations.
The Trust is registered with the SEC as a management investment company. Such a
registration does not involve supervision of the management or policies of the
Fund by the SEC. The Prospectus of the Fund and this Statement of Additional
Information omit certain of the information contained in the Registration
Statement filed with the SEC. Copies of such information may be obtained from
the SEC upon payment of the prescribed fee.
B-20
<PAGE>
PROFESSIONALLY MANAGED PORTFOLIOS
FORM N-1A
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements: Financial Statements for the fiscal year
ended March 31, 1995: Incorporated by reference from the annual
reports to shareholders for the fiscal year ended March 31, 1995 and
the semi-annual period ended September 30, 1995: incorporated by
reference from the semi-annual reports to shareholders for the fiscal
period ended September 30, 1995
Financial Statements for the fiscal year ended August
31, 1995: Incorporated by Reference from the annual
reports to shareholders for the fiscal year ended August 31, 1995
(Academy Value and Trent Equity Fund Series).
(b) Exhibits:
(1) Agreement and Declaration of Trust-1
(2) By-Laws--1
(3) Voting Trust Agreement -- Not applicable
(4) Specimen Share Certificate-2
(5) Form of Investment Advisory Agreement-
(6) Form of Distribution Agreement-
(7) Benefit Plan -- Not applicable
(8) Form of Custodian Agreement-4
(9) Form of Administration Agreement-
(10) Consent and Opinion of Counsel as to legality of
shares-2
(11) Consent of Accountants
(12) All Financial Statements omitted from Item 23 --
Not applicable
(13) Letter of Understanding relating to initial
capital-2
(14) Model Retirement Plan Documents - Not applicable
<PAGE>
(15) Form of Plan pursuant to Rule 12b-1-
(16) Schedule for Computation of Performance
Quotations-3
1 Incorporated by reference from Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A, filed on December , 1995.
2 Incorporated by reference from Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A, filed on April 13, 1987.
3 Incorporated by reference to Post-effective Amendment No. 5 to
the Registration Statement on Form N-1A, filed on May 2, 1991.
4 Incorporated by reference to Post-Effective Amendment No. 7 to
the Registration Statement on Form N-1A filed on June 17, 1992.
Item 25. Persons Controlled by or under Common Control with
Registrant.
As of the date of this Amendment to the Registration Statement, there
are no persons controlled or under common control with the Registrant.
Item 26. Number of Holders of Securities.
Number of Record
Holders as of
Title of Class January 2, 1996
Shares of Beneficial Interest, no par value:
Academy Value Fund 124
Avondale Total Return Fund 130
Crescent Fund 107
Hodges Fund 609
Osterweis Fund 122
Perkins Opportunity Fund 4,611
ProConscience Womens Equity Fund 456
Trent Equity Fund 218
Matrix Growth Fund 510
Matrix Emerging Growth Fund 43
Kayne, Anderson Rising Dividend Fund 93
Insightful Investor Growth Fund 120
Leonetti Balanced Fund 187
U.S.Global Leaders Growth Fund 15
<PAGE>
Item 27. Indemnification
The information on insurance and indemnification is
incorporated by reference to Pre-Effective Amendment No. 1 and
Post-Effective Amendment No. 1 to the Registrant's Registration
Statement.
In addition, insurance coverage for the officers and trustees of the
Registrant also is provided under a Directors and Officers/Errors and Omissions
Liability insurance policy issued by ICI Mutual Insurance Company with a
$1,000,000 limit of liability.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Securities Act") may be permitted to directors, 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 Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares 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 Securities Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
With respect to Investment Advisors, the response to this item is
incorporated by reference to their Form ADVs as amended:
Herbert R. Smith & Co, Inc. File No. 801-7098
Hodges Capital Management, Inc. File No. 801-35811
Perkins Capital Management, Inc. File No. 801-22888
Crescent Research & Management File No. 801-36828
Osterweis Capital Management File No. 801-18395
Pro-Conscience Funds, Inc. File No. 801-43868
Trent Capital Management, Inc. File No. 801-34570
Academy Capital Management File No. 801-27836
Kayne, Anderson Investment Mgmnt. File No. 801-24241
Sena, Weller, Rohs, Williams File No. 801-5326
Insightful Management Company File No. 801-46565
Leonetti & Associates, Inc. File No. 801-36381
Lighthouse Capital Management File No. 801-32168
Yeager, Wood & Marshall, Inc. File No. 801-4995
Harris Bretall Sullivan & Smith File No. 801-7369
<PAGE>
With respect to United States Trust Company of Boston, the response to this
item is incorporated by reference to the responses to Item 5 of Part A and Item
16 of Part B ("Management")of Post-Effective Amendment No. 20 to the
Registration Statement.
Item 29. Principal Underwriters.
(a) First Fund Distributors, Inc. (the "Distributor") is the principal
underwriter all series of the Registrant except for the Hodges Fund, the Matrix
Growth Fund, the Matrix Emerging Growth Fund and the Insightful Investor Growth
Fund. The Distributor acts as principal underwriter for the following other
investment companies:
RNC Liquid Assets Fund, Inc.
Hotchkis and Wiley Funds
PIC Investment Trust
Rainier Investment Management Mutual Funds
Guinness Flight Investment Funds
Jurika & Voyles Fund Group
First Dallas Securities, Inc., 2311 Cedar Springs Rd., Ste.
100, Dallas, TX 75201, an affiliate of Hodges Capital Management,
acts as Distributor of the Hodges Fund. The President and Chief
Financial Officer of First Dallas Securities, Inc. is Don W.
Hodges. First Dallas does not act as principal underwriter for any
other investment companies. Reynolds, DeWitt Securities Co., an
affiliate of Sena Weller Rohs Williams, 300 Main St., Cincinnati,
OH 45202, acts as Distributor for the Matrix Growth Fund and Matrix
Emerging Growth Fund. Newcomb & Company, 6 New England Executive
Park, Ste. 400, Burlington, MA 01803 acts as Distributor for the
Insightful Investor Growth Fund.
(b) The officers of First Fund Distributors, Inc. are:
Robert H. Wadsworth President & Treasurer
Eric Banhazl Vice President
Steven J. Paggioli Secretary
Each officer's business address is 4455 E. Camelback Rd., Ste.
