SECURITIES ACT FILE NO. 33-12213
INVESTMENT COMPANY ACT FILE NO. 811-5037
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post Effective Amendment No. 54 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 55 [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
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.
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, CA 94104
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It is proposed that this filing will become effective (check appropriate box)
[X] Immediately upon filing pursuant to paragraph (b)
[ ] On pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On pursuant to paragraph (a)(1)
[ ] 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.
<PAGE>
LIGHTHOUSE CONTRARIAN FUND
10000 Memorial Drive, Suite 660
Houston, TX 77024
(713) 688-6881
(800) 282-2340
www.lightkeepers.com
The LIGHTHOUSE CONTRARIAN FUND (the "Fund") is a mutual fund with the
investment objective of seeking growth of capital. The Fund seeks to achieve its
objective by investing primarily in equity securities (common and preferred
stocks). Lighthouse Capital Management, Inc. (the "Advisor") serves as
investment advisor to the Fund.
The Advisor uses a contrarian investment approach for the Fund, seeking
sound, undervalued companies in out-of-favor industries. The Fund may engage in
short sales of securities, and may purchase shares of smaller and younger
companies, which may involve special risks. The Fund is not a complete
investment program, and may not be appropriate for short-term investors. See pp.
4-6.
This Prospectus sets forth basic information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information ("SAI")
dated November 16, 1998, as may be amended from time to time, has been filed
with the Securities and Exchange Commission ("SEC") and is incorporated herein
by reference. This SAI is available without charge upon written request to the
Fund at the address given above. The SEC maintains an internet site
(http://www.sec.gov) that contains the SAI, other material incorporated by
reference and other information about companies that file electronically with
the SEC.
TABLE OF CONTENTS
Expense Table 2
Financial Highlights 3
Objective and Investment Approach of the Fund; Risk Factors 4
Management of the Fund 6
Distribution Plan 7
How To Invest in the Fund 7
How To Redeem an Investment in the Fund 8
Services Available to the Fund's Shareholders 9
How the Fund's Per Share Value Is Determined 10
Distributions and Taxes 10
General Information 11
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated November 16, 1998
EXPENSE TABLE
Expenses are one of several factors to consider when investing in the Fund.
The purpose of the following fee table is to provide an understanding of the
various costs and expenses which may be borne directly or indirectly by an
investment in the Fund. Actual expenses may be more or less than those shown.
The Fund has adopted a plan of distribution under which the Fund will pay the
Advisor as Distribution Coordinator a fee at an annual rate of up to 0.25% of
the Fund's average daily net assets. A long-term shareholder may pay more,
directly and indirectly, in sales charges and such fees than the maximum sales
charge permitted under the rules of the National Association of Securities
Dealers. Shares will be redeemed at net asset value per share.
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)
Advisory Fees 1.25%
12b-1 Expenses 0.25%
Other Expenses 0.50%**
Total Fund Operating Expenses 2.00%**
**The Advisor is currently undertaking to limit the Fund's expense ratio to
2.00% annually. In the absence of this limitation, the Fund's ratio of expenses
to average net assets would have been 2.13% for the fiscal year ended August 31,
1998.
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.
The Example shown above should not be considered a representation of past
or future expenses and actual expenses may be greater or less than shown. In
addition, federal regulations require the Example to assume a 5% annual return,
but the Fund's actual return may be higher or lower. See "Management of the
Fund."
The LIGHTHOUSE CONTRARIAN FUND (the "Fund") is a diversified series of
Professionally Managed Portfolios (the "Trust"), an open-end management
investment company offering redeemable shares of beneficial interest. Shares of
the Fund may be purchased at their net asset value per share. The minimum
initial investment is $2,000 with subsequent investments of $100 or more. Shares
will be redeemed at net asset value per share.
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period The following information
has been audited by Ernst & Young LLP, independent auditors, whose unqualified
report covering the fiscal period ended August 31, 1998 is incorporated by
reference herein and appears in the annual report to shareholders. This
information shoud be read in conjunction with the financial statements and
accompanying notes thereto which appear in the annual report and are
incorporated by reference into the SAI. Further information about the Fund's
performance is included in its annual report, which may be obtained without
charge by writing or calling the address or telephone number on the Prospectus
cover page.
