Insightful Investor Growth Fund
Supplement to Prospectus dated July 1, 1995
The disclosure under the caption "How to Invest in the Fund" and "How to Redeem
an Investment in the Fund" in the Fund's prospectus dated July 1, 1995 is
supplemented by the following information. Shareholders should review those
portions of the prospectus for a complete discussion regarding purchases and
redemptions of fund shares.
Effective March 8, 1996, Star Bank, N.A., 425 Walnut Street, Cincinnati, OH
45202 will serve as Custodian of the Fund's assets and American Data Services,
Inc., 24 West Carver St., Huntington, NY 11743 will serve as the Fund's Transfer
and Shareholder Service Agent.
Shareholders should direct correspondence and inquiries as follows:
INVESTMENTS
BY MAIL: Initial and subsequent investments should be sent to Insightful
Investor Growth Fund, P.O. Box 856, Cincinnati, OH 45264-0856.
BY WIRE: It is necessary to notify the Fund prior to each wire purchase. Wires
sent without notifying the Fund will result in a delay of the effective date of
your purchase.
Shareholders should instruct their bank to wire funds as follows:
Star Bank, N.A. Cinti/Trust
ABA #0420-0001-3
Attn: Insightful Investor Growth Fund
DDA # 483897955
Account name (shareholder name)
Shareholder account number
BY COURIER: All investments sent by overnight or other courier services should
be sent to Insightful Investor Growth Fund, c/o Star Bank, N.A., 425 Walnut
Street, Mutual Fund Custody Dept. M.L. 6118, Cincinnati, OH 45202.
REDEMPTIONS:
DIRECT REDEMPTION: Requests for redemption of fund shares should be mailed to
Insightful Investor Growth Fund, 24 West Carver St., Huntington, NY 11743.
TELEPHONE REDEMPTION: If you have completed the Redemption by Telephone portion
of the Fund's account application you may redeem shares on any business day the
New York Stock Exchange is open by calling the Transfer Agent at 1-800-385-7003
before 4:00 p.m. Eastern time.
All other shareholder account questions should be directed to 1-800-385-7003.
The disclosure under the caption "Management of the Fund" in the Prospectus is
revised as follows:
Effective March 8, 1996, Investment Company Administration Corporation ("ICAC")
will act as the Fund's Administrative Manager under substantially the same terms
and conditions as in the previous management agreement with Southampton
Investment Management Company. ICAC and Southampton have the same officers,
directors and employees. Under the current arrangement with Southampton, a
monthly fee is paid at the annual rate of 0.25% of average net assets or
$30,000, whichever is greater. Under the agreement with ICAC, a monthly fee will
be paid by the Fund to ICAC at the following annual rate:
Average net assets of each Fund Fee or fee rate
- ------------------------------- ---------------
Under $15 million $30,000
$15 to $50 million 0.20% of average net assets
$50 to $100 million 0.15% of average net assets
$100 million to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
March 8, 1996
<PAGE>
Insightful Investor Growth Fund
The following Financial Highlights have been audited by Tait, Weller & Baker,
independent accountants, whose unqualified report covering the periods indicated
below is incorporated by reference herein and appears in the annual report to
shareholders. This information should be read in conjunction with the financial
statements and accompanying notes which appear in the Statement of Additional
Information. Further information about the Fund's performance is contained in
its annual report to shareholders, which may be obtained without charge by
writing or calling the address or telephone number of the Investment Advisor on
the Prospectus cover page.
FINANCIAL HIGHLIGHTS
for a capital share outstanding throughout the period
- --------------------------------------------------------------------------------
July 28, 1995*
through
December 31, 1995
- --------------------------------------------------------------------------------
Net asset value, beginning of period ............................. $10.00
------
Income from investment operations:
Net investment income ...................................... .01
Net realized and unrealized gain on investments ............ 1.59
------
Total from investment operations ................................. 1.60
------
Less distributions:
Dividends from net investment income ....................... (.01)
------
Net asset value, end of period ................................... $11.59
======
Total return ..................................................... 15.93%
Ratios/supplemental data:
Net assets, end of period (millions) ............................. $ 2.1
Ratio of expenses to average net assets:
Before expense reimbursement ............................... 8.13%+
After expense reimbursement ................................ 2.50%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement ............................... (5.31)%+
After expense reimbursement ................................ 0.32%+
Portfolio turnover rate .......................................... 50.75%
*Commencement of operations.
+Annualized.
March 8, 1996
<PAGE>
INSIGHTFUL INVESTOR GROWTH FUND
175 Great Neck Road, Ste. 307
Great Neck, NY 11021
(800) 424-2295
INSIGHTFUL INVESTOR GROWTH 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 principally in common stocks. Insightful Management
Corporation (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. The Fund is a series of Professionally Managed Portfolios. A
Statement of Additional Information dated July 1,1995, 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 or
telephone number given above.
TABLE OF CONTENTS
Expense Table..............................................................2
Objective and Investment Approach of the Fund..............................3
Management of the Fund.....................................................7
How To Invest in the Fund..................................................8
How To Redeem an Investment in the Fund...................................11
Distribution and Shareholder Servicing Plan...............................12
Services Available to the Fund's Shareholders.............................13
How the Fund's Per Share Value Is Determined..............................14
Distributions and Taxes...................................................14
General Information.......................................................15
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 July 1, 1995
<PAGE>
INSIGHTFUL INVESTOR GROWTH 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 may
be purchased at a public offering price which includes a maximum sales charge of
6.25% of the offering price, or less, depending upon the amount invested. The
minimum initial investment is $10,000 with subsequent investments of $500 or
more ($1,000 and $100, respectively, for retirement plans). The Fund has adopted
a plan of distribution under which the Fund will pay the Distributor a fee at an
annual rate of up to 0.25% of the Fund's net assets. A long-term shareholder may
pay more, directly and indirectly, in sales charges and 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.
Although the principals of the Advisor are the editors of the Insightful
Investor investment newsletter , and the Advisor, in managing the Fund's
portfolio, may use investment approaches and techniques developed in connection
with the newsletter, investors should be aware that the securities held by the
Fund, the Fund's operating expenses, policies and restrictions, and its
investment results will differ from investment techniques, securities and
results that may be discussed in the newsletter. Particular securities and
investment performance discussed in the newsletter should not be regarded as
indicative of the holdings of or investment results to be obtained from an
investment in the Fund.
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.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases. . . . . . . . .6.25%
Maximum Sales Load Imposed on Reinvested Dividends . . . None
Deferred Sales Load. . . . .. . ... . . . . . . . . . . .None
Redemption Fees. . . . . . . . . . . . .. . . . . . . . .None
Exchange Fee. . . . . . . . . . . . . . . . . . . . . . .None
2
<PAGE>
Annual Fund Operating Expenses
(As a percentage of average net assets)
Investment Advisory Fee 1.25%
Fee to Administrative Manager *0.25%
12b-1 Fee 0.25%
Other expenses **0.75%
Total Fund Operating Expenses* **2.50%
*The Administrative Manager's fee is the greater of 0.25% of average daily net
assets annually or $30,000.
**The Advisor has undertaken to limit the Fund's operating expenses to an amount
which will not exceed the most restrictive state expense limitation, which is
currently 2.50% annually of average net assets under $30 million.
Example
This table illustrates the net transaction and operating expenses that would
be incurred by an investment in the Fund over different time periods, assuming a
$1,000 investment, a 5% annual return, and redemption at the end of each time
period.
1 year 3 years
$72 $122
The Example shown above should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown. In
addition, federal regulations require the Example to assume a 5% annual return,
but the Fund's actual return may be higher or lower.
See "Management of the Fund."
OBJECTIVE AND INVESTMENT APPROACH OF THE FUND
The investment objective of the Fund is growth of capital. The Fund pursues its
objective by investing principally in common stocks and under normal market
conditions, at least
3
<PAGE>
65% of the Fund's total assets will be invested in common stocks that the
Advisor believes will produce growth of capital. The Fund also may invest in
preferred stocks, warrants, convertible debt obligations, and other debt
obligations that, in the Advisor's opinion, offer the possibility of capital
growth. There is, of course, no assurance that the Fund's objective will be
achieved. Because prices of common stocks and other securities 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 any such issuer.
Investment Approach. The Advisor's approach to selecting securities with growth
potential begins with its identification and selection of a limited number of
top- performing investors and investment managers ("major investors") with
long-term track records of superior investment performance whose own investments
and recommendations, in the Advisor's judgment, present possibilities for
growth. The Advisor gains access to such information through publications
disseminated by such major investors, through research and on-line services that
track purchases and sales of such investors, and through monitoring of publicly
available information about securities transactions of such investors, such as
governmental regulatory reports.
Once the Advisor has identified a group of growth stocks from its analysis of
current holdings and recommendations of such major investors, such stocks are
further analyzed by the Adviser to determine which of them would be appropriate
for purchase by the Fund. In general, the Advisor looks for companies whose
sales and earnings have grown by at least 20% per year for the past three years,
with strong positive cash flow from operations and strong balance sheets. The
overall goal is to select those growth stocks that are viewed as likely to show
strong sales and earnings gains over the next two years and are trading at
price/earnings ratios below the overall market.
During those times when stocks cannot be found that meet the Advisor's
investment criteria, and for temporary defensive purposes or pending longer-term
investment, the Fund may
4
<PAGE>
invest any amount of its assets in short-term money market instruments,
including securities issued by the U.S. Government, its agencies and
instrumentalities ("U.S. Government Securities") or other such instruments rated
in the top two grades by Moody's Investors Services ("Moody's") or Standard &
Poor's Corporation ("S & P") or, if unrated, instruments deemed to be of
comparable quality by the Advisor.
Sales of the Fund's portfolio securities by the Advisor may occur where the
Advisor believes, either based on its own analysis or jointly with the
assessment of one of the major investors the Advisor follows, that the stock
appears fully valued or overvalued based on its growth prospects, that the
growth prospects of a particular stock have decreased based on a fundamental
change in the company's business, or notwithstanding growth prospects, the stock
is viewed negatively by the majority of the major investors the Advisor follows.
Portfolio Turnover. The annual rate of portfolio turnover is not expected to
exceed 100%. 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.
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
5
<PAGE>
of the banks and securities dealers with whom the Fund engages in repurchase
transactions, and the Fund will not invest more than 10% of its net assets in
illiquid securities, including repurchase agreements maturing in more than seven
days.
Illiquid and Restricted Securities. The Fund may not invest more than 10%
of its net assets in illiquid securities, including (I) securities for which
there is no readily available market; (ii) securities the disposition of which
would be subject to legal restrictions (so-called "restricted securities"); and
(iii) repurchase agreements having more than seven days to maturity. A
considerable period of time may elapse between the Fund's decision to dispose of
such securities and the time when the Fund is able to dispose of them, during
which time the value of the securities could decline. Restricted securities do
not include those which meet the requirements of Rule 144A under the Securities
Act of 1933, as amended, and which the Trustees of the Trust have determined to
be liquid based on the applicable trading markets.
Foreign Securities. The Fund may invest up to 25% of its total assets in U.S.
dollar-denominated securities of foreign issuers, including American Depositary
Receipts with respect to securities of foreign issuers. There may be less
publicly available information about these issuers than is available about
companies in the U.S. and foreign auditing requirements may not be comparable to
those in the U.S. In addition, the value of foreign securities may be adversely
affected by movements in the exchange rates between foreign currencies and the
U.S. dollar, as well as other political and economic developments, including the
possibility of expropriation, confiscatory taxation, exchange controls or other
foreign governmental restrictions. The Fund may also invest without limit in
securities of foreign issuers which are listed and traded on a domestic national
securities exchange.
Short Sales. The Fund may engage in short sales of securities. In a short sale,
the Fund sells stock which it does not own, making delivery with securities
"borrowed" from a broker. The Fund is then obligated to replace the security
borrowed by purchasing it at the market price at the time of replacement. This
price may or may not be less than the price at which the security was sold by
the Fund. Until the security is replaced, the Fund is required to pay to the
lender any dividends or interest which accrue during the period of the loan. In
order to borrow the security, the Fund may also have to pay a premium which
would increase the
6
<PAGE>
cost of the security sold. The proceeds of the short sale will be retained by
the broker, to the extent necessary to meet margin requirements, until the short
position is closed out.
The Fund also must deposit in a segregated account an amount of cash or U.S.
Government Securities equal to the difference between (a) the market value of
the securities sold short at the time they were sold short and (b) the value of
the collateral deposited with the broker in connection with the short sale (not
including the proceeds from the short sale). While the short position is open,
the Fund must maintain daily the segregated account at such a level that (1) the
amount deposited in it plus the amount deposited with the broker as collateral
equals the current market value of the securities sold short and (2) the amount
deposited in it plus the amount deposited with the broker as collateral is not
less than the market value of the securities at the time they were sold short.
The Fund will incur a loss as a result of the short sale if the price of the
security increases between the date of the short sale and date on which the Fund
replaces the borrowed security. The Fund will realize a gain if the security
declines in price between those dates. The amount of any gain will be decreased
and the amount of any loss will be increased by any dividends or interest the
Fund may be required to pay in connection with the short sale.
The dollar amount of short sales at any one time (not including short sales
against-the-box) may not exceed 25% of the net equity of the Fund. The value of
securities of any one issuer in which the Fund is short may not exceed the
lesser of 2% of the value of the Fund's net assets or 2% of the securities of
any class of any issuer.
A short sale is "against-the-box" if at all times when the short position is
open the Fund owns an equal amount of the securities or securities convertible
into, or exchangeable without further consideration for, securities of the same
issue as the securities sold short. Such a transaction serves to defer a gain or
loss for Federal income tax purposes.
Options Transactions. The Fund may buy call and put options on individual
securities, stock indices and index futures and write covered call and put
options, and engage in related closing transactions. A call option gives the
purchaser of
7
<PAGE>
the option the right to buy, and obligates the writer to sell, the underlying
security at the exercise price at any time during the option period. Conversely,
a put option gives the purchaser of the option the right to sell, and obligates
the writer to buy, the underlying security at the exercise price at any time
during the option period. A covered call option sold by the Fund, which is a
call option with respect to which the Fund owns the underlying security, exposes
the Fund during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying security or to
possible continued holding of a security which might otherwise have been sold to
protect against depreciation in the market price of the security. A covered put
option sold by the Fund exposes the Fund during the term of the option to a
decline in the price of the underlying security. A put option sold by the Fund
is covered when, among other things, cash or liquid securities are placed in a
segregated account with the Fund's custodian to fulfill the obligation
undertaken.
To close out a position when writing covered options, the Fund may make a
"closing purchase transaction," which involves purchasing an option on the same
security with the same exercise price and expiration date as the option which it
has previously written on the security. To close out a position as a purchaser
of an option, the Fund may make a "closing sale transaction," which involves
liquidating the Fund's position by selling the option previously purchased. The
Fund will realize a profit or loss from a closing purchase or sale transaction
depending upon the difference between the amount paid to purchase an option and
the amount received from the sale thereof.
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.
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, Insightful
Management Corporation, 175 Great Neck Road, Ste. 307, Great Neck, NY 11021, has
been in the investment advisory business since 1994. The Advisor is controlled
by Mr. Dan Bruce Levine and Mr. Richard Horowitz, who are responsible for
management of the Fund's portfolio. While the Advisor has
8
<PAGE>
not previously advised a registered investment company, the principals of the
Advisor are the former owners and publishers and are the editors of Insightful
Investor, an investment newsletter which has utilized investment strategies that
the Fund may utilize.
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
annual rate of 1.25%. This fee is higher than that paid by most investment
companies.
Southampton Investment Management Company (the "Manager") acts as the
Fund's Administrative Manager under a Management Agreement. Under that
agreement, the Manager prepares various federal and state regulatory filings,
reports and returns for the Fund, prepares reports and materials to be supplied
to the trustees of the Trust, 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
Manager receives an annual fee equal to the greater of 0.25 of 1% of the Fund's
average daily net assets or $30,000.
The Fund is responsible for its own operating expenses. The Advisor has
undertaken to limit the Fund's operating expenses to an amount which will not
exceed the most restrictive state expense limitation, which is currently 2.50%
annually of average net assets under $30 million. The Advisor also may 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. Any such
reductions made by the Advisor in its fees or payments or reimbursement of
expenses which are the Fund's obligation may be subject to reimbursement by the
Fund.
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.
9
<PAGE>
HOW TO INVEST IN THE FUND
The minimum initial investment in the Fund is $10,000. Subsequent investments
must be at least $500. Investments in retirement plans may be for an initial
minimum of $1,000 and subsequent investments of at least $100. Newcomb & Company
(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.
Shares of the Fund are offered continuously for purchase at the public offering
price next determined after a purchase order is received. The public offering
price is effective for orders received by the Fund or investment dealers prior
to the time of the next determination of the Fund's net asset value, and in the
case of orders placed with dealers, transmitted promptly to the Transfer Agent.
Orders received after the time of the next determination of the Fund's net asset
value will be entered at the next calculated public offering price.
The public offering price per share is equal to the net asset value per share,
plus a sales charge, which is reduced on purchases involving amounts of $50,000
or more, as set forth in the table below. The reduced sales charges apply to
quantity purchases made at one time by (I) an individual, (ii) members of a
family (i.e., an individual, spouse and children under age 21), or (iii) a
trustee or fiduciary of a single trust estate or a single fiduciary account. In
addition, purchases of shares made during a thirteen month period pursuant to a
written Letter of Intent are eligible for a reduced sales charge. Reduced sales
charges also are applicable to subsequent purchases by a "person," based on the
aggregate of the amount being purchased and the value, at offering price, of
shares owned at the time of investment.
Sales Charge Portion
as of sales
percentage of charge
net retained
offering asset by
Amount of Purchase price value dealers
- ------------------ ------ ----- -------
Less than $50,000 6.25% 6.66% 5.50%
$50,000 but less than $100,000 5.75% 6.10% 5.25%
$100,000 but less than $250,000 5.00% 5.26% 4.75%
$250,000 but less than $500,000 4.00% 4.17% 3.75%
$500,000 but less than $750,000 3.00% 3.09% 2.80%
$750,000 but less than $850,000 2.00% 2.04% 1.85%
$850,000 but less than $1,000,000 1.00% 1.01% 0.90%
Over $1,000,000 None None None
10
<PAGE>
Purchase Orders Placed with Investment Dealers
Dealers who have a sales agreement with the Distributor may place orders for
shares of the Fund on behalf of clients at the offering price next determined
after receipt of the client's order by calling The Provident Bank, the Transfer
Agent, at (800) 424-2295. If the order is placed by the client with the dealer
by 4:00 p.m. New York time and forwarded promptly to the transfer agent on any
day that the New York Stock Exchange is open for trading, it will be confirmed
at the applicable offering price on that day. The dealer is responsible for
placing orders promptly with the transfer agent and for forwarding payment
within five business days. Dealers must be registered to sell securities in
states where sales are to be made.
Purchases sent to the Transfer Agent
Investors may purchase shares by sending an Account Application directly to the
Transfer Agent, with payment made either 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 "Insightful Investor Growth Fund," should be
mailed to the Fund's Transfer Agent: The Provident Bank, Mutual Fund Services,
P.O. Box 14967, Cincinnati, OH 45250-0967.
For subsequent investments, a stub is attached to the account statement sent to
shareholders after each transaction. The stub should be detached from the
statement and, together with a check payable to "Insightful Investor Growth
Fund," mailed to the Provident Bank 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) 424-2295 to advise the Transfer Agent that an
initial investment will be made by wire and to receive an account number. The
Transfer Agent will request the investor's name and the dollar amount to be
invested and provide an order confirmation number. The investor should then
complete the Fund's Account Application (included with this Prospectus),
including the date and the
11
<PAGE>
order confirmation number on the application. The completed Application should
be mailed to the address shown at the top of the completed Account Application.
The investor's bank should transmit immediately available funds by wire for
purchase of shares, in the investor's name to the Fund's Custodian, as follows:
The Provident Bank
Attn: Mutual Fund Services
ABA Routing Number: 042-000-424
for further credit to Insightful Investor Growth Fund
Account Number [Name of Shareholder]
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.
Purchase at Net Asset Value. Shares of the Fund may be purchased at net asset
value by officers, Trustees, and full-time employees of the Trust, the Advisor,
the Manager, the Distributor and affiliates of such companies, by their family
members, by subscribers to Insightful Investor and other publications published
by the Advisor and its affiliates, by registered representatives and employees
of firms which have sales agreements with the Distributor and by such other
persons who are determined by the Board of Trustees to have acquired shares
under circumstances not involving any sales expense to the Fund or Distributor.
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 New York Stock Exchange (currently 4:00
p.m., New York City time), Fund
12
<PAGE>
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 New York Stock Exchange 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
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 New York
Stock Exchange 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 New York Stock Exchange is open by calling the Fund's Transfer Agent at
(800) 424-2295 before 4:00 p.m. Eastern time. Redemption proceeds will be mailed
or wired at the shareholder's direction the next business
13
<PAGE>
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 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 normal 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 privileges 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 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 Securities and Exchange Commission. 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
14
<PAGE>
least $10,000. 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 $10,000 and will be allowed 30 days to make an additional investment to
bring the value of his account to at least $10,000 before the Fund takes any
action.
Distribution Agreement. The Distributor is the principal underwriter and
distributor of shares of the Fund. The Distributor makes a continuous offering
of the Fund's shares and bears the costs and expenses of printing and
distributing to selected dealers and prospective investors any copies of any
prospectuses, statements of additional information and annual and interim
reports of the Fund other than to existing shareholders (after such items have
been prepared and set in type by the Fund) which are used in connection with the
offering of shares, and the costs and expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it for
use by selected dealers in connection with the offering of the shares for sale
to the public. All or a part of the expenses borne by the Distributor may be
reimbursed pursuant to the Distribution and Shareholder Servicing Plan discussed
below.
Distribution and Shareholder Servicing Plan. The Fund has adopted a Distribution
and Shareholder Servicing Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "Plan") under which the Fund pays the Distributor an
amount which is accrued daily and paid monthly, at an annual rate of up to 0.25%
of the average daily net assets of the Fund. Amounts paid under the Plan by the
Fund are paid to the Distributor to reimburse it for costs of the services it
provides and the expenses it bears in the distribution of the Fund's shares,
including overhead and telephone expenses; printing and distribution of
prospectuses and reports used in connection with the offering of the Fund's
shares to prospective investors; and preparation, printing and distribution of
sales literature and advertising materials. Such fee is paid to the Distributor
each year only to the extent of such costs and expenses of the Distributor under
the Plan actually incurred in that year, up to 0.25% of the average daily net
assets of the Fund for that year. In addition, payments to the Distributor under
the Plan reimburse the Distributor for payments it makes to selected dealers and
administrators which have entered into Service Agreements with the Distributor
of periodic fees for services provided to shareholders of the Fund. The services
provided by selected dealers pursuant to the Plan are primarily designed to
promote the sale of shares of the Fund and include
15
<PAGE>
the furnishing of office space and equipment, telephone facilities, personnel
and assistance to the Company in servicing such shareholders. The service
provided by administrators pursuant to the Plan are designed to provide support
services to the Fund and include establishing and maintaining shareholders'
accounts and records, processing purchase and redemption transactions, answering
routine client inquires regarding the Fund, and providing such other services to
the Fund as the Company may reasonably request.
SERVICES AVAILABLE TO THE FUND'S SHAREHOLDERS
Retirement Plans. The minimum initial investment for such plans is $1,000, with
minimum subsequent investments of $100. 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.
Check-A-Matic 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 $250), 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 net asset value. 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.
Systematic Withdrawal Program. As another convenience, the Fund offers a
Systematic Withdrawal Program whereby shareholders may request that 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 involves a redemption of shares, and may result in a gain or
loss for federal income tax purposes. In addition, if the amount withdrawn
exceed the dividends credited to the shareholder's account, the account
ultimately may be depleted.
16
<PAGE>
Exchange Privilege
Shareholders may exchange shares (in amounts of $1,000 or more) of the Fund
for shares of RNC Liquid Assets Fund, Inc. ("RNC Fund"), a money market fund not
affiliated with the Fund or the Advisor, if such shares are offered in your
state of residence. Prior to making such exchange, you should obtain and
carefully read the prospectus for the RNC Fund. The exchange privilege does not
constitute an offering or recommendation on the part of the Fund or Advisor of
an investment in the RNC Fund. For further information, contact the Transfer
Agent at 1-800-424-2295.
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 New York Stock Exchange (currently 4:00 p.m. Eastern time)
on each day the New York Stock Exchange 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 sixty
days or less are valued at amortized cost as reflecting fair value.
DISTRIBUTIONS AND TAXES
Dividends and Distributions. Any dividends from net investment income are
declared and paid at least annually, typically at the end of the Fund's fiscal
year (December 31). Any undistributed 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 payment be made in cash.
17
<PAGE>
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 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 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. The 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 investment in 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. The
fiscal year of the Fund ends on December 31.
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
18
<PAGE>
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
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.
Shareholder Inquiries. Shareholder inquiries should be directed to the Transfer
Agent at (800) 424-2295.
19
<PAGE>
Advisor
Insightful Management Corporation
175 Great Neck Rd., Suite 307
Great Neck, NY 11021
Distributor
Newcomb & Company
Six New England Executive Park
Burlington, MA 01803
Custodian and Transfer Agent
The Provident Bank
P.O. Box 14967
Cincinnati, Ohio 45250-0967
(800) 424-2295
Auditors
Tait, Weller & Baker
Two Penn Center Plaza
Philadelphia, PA 19102
Legal Counsel
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, CA 94104
20