261-E, Phoenix, AZ 85018. Mr. Paggioli serves as President and a
Trustee of the Registrant. Mr. Wadsworth serves as Vice President
of the Registrant. Mr. Banhazl serves as Treasurer of the
Registrant.
c. Incorporated by reference from the Statement of Additional
Information filed herewith as Part B.
Item 30. Location of Accounts and Records.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder
<PAGE>
are in the possession the Registrant's custodian and transfer agent, except
those records relating to portfolio transactions and the basic organizational
and Trust documents of the Registrant (see Subsections (2) (iii). (4), (5), (6),
(7), (9), (10) and (11) of Rule 31a-1(b)), which, with respect to portfolio
transactions are kept by each Fund's Advisor at its address set forth in the
prospectus and statement of additional information and with respect to trust
documents by its administrator at 479 West 22nd Street, New York, NY 10011.
Item 31. Management Services.
There are no management-related service contracts not discussed in
Parts A and B.
Item 32. Undertakings
The registrant undertakes to file a post-effective amendment using financial
statements which need not be certified, within four to six months from the
effective date of this amendment, as such requirement is interpreted by the
staff in its generic comment letter dated February 25, 1994.
The registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of each Fund's latest annual report to shareholders, upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York in the State of New York on
January 16, 1996.
.
PROFESSIONALLY MANAGED PORTFOLIOS
By: Steven J. Paggioli
Steven J. Paggioli
President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Steven J. Paggioli Trustee January 16, 1996
Steven J. Paggioli
Eric M. Banhazl Principal January 16, 1996
Eric M. Banhazl Financial
Officer
Dorothy A. Berry Trustee January 16, 1996
*Dorothy A. Berry
Wallace L. Cook Trustee January 16, 1996
*Wallace L. Cook
Carl A. Froebel Trustee January 16, 1996
*Carl A. Froebel
Rowley W. P. Redington Trustee January 16, 1996
*Rowley W. P. Redington
* By: Steven J. Paggioli
Steven J. Paggioli, Attorney-in-Fact
under powers of attorney as filed with
Post-Effective Amendment No. 20 to the
Registration Statement.
Exhibit 5
PROFESSIONALLY MANAGED PORTFOLIOS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this day of , 1996 by and between
PROFESSIONALLY MANAGED PORTFOLIOS (the "Trust"), a Massachusetts
business trust and [ ], a [ ]
corporation (the "Advisor").
WITNESSETH:
WHEREAS, a series of the Trust having separate assets and liabilities
has been created entitled the [ ] Fund (the "Fund"); and
WHEREAS, it is therefore desirable to have an investment advisory
agreement (i.e., this Agreement) relating to the Fund, which agreement will
apply only to this Fund;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and among the parties hereto as
follows:
l. In General
The Advisor agrees, all as more fully set forth herein, to act as investment
adviser to the Trust with respect to the investment of the assets of the Fund
and to supervise and arrange the purchase and sale of securities held in the
portfolio of the Fund.
2. Duties and Obligations of the Advisor with respect to
Investment of Assets of the Fund.
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Trustees of the Trust, the Advisor
shall:
(I) Decide what securities shall be purchased or sold by the
Trust with respect to the Fund and when; and
(ii) Arrange for the purchase and the sale of securities held
in the portfolio of the Fund by placing purchase and sale orders for the Trust
with respect to the Fund.
(b) Any investment purchases or sales made by the Advisor shall at all
times conform to, and be in accordance with, any requirements imposed by: (l)
the provisions of the 1940 Act and of any rules or regulations in force
thereunder; (2) any other applicable provisions of law; (3) the provisions of
the Declaration of Trust and By-Laws of the Trust as amended from
<PAGE>
time to time; (4) any policies and determinations of the Board of Trustees of
the Trust; and (5) the fundamental policies of the Trust relating to the Fund,
as reflected in the Trust's registration statement under the 1940 Act (including
by reference the Statement of Additional Information) as such registration
statement is amended from time to time, or as amended by the shareholders of the
Fund.
(c) The Advisor shall give the Trust the benefit of its best judgment
and effort in rendering services hereunder, but the Advisor shall not be liable
for any loss sustained by reason of the purchase, sale or retention of any
security whether or not such purchase, sale or retention shall have been based
on its own investigation and research or upon investigation and research made by
any other individual, firm or corporation, if such purchase, sale or retention
shall have been made and such other individual, firm or corporation shall have
been selected in good faith. Nothing herein contained shall, however, be
construed to protect the Advisor against any liability to the Trust or its
security holders by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the 1940 Act) of the Advisor from acting as
investment adviser or manager and/or principal underwriter for any other person,
firm or corporation and shall not in any way limit or restrict the Advisor or
any such affiliated person from buying, selling or trading any securities for
its or their own accounts or the accounts of others for whom it or they may be
acting, provided, however, that the Advisor expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
(e) It is agreed that the Advisor shall have no responsibility or
liability for the accuracy or completeness of the Trust's Registration Statement
under the 1940 Act or the Securities Act of 1933 except for information supplied
by the Advisor for inclusion therein. The Trust may indemnify the Advisor to the
full extent permitted by the Trust's Declaration of Trust.
(f) The Fund may use the name [ ] Fund or any name derived from or using
the name [ ] only for so long as this Agreement or any extension, renewal or
amendment hereof remains in effect. At such time as such an agreement shall no
longer be in effect, the Fund shall cease to use such a name or any other name
connected with the Advisor.
2
<PAGE>
3. Broker-Dealer Relationships
The Advisor is responsible for decisions to buy and sell securities for the
Fund, broker-dealer selection, and negotiation of brokerage commission rates.
The Advisor's primary consideration in effecting a securities transaction will
be execution at the most favorable price. In selecting a broker-dealer to
execute each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Trustees of the Trust may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage or research
services to the Advisor an amount of commission for effecting a portfolio
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Advisor determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Advisor's overall
responsibilities with respect to the Trust. The Advisor is further authorized to
allocate the orders placed by it on behalf of the Fund to such brokers or
dealers who also provide research or statistical material, or other services, to
the Trust, the Advisor, or any affiliate of either. Such allocation shall be in
such amounts and proportions as the Advisor shall determine, and the Advisor
shall report on such allocations regularly to the Trust, indicating the
broker-dealers to whom such allocations have been made and the basis therefor.