<TABLE>
<CAPTION>
Year Year September 29, 1995*
Ended Ended through
August 31, 1998 August 31, 1997 August 31, 1996
<S> <C> <C> <C>
Net asset value, beginning of period $15.76 $13.57 $12.00
Income from investment operations:
Net investment income (loss) 0.01 0.05 (0.09)
Net realized and unrealized (loss)
gain on investments (4.31) 2.41 1.72
Total from investment operations (4.30) 2.46 1.63
Less distributions:
From net capital gains (0.61) (0.27) (0.06)
Net asset value, end of period $10.85 $15.76 $13.57
Total return (28.46)% 18.22% 13.67%
Ratios/supplemental data:
Net assets, end of period (millions) $21.7 $30.5 $14.0
Ratio of expenses to average net assets:
Before expense reimbursement** 2.13% 2.24% 2.95%+
After expense reimbursement** 2.00% 2.00% 2.00%+
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement (0.06)% (0.13)% (2.14)%+
After expense reimbursement 0.08% 0.11% (1.19)%+
Portfolio turnover rate 44.09% 21.94% 20.56%
*Commencement of operations.
+Annualized.
**Excludes 0.15%, 0.06%, and 0.00%, respectively, from dividends paid on
securities sold short which are not expenses subject to expense reimbursement.
</TABLE>
OBJECTIVE AND INVESTMENT APPROACH OF THE FUND; RISK FACTORS
The investment objective of the Fund is to seek growth of capital. The Fund
seeks to achieve its objective by investing primarily in equity securities.
Equity securities in which the Fund invests include common stocks and securities
having the characteristics of common stocks, such as convertible preferred
stocks, convertible debt securities and warrants. There is, of course, no
assurance that the Fund's objective will be achieved.
Because prices of securities held by the Fund fluctuate, the value of an
investment in the Fund will vary, as the market value of its investment
portfolio changes and when shares are redeemed, they may be worth more or less
than their original cost. The Fund is diversified, which under applicable
federal law means that as to 75% of its total assets, no more than 5% may be
invested in the securities of a single issuer and in no more than 10% of the
voting securities of a single issuer.
Investment Approach. The Advisor uses a contrarian strategy to seek what it
believes to be the best investments. Since stocks do not become bargains when
they are popular, the Advisor tends to look for sound, undervalued companies in
out-of-favor industries. The Advisor seeks companies that are technologically
aggressive, fiscally conservative and globally competitive. Companies seeking
government protection from what they believe to be "unfair competition" are
avoided. As part of its contrarian strategy, the Fund may occasionally hold
natural resources (gold) stock.
The Advisor uses a long-term approach to valuation. It is the Advisor's
view that most investors are infatuated with short-term earnings. As a result,
companies with margins that are temporarily low are often discarded. The Advisor
seeks companies that are not afraid to forego short-term profits in order to
invest in research, marketing and service--all areas which should lead to higher
earnings in the future. Conversely, the Advisor avoids companies that neglect
these areas because it appears likely that long-term profitability of such
companies will suffer.
Although equity securities are the primary focus for the Fund, the Advisor
may also purchase fixed income securities where it believes that such securities
offer the potential for capital growth. The Fund is permitted to hold up to 25%
of its net assets in fixed-income securities, but it is not expected that under
normal circumstances more than 10% of the Fund's portfolio would be invested in
such securities. Fixed-income securities eligible for purchase by the Fund
include those rated investment grade, i.e., rated BBB or better by Standard &
Poor's Ratings Group ("S&P"), Duff & Phelps Credit Rating Co. ("Duff"), or Fitch
Investors Service, Inc. ("Fitch"), or Baa or better by Moody's Investors
Service, Inc. ("Moody's"). Securities rated BBB by S&P, Duff, and Fitch or Baa
by 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.
Within the overall limit on investment in fixed-income securities, the Fund
also may invest in corporate debt securities that are rated below investment
grade or, if unrated, are deemed to be of comparable quality by the Advisor.
Such securities 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 or unrated fixed income securities also are likely to be
more sensitive to adverse economic or company developments. 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.
Short Sales. The Fund may engage in short sales of securities. In a short
sale, the Fund sells stock which it does not own, making delivery with
securities "borrowed" from a broker. The Fund is then obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. This price may or may not be less than the price at which the
security was sold by the Fund. Until the security is replaced, the Fund is
required to pay to the lender any dividends or interest which accrue during the
period of the loan. In order to borrow the security, the Fund may also have to
pay a premium which would increase the cost of the security sold. The Fund will
incur additional expense for any dividends or interest the Fund may be required
to pay in connection with short sales. 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 segregate liquid assets equal to the difference between
(a) the market value of the securities sold short at the time they were sold
short and (b) the value of the collateral deposited with the broker in
connection with the short sale (not including the proceeds from the short sale).
While the short position is open, the Fund must maintain segregated assets at
such a level that the amount segregated plus the amount deposited with the
broker as collateral equals the current market value of the securities sold
short.
The Fund will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and date on which the
Fund replaces the borrowed security. The Fund will realize a gain if the
security declines in price between those dates. The amount of any gain will be
decreased and the amount of any loss will be increased by any dividends or
interest the Fund may be required to pay in connection with the short sale. The
dollar amount of short sales (not including short sales against-the-box) may not
exceed 331/3% of the net assets of the Fund at the time of entering into the
short sale and may not exceed 50% of the net assets of the Fund at any time.
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.
Smaller Companies. Some of the companies held by the Fund may be smaller
and younger than companies whose shares trade on the major stock exchanges.
Accordingly, shares of these companies, which typically trade over-the-counter,
may be more volatile than those of larger exchange-listed companies. New or
improved products or methods of development may have a substantial impact on the
earnings and revenues of such companies, and such developments could have a
positive or negative impact on their shares. Some of these companies may be
thinly traded. From time to time, the Fund and other client accounts of the
Advisor, on a collective basis, may hold a significant amount of such companies'
outstanding shares or trading volume. During such times, the Fund's ability to
dispose of such securities without affecting market price could be limited. The
Fund will monitor the level of investment in such securities to determine
whether they may be considered illiquid and subject to the Fund's limitation
that no more than 15% of its total assets may in invested in restricted or
illiquid securities.
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 (other than the custodian
bank) and securities dealers with whom the Fund engages in repurchase
transactions.
Options Transactions. The Fund may purchase and write call and put options
on securities and securities indices in pursuit of its investment objective and
for hedging purposes. Options transactions involve certain risks. For example,
there are significant differences between the securities and options markets
that could result in an imperfect correlation between those markets. A given
hedging transaction may not achieve its objective, resulting in possible losses.
Decisions as to whether and when to use options involve the exercise of skill
and judgement and even a well-conceived transaction may be unsuccessful because
of market behavior or unexpected events. Options markets may not be liquid in
all circumstances, and the Fund might not be able to complete or neutralize an
options transaction in the manner desired. The Fund limits the total option
positions to no more than 10% of its net assets, measured at the time of
investment.
Portfolio Turnover. The annual rate of portfolio turnover is anticipated to
be approximately 25%. In general, the Advisor will not consider the rate of
portfolio turnover to be a limiting factor in determining when or whether to
purchase or sell securities in order to achieve the Fund's objective.
Other Permitted Investments and Risks. The Fund is authorized to invest in
foreign securities to borrow money and to lend portfolio securities. However,
the Fund may not engage in any of such activities to an extent greater than 5%
of its net assets, measured at the time of investment. For more information on
such securities and practices, and the risks associated with them, see the
Fund's Statement of Additional Information.
The Fund has adopted certain investment restrictions, which are described
fully in the Statement of Additional Information. Like the Fund's investment
objective, certain of these restrictions are fundamental and may be changed only
by a majority vote of the Fund's outstanding shares.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust establishes the Fund's policies and
supervises and reviews the management of the Fund. The Advisor is located at
10000 Memorial Drive, Suite 660, Houston, TX 77024. The Advisor was founded in
1988 and is controlled by Mr. Paul G. Horton, President and Managing Director
and Mr. Kevin P. Duffy, Chief Investment Strategist. Mr. Duffy, formerly the
Portfolio Manager, handed over the day-to-day management of the Fund to Mr.
Lanny C. Barbee, CPA/CFA effective November 9, 1998. Mr. Barbee, Portfolio
Manager, joined Lighthouse Capital Management in July 1996 as Portfolio
Administrator and Research Analyst. Prior to joining Lighthouse Capital
Management, Mr. Barbee was President of Meridian Investment Management, an
investment advisory firm he founded in 1982. The Advisor provides investment
advisory services to individual and institutional investors with assets of
approximately $263 million.
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 1.25% annually. This fee is higher than that paid by most investment
companies.
Investment Company Administration, LLC (the "Administrator") acts as the
Fund's Administrator under an Administration 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 monthly fee at the following annual rate:
Average daily net assets of the Fund Fee or fee rate
Under $15 million $30,000
$15 to $50 million 0.20% of average daily net assets
$50 to $100 million 0.15% of average daily net assets
$100 to $150 million 0.10% of average daily net assets
Over $150 million 0.05% of average daily net assets
The Fund is responsible for its own operating expenses. The Advisor may
waive its fees or reimburse the Fund for its operating expenses at any time in
order to reduce the Fund's expenses. The Advisor is currently undertaking to
limit the Fund's expense ratio to 2.00% annually. Any reductions made by the
Advisor in its fees or payments or reimbursements of expenses which are the
Fund's obligation may be subject to reimbursement by the Fund.
The Advisor considers a number of factors in determining which brokers or
dealers to use for the Fund's portfolio transactions. While these are more fully
discussed in the SAI, the factors include, but are not limited to, the
reasonableness of commissions, quality of services and execution, and the
availability of research which the Advisor may lawfully and appropriately use in
its investment management and advisory capacities. Provided the Fund receives
prompt execution at competitive prices, the Advisor may also consider the sale
of Fund shares as a factor in selecting broker-dealers for the Fund's portfolio
transactions.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act. 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 daily net assets to the Advisor as distribution coordinator.
Expenses permitted to be paid by the Fund under its Plan include: preparation,
printing and mailing of prospectuses; shareholder reports such as semiannual and
annual reports, performance reports and newsletters; sales literature and other
promotional material to prospective investors; direct mail solicitation;
advertising; public relations; compensation of sales personnel, advisors or
other third parties for their assistance with respect to the distribution of the
Fund's shares; payments to financial intermediaries for shareholder support;
administrative and accounting services with respect to the shareholders of the
Fund; and such other expenses as may be approved from time to time by the Board
of Trustees.
Payments made pursuant to the Plan represent compensation for distribution
and service activities, not reimbursement for specific expenses incurred. The
Plan allows excess distribution expenses to be carried forward for the following
three fiscal years. See the SAI for a full discussion of the Plan.
The Advisor, out of its own funds, also may compensate broker-dealers who
have signed dealer agreements for the distribution of the Fund's shares as well
as other service providers who provide shareholder and administrative services.
HOW TO INVEST IN THE FUND
The minimum initial investment is $2,000. Subsequent investments must be at
least $100. First Fund Distributors, Inc. (the "Distributor"), acts as
Distributor of the Fund's shares. The Distributor may, at its discretion, waive
the minimum investment requirements for purchases in conjunction with certain
group or periodic plans. In addition to cash purchases, shares may be purchased
by tendering payment in kind in the form of shares of stock, bonds or other
securities, provided that any such tendered security is readily marketable, its
acquisition is consistent with the Fund's objective and it is otherwise
acceptable to the Fund's Advisor.
Shares of the Fund are offered continuously for purchase at their net asset
value per share next determined after a purchase order is received. The public
offering price is effective for orders received by the Fund prior to the time of
the next determination of the Fund's net asset value. Orders received after the
time of the next determination of the Fund's net asset value will be entered at
the next calculated public offering price. Investors may be charged a fee if
they effect a transaction in fund shares through a broker or agent. Such brokers
or agents may also impose different minimum transaction amounts.
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 "Lighthouse Contrarian Fund," should be mailed
to the Fund's Transfer Agent: Lighthouse Contrarian Fund, P.O. Box 640856,
Cincinnati, OH 45264-0856. A purchase order sent by overnight mail should be
sent to Lighthouse Contrarian Fund, 425 Walnut Street, M.L.
6118, 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 "Lighthouse Contrarian
Fund," mailed to the Transfer Agent in the envelope provided at the address
indicated above. The investor's account number should be written on the check.
By Wire: For initial investments, before wiring funds, an investor should
call the Transfer Agent at (800) 282-2340 between the hours of 9:00 a.m. and
4:00 p.m. Eastern time, on a day when the New York Stock Exchange ("NYSE") is
open for trading in order to receive an account number. The Transfer Agent will
request the investor's name, address, tax identification number, amount being
wired and wiring bank. The investor should then instruct the wiring bank to
transfer funds by wire to: Star Bank, N.A. Cinti/Trust, ABA #0420-0001-3, Attn:
Lighthouse Contrarian Fund, DDA #483897971, for credit to Lighthouse Contrarian
Fund, for further credit to [investor's name and account number]. The investor
should also ensure that the wiring bank includes the name of the Fund and the
account number with the wire. If the funds are received by the Transfer Agent
prior to the time that the Fund's net asset value is calculated, the funds will
be invested on that day; otherwise they will be invested on the next business
day. Finally, the investor should write the account number provided by the
Transfer Agent on the Application Form and mail the Form promptly to the
Transfer Agent.
For subsequent investments, an investor should call the Transfer Agent at
(800) 282-2340 before the wire is sent. Failure to do so will cause the purchase
to be credited the next day, when the Transfer Agent receives notice of the
wire. The investor's bank should wire funds as indicated above. It is essential
that complete information regarding the investor's account be included in all
wire instructions in order to facilitate prompt and accurate handling of
investments. Investors may obtain further information from the Transfer Agent
about remitting funds in this manner and from their own banks about any fees
that may be imposed.
Payment of proceeds from redemption of shares purchased with an initial
investment made by wire may be delayed 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 (normally 4:00 p.m., Eastern
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 regulations require that investors provide a certified Taxpayer
Identification Number and certain other required certifications upon opening or
reopening an account in order to avoid backup withholding of taxes at the rate
of 31% on taxable distributions and proceeds of redemptions. See the Fund's
Account Application for further information concerning this requirement.
The Fund is not required to issue share certificates. All shares are
normally held in non-certificated form registered on the books of the Fund and
the Fund's Transfer Agent for the account of the shareholder.
HOW TO REDEEM AN INVESTMENT IN THE FUND
Shareholders have the right to redeem all or any portion of their
outstanding shares at the current net asset value on each day the NYSE is open
for trading. The redemption price is the net asset value per share next
determined after the shares are validly tendered for redemption.
Direct Redemption. A written request for redemption must be received by the
Fund's Transfer Agent in order to constitute a valid tender for redemption.
Redemption requests should be sent to Lighthouse Contrarian Fund, P. O. Box
5536, Hauppauge, NY 11788-0132. Redemption requests should (a) state the number
of shares to be redeemed, (b) identify the shareholder's account number and (c)
be signed by each registered owner exactly as recorded on the account
registration. To protect the Fund and its shareholders, a signature guarantee is
required for certain transactions, including redemptions. Signature(s) on the
redemption request must be guaranteed by an "eligible guarantor institution" as
defined in the federal securities laws. These institutions include banks,
broker-dealers, credit unions and savings institutions. A broker-dealer
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program. A
notary public is not an acceptable guarantor.
Telephone Redemption. Shareholders who complete the Redemption by Telephone
portion of the Fund's Account Application may redeem shares on any business day
the NYSE is open by calling the Fund's Transfer Agent at (800) 282-2340 between
the hours of 9:00 a.m. and 4:00 p.m. Eastern time. Redemption proceeds will be
mailed to the address of record or wired at the shareholder's direction the next
business day to the predesignated account. The minimum amount that may be wired
is $1,000 (wire charges, if any, will be deducted from redemption proceeds).
By establishing telephone redemption privileges, a shareholder authorizes
the Fund and its Transfer Agent to act upon the instruction of any person by
telephone to redeem from the account for which such service has been authorized
and send the proceeds to the address of record on the account or transfer the
proceeds to the bank account designated in the Authorization. The Fund and the
Transfer Agent will use procedures to confirm that redemption instructions
received by telephone are genuine, including recording of telephone instructions
and requiring a form of personal identification before acting on such
instructions. As long as these identification procedures are followed, neither
the Fund nor its agents will be liable for any loss, liability or cost which
results from acting upon instructions of a person believed to be a shareholder
with respect to the telephone redemption privilege. The Fund may change, modify,
or terminate these privileges at any time upon at least 60 days' notice to
shareholders.
Shareholders may request telephone redemption after an account is opened;
however, the authorization form will require a separate signature guarantee.
Shareholders may experience delays in exercising telephone redemption privileges
during periods of abnormal market activity.
General. Payment of the redemption proceeds will be made promptly, but not
later than seven days after the receipt of all documents in proper form,
including a written redemption order with appropriate signature guarantee in
cases where telephone redemption privileges are not being utilized. The Fund may
suspend the right of redemption under certain extraordinary circumstances in
accordance with the Rules of the SEC. In the case of shares purchased by check
and redeemed shortly after purchase, the Fund will not mail redemption proceeds
until it has been notified that the check used for the purchase has been
collected, which may take up to 15 days from the purchase date. To minimize or
avoid such delay, investors may purchase shares by certified check or federal
funds wire. A redemption may result in recognition of a gain or loss for federal
income tax purposes.
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem shares in any account, other than retirement plan
or Uniform Gift to Minors Act accounts, if at any time, due to redemptions by
the shareholder, the total value of a shareholder's account does not equal at
least $2,000. If the Fund determines to make such an involuntary redemption, the
shareholder will first be notified that the value of the account is less than
$2,000 and will be allowed 30 days to make an additional investment to bring the
value of the account to at least $2,000 before the Fund takes any action.
SERVICES AVAILABLE TO THE FUND'S SHAREHOLDERS
Retirement Plans. The Fund offers a prototype Individual Retirement Account
("IRA") plan and information is available from the Distributor or from your
securities dealer with respect to Keogh, Section 403(b) and other retirement
plans offered. Investors should consult a tax adviser before establishing any
retirement plan.
Automatic Investment Plan. For the convenience of shareholders, the Fund
offers a preauthorized check service under which a check is automatically drawn
on the shareholder's personal checking account each month for a predetermined
amount (but not less than $100), as if the shareholder had written it himself.
Upon receipt of the withdrawn funds, the Fund automatically invests the money in
additional shares of the Fund at the current offering price. Purchases are made
at net asset value at the close of regular trading on the NYSE (the "Exchange")
(currently 4:00 P.M. Eastern time) on or about the 20th day of the month.
Applications for this service are available from the Distributor. There is no
charge by the Fund for this service. The Distributor may terminate or modify
this privilege at any time, and shareholders may terminate their participation
by notifying the Transfer Agent in writing, sufficiently in advance of the next
scheduled withdrawal.
Automatic Withdrawals. As another convenience, the Fund offers an Automatic
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 an Automatic Withdrawal Program, and the minimum amount that may
be withdrawn each month or quarter under the Automatic Withdrawal Program is
$100. Redemptions are made at net asset value as of the close of regular trading
on the Exchange on the 25th day of each month (or the next business day). This
Program may be terminated or modified by a shareholder or the Fund at any time
without charge or penalty.
A withdrawal under the Automatic 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 exceeds the dividends credited to the
shareholder's account, the account ultimately may be depleted.
HOW THE FUND'S PER SHARE VALUE IS DETERMINED
The net asset value of a Fund share is determined once daily as of the
close of public trading on the NYSE (currently 4:00 p.m. Eastern time) on each
day the NYSE is open for trading. Net asset value per share is calculated by
dividing the value of the Fund's total assets, less its liabilities, by the
number of Fund shares outstanding.
Portfolio securities are valued using current market values, if available.
Securities for which market quotations are not readily available are valued at
fair values as determined in good faith by or under the supervision of the
Trust's officers in accordance with methods which are specifically authorized by
the Board of Trustees. Short-term obligations with remaining maturities of 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. 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 in December of any
undistributed net investment income for the calendar year 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 distributions be
made in cash.
Any dividend or distribution paid by the Fund has the effect of reducing
the net asset value per share on the reinvestment date by the amount of the
dividend or distribution. Investors should note that a dividend or distribution
paid on shares purchased shortly 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 has qualified and elected to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As long as the fund continues to qualify, and as long as
the Fund distributes all of its income each year to the shareholders, the Fund
will not be subject to any federal income 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 gain 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 SAI. Shareholders should consult
their own tax advisers concerning federal, state and local tax consequences of
investments in the Fund.
GENERAL INFORMATION
The Trust. The Trust was organized as a Massachusetts business trust on
February 17, 1987. The Agreement and Declaration of Trust permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest, without par value, which may be issued in any number of
series. The Board of Trustees may from time to time issue other series, the
assets and liabilities of which will be separate and distinct from any other
series.
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 a change in the Fund's investment objective); all series of the Trust vote as
a single class on matters affecting all series jointly or the Trust as a whole
(e.g., election or removal of Trustees). Voting rights are not cumulative, so
that the holders of more than 50% of the shares voting in any election of
Trustees can, if they so choose, elect all of the Trustees. While the Trust is
not required and does not intend to hold annual meetings of shareholders, such
meetings may be called by the Trustees in their discretion, or upon demand by
the holders of 10% or more of the outstanding shares of the Trust for the
purpose of electing or removing Trustees.
Performance Information. From time to time, the Fund may publish its total
return in advertisements and communications to investors. Total return
information will include the Fund's average annual compounded rate of return
over the most recent year and over the period from the Fund's inception of
operations, through the most recent calendar quarter. The Fund may also
advertise aggregate and average total return information over different periods
of time. The Fund's total return will be based upon the value of the shares
acquired through a hypothetical $1,000 investment at the beginning of the
specified period and the net asset value of such shares at the end of the
period, assuming reinvestment of all distributions. Total return figures will
reflect all recurring charges against Fund income. Investors should note that
the investment results of the Fund will fluctuate over time, and any
presentation of the Fund's total return for any prior period should not be
considered as a representation of what an investor's total return may be in any
future period.
Year 2000. Like other business organizations around the world, the Fund
could be adversely affected if the computer systems used by its Advisor, and
other service providers do not properly process and calculate information
related to dates beginning January 1, 2000. This is commonly known as the "Year
2000 Issue." The Fund's Advisor is taking steps that it believes are reasonably
designed to address the Year 2000 Issue with respect to its own computer
systems, and it has obtained assurances from the Fund's other service providers
that they are taking comparable steps. However, there can be no assurance that
these actions will be sufficient to avoid any adverse impact on the Fund.
Custodian and Transfer Agent; Shareholder Inquiries. Star Bank N.A., 425
Walnut St., Cincinnati, OH 45202, serves as custodian of the Fund's assets.
American Data Services, P.O. Box 5536, Hauppauge, NY 11788-0132 is the Fund's
Transfer Agent. Shareholder inquiries should be directed to the Transfer Agent
at (800) 282-2340.
Advisor
LIGHTHOUSE CAPITAL MANAGEMENT, INC.
10000 Memorial Drive, Suite 660
Houston, Texas 77024
(713) 688-6881
Account Inquiries (800) 282-2340
Distributor
FIRST FUND DISTRIBUTORS, INC.
4455 East Camelback Road, Suite 261E
Phoenix, Arizona 85018
Custodian
STAR BANK, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Transfer Agent
AMERICAN DATA SERVICES, INC.
P. O. Box 5536
Hauppauge, New York 11788-0132
Auditors
ERNST & YOUNG LLP
515 South Flower Street
Los Angeles, California 90071
Legal Counsel
PAUL, HASTINGS, JANOFSKY & WALKER LLP
345 California Street
San Francisco, California 94104
PROSPECTUS
November 16, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
November 16, 1998
LIGHTHOUSE CONTRARIAN FUND
a series of
PROFESSIONALLY MANAGED PORTFOLIOS
10000 Memorial Drