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. 28 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 29 |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
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It is proposed that this filing will become effective:
Immediately upon filing pursuant to paragraph (b)
|_| On pursuant to paragraph (b)
|x| 60 days after filing pursuant to paragraph (a)(1)
|_| On pursuant to paragraph (a)(1)
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 February
28, 1996.
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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................. Financial
Highlights
Item 4. General Description of Registrant.... Investment
Objective,
Policies and
Risks;
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
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Part B
Item 10. Cover Page ............................. Cover Page
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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UAM/FPA CRESCENT FUND
11400 West Olympic Blvd., Ste. 1200
Los Angeles, CA 90064
(800) 385-7003
UAM/FPA CRESCENT FUND (the "Fund") is a mutual fund with the investment
objective of providing, through a combination of income and capital
appreciation, a total return consistent with reasonable investment risk. The
Fund seeks to achieve its objective by investing primarily in equity securities
(common and preferred stocks) and fixed income obligations. First Pacific
Advisors, Inc. (the "Advisor"), serves as investment advisor to the Fund.
Class Y shares of the Fund are described in this Prospectus and are
subject to a Rule 12b-1 Distribution Fee. See Distribution Plan
at_________.
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 ____________ 1996, as may be amended
from time to time, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. This Statement of Additional
Information is available without charge upon request to the Fund at the address
or telephone number given above.
TABLE OF CONTENTS
Expense Table. . .. . . . . . . . . . . . . . . .
Objective and Investment Approach of the Fund..............................
Management of the Fund...................................................
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..........................................................
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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 , 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. Because Rule
12b-1 distribution fees are accounted for on a class-level basis (and not on an
individual shareholder-level basis), individual long-term investors in the Class
Y shares of the Fund may over time pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc. ("NASD"), even though all shareholders of the Class in
the aggregate will not. This recognized and permitted by the NASD.
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
Exchange Fee.................................................. None
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Annual Fund Operating Expenses
(As a percentage of average net assets)
Management Fees . . . . . . . . . . . . . 1.00%
12b-1 Fees . . . . . . . . . . . . . . . . 0.25%
Other Expenses . . . . . . . . . . . . . . 0.65%
Total Fund Operating Expenses . . . . . . . 1.90%
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
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."
UAM/FPA CRESCENT 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 are purchased and
redeemed at their net asset value per share, without a sales charge. The minimum
initial investment is $5,000, with subsequent investments of $500 or more
($2,000 and $200, respectively, for retirement plans). This prospectus offers
Class Y shares of the Fund, which are offered without a sales charge, but are
subject to a Rule 12b-1 Distribution Fee. The Fund offers another class of
shares to investors. That class has different fees and expenses than the Class Y
shares offered by this Prospectus. For more information, please call the Fund at
the number on the Prospectus cover page.
OBJECTIVE AND INVESTMENT APPROACH OF THE FUND The investment objective of the
Fund is to provide, through a combination of income and capital appreciation, a
total return consistent with reasonable investment risk. The Fund seeks to
achieve its objective by investing in a combination of equity securities and
fixed income obligations. There is, of course, no assurance that the Fund's
objective will be achieved. Because prices of common stocks and fixed-income
securities fluctuate, the value of an investment in the Fund will vary, as the
market value of its investment portfolio changes. Investment Approach-Equity
Securities. The Advisor selects equity securities for the Fund which it believes
offer superior investment value. The Advisor looks for securities of quality
companies with characteristics such as:
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-Projected corporate earnings growth rate exceeding
that of the stock market average
-High return on capital
-Solid balance sheet
-Meaningful cash flow
-High relative profit margin
-Increasing dividend
-Active share repurchase program
-Superior management, seeking to maximize
shareholder value
In the Advisor's view, the stock market prices securities efficiently in the
long term, rewarding companies who successfully grow their earnings and
penalizing those who do not. The Advisor's investment philosophy is based on the
conviction that the market valuation of securities is often inefficient in the
short term. When reacting to current economic or company information, investors
frequently make purchase or sale decisions hastily. These decisions could cause
a particular security, industry group or the entire market to become underpriced
or overpriced in the short term thereby creating an excellent opportunity to
either buy or sell.
Fundamental analysis is the foundation of the Advisor's investment approach. The
Advisor makes use of computer screens, company reports, research and personal
contacts to determine the prospects for a particular industry or company.
Specific considerations affecting an industry or company are reviewed, as well
as macroeconomic factors affecting financial markets.
In addition to common stocks, equity securities purchased for the Fund may
include preferred stocks, convertible preferred stocks and warrants.
Investment Approach-Fixed Income Obligations. Through fixed-
income investments, the Advisor seeks a reliable and recurring
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stream of income for the Fund, while preserving its capital. The Advisor
attempts to identify the current interest rate and invest funds accordingly.
Usually, a defensive strategy is employed, with investments made at different
points along the yield curve in an attempt to keep the average maturity of
fixed-income investments less than or equal to ten years.
The Advisor's approach is to invest in U.S. Treasury obligations, U. S.
Government Agency and mortgage-backed securities, corporate and convertible
bonds. The Advisor considers yield spread relationships and their underlying
factors such as credit quality, investor perception and liquidity on a
continuous basis to determine which sector offers the best investment value.
The Fund may purchase investment grade corporate debt securities. Securities
rated BBB by Standard & Poor's Corporation ("S & P") or Moody's Investors
Service ("Moody's") are investment grade, but Moody's considers securities rated
Baa to have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity for such securities
to make principal and interest payments than is the case for higher-rated debt
securities.
Lower Rated Securities. The Fund may invest in debt securities that are rated
below investment grade, but will limit that investment to no more than 20% of
its assets. Such securities, sometimes referred to as "junk bonds," typically
carry higher coupon rates than investment grade securities but also are
described as speculative by both Moody's and S & P and may be subject to greater
market price fluctuations, less liquidity, and greater risk of income or
principal, including a greater possibility of default or bankruptcy of the
issuer of such securities, than are more highly rated debt securities. Lower
rated fixed income securities also are likely to be more sensitive to adverse
economic or company developments and more subject to price fluctuations in
response to changes in interest rates. The market for lower rated debt issues
generally is thinner and less active than that for higher quality securities,
which may limit the Fund's ability to sell such securities at fair value in
response to changes in the economy or financial markets.
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The Advisor seeks to reduce the risks associated with investing in such
securities by limiting the Fund's holdings in such securities and by the depth
of its own credit analysis. In selecting below investment grade securities, the
Advisor seeks securities in companies with improving cash flows and balance
sheet prospects, whose credit ratings the Advisor views as likely to be
upgraded. The Advisor believes that such securities can produce returns similar
to equities, but with less risk. See the Statement of Additional Information.
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 maturities. 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. Illiquid and Restricted
Securities. The Fund may not invest more than 15% 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
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which time the value of the securities could decline. Securities which meet the
requirements of Securities Act Rule 144A are restricted, but may be determined
to be liquid by the Trustees, based on an evaluation of the applicable trading
markets.
Foreign Securities. The Fund may invest up to 20% of its assets in securities of
foreign issuers. The Advisor usually buys securities of larger foreign companies
that have well recognized franchises and are selling at a discount to the
securities of similar domestic businesses.
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 the 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 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 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 case or U.S.
Government securities equal to the difference between (a) the market value of
the securities short at the time they were sold short and (b) the value of the
collateral
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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 interest the Fund may be
required to pay in connection with the short sale.
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 and Futures. The Fund may purchase and write call and put options on
securities, securities indexes and on foreign currencies, and enter into futures
contracts and use options on futures contracts. The Fund may use these
techniques to hedge against changes in interest rates, foreign currency exchange
rates or securities prices or as part of its overall investment strategies. The
Fund is subject to regulatory limitations on the use of such techniques and is
required to maintain segregated accounts consisting of cash, U.S. Government
securities, or other high grade debt obligations (or, as permitted by applicable
regulation, enter into certain offsetting positions) to cover its obligations
under options and futures contracts to avoid leveraging of the Fund.
The Fund may buy or sell interest rate futures contracts, options on interest
rate futures contracts and options on debt securities for the purpose of hedging
against changes in the value of securities which the Fund owns or anticipates
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purchasing due to anticipated changes in interest rates. The Funds also may
engage in currency exchange transactions by means of buying or selling foreign
currency on a spot basis, entering into foreign currency forward contracts, any
buying and selling foreign currency options, futures and options on futures.
Foreign currency exchange transactions may be entered into for the purpose of
hedging against foreign currency exchange risk arising from the Fund's
investment or anticipated investment in securities denominated in foreign
currencies.
See the Statement of Additional Information for further information regarding
characteristics of and risks involved in the use of these instruments.
U.S. Government Securities. The Fund may invest in 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, Government National Mortgage Association, 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 Federal National Mortgage Association, 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.
Mortgage-Related 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
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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 foreclosure, net of fees and costs which may be
incurred) may expose a 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 GNMA), 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
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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.
Portfolio Turnover. The annual rate of portfolio turnover is not normally
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.
The Fund has adopted certain investment restrictions, which are described fully
in the Statement of Additional Information. Like the Fund's investment
objective, 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. First Pacific Advisors, Inc.,
located at 11400 West Olympic Blvd., Suite 1200, Los Angeles, CA 90064, acts as
the Fund's Advisor. Mr. Steven Romick is responsible for management of the
Fund's portfolio.
The Advisor, together with its predecessors, has been in the investment advisory
business since 1954. Presently, the Advisor manages assets of approximately $4.0
billion for five investment companies, including one closed-end investment
company, and more than 50 institutional accounts. The Advisor is an indirect
wholly-owned subsidiary of United Asset Management Corporation, a New York Stock
Exchange listed holding company, principally engaged, through affiliated firms
in providing institutional investment management and acquiring institutional
investment management firms.
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
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(accrued daily) based upon the average daily net assets of the Fund at the rate
of 1.00% annually.
Investment Company Administration Corporation (the
"Administrator") acts as the Fund's Administrator under an Administrative
Agreement. Under that Agreement, the Administrator 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 Administrator receives a fee at the following annual rate:
Average net assets Fee or fee rate
Under $6 million $12,000
$6 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
The Fund is responsible for its own operating expenses. The Advisor has agreed
to reduce its fees or reimburse the Fund for its annual operating expenses which
exceed the most stringent limits prescribed by any state in which the Fund's
shares are offered for sale. 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. 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
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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 with respect to
the Class Y shares offered by this Prospectus. The Plan provides that the Fund
may pay for distribution and related expenses at an annual rate of up to 0.25%
of the Fund's average net assets attributable to the Class Y shares to the
Advisor as distribution coordinator. The distribution fee attributable to the
Class Y shares is designed to permit an investor to purchase Class Y shares
through broker-dealers, financial planners, retirement and pension plan
administrators, and other financial intermediaries without the assessment of a
front-end sales charge and at the same time to permit the Advisor to compensate
those persons on an ongoing basis in connection with the sale of the Class Y
shares.
Expenses permitted to be paid by the Fund under its Plan include: compensation
to broker-dealers, financial institutions, intermediaries or other persons for
providing distribution, shareholder support, administrative and accounting
services and assistance with respect to the Class Y shares, preparation,
printing and mailing of prospectuses, shareholder reports such as annual and
semiannual reports, performance reports and newsletters; sales literature and
other promotional material to prospective investors; direct mail solicitation;
advertising and public relations, and such other expenses with respect to
marketing and promotional activities that the Fund may from time to time deem
advisable with respect to the distribution of the Class Y shares.
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
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resubmitted for payment, to the effect that payment at the time is appropriate,
consistent with the objectives of the Plan an in the current best interest of
shareholders.
The Advisor also may, out of its own funds, compensate broker-dealers and other
intermediaries that distribute the Fund's shares as well as other service
providers of shareholder and administrative services.
HOW TO INVEST IN THE FUND
The minimum initial investment is $5,000. Subsequent investments must be at
least $500. Investments in retirement plans may be for minimums of $2,000 and
$200, respectively. 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.
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 "Crescent Fund" should be sent to Crescent
Fund, P.O. Box 856, Cincinnati, OH 45264-0856. Investments sent by overnight
delivery services should be sent to Crescent Fund, Star Bank, N.A., 425 Walnut
St., Mutual Fund Custody Dept., Cincinnati, OH 45202.
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 Crescent Fund, mailed to 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) 385-7003 between the hours of 9:00 AM and 4:00
PM Eastern time on a day when the New York Stock Exchange ("NYSE") is open for
trading to advise that an initial investment will be made by wire and to receive
an account number. It is necessary to notify the
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Fund prior to each wire purchase. Wires sent without notifying the Fund will
result in a delay of the effective date of the purchase. 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 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 as follows:
Star Bank, N.A.
ABA Routing Number 0420-0001-3
Attn: Crescent Fund Cl. Y
DDA #483897922
(Account Name and Number)
For subsequent investments, the investor should first notify the Fund and then
the investor's bank should wire funds as indicated above. It is essential that
complete information regarding your 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 any fees from their own banks 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
16
<PAGE>
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 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
requests 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
17
<PAGE>
redeem shares on any business day the New York Stock Exchange is open by calling
the Fund's Transfer Agent at (800) 385-7003 before 4:00 p.m. Eastern time.
Redemption proceeds will be mailed 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 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 on 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 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
18
<PAGE>
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 $1,500. 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 $1,500 and will be allowed 30 days to make
an additional investment to bring the value of his account to at least $1,500
before the Fund takes any action.
SERVICES AVAILABLE TO THE FUND'S SHAREHOLDERS
Retirement Plans. The minimum initial investment for such plans is $2,000, with
minimum subsequent investments of $200. 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 check, 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. 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
19
<PAGE>
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.
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. Dividends from net investment income are declared
and paid at least annually, typically at the end of the Fund's fiscal year
(March 31). Any undistributed net capital gains realized during the Fund's
fiscal year will also be distributed to shareholders after the end of the year,
with a supplemental distribution on or about December 31 of any undistributed
net investment income as well as any additional undistributed capital gains
earned during the 12-month period ended each October 31. Dividends and capital
gain distributions (net of any required
20
<PAGE>
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. 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 or excise
taxes. 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 taxation of distributions 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
21
<PAGE>
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. This prospectus relates only to the Class Y
shares of the Crescent Fund series. The Trust has designated another class of
shares and may in the future designate other classes of shares for specific
purposes. All classes of shares issue by a Fund shall have identical voting,
dividend, liquidation and other rights, preferences, terms and conditions. The
only differences among the classes of share relate solely to the following: (a)
each class may be subject to different class expenses; (b) each class may bear a
different identifying designation;(b) each class may have exclusive voting
rights with respect to matters solely affecting such class; and (d) each class
may have different exchange privileges. The fiscal year end of the Fund is March
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 separate series of
the Trust, votes separately on matters affecting only the Fund (e.g., approval
of the Management Agreement); all series or classes of the Trust vote as a
single series or 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. Performance data may
be quoted separately for the Class Y shares as for other classes. 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
22
<PAGE>
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 maximum public offering price) 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 and after giving
effect to the maximum applicable sales charge. 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 Fund at
the number shown on the cover of the Prospectus.
23
<PAGE>
Advisor
First Pacific Advisors, Inc.
11400 West Olympic Blvd., Suite 1200
Los Angeles, CA 90064
(310) 996-5436
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Rd., Ste. 261-E
Phoenix, AZ 85018
Custodian
Star Bank
425 Walnut St.
Cincinnati, OH 45202
Transfer Agent
American Data Services
24 West Carver St.
Huntington, NY 11743
(800) 385-7003
Auditors
Tait, Weller & Baker
121 South Broad Street
Philadelphia, Pennsylvania 19107
Legal Counsel
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
24
<PAGE>
UAM/FPA CRESCENT FUND
11400 West Olympic Blvd., Ste. 1200
Los Angeles, CA 90064
(800) 385-7003
UAM/FPA CRESCENT FUND (the "Fund") is a mutual fund with the investment
objective of providing, through a combination of income and capital
appreciation, a total return consistent with reasonable investment risk. The
Fund seeks to achieve its objective by investing primarily in equity securities
(common and preferred stocks) and fixed income obligations. First Pacific
Advisors, Inc. (the "Advisor"), serves as investment advisor to the Fund.
Class I shares of the Fund are described in this Prospectus. They are offered
for sale at net asset value without a sales charge or distribution fee.
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 ____________ 1996, as may be amended
from time to time, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. This Statement of Additional
Information is available without charge upon request to the Fund at the address
or telephone number given above.
TABLE OF CONTENTS
Expense Table. . .. . . . . . . . . . . . . . . .
Objective and Investment Approach of the Fund.............................
Management of the Fund...................................................
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
<PAGE>
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 , 1996
2
<PAGE>
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....................... None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load........................................... None
Redemption Fees............................................... None
Exchange Fee.................................................. None
Annual Fund Operating Expenses
(As a percentage of average net assets)
Management Fees . . . . . . . . . . . . . 1.00%
12b-1 Fees . . . . . . . . . . . . . . . . 0.00%
Other Expenses . . . . . . . . . . . . . . 0.59%
Total Fund Operating Expenses . . . . . . . 1.59%
3
<PAGE>
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 5 Years 10 Years
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."
UAM/FPA CRESCENT 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 are purchased and
redeemed at their net asset value per share, without a sales charge. The minimum
initial investment is $5,000, with subsequent investments of $500 or more
($2,000 and $200, respectively, for retirement plans). This prospectus offers
Class I shares of the Fund, which are offered without a sales charge or
distribution fee. The Fund offers another class of shares to investors. That
class has different fees and expenses than the Class I shares offered by this
Prospectus. For more information, please call the Fund at the number on the
Prospectus cover page.
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
The following information has 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 annual report and are
incorporated by reference herein. 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 of telephone number on
the Prospectus cover page.
Year Ended Year Ended June 2,1993*
March 31 March 31 Through
1996 1995 March 31, 1994
(Unaudited)
Net asset value,
beginning of period $11.23 $10.96 $10.00
4
<PAGE>
Income from
investment operations
Net investment income .40 .21 .13
Net realized and unrealized
gain on investments 2.29 .77 .99
---- ----- ----
Total from
investment operations 2.69 .98 1.12
Less distributions:
Dividends from net
investment income (.37) (.18) (.10)
Distributions from
net capital gains (.88) (.53) (.06)
----- ----- -----
Total distributions (1.25) (.71) (.16)
Net asset value,
end of period $12.67 $11.23 $10.96
Total return 24.63% 9.35% 13.73%**
Ratios/supplemental data
Net assets, end of period
(millions) $22.0 $16.0 $10.2
Ratio of expenses to
average net assets
Before expense
reimbursement 1.59% 1.65% 1.86%**
After expense
reimbursement 1.59% 1.65% 1.85%**
Ratio of net investment
income to average net assets
Before expense
reimbursement 3.35% 2.16% 1.60%**
After expense
reimbursement 3.35% 2.16% 1.61%**
Portfolio turnover rate % 101.41% 88.88%
*Commencement of operations
**Annualized
5
<PAGE>
OBJECTIVE AND INVESTMENT APPROACH OF THE FUND
The investment objective of the Fund is to provide, through a combination of
income and capital appreciation, a total return consistent with reasonable
investment risk. The Fund seeks to achieve its objective by investing in a
combination of equity securities and fixed income obligations. There is, of
course, no assurance that the Fund's objective will be achieved. Because prices
of common stocks and fixed-income securities fluctuate, the value of an
investment in the Fund will vary, as the market value of its investment
portfolio changes. Investment Approach-Equity Securities. The Advisor selects
equity securities for the Fund which it believes offer superior investment
value. The Advisor looks for securities of quality companies with
characteristics such as:
-Projected corporate earnings growth rate exceeding
that of the stock market average
-High return on capital
-Solid balance sheet
-Meaningful cash flow
-High relative profit margin
-Increasing dividend
-Active share repurchase program
-Superior management, seeking to maximize
shareholder value
In the Advisor's view, the stock market prices securities efficiently in the
long term, rewarding companies who successfully grow their earnings and
penalizing those who do not. The Advisor's investment philosophy is based on the
conviction that the market valuation of securities is often inefficient in the
short term. When reacting to current
6
<PAGE>
economic or company information, investors frequently make purchase or sale
decisions hastily. These decisions could cause a particular security, industry
group or the entire market to become underpriced or overpriced in the short term
thereby creating an excellent opportunity to either buy or sell.
Fundamental analysis is the foundation of the Advisor's investment approach. The
Advisor makes use of computer screens, company reports, research and personal
contacts to determine the prospects for a particular industry or company.
Specific considerations affecting an industry or company are reviewed, as well
as macroeconomic factors affecting financial markets.
In addition to common stocks, equity securities purchased for the Fund may
include preferred stocks, convertible preferred stocks and warrants.
Investment Approach-Fixed Income Obligations. Through fixed-income investments,
the Advisor seeks a reliable and recurring stream of income for the Fund, while
preserving its capital. The Advisor attempts to identify the current interest
rate and invest funds accordingly. Usually, a defensive strategy is employed,
with investments made at different points along the yield curve in an attempt to
keep the average maturity of fixed-income investments less than or equal to ten
years.
The Advisor's approach is to invest in U.S. Treasury obligations, U. S.
Government Agency and mortgage-backed securities, corporate and convertible
bonds. The Advisor considers yield spread relationships and their underlying
factors such as credit quality, investor perception and liquidity on a
continuous basis to determine which sector offers the best investment value.
The Fund may purchase investment grade corporate debt securities. Securities
rated BBB by Standard & Poor's Corporation ("S & P") or Moody's Investors
Service ("Moody's") are investment grade, but Moody's considers securities rated
Baa to have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity for such securities
to make principal and interest payments than is the case for higher-rated debt
securities.
7
<PAGE>
Lower Rated Securities. The Fund may invest in debt securities that are rated
below investment grade, but will limit that investment to no more than 20% of
its assets. Such securities, sometimes referred to as "junk bonds," typically
carry higher coupon rates than investment grade securities but also are
described as speculative by both Moody's and S & P and may be subject to greater
market price fluctuations, less liquidity, and greater risk of income or
principal, including a greater possibility of default or bankruptcy of the
issuer of such securities, than are more highly rated debt securities. Lower
rated fixed income securities also are likely to be more sensitive to adverse
economic or company developments and more subject to price fluctuations in
response to changes in interest rates. The market for lower rated debt issues
generally is thinner and less active than that for higher quality securities,
which may limit the Fund's ability to sell such securities at fair value in
response to changes in the economy or financial markets.
The Advisor seeks to reduce the risks associated with investing in such
securities by limiting the Fund's holdings in such securities and by the depth
of its own credit analysis. In selecting below investment grade securities, the
Advisor seeks securities in companies with improving cash flows and balance
sheet prospects, whose credit ratings the Advisor views as likely to be
upgraded. The Advisor believes that such securities can produce returns similar
to equities, but with less risk. See the Statement of Additional Information.
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 maturities. 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
8
<PAGE>
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. Illiquid and Restricted
Securities. The Fund may not invest more than 15% 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. Securities which meet the requirements of
Securities Act Rule 144A are restricted, but may be determined to be liquid by
the Trustees, based on an evaluation of the applicable trading markets.
Foreign Securities. The Fund may invest up to 20% of its assets in securities of
foreign issuers. The Advisor usually buys securities of larger foreign companies
that have well recognized franchises and are selling at a discount to the
securities of similar domestic businesses.
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 the 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.
9
<PAGE>
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 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 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 case or U.S.
Government securities equal to the difference between (a) the market value of
the securities 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 interest the Fund may be
required to pay in connection with the short sale.
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.
10
<PAGE>
Options and Futures. The Fund may purchase and write call and put options on
securities, securities indexes and on foreign currencies, and enter into futures
contracts and use options on futures contracts. The Fund may use these
techniques to hedge against changes in interest rates, foreign currency exchange
rates or securities prices or as part of its overall investment strategies. The
Fund is subject to regulatory limitations on the use of such techniques and is
required to maintain segregated accounts consisting of cash, U.S. Government
securities, or other high grade debt obligations (or, as permitted by applicable
regulation, enter into certain offsetting positions) to cover its obligations
under options and futures contracts to avoid leveraging of the Fund.
The Fund may buy or sell interest rate futures contracts, options on interest
rate futures contracts and options on debt securities for the purpose of hedging
against changes in the value of securities which the Fund owns or anticipates
purchasing due to anticipated changes in interest rates. The Funds also may
engage in currency exchange transactions by means of buying or selling foreign
currency on a spot basis, entering into foreign currency forward contracts, any
buying and selling foreign currency options, futures and options on futures.
Foreign currency exchange transactions may be entered into for the purpose of
hedging against foreign currency exchange risk arising from the Fund's
investment or anticipated investment in securities denominated in foreign
currencies.
See the Statement of Additional Information for further information regarding
characteristics of and risks involved in the use of these instruments.
U.S. Government Securities. The Fund may invest in 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, Government National Mortgage Association, Federal Home Loan Banks,
Federal Financing Bank, and Student Loan Marketing Association.
11
<PAGE>
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 Federal National Mortgage Association, 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.
Mortgage-Related 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 foreclosure, net of fees and costs which
may be incurred) may expose a 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 GNMA), 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
12
<PAGE>
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.
Portfolio Turnover. The annual rate of portfolio turnover is not normally
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.
The Fund has adopted certain investment restrictions, which are described fully
in the Statement of Additional Information. Like the Fund's investment
objective, 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. First Pacific Advisors, Inc.,
located at 11400 West Olympic Blvd., Suite 1200, Los Angeles, CA 90064, acts as
the Fund's
13
<PAGE>
Advisor. Mr. Steven Romick is responsible for management of the
Fund's portfolio.
The Advisor, together with its predecessors, has been in the investment advisory
business since 1954. Presently, the Advisor manages assets of approximately $4.0
billion for five investment companies, including one closed-end investment
company, and more than 50 institutional accounts. The Advisor is an indirect
wholly-owned subsidiary of United Asset Management Corporation, a New York Stock
Exchange listed holding company, principally engaged, through affiliated firms
in providing institutional investment management and acquiring institutional
investment management firms.
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 1.00% annually.
Investment Company Administration Corporation (the "Administrator") acts as
the Fund's Administrator under an Administrative Agreement. Under that
Agreement, the Administrator 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
Administrator receives a fee at the following annual rate:
Average net assets Fee or fee rate
Under $15 million $30,000
$15 million to $50 million 0.20% of average net assets
$50 million to $100million 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
The Fund is responsible for its own operating expenses. The
Advisor has agreed to reduce its fees or reimburse the Fund for
14
<PAGE>
its annual operating expenses which exceed the most stringent limits prescribed
by any state in which the Fund's shares are offered for sale. 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. 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.
HOW TO INVEST IN THE FUND
The minimum initial investment is $5,000. Subsequent investments must be at
least $500. Investments in retirement plans may be for minimums of $2,000 and
$200, respectively. 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.
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 "Crescent Fund" should be sent to Crescent
Fund, P.O. Box 856, Cincinnati, OH 45264-0856. Investments sent by overnight
delivery services should be sent to Crescent Fund, Star Bank, N.A., 425 Walnut
St., Mutual Fund Custody Dept., Cincinnati, OH 45202.
For subsequent investments, a stub is attached to the account
15
<PAGE>
statement sent to shareholders after each transaction. The stub should be
detached from the statement and, together with a check payable to Crescent Fund,
mailed to 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) 385-7003 between the hours of
9:00 AM and 4:00 PM Eastern time on a day when the New York Stock Exchange
("NYSE") is open for trading to advise that an initial investment will be made
by wire and to receive an account number. 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 the purchase. 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 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 as follows:
Star Bank, N.A.
ABA Routing Number 0420-0001-3
Attn: Crescent Fund Cl. I
DDA #483897922
(Account Name and Number)
For subsequent investments, the investor should first notify the Fund and then
the investor's bank should wire funds as indicated above. It is essential that
complete information regarding your 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 any fees from their own banks 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,
16
<PAGE>
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 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
requests must be guaranteed by an "eligible guarantor
17
<PAGE>
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) 385-7003 before
4:00 p.m. Eastern time. Redemption proceeds will be mailed 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 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 on 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 during
periods of abnormal market activity.
18
<PAGE>
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 least $1,500. 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 $1,500 and will be allowed 30 days to make
an additional investment to bring the value of his account to at least $1,500
before the Fund takes any action.
SERVICES AVAILABLE TO THE FUND'S SHAREHOLDERS
Retirement Plans. The minimum initial investment for such plans is $2,000, with
minimum subsequent investments of $200. 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 check, the Fund automatically
invests the money
19
<PAGE>
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. 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.
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. Dividends from net investment
20
<PAGE>
income are declared and paid at least annually, typically at the end of the
Fund's fiscal year (March 31). Any undistributed net capital gains realized
during the Fund's fiscal year will also be distributed to shareholders after the
end of the year, with a supplemental distribution on or about December 31 of any
undistributed net investment income as well as any additional undistributed
capital gains earned during the 12-month period ended each October 31. 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. 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 or excise taxes. 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.
21
<PAGE>
Additional information about taxes is set forth in the Statement of Additional
Information. Shareholders should consult their own advisers concerning federal,
state and local taxation of distributions 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. This
prospectus relates only to the Class I shares of the Crescent Fund series. The
Trust has designated another class of shares and may in the future designate
other classes of shares for specific purposes. All classes of shares issued by a
Fund shall have identical voting, dividend, liquidation and other rights,
preferences, terms and conditions. The only differences among the classes of
share relate solely to the following: (a) each class may be subject to different
class expenses; (b) each class may bear a different identifying designation;(b)
each class may have exclusive voting rights with respect to matters solely
affecting such class; and (d) each class may have different exchange privileges.
The fiscal year end of the Fund is March 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 separate series of
the Trust, votes separately on matters affecting only the Fund (e.g., approval
of the Management Agreement); all series or classes of the Trust vote as a
single series or 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
22
<PAGE>
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. Performance data may
be quoted separately for the Class I shares as for other classes. 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 maximum public offering price) 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 and after giving effect to
the maximum applicable sales charge. 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 Fund at the number
shown on the cover of the Prospectus.
23
<PAGE>
Advisor
First Pacific Advisors, Inc.
11400 West Olympic Blvd., Suite 1200
Los Angeles, CA 90064
(310) 996-5436
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Rd., Ste. 261-E
Phoenix, AZ 85018
Custodian
Star Bank
425 Walnut St.
Cincinnati, OH 45202
Transfer Agent
American Data Services
24 West Carver St.
Huntington, NY 11743
(800) 385-7003
Auditors
Tait, Weller & Baker
121 South Broad Street
Philadelphia, Pennsylvania 19107
Legal Counsel
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
24
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
June , 1996
THE CRESCENT FUND
a series of
PROFESSIONALLY MANAGED PORTFOLIOS
11400 West Olympic Blvd., Ste. 1200
Los Angeles, CA 90064
(800) 385-7003
This Statement of Additional Information is not a prospectus and it
should be read in conjunction with the prospectus of the Crescent Fund Class I
Shares or Crescent Fund Class Y Shares (the "Fund"). A copy of the prospectus of
each class of the Fund dated June , 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-8
Distributions and Tax Information . . . . . . . . . . . . B-10
Management . . . . . . . . . . . . . . . . . . B-13
Execution of Portfolio Transactions . . . . . . . . . . . B-16
Additional Purchase and Redemption Information . . . . . B-19
Determination of Share Price . . . . . . . . . . . . . . B-20
Performance Information . . . . . . . . . . . . . . . . . B-21
General Information . . . . . . . . . . . . . . . . . . . B-22
Financial Statements . . . . . . . . . . . . . . . . . . . B-23
Appendix-Description of Bond Ratings . . . . . . . . . . . B-24
1
<PAGE>
THE TRUST
Professionally Managed Portfolios (the "Trust") is an open-end
management investment company organized as a Massachusetts business trust. The
Trust currently consists of various series which represent separate investment
portfolios. This Statement of Additional Information relates only to the
Crescent Fund series (the "Fund"). The Crescent Fund currently offers two
classes of shares. Class I shares are offered without a sales charge or
distribution fee. Class Y shares are offered without a front end or contingent
sales charge, but are subject to a distribution fee of up to 0.25% of average
net assets annually.
INVESTMENT OBJECTIVE AND POLICIES
The Crescent Fund (the "Fund") is a mutual fund with the investment
objective of seeking to provide, through a combination of income and capital
appreciation, a total return consistent with reasonable investment risk. 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
B-2
<PAGE>
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 10%
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 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. Delays may involve loss of interest or a decline in price 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
B-3
<PAGE>
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.
When-Issued Securities
The Fund may from time to time purchase securities on a "when-issued"
basis. The price of such securities, which may be expressed in yield terms, 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 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.
Foreign Securities
Among the means through which the Fund may invest in foreign
securities is the purchase of American Depository Receipts
("ADR's") or European Depository Receipts ("EDR's"). Generally,
ADR's, in registered form, are denominated in U.S. dollars and
are designed for use in the U.S. securities markets, while EDR's,
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in bearer form, may be denominated in other currencies and are designed for use
in European securities markets. ADR's are receipts typically issued by a U.S.
bank or trust company evidencing ownership of the underlying securities. EDR's
are European receipts evidencing a similar arrangement. For purposes of the
Funds' investment policies, ADR's and EDR's are deemed to have the same
classification as the underlying securities they represent. Thus an ADR or EDR
representing ownership of common stock will be treated as common stock.
Debt Securities and Ratings
Ratings of debt securities represent the rating agencies' opinions
regarding their quality, are not a guarantee of quality and may be reduced after
the Fund has acquired the security. The Advisor will consider whether the Fund
should continue to hold the security but is not required to dispose of it.
Credit ratings attempt to evaluate the safety of principal and interest payments
and do not evaluate the risks of fluctuations in market value. Also, rating
agencies may fail to make timely changes in credit ratings in response to
subsequent events, so that an issuer's current financial conditions may be
better or worse than the rating indicates.
The Fund reserves the right to invest up to 20% of its assets in securities
rated lower than BBB by S & P or lower than Baa by Moody's but rated at least B
by S & P or Moody's (or, in either case, if unrated, deemed by the Advisor to be
of comparable quality). Lower rated securities generally offer a higher current
yield than that available for higher grade issues. However, lower rated
securities involve higher risks, in that they are especially subject to adverse
changes in general economic conditions and in the industries in which the
issuers are engaged, to changes in the financial condition of the issuers and to
price fluctuations in response to changes in interest rates. During periods of
economic downturn or rising interest rates, highly leveraged issuers may
experience financial stress which could adversely affect their ability to make
payments of interest and principal and increase the possibility of default. In
addition, the market for lower rated debt securities has expanded rapidly in
recent years, and its growth paralleled a long economic expansion. At times in
recent years, the prices of many lower rated debt securities declined
substantially,
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reflecting an expectation that many issuers of such securities might experience
financial difficulties. As a result, the yields on lower rated debt securities
rose dramatically, but such higher yields did not reflect the value of the
income stream that holders of such securities expected, but rather, the risk
that holders of such securities could lose a substantial portion of their value
as a result of the issuers' financial restructuring or default. There can be no
assurance that such declines will not recur. The market for lower-rated debt
issues generally is thinner and less active than that for higher quality
securities, which may limit the Fund's ability to sell such securities at fair
value in response to changes in the economy or financial markets. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of lower rated securities,
especially in a thinly traded market.
Short Sales
The Fund may seek to hedge investments or realize additional gains
through short sales. The Fund may make short sales, which are transactions in
which the Fund sells a security it does not own, in anticipation of a decline in
the market value of that security. To complete such a transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund than is obligated to
replace the security borrowed by purchasing it at the market price at or prior
to the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Fund. Until the security is
replaced, the Fund is required to repay the lender any dividends or interest
that accrue during the period of the loan. To borrow the security, the Fund also
may be required to pay a premium, which would increase the cost of the security
sold. The net 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 will incur transaction costs in effecting short sales.
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 the 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
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decreased, and the amount of any loss increased by the amount of the premium,
dividends, interest, or expenses the Fund may be required to pay in connection
with a short sale.
Whenever the Fund engages in short sales, its custodian segregates an
amount of cash or U.S. Government securities or other high-grade liquid debt
securities equal to the difference between (a) the market value of the
securities sold short at the time they were sold short and (b) any cash or U.S.
Government securities required to be deposited with the broker in connection
with the short sale (not including the proceeds from the short sale). The
segregated assets are marked to market daily, provided that at no time will the
amount deposited in it plus the amount deposited with the broker be less than
the market value of the securities at the time they were sold short.
In addition, the Fund may make short sales "against the box," i.e. when
a security identical to one owned by the Fund is borrowed and sold short. If the
Fund enters into a short sale against the box, it is required to segregate
securities equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities) and is required to
hold such securities while the short sale is outstanding. The Fund will incur
transaction costs, in connection with opening, maintaining, and closing short
sales against the box.
Options and Futures Transactions.
As indicated in the prospectus, to the extent consistent with its investment
objectives and policies, the Fund may purchase and write call and put options on
securities, securities indexes and on foreign currencies and enter into futures
contracts and use options on futures contracts, to the extent of up to 5% of its
assets.
Transactions in options on securities and on indexes involve certain risks.
For example, there are significant differences between the securities and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision
as to whether, when and how to use options involves the exercise of
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skill and judgment, and even a well-conceived transaction may be unsuccessful to
some degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. If the Fund were unable to close out an
option that it had purchased on a security, it would have to exercise the option
in order to realize any profit or the option may expire worthless. If the Fund
were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security unless the option
expired without exercise. As the writer of a covered call option, the Fund
forgoes, during the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above the sum of the
premium and the exercise price of the call.
If trading were suspended in an option purchased by the Fund, the Fund
would not be able to close out the option. If restrictions on exercise were
imposed, the Fund might be unable to exercise an option it has purchased. Except
to the extent that a call option on an index written by the Fund is covered by
an option on the same index purchased by the Fund, movements in the index may
result in a loss to the Fund; such losses may be mitigated or exacerbated by
changes in the value of the Fund's securities during the period the option was
outstanding.
Use of futures contracts and options thereon also involves certain risks.
The variable degree of correlation between price movements of futures contracts
and price movements in the related portfolio positions of the Fund creates the
possibility that losses on the hedging instrument may be greater than gains in
the value of the Fund's position. Also, futures and options markets may not be
liquid in all circumstances and certain over the counter options may have no
markets. As a result, in certain markets, the Fund might not be able to close
out a transaction at all or without incurring losses. Although the use of
options and futures transactions for hedging should minimize the risk of loss
due to a decline in the value of the hedged position, at the same time they tend
to limit any potential gain which might result from an increase in the value of
such position. If losses were to result from the use of such transactions, they
could reduce net asset value and possibly income. The Fund may use these
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techniques to hedge against changes in interest rates or securities prices or as
part of its overall investment strategy. The Fund will maintain segregated
accounts consisting of cash, U.S. Government securities, or other high grade
debt obligations (or, as permitted by applicable regulation, enter into certain
offsetting positions) to cover its obligations under options and futures
contracts to avoid leveraging of the Fund.
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, (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 borrowings.
(b) Mortgage, pledge or hypothecate any of its assets
except in connection with any such borrowings.
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 (other than
futures transactions for the purposes and under the conditions described in the
prospectus and in this Statement of Additional Information).
5. Invest more than 25% of the market value of its assets
in the securities of companies engaged in any one industry.
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(Does not apply to investment in the securities of the U.S. Government, its
agencies or instrumentalities.)
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 borrowings, ortgages or pledges, or (b) entering into options, futures
or repurchase transactions.
7. Purchase the securities of any issuer, if as a result more than 5% of
the total assets of the Fund would be invested in the securities of that issuer,
other than obligations of the U.S. Government, its agencies or
instrumentalities, provided that up to 25% of the value of the Fund's assets may
be invested without regard to this limitation.
8. Purchase or sell real estate; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein, including real estate
investment trusts;
The Fund observes the following policies, which are not deemed fundamental
and which may be changed without shareholder vote. The Fund may not:
9. Purchase any security if as a result the Fund would then hold more than
10% of any class of securities of an issuer (taking all common stock issues of
an issuer as a single class, all preferred stock issues as a single class, and
all debt issues as a single class) or more than 10% of the outstanding voting
securities of an issuer.
10. Invest in any issuer for purposes of exercising control
or management.
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.)
12. 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 Fund's investment manager owns beneficially
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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.
13. 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.
14. Invest, in the aggregate, more than 15% of its total
assets in securities which are not readily marketable or are
illiquid.
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.
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.
DISTRIBUTIONS AND TAX INFORMATION
Distributions
Dividends from net investment income and distributions from net profits
from the sale of securities, if any, are generally made annually by the Fund
after the conclusion of its fiscal year (March 31). Also, the Fund expects to
distribute any undistributed net investment income on or about December 31 of
each year. Any net capital gains realized through the twelve month period ended
October 31 of each year will also be distributed by December 31 of each year.
Each distribution by the Fund is accompanied by a brief
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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 (the
"Code"). In order to 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. 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 carryforward 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 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
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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 the 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.
The Fund may write, purchase or sell certain options and futures contracts.
Such transactions are subject to special tax rules that may affect the amount,
timing and character of distributions to shareholders. Unless the Fund is
eligible to make and makes a special election, such contracts that are "Section
1256 contracts" will be "marked-to-market" for federal income tax purposes at
the end of each taxable year, i.e., each contract will be treated as sold for
its fair market value on the last day of the taxable year. In general, unless
the special election referred to in the previous sentence is made, gain or loss
from transactions in such contracts will be 60% long-term and 40% short-term
capital gain or loss. Section 1092 of the Code, which applies to certain
"straddles", may affect the
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taxation of the Fund's transactions in options and futures contracts. Under
Section 1092 of the Code, the Fund may be required to postpone recognition for
tax purposes of losses incurred in certain closing transactions.
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.
Under the Code, the Fund will be required to report to the Internal
Revenue Service all distributions of taxable income and capital gains as well as
gross proceeds from the redemption or exchange of Fund shares, except in the
case of exempt shareholders, which includes 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 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
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person failing to provide a certified 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.
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.
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Steven J. Paggioli,* 46 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 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 Dr., Malvern, PA. Managing Director, Premier
Solutions, Ltd., Formerly President and Founder, 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
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.
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Senior Vice President, Robert H. Wadsworth & Associates, Inc.,
Senior Vice President of ICAC and Vice President of
FFD since 1990.
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.
Set forth below is the total compensation received by the following
Trustees from the Fund and all other portfolios of the Trust. This total amount
is allocated among the portfolios. Disinterested trustees are also reimbursed
for expenses in connection with each Board meeting attended. No other
compensation or retirement benefits were received by any Trustee or officer from
the Fund or any other portfolios of the Trust. During the fiscal year ended
March 31, 1996, trustees' fees and expenses of $3,609 were allocated to the
Crescent Fund, now designated as Class I shares. Class Y shares were not offered
prior to the date of this Statement.
Name of Trustee Total Compensation
Dorothy A. Berry $10,000
Wallace L. Cook $10,000
Carl A. Froebel $10,000
Rowley W.P Redington $10,000
The Fund receives investment advisory services pursuant to
agreements with the Advisor. Each such agreement,
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after its initial term, continues in effect for successive annual periods so
long as such continuation is approved at least annually 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 sixty days' written notice and is automatically terminated in the
event of its "assignment," as defined in the 1940 Act.
Investment Advisor
As stated in the Prospectus, investment advisory services are provided
to the Fund by First Pacific Advisors, Inc. (the "Advisor"), pursuant to an
Investment Advisory Agreement. The Agreement continues in effect from year to
year for periods not exceeding one 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 sixty days' written notice and is
automatically terminated in the event of its assignment as defined in the 1940
Act.
With respect to the Class I shares of the Fund, which began operations on
June 2, 1993, during the initial fiscal period ended March 31, 1994, Crescent
Management, the former Advisor, received advisory fees of $75,407 and reimbursed
expenses of $927. For the fiscal years ended March 31, 1995, and 1996 Crescent
Management received advisory fees of $132,646 and $189,156, respectively.
Administrator
The Fund has entered into an Administrative Agreement with Investment
Company Administration Corporation, a corporation owned in part and controlled
by Messrs. Banhazl, Paggioli and Wadsworth. The Administrative Agreement
provides that Southampton will prepare and coordinate reports and other
materials supplied to the
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Trustees; 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; 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
Administrator. For its services, Southampton receives a monthly fee at the
following annual rate:
Class I shares
Average net assets Fee or fee rate
Under $15 million $30,000
$15 million to $50 million 0.20% of average net assets
$50 million to $100million 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
Class Y shares
Average net assets Fee or fee rate
Under $6 million $12,000
$6 million to $50 million 0.20% of average net assets
$50 million 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
With respect to the Class I shares, which began operations on June 2, 1993, for
the period ended March 31, 1994, Southampton Investment Management Co., Inc., a
corporation owned by the same individuals as the Administrator and which
previously served in that capacity, received fees of $24,936. During the fiscal
years ended March 31, 1995 and March 31, 1996, Southampton received fees of
$30,000 and $51,509, respectively.
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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 sixty 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 Agreement, 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 (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
B-20
<PAGE>
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-21
<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
such brokers solely for selling
B-22
<PAGE>
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. During the initial fiscal period from June 2, 1993 through March
31, 1994 and for the fiscal years ended March 31, 1995, and March 31, 1996,
brokerage commissions paid with respect to the Class I shares of the Fund
totaled $38,160, $51,853, and $65,137, respectively.
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
B-23
<PAGE>
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 a Check-A-Matic 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 the Check-A-Matic 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, the
investor should 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 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,
B-24
<PAGE>
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 each 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 each class 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 with respect to
any class of Shares 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 average annual compounded rate of return for a Class over the most recent
four calendar quarters and the period from inception of operations. The Fund may
also advertise aggregate and average total return information over different
periods of time.
The Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
P(1+T)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
B-25
<PAGE>
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 average annual total returns for the Class I shares for the one year
period and from inception on June 2, 1993 through March 31, 1996 were 15.86% and
24.71% respectively.
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 a Fund's performance
by independent sources may also be used in advertisements and in information
furnished to present
or prospective investors in the Funds.
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. located at 425 Walnut Street, Cincinnati, Ohio 45202 acts
as Custodian of the securities and other assets of the Fund. American Data
Services, Inc. . 24 West Carver St., Huntington, NY 11743 is the Fund's transfer
and shareholder service agent. They do not participate in decisions relating to
the purchase and sale of securities by the Fund.
B-26
<PAGE>
Tait, Weller & Baker, Two Penn Center Plaza, Philadelphia, PA
19102, 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 following persons are beneficial owners of more than 5% of the Fund's
outstanding voting securities as of April 30, 1996. An asterisk (*) denotes an
account affiliated with the Fund's investment advisor, officers or trustees:
David Sofro Trust DTD 1990, Van Nuys, CA 91409; 13.88%
*Bear Stearns Securities Corp for acct. of Crescent
Multi-Advisor Fund, LP, Los Angeles, CA 90067; 13.12%
Bear Stearns Securities Corp Special Custody Account
For benefit of Customers; Brooklyn, NY 11201; 8.07%
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.
B-27
<PAGE>
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. 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.
FINANCIAL STATEMENTS
The annual report to shareholders for the Fund for the fiscal year ended
March 31, 1996 is a separate document supplied with this Statement of Additional
Information and the financial statements, accompanying notes and report of
independent accountants appearing therein all of which pertain to the Class I
shares of the Fund are incorporated by reference in this Statement of Additional
Information.
B-28
<PAGE>
APPENDIX
Description of Bond Ratings*
Moody's Investors Service
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations or protective elements
may be of greater amplitude or there may be other elements present which make
long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative
elements: their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position
B-29
<PAGE>
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Standard & Poor's Corporation
AAA: Bonds rated AAA are highest grade debt obligations. This
rating indicates an extremely strong capacity to pay principal and
interest.
AA: Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A: Bonds rated A have a strong capacity to pay principal and interest, although
they are more susceptible to the adverse effects of changes in circumstances and
economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB, B: Bonds rated BB and B are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. While such bonds will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
Ratings may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
*Ratings are generally given to securities at the time of issuance. While the
rating agencies may from time to time revise such ratings, they undertake no
obligation to do so.
B-30
<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, 1996: To be filed by
amendment and incorporated by reference from the annual
reports to shareholders for the fiscal year ended March 31,
1996; incorporated by reference from the semi-annual reports
to shareholders for the fiscal period ended September 30, 1995
(unaudited) (Avondale Total Return, Crescent,
Hodges,Osterweis, Perkins Opportunity, and Women's Equity
Mutual Fund Series).
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).
Financial Statements for the fiscal period ended December 31, 1995;
Incorporated by Reference from the annual reports to shareholders for
the fiscal period ended December 31, 1995 (Kayne, Anderson Rising
Dividend Fund Series, Insightful Investor Growth Fund Series, Matrix
Growth Fund Series, Matrix Emerging Growth Fund Series) and semi-annual
report for the fiscal period ended December 31, 1995 (Boston Managed
Growth Fund series).
(b) Exhibits:
(1) Agreement and Declaration of Trust-2
(2) By-Laws--2
(3) Voting Trust Agreement -- Not applicable
(4) Specimen Share Certificate-3
(5) Form of Investment Advisory Agreement-1
(6) Form of Distribution Agreement-1
<PAGE>
(7) Benefit Plan -- Not applicable
(8) Form of Custodian and Transfer Agent
Agreements-6
(9) Form of Administration Agreement-1
(10) Consent and Opinion of Counsel as to legality of
shares-3
(11) Consent of Accountants-2
(12) All Financial Statements omitted from Item 23 --
Not applicable
(13) Letter of Understanding relating to initial
capital-3
(14) Model Retirement Plan Documents - Not applicable
(15) Form of Plan pursuant to Rule 12b-1 and Multiple
Class Plan (Crescent Fund)
(16) Schedule for Computation of Performance
Quotations-5
1 Incorporated by reference from Post-Effective Amendment No. 24 to
the Registration Statement on Form N-1A, filed on January 16, 1996.
2 Incorporated by reference from Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A, filed on December 29 ,
1995.
3 Incorporated by reference from Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A, filed on April 13, 1987.
4 Incorporated by reference to Post-effective Amendment No. 5 to
the Registration Statement on Form N-1A, filed on May 2, 1991.
5 Incorporated by reference to Post-Effective Amendment No. 7 to
the Registration Statement on Form N-1A filed on June 17, 1992.
6 To be filed by amendment.
<PAGE>
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 April 24, 1996
Shares of Beneficial Interest, no par value:
Academy Value Fund 134
Avondale Total Return Fund 145
Crescent Fund 114
Hodges Fund 126
Osterweis Fund 125
Perkins Opportunity Fund 5,442
ProConscience Womens Equity Fund 473
Trent Equity Fund 185
Matrix Growth Fund 485
Matrix Emerging Growth Fund 53
Kayne, Anderson Rising Dividend Fund 122
Insightful Investor Growth Fund 127
Leonetti Balanced Fund 234
U.S.Global Leaders Growth Fund 30
Harris, Bretall, Sullivan & Smith
Growth Equity Fund 0
Pzena Focused Value Fund 0
Titan Financial Services Fund 0
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.
<PAGE>
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
Pzena Investment Management LLC File No. 801-50838
Titan Investment Advisers, LLC File No. 801-51306
<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.
<PAGE>
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 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 with respect to the Class Y shares of
the Crescent Fund 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
April 30, 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 April 30, 1996
Steven J. Paggioli
Eric M. Banhazl Principal April 30, 1996
Eric M. Banhazl Financial
Officer
Dorothy A. Berry Trustee April 30, 1996
*Dorothy A. Berry
Wallace L. Cook Trustee April 30, 1996
*Wallace L. Cook
Carl A. Froebel Trustee April 30, 1996
*Carl A. Froebel
Rowley W. P. Redington Trustee April 30, 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.
<PAGE>
Ex. 15
RULE 12b-1 DISTRIBUTION PLAN
PROFESSIONALLY MANAGED PORTFOLIOS
CRESCENT FUND: CLASS Y SHARES
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 the Class Y shares of Crescent 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 First Pacific Advisors,
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 Class Y
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<PAGE>
shares of the Fund 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 Class Y shares of the Fund and the shareholders thereof.
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 Class Y shares of the Fund
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 0.25% of the average daily net assets of the Class
Y shares of the Fund.
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
the Class Y shares of the Fund ("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
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<PAGE>
Trust, including pension administration firms that provide distribution related
services and broker-dealers that engage in the distribution of the Fund's Class
Y shares; (b) payments made to, and expenses of, persons who provide support
services in connection with the distribution of the Fund's Class Y shares and
servicing of its shareholders, including, but not limited to, personnel of the
Distribution Coordinator, office space and equipment, telephone facilities,
answering routine inquiries regarding the Class Y shares of 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 Class Y
shares of the Fund to prospective shareholders of the Class; (f) costs involved
in preparing, printing and distributing sales literature pertaining to the Class
Y shares of 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 Class
Y shares of 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 Class Y shares of the Fund.
5. Termination. The Plan may be terminated at any
time, without penalty, by vote of a majority of the outstanding
voting securities of the Class Y shares of the Fund or by a vote
of a majority of the disinterested Trustees, and any Distribution
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<PAGE>
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 the Class Y shares pursuant to Section 1 hereof without approval by
a majority of the outstanding voting securities of the Class Y shares 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 Fund, nor from any trustee, officer, employee or
agent of the Trust.
9. Effective Date of Plan. The Plan shall take effect upon the
date set forth below, 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.
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<PAGE>
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 June, 1996.
PROFESSIONALLY MANAGED PORTFOLIOS
on behalf of Crescent Fund: Class Y Shares
By: _____________________________
FIRST PACIFIC ADVISORS, INC.
as Distribution Coordinator
By: ______________________________
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<PAGE>
EXHIBIT
CRESCENT FUND
Class Y Shares
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 the Class Y Shares of Crescent 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.
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 Class Y 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").
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<PAGE>
2. In no event may the aggregate annual fee paid to you
pursuant to the Schedule attached hereto exceed 0.25% (such amount will be
negotiable by First Pacific Advisors, Inc. (the "Distribution Coordinator")) but
will not exceed 0.25% of the value of the net assets of the Class Y Shares of
the Fund 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 Prospectus), without
approval by a majority of the outstanding Class Y 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 Class Y Shares of 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 Class Y 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 or
amendment thereto with respect to the Class Y 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.
FIRST PACIFIC ADVISORS, INC.
as Distribution Coordinator
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<PAGE>
By: ___________________________
Authorized Officer
Agreed and Accepted:
- ----------------------------
(Name)
By: ________________________
(Authorized Officer)
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<PAGE>
PROFESSIONALLY MANAGED PORTFOLIOS
FIRST PACIFIC ADVISORS, INC.
SCHEDULE TO DISTRIBUTION AGREEMENT
BETWEEN FIRST PACIFIC ADVISORS, INC.
AND
(Name)
Pursuant to the provisions of the Distribution Agreement
between the above parties with respect to the Class Y Shares of Crescent Fund,
First Pacific Advisors, 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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<PAGE>
MULTIPLE CLASS PLAN
OF
THE CRESCENT FUND
This Multiple Class Plan (the "Plan") is required by Securities and Exchange
Commission Rule 18f-3 promulgated under the Investment Company Act of 1940 (the
"1940 Act").
This Plan shall govern the terms and conditions under which the Crescent Fund
(the "Fund") series of Professionally Managed Portfolios (the "Trust") may issue
separate classes of shares representing interests in the Fund. To the extent
that a subject matter herein is covered by the Trust's Agreement and Declaration
of Trust and Bylaws, the Agreement and Declaration of Trust and Bylaws will
control in the event of any inconsistencies with the descriptions herein.
SECTION 1. Rights and Obligations. Except as set forth herein, all classes of
shares issued by the Fund shall have identical voting, dividend, liquidation and
other rights, preferences, powers, restrictions, limitations, qualifications,
designations, and terms and conditions. The only differences among the various
classes of shares relate solely to the following: (a) each class may be subject
to different class expenses as discussed under Section 3 of this Plan; (b) each
class may bear a different identifying designation; (C) each class has exclusive
voting rights with respect to matters solely affecting such class (except as set
forth in Section 6 below); (d) each class may have different exchange
privileges; and (e) each class may provide for the automatic conversion of that
class into another class.
SECTION 2. Classes of Shares and Designation Thereof. The Fund may offer
the following classes of shares:
(a) Class I Shares. Class I shares will be sold at their net asset value
wihtout the imposition of a front-end sales load or contingent deferred sales
charge ("CDSC"). Class I shares will not be subject to a Rule 12b-1 distribution
fee and will not be subject to a shareholder service fee.
(b) Class Y Shares. Class Y shares will be sold at their net asset value
without the imposition of a front-end sales load or CDSC.
Class Y Shares will be subject to a Rule 12b-1 distribution fee at an
annual rate of up to 0.25% of the daily net assets attributable to the Class Y
shares. Class Y shares will not be subject to a shareholder service fee.
Class Y Shares may be offered to one or more of the following categories of
investors: (1) broker-dealers, financial planners, financial advisers and
intermediaries that provide services to shareholders; (2) employee benefit plans
such as qualified retirement plans ; (3) banks, insurance companies, investment
companies not affiliated with the Advisor or Distributor; (4) endowment funds or
non-profit organizations that are not affiliated with the Advisor; (5)
corporations, foundations and financial institutions.
<PAGE>
SECTION 4. Allocation of Income. The Fund will allocate income and realized and
unrealized capital gains and losses based on the relative net assets of each
class of shares.
SECTION 6. Effective When Approved. This Plan shall not take effect until a
majority of the trustees of the Trust, including a majority of the trustees who
are not interested persons of the Trust, find that the Plan, as proposed and
including the expense allocations, is in the best intersts of each class
individually and the Trust as a whole.
SECTION 7. Amendments. This Plan may not be amended to materially change
the provisions of this Plan unless such amendment is approved in the manner
specified in Section 6 above.