The Advisor is also authorized to consider sales of shares as a factor in the
selection of brokers or dealers to execute portfolio transactions, subject to
the requirements of best execution, i.e., that such brokers or dealers are able
to execute the order promptly and at the best obtainable securities price.
4. Allocation of Expenses
The Advisor agrees that it will furnish the Trust, at the Advisor's expense,
with office space and facilities, equipment and clerical personnel necessary for
carrying out its duties under this Agreement. The Advisor will also pay all
compensation of any Trustees, officers and employees of the Trust who are
affiliated persons of the Advisor. All operating costs and
3
<PAGE>
expenses relating to the Fund not expressly assumed by the Advisor under this
Agreement shall be paid by the Trust from the assets of the Fund, including, but
not limited to (I) interest and taxes; (ii) brokerage commissions; (iii)
insurance premiums; (iv) compensation and expenses of the Trust's Trustees other
than those affiliated with the Advisor or the Manager; (v) legal and audit
expenses; (vi) fees and expenses of the Trust's custodian, shareholder servicing
or transfer agent and accounting services agent; (vii) expenses incident to the
issuance of the Fund's shares, including issuance on the payment of, or
reinvestment of, dividends; (viii) fees and expenses incident to the
registration under Federal or state securities laws of the Trust or the shares
of the Fund; (ix) expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders of the Trust; (x) all other expenses
incidental to holding meetings of the Trust's shareholders; (xi) dues or
assessments of or contributions to the Investment Company Institute or any
successor; (xii) such non-recurring expenses as may arise, including litigation
affecting the Trust and the legal obligations which the Trust may have to
indemnify its officers and Trustees with respect thereto; and (xiii) all
expenses which the Trust or the Fund agrees to bear in any distribution
agreement or in any plan adopted by the Trust and/or a Fund pursuant to Rule
12b-1 under the Act.
5. Compensation of the Advisor
(a) The Trust agrees to pay the Advisor and the Advisor agrees to accept as
full compensation for all services rendered by the Advisor hereunder, an annual
management fee, payable monthly and computed on the value of the net assets of
the Fund as of the close of business each business day at the annual rate of [
]% of such net assets.
(b) In the event the expenses of the Fund (including the fees of the
Advisor and amortization of organization expenses but excluding interest, taxes,
brokerage commissions, extraordinary expenses and sales charges and any
distribution fees) for any fiscal year exceed the limits set by applicable
regulations of state securities commissions where the Fund is registered or
qualified for sale, the Advisor will reduce its fees by the amount of such
excess. Any such reductions are subject to readjustment during the year. The
payment of the advisory fee at the end of any month will be reduced or postponed
or, if necessary, a refund will be made to the Fund so that at no time will
there be any accrued but unpaid liability under this expense limitation. The
Advisor may reduce any portion of the compensation or reimbursement of expenses
due to it under this agreement, or may agree to make payments to limit the
expenses which are the responsibility of the Fund. Any such reduction or payment
shall be applicable only to such specific reduction or payment and shall not
constitute an agreement to reduce any
4
<PAGE>
future compensation or reimbursement due to the Advisor hereunder or to continue
future payments. Any fee withheld from the Advisor under this paragraph shall be
reimbursed by the Fund to the Advisor to the extent permitted by the applicable
state law if the aggregate expenses for the next succeeding fiscal year do not
exceed the applicable state limitation or any more restrictive limitation to
which the Advisor has agreed.
6. Duration and Termination
(a) This Agreement shall go into effect on the effective date of the
Post-Effective Amendment of the Registration Statement of the Trust covering the
shares of the Fund and shall, unless terminated as hereinafter provided,
continue in effect for a period of two years from that date, and thereafter from
year to year, but only so long as such continuance is specifically approved at
least annually by the Trust's Board of Trustees, including the vote of a
majority of the Trustees who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any such party cast in person at a
meeting called for the purpose of voting on such approval, or by the vote of the
holders of a "majority" (as so defined) of the outstanding voting securities of
the Fund and by such a vote of the Trustees.
(b) This Agreement may be terminated by the Advisor at any time without
penalty upon giving the Trust sixty (60) days' written notice (which notice may
be waived by the Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written notice (which notice
may be waived by the Advisor), provided that such termination by the Trust shall
be directed or approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority (as defined in
the 1940 Act) of the voting securities of the Trust at the time outstanding and
entitled to vote. This Agreement shall automatically terminate in the event of
its assignment (as so defined).
7. Agreement Binding Only on Fund Property
The Advisor understands that the obligations of this Agreement are not binding
upon any shareholder of the Trust personally, but bind only the Trust's
property; the Advisor represents that it has notice of the provisions of the
Trust's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Trust. This agreement has been executed by or with reference
to any Trustee in such person's capacity as a Trustee, and the Trustees shall
not be personally liable hereon.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to
be executed by duly authorized persons and their seals to be hereunto affixed,
all as of the day and year first above written.
PROFESSIONALLY MANAGED PORTFOLIOS
By
ATTEST:
[ ADVISOR ]
By
ATTEST:
- -------------------------------
6
Exhibit 6
PROFESSIONALLY MANAGED PORTFOLIOS
DISTRIBUTION AGREEMENT
This Agreement, made as of the day of , 1996 between PROFESSIONALLY
MANAGED PORTFOLIOS, a Massachusetts business trust (the "Trust"), and FIRST FUND
DISTRIBUTORS, INC. a Delaware corporation (the "Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
l940 (the "1940 Act"), and it is in the interest of the Trust to offer its class
of shares entitled the [ ] FUND (the "Fund") for sale continuously; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of l934 (the "1934 Act") and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
and
WHEREAS, the Trust and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the shares of
beneficial interest of the Fund (the "Shares"), to commence after the
effectiveness of amendment to the registration statement filed pursuant to the
Securities Act of 1933 (the "1933 Act") and the 1940 Act relating to the Fund.
NOW, THEREFORE, the parties agree as follows:
l. Appointment of Distributor. The Trust hereby appoints the
Distributor as its exclusive agent to sell and to arrange for the sale of the
Shares, on the terms and for the period set forth in this Agreement, and the
Distributor hereby accepts such appointment and agrees to act hereunder directly
and/or through the Trust's transfer agent in the manner set forth in the
Prospectuses (as defined below). It is understood and agreed that the services
of the Distributor hereunder are not exclusive, and the Distributor may act as
principal underwriter for the shares of any other registered investment company.
2. Services and Duties of the Distributor
(a) The Distributor agrees to sell the Shares, as agent for the Trust,
from time to time during the term of this Agreement upon the terms described in
the Fund's Prospectus. As used in this Agreement, the term "Prospectus" shall
mean the prospectus and statement of additional information of the Fund included
as part of the Trust's Registration Statement, as such prospectus and statement
of additional information may be amended or supplemented
1
<PAGE>
from time to time, and the term "Registration Statement" shall mean the
Registration Statement most recently filed from time to time by the Trust with
the Securities and Exchange Commission and effective under the 1933 Act and the
1940 Act, as such Registration Statement is amended by any amendments thereto at
the time in effect. The Distributor shall not be obligated to sell any certain
number of Shares.
(b) Upon commencement of the Fund's operations, the Distributor will
hold itself available to receive orders, satisfactory to the Distributor, for
the purchase of the Shares and will accept such orders and will transmit such
orders and funds received by it in payment for such Shares as are so accepted to
the Trust's transfer agent or custodian, as appropriate, as promptly as
practicable. Purchase orders shall be deemed effective at the time and in the
manner set forth in the Prospectus. The Distributor shall not make any short
sales of Shares.
(c) The offering price of the Shares shall be the net asset value per
share of the Shares (as defined in the Declaration of Trust), plus the sales
charge, if any, determined as set forth in the prospectus). The Trust shall
furnish the Distributor, with all possible promptness, an advice of each
computation of net asset value and offering price.
3. Duties of the Trust.
(a) Maintenance of Federal Registration. The Trust shall, at its
expense, take, from time to time, all necessary action and such steps, including
payment of the related filing fees, as may be necessary to register and maintain
registration of a sufficient number of Shares under the 1933 Act. The Trust
agrees to file from time to time such amendments, reports and other documents as
may be necessary in order that there may be no untrue statement of a material
fact in a registration statement or prospectus, or necessary in order that there
may be no omission to state a material fact in the registration statement or
prospectus which omission would make the statements therein misleading.
(b) Maintenance of "Blue Sky" Qualifications. The Trust shall, at its
expense, use its best efforts to qualify and maintain the qualification of an
appropriate number of Shares for sale under the securities laws of such states
as the Distributor and the Trust may approve, and, if necessary or appropriate
in connection therewith, to qualify and maintain the qualification of the Trust
as a broker or dealer in such states; provided that the Trust shall not be
required to amend its Declaration of Trust or By-Laws to comply with the laws of
any state, to maintain an office in any state, to change the terms of the
offering of the Shares in any state, to change the terms of the offering of the
Shares in any state from the terms set forth in its Prospectuses, to qualify as
a foreign corporation in any state or to consent to service of process in any
state other than with respect to claims
2
<PAGE>
arising out of the offering and sale of the Shares. The Distributor shall
furnish such information and other material relating to its affairs and
activities as may be required by the Trust in connection with such
qualifications.
(c) Copies of Reports and Prospectuses. The Trust shall, at its
expense, keep the Distributor fully informed with regard to its affairs and in
connection therewith shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, including such
reasonable number of copies of its Prospectuses and annual and interim reports
as the Distributor may request and shall cooperate fully in the efforts of the
Distributor to sell and arrange for the sale of the Shares and in the
performance of the Distributor under this Agreement.
4. Conformity with Applicable Law and Rules. The Distributor agrees
that in selling Shares hereunder it shall conform in all respects with the laws
of the United States and of any state in which Shares may be offered, and with
applicable rules and regulations of the NASD.
5. Independent Contractor. In performing its duties hereunder, the
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, directors, employees, or representatives is or shall be an
employee of the Trust in the performance of the Distributor's duties hereunder.
The Distributor shall be responsible for its own conduct and the employment,
control, and conduct of its agents and employees and for injury to such agents
or employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employee taxes thereunder.
6. Indemnification.
(a) Indemnification of Trust. The Distributor agrees to indemnify and hold
harmless the Trust and each of its present or former trustees, officers,
employees, representatives and each person, if any, who controls or previously
controlled the Trust within the meaning of Section l5 of the 1933 Act against
any and all losses, liabilities, damages, claims or expenses (including the
reasonable costs of investigating or defending any alleged loss, liability,
damage, claims or expense and reasonable legal counsel fees incurred in
connection therewith) to which the Trust or any such person may become subject
under the 1933 Act, under any other statute, at common law, or otherwise,
arising out of the acquisition of any Shares by any person which (I) may be
based upon any wrongful act by the Distributor or any of the Distributor's
directors, officers, employees or representatives, or (ii) may be based upon any
untrue statement or alleged untrue
3
<PAGE>
statement of a material fact contained in a registration statement, prospectus,
shareholder report or other information covering Shares filed or made public by
the Trust or any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such statement or
omission was made in reliance upon information furnished to the Trust by the
Distributor. In no case (I) is the Distributor's indemnity in favor of the
Trust, or any person indemnified to be deemed to protect the Trust or such
indemnified person against any liability to which the Trust or such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties or by reason of his reckless
disregard of his obligations and duties under this Agreement or (ii) is the
Distributor to be liable under its indemnity agreement contained in this
Paragraph with respect to any claim made against the Trust or any person
indemnified unless the Trust or such person, as the case may be, shall have
notified the Distributor in writing of the claim within a reasonable time after
the summons or other first written notification giving information of the nature
of the claim shall have been served upon the Trust or upon such person (or after
the Trust or such person shall have received notice to such service on any
designated agent). However, failure to notify the Distributor of any such claim
shall not relieve the Distributor from any liability which the Distributor may
have to the Trust or any person against whom such action is brought otherwise
than on account of the Distributor's indemnity agreement contained in this
Paragraph.
The Distributor shall be entitled to participate, at its own expense, in the
defense, or, if the Distributor so elects, to assume the defense of any suit
brought to enforce any such claim, but, if the Distributor elects to assume the
defense, such defense shall be conducted by legal counsel chosen by the
Distributor and satisfactory to the Trust, to the persons indemnified defendant
or defendants, in the suit. In the event that the Distributor elects to assume
the defense of any such suit and retain such legal counsel, the Trust, the
persons indemnified defendant or defendants in the suit, shall bear the fees and
expenses of any additional legal counsel retained by them. If the Distributor
does not elect to assume the defense of any such suit, the Distributor will
reimburse the Trust and the persons indemnified defendant or defendants in such
suit for the reasonable fees and expenses of any legal counsel retained by them.
The Distributor agrees to promptly notify the Trust of the commencement of any
litigation of proceedings against it or any of its officers, employees or
representatives in connection with the issue or sale of any Shares.
(b) Indemnification of the Distributor. The Trust agrees to
indemnify and hold harmless the Distributor and each of its
4
<PAGE>
present or former directors, officers, employees, representatives and each
person, if any, who controls or previously controlled the Distributor within the
meaning of Section l5 of the 1933 Act against any and all losses, liabilities,
damages, claims or expenses (including the reasonable costs of investigating or
defending any alleged loss, liability, damage, claim or expense and reasonable
legal counsel fees incurred in connection therewith) to which the Distributor or
any such person may become subject under the 1933 Act, under any other statute,
at common law, or otherwise, arising out of the acquisition of any Shares by any
person which (I) may be based upon any wrongful act by the Trust or any of the
Trust's trustees, officers, employees or representatives, or (ii) may be based
upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement, prospectus, shareholder report or other
information covering Shares filed or made public by the Trust or any amendment
thereof or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading unless such statement or omission was made in
reliance upon information furnished to the Trust by the Distributor. In no case
(I) is the Trust's indemnity in favor of the Distributor, or any person
indemnified to be deemed to protect the Distributor or such indemnified person
against any liability to which the Distributor or such person would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his duties or by reason of his reckless disregard of his
obligations and duties under this Agreement, or (ii) is the Trust to be liable
under its indemnity agreement contained in this Paragraph with respect to any
claim made against Distributor, or person indemnified unless the Distributor, or
such person, as the case may be, shall have notified the Trust in writing of the
claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or upon such person (or after the Distributor or
such person shall have received notice of such service on any designated agent).
However, failure to notify the Trust of any such claim shall not relieve the
Trust from any liability which the Trust may have to the Distributor or any
person against whom such action is brought otherwise than on account of the
Trust's indemnity agreement contained in this Paragraph.
The Trust shall be entitled to participate, at its own expense, in the
defense, or, if the Trust so elects, to assume the defense of any suit brought
to enforce any such claim, but if the Trust elects to assume the defense, such
defense shall be conducted by legal counsel chosen by the Trust and satisfactory
to the Distributor, to the persons indemnified defendant or defendants, in the
suit. In the event that the Trust elects to assume the defense of any such suit
and retain such legal counsel, the Distributor, the persons indemnified
defendant or defendants
5
<PAGE>
in the suit, shall bear the fees and expenses of any additional legal counsel
retained by them. If the Trust does not elect to assume the defense of any such
suit, the Trust will reimburse the Distributor and the persons indemnified
defendant or defendants in such suit for the reasonable fees and expenses of any
legal counsel retained by them. The Trust agrees to promptly notify the
Distributor of the commencement of any litigation or proceedings against it or
any of its trustees, officers, employees or representatives in connection with
the issue or sale of any Shares.
7. Authorized Representations. The Distributor is not authorized by the
Trust to give on behalf of the Trust any information or to make any
representations in connection with the sale of Shares other than the information
and representations contained in a registration statement or prospectus filed
with the Securities and Exchange Commission ("SEC") under the 1933 Act and/or
the 1940 Act, covering Shares, as such registration statement and prospectus may
be amended or supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on behalf of the Trust for
the Distributor's use. This shall not be construed to prevent the Distributor
from preparing and distributing tombstone ads and sales literature or other
material as it may deem appropriate. No person other than the Distributor is
authorized to act as principal underwriter (as such term is defined in the 1940
Act) for the Fund.
8. Term of Agreement. The term of this Agreement shall begin on the
date first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect for a period of two years from that date.
Thereafter, this Agreement shall continue in effect from year to year, subject
to the termination provisions and all other terms and conditions thereof, so
long as such continuation shall be specifically approved at least annually by
the Board of Trustees or by vote of a majority of the outstanding voting
securities of the Fund and, concurrently with such approval by the Board of
Trustees or prior to such approval by the holders of the outstanding voting
securities of the Fund, as the case may be, by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a majority of the
trustees of the Trust who are not parties to this Agreement or interested
persons of any such party. The Distributor shall furnish to the Trust, promptly
upon its request, such information as may reasonably be necessary to evaluate
the terms of this Agreement or any extension, renewal or amendment hereof.
9. Amendment or Assignment of Agreement. This Agreement
may not be amended or assigned except as permitted by the 1940
Act, and this Agreement shall automatically and immediately
terminate in the event of its assignment.
6
<PAGE>
10. Termination of Agreement. This Agreement may be terminated by
either party hereto, without the payment of any penalty, on not more than upon
60 days' nor less than 30 days' prior notice in writing to the other party;
provided, that in the case of termination by the Trust such action shall have
been authorized by resolution of a majority of the trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, or by
vote of a majority of the outstanding voting securities of the Fund.
11. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way define or
delineate any of the provisions hereof or otherwise affect their
construction or effect.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Trust to take
any action contrary to its Declaration of Trust or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the Trust of
responsibility for and control of the conduct of the affairs of the Trust.
12. Definition of Terms. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission
validly issued pursuant to the 1940 Act. Specifically, the terms "vote of a
majority of the outstanding voting securities", "interested persons",
"assignment", and "affiliated person", as used in Paragraphs 8, 9 and 10 hereof,
shall have the meanings assigned to them by Section 2(a) of the 1940 Act. In
addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is relaxed by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
13. Compliance with Securities Laws. The Trust represents that it is
registered as an open-end management investment company under the 1940 Act, and
agrees that it will comply with all the provisions of the 1940 Act and of the
rules and regulations thereunder. The Trust and the Distributor each agree to
comply with all of the applicable terms and provisions of the 1940 Act,
7
<PAGE>
the 1933 Act and, subject to the provisions of Section 4(d), all applicable
"Blue Sky" laws. The Distributor agrees to comply with all of the applicable
terms and provisions of the Securities Exchange Act of 1934.
14. Notices. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, to the Distributor at 4455 E. Camelback Rd., 261-E, Phoenix, AZ 85018
or to the Trust on behalf of the Fund at 479 West 22nd Street, New York, NY
10011.
15. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York.
16. No Shareholder Liability. The Distributor understands that the
obligations of this Agreement are not binding upon any shareholder of the Trust
personally, but bind only the Trust's property; the Distributor represents that
it has notice of the provisions of the Declaration of Trust disclaiming
shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.
PROFESSIONALLY MANAGED PORTFOLIOS
By:
Attest:
FIRST FUND DISTRIBUTORS, INC.
By: _____________________________
Attest:
8
Exhibit 9
MANAGEMENT AGREEMENT
THIS AGREEMENT is made as of the day of , 1996 by and between
PROFESSIONALLY MANAGED PORTFOLIOS a Massachusetts business trust (the "Trust"),
on behalf of the FUND, (the "Fund") a separate series of the Trust, and
SOUTHAMPTON INVESTMENT MANAGEMENT COMPANY, a Delaware Corporation (the
"Manager").
WITNESSETH
WHEREAS, the Fund is a diversified series of an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust wishes to retain the Manager to provide certain
administrative services in connection with the management of the Fund's
operations and the Manager is willing to furnish such services:
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Manager to provide certain
administrative services, hereinafter enumerated, in connection with the
management of the Fund's operations for the period and on the terms set forth in
this Agreement. The Manager agrees to comply with all relevant provisions of the
1940 Act, applicable rules and regulations thereunder, and other applicable law.
2. Services on a Continuing Basis. The Manager will
perform the following services on a regular basis which would be
daily weekly or as otherwise appropriate:
(A) prepare and coordinate reports and other materials to
be supplied to the Board of Trustees of the Fund;
(B) prepare and/or supervise the preparation and filing of all securities
filings, periodic financial reports, prospectuses, statements of additional
information, marketing materials, tax returns, shareholder reports and other
regulatory reports or filings required of the Fund.
(C) prepare all required filings necessary to maintain the Fund's
qualification and/or registration to sell shares in all states where the Fund
currently does, or intends to do business;
<PAGE>
(D) coordinate the preparation, printing and mailing of all materials
(e.g., Annual Reports) required to be sent to shareholders;
(E) coordinate the preparation and payment of Fund related
expenses;
(F) monitor and oversee the activities of the Fund's servicing agents
(i.e., transfer agent, custodian, fund accountants, etc.);
(G) review and adjust as necessary the Fund's daily
expense accruals; and
(H) perform such additional services as may be agreed upon by the Fund
and the Manager.
3. Responsibility of the Manager. The Manager shall be under no duty to
take any action on behalf of the Fund except as set forth herein or as may be
agreed to by the Manager in writing. In the performance of its duties hereunder,
the Manager shall be obligated to exercise reasonable care and diligence and to
act in good faith and to use its best efforts. Without limiting the generality
of the foregoing or any other provision of this Agreement, the Manager shall not
be liable for delays or errors or loss of data occurring by reason of
circumstances beyond the Administrator's control.
4. Reliance Upon Instructions. The Fund agrees that the Manager shall be
entitled to rely upon any instructions, oral or written, actually received by
the Manager from the Board of Trustees of the Fund and shall incur no liability
to the Fund or the Fund's Advisor in acting upon such oral or written
instructions, provided such instructions reasonably appear to have been received
from a person duly authorized by the Board of Trustees of the Fund to give oral
or written instructions on behalf of the Fund.
5. Confidentiality. The Manager agrees on behalf of itself and its
employees to treat confidentially all records and other information relative to
the Fund and all prior, present or potential shareholders of the Fund, except
after prior notification to, and approval of release of information in writing
by, the Fund, which approval shall not be unreasonably withheld where the
Manager may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Fund.
6. Equipment Failures. In the event of equipment failures
or the occurrence of events beyond the Manager's control which
render the performance of the Manager's functions under this
agreement impossible, the Manager shall take reasonable steps to
<PAGE>
minimize service interruptions and is authorized to engage the services of third
parties to prevent or remedy such service interruptions.
7. Compensation. As compensation for services rendered by the
Manager during the term of this agreement, the Fund will pay to
the Manager a monthly fee at the annual rate of [ ] of 1%
of the Fund's average daily net assets or $30,000, whichever is
greater.
8. Indemnification. The Fund agrees to indemnify and hold harmless the
Manager from all taxes, filing fees, charges, expenses, assessments, claims and
liabilities (including without limitation, liabilities arising under the
Securities Act of 1933, the Securities Exchange Act of 1934, the 1940 Act, and
any state and foreign securities laws, all as amended from time to time) and
expenses, including (without limitation) reasonable attorneys fees and
disbursements, arising directly or indirectly from any action or thing which the
Manager takes or does or omits to take or do at the request of or in reliance
upon the advice of the Board of Trustees of the Fund, provided that the Manager
will not be indemnified against any liability to the Fund or to shareholders (or
any expenses incident to such liability) arising out of the Manager's own
willful misfeasance, bad faith, negligence or reckless disregard of its duties
and obligations under this Agreement. The Manager agrees to indemnify and hold
harmless the Fund and each of its Trustees from all claims and liabilities
(including without limitation, liabilities under the Securities Act of 1933, the
Securities Exchange Act of 1934, the 1940 Act, and any state and foreign
securities laws, all as amended from time to time) and expenses, including
(without limitation) reasonable attorneys fees and disbursements, arising
directly or indirectly from any action or thing which the Manager takes or does
or omits to take or do which is in violation of this Agreement or not in
accordance with instructions properly given to the Manager, or arising out of
the Manager's own willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties and obligations under this Agreement.
9. Duration and termination. This Agreement shall continue until
termination by the Fund (through the Board of Trustees) or the Manager on 60
days' written notice to the other. All notices and other communications
hereunder shall be in writing.
10. Amendments. This Agreement or any part hereof may be
changed or waived only by instrument in writing signed by the
party against which enforcement of such change or waiver is
sought.
11. Miscellaneous. This Agreement embodies the entire
agreement and understanding between the parties thereto with
respect to the services to be performed hereunder, and supersedes
all prior agreements and understandings, relating to the subject
matter hereof. The captions in this Agreement are included for
<PAGE>
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in New York and governed by New
York law. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first written
above.
By:________________________________________
Title:____________________________________
PROFESSIONALLY MANAGED PORTFOLIOS
By:________________________________________
Title:_____________________________________
SOUTHAMPTON INVESTMENT MANAGEMENT COMPANY
Exhibit 15
RULE 12b-1 DISTRIBUTION PLAN
PROFESSIONALLY MANAGED PORTFOLIOS
[ ] FUND
This Distribution Plan (the "Plan") is adopted in accordance
with Rule 12b-1 (the "Rule") under the Investment Company Act of 1940, as
amended, (the "Act") by PROFESSIONALLY MANAGED PORTFOLIOS, a business trust
organized under the laws of the State of Massachusetts (the "Trust") with
respect to [
] Fund, a series of shares of the Trust (referred to herein as the "Fund").
The Plan has been approved by a majority of the Trust's Board of Trustees,
including 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 (the "disinterested Trustees"), cast in person at a meeting called for the
purpose of voting on the Plan and by a majority of the Fund's shareholders as
required by the Act.
In reviewing the Plan, the Board of Trustees considered the
schedule and nature of payments and terms of the proposed investment advisory
agreement between the Trust on behalf of the Fund and Lighthouse Capital
Management, Inc. (the "Advisor") and the nature and amount of other payments,
fees, and commissions which may be paid to the Advisor, its affiliates and other
agents of the Trust. The Board of Trustees, including the disinterested
Trustees, concluded that the proposed overall compensation of the Advisor and
its affiliates was fair and not excessive.
In its considerations, the Board of Trustees recognized that
uncertainty may exist from time to time with respect to whether payments to be
made by the Trust to the Advisor or other firms under agreements with respect to
a Fund may be deemed to constitute impermissible distribution expenses. As a
general rule, an investment company may not finance any activity primarily
intended to result in the sale of its shares, except pursuant to the Rule.
Accordingly, the Board of Trustees determined that the Plan also should provide
that payments by Trust and expenditures made by others out of monies received
from the Trust which are later deemed to be for the financing of any activity
primarily intended to result in the sale of Fund shares shall be deemed to have
been made pursuant to the Plan.
The Board of Trustees' approval included a determination that
in the exercise of the Trustees' reasonable business judgment and in light of
their fiduciary duties, there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders. The Plan also has been approved by a vote
of at least a majority of the Fund's outstanding voting securities, as defined
in the Act.
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<PAGE>
The provisions of the Plan are:
1. Annual Fee. The Fund will pay to the Advisor, as the Fund's
Distribution Coordinator, (or to such other entity appointed by the Trust's
Board of Trustees as Distribution Coordinator) an annual fee for the
Distribution Coordinator's services in such capacity including its expenses in
connection with the promotion and distribution of the Fund's shares and related
shareholder servicing (collectively, "Distribution Expenses"). The annual fee
paid to the Distribution Coordinator under the Plan will be calculated daily and
paid monthly by the Fund on the first day of each month at an annual rate not to
exceed [ ]% of the Fund's average daily net assets.
2. Distribution Expenses in Excess of Amount of Fee. Excess
Distribution Expenses may be carried forward by the Distribution Coordinator and
resubmitted in a subsequent fiscal years provided that (i) Distribution Expenses
cannot be carried forward for more than 3 years following initial submission;
(ii) the Trust's Board of Trustees has made a determination at the time of
initial submission that the Distribution Expenses are appropriate to be carried
forward; and (iii) the Trust's Board of Trustees makes a further determination,
at the time any Distribution Expenses which have been carried forward are
resubmitted for payment, to the effect that payment at that time is appropriate,
consistent with the objectives of the Plan and in the current best interests of
shareholders.
3. Expenses Covered by the Plan. The fee paid to the
Distribution Coordinator under Section 1 of the Plan may be used by the
Distribution Coordinator to pay for any expenses primarily intended to result in
the sale of a Fund's shares ("distribution services"), including, but not
limited to: (a) costs of payments, including incentive compensation, made to
agents for and consultants to the Distribution Coordinator or the Trust,
including pension administration firms that provide distribution related
services and broker-dealers that engage in the distribution of the Fund's
shares; (b) payments made to, and expenses of, persons who provide support
services in connection with the distribution of a Fund's shares and servicing of
a Fund's shareholders, including, but not limited to, personnel of the
Distribution Coordinator, office space and equipment, telephone facilities,
answering routine inquiries regarding the Fund, processing shareholder
transactions and providing any other shareholder services not otherwise provided
by the Trust's transfer agency or other servicing arrangements; (c) all payments
made pursuant to the form of Distribution Agreement attached hereto as an
Exhibit; (d) costs relating to the formulation and implementation of marketing
and promotional activities, including, but not limited to, direct mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (e) costs of printing and distributing prospectuses, statements of
additional information and reports of the Fund to prospective shareholders of
the Fund; (f) costs involved in preparing, printing and distributing sales
literature pertaining
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<PAGE>
to the Fund; and (g) costs involved in obtaining whatever information, analyses
and reports with respect to marketing and promotional activities that the Trust
may, from time to time, deem advisable. Such expenses shall be deemed incurred
whether paid directly by the Distribution Coordinator or by a third party to the
extent reimbursed therefor by the Distribution Coordinator.
4. Written Reports. The Distribution Coordinator shall furnish
to the Board of Trustees of the Trust, for their review, on a quarterly basis, a
written report of the monies paid to it under the Plan with respect to the Fund,
and shall furnish the Board of Trustees of the Trust with such other information
as the Board of Trustees may reasonably request in connection with the payments
made under the Plan in order to enable the Board of Trustees to make an informed
determination of whether the Plan should be continued as to the Fund.
5. Termination. The Plan may be terminated as to any Fund at
any time, without penalty, by vote of a majority of the outstanding voting
securities of the Fund or by a vote of a majority of the disinterested Trustees,
and any Distribution Agreement under the Plan may be likewise terminated on not
more than sixty (60) days' written notice.
6. Amendments. The Plan and any Distribution Agreement may not
be amended to increase materially the amount to be spent for distribution and
servicing of Fund shares pursuant to Section 1 hereof without approval by a
majority of the outstanding voting securities of the Fund. All material
amendments to the Plan and any Distribution Agreement entered into with third
parties shall also be approved by the disinterested Trustees cast in person at a
meeting called for the purpose of voting on any such amendment.
7. Selection of Disinterested Trustees. So long as
the Plan is in effect, the selection and nomination of the
Trust's disinterested Trustees shall be committed to the
discretion of such disinterested Board of Trustees.
8. Relationship to Agreement and Declaration of Trust. A copy
of the Agreement and Declaration of Trust of the Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts and notice is hereby
given that this Plan is executed on behalf of the Trustees of the Trust as
Trustees, and not individually, and that the Trust's obligations arising out of
this Plan are not binding upon the Trustees or holders of the Trust's shares
individually but are binding only upon the assets and property of the Fund. The
Advisor acknowledges that it has received notice of and accepts the limitations
of liability as set forth in the Agreement and Declaration of Trust. The Advisor
agrees that the Trust's obligations hereunder shall be limited to the Fund and
to its assets, and that no party shall seek satisfaction of any such obligation
from any shareholder of the
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<PAGE>
Fund, nor from any trustee, officer, employee or agent of the Trust.
9. Effective Date of Plan. The Plan shall take effect upon
approval by vote of a majority of shareholders of the Fund, as defined in the
Act, and, unless sooner terminated, shall continue in effect for a period of
more than one year from the date of its execution only so long as such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust, including the disinterested Trustees, cast in person at a meeting
called for the purpose of voting on such continuance.
10. Preservation of Materials. The Trust will preserve copies
of the Plan, any agreements relating to the Plan and any report made pursuant to
Section 5 above, for a period of not less than six years (the first two years in
an easily accessible place) from the date of the Plan, agreement or report.
11. Meanings of Certain Terms. As used in the Plan, the terms
"interested person" and "majority of the outstanding voting securities" will be
deemed to have the same meaning that those terms have under the Act and the
rules and regulations under the Act, subject to any exemption that may be
granted to the Trust under the Act by the Securities and Exchange Commission.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust and the Distribution Coordinator, as
evidenced by their execution hereof, as of this ____ day of ____________ 1996.
[ ] FUND
a series of PROFESSIONALLY MANAGED PORTFOLIOS
By: ________________________
[ ] MANAGEMENT, INC.
as Distribution Coordinator
By:_________________________
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<PAGE>
EXHIBIT
[ ] FUND
Distribution Agreement
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
Gentlemen:
This Distribution Agreement has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended, (the "Act") by
PROFESSIONALLY MANAGED PORTFOLIOS, a Massachusetts business trust (the "Trust"),
on behalf of [
] FUND, a series of its shares (such series referred to herein as the
"Fund"), as part of a Plan pursuant to said Rule (the "Plan"). The Plan has been
approved by a majority of the Trustees who are not interested persons of the
Trust or the Fund and who have no direct or indirect financial interest in the
operation of the Plan (the "disinterested Trustees"), cast in person at a
meeting called for the purpose of voting on such Plan. Such approval included a
determination that in the exercise of the reasonable business judgment of the
Board of Trustees and in light of the Trustees' fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
The Plan has also been approved by a vote of at least a majority of the
outstanding voting securities of the Fund, as defined in the Act.
1. To the extent you provide distribution services we shall pay you a monthly
fee [based on the average net asset value during any month of Fund shares which
are attributable to customers of your firm,] at the rate set forth on the
Schedule attached hereto and made a part of this Agreement (the "Schedule").
2. In no event may the aggregate annual fee paid to you
pursuant to the Schedule attached hereto exceed ____ [such amount will be
negotiable by [ ](the "Distribution Coordinator") but will not exceed 0.__%]
percent of the value of the Fund's net assets held in your customers' accounts
which are eligible for payment pursuant to this Agreement (determined in the
same manner as the Fund uses to compute its net assets as set forth in its then
effective
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<PAGE>
Prospectus), without approval by a majority of the outstanding shares of the
Fund.
3. You shall furnish us and the Trust with such information as
shall reasonably be requested by the Trust's Board of Trustees with respect to
the fees paid to you pursuant to the Schedule.
4. We shall furnish to the Board of Trustees of the Trust, for
their review, on a quarterly basis, a written report of the amounts expended
under the Plan by us with respect to the Fund and the purposes for which such
expenditures were made.
5. This Agreement may be terminated by us or by you, by the
vote of a majority of the disinterested Trustees, or by a vote of a majority of
the outstanding shares of the Fund, on sixty (60) days' written notice, all
without payment of any penalty. It shall also be terminated automatically by any
act that terminates the Trust's Distribution Plan.
6. The provisions of the Plan between the Trust and
us, insofar as they relate to you, are incorporated herein by
reference.
This Agreement shall take effect at the later of the (i) the
time the Trust's Registration Statement under the Securities Act of 1933 with
respect to the shares of the Fund is declared effective by the Securities and
Exchange Commission, and (ii) the date hereof, and the terms and provisions
thereof are hereby accepted and agreed to by us as evidenced by our execution
hereof.
[ ] MANAGEMENT, INC.
as Distribution Coordinator
By: ___________________________
Authorized Officer
Agreed and Accepted:
- ----------------------------
(Name)
By: ________________________
(Authorized Officer)
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<PAGE>
PROFESSIONALLY MANAGED PORTFOLIOS
[ ] FUND
SCHEDULE TO DISTRIBUTION AGREEMENT
BETWEEN [ ] MANAGEMENT, INC.
AND
(Name)
Pursuant to the provisions of the Distribution
Agreement between the above parties with respect to [
] Fund, [ ] Management, Inc., as Distribution Coordinator, shall pay a
monthly fee to the above-named party based on the average net asset value of
Fund shares during the previous calendar month the sales of which are
attributable to the above-named party, as follows:
[ ]
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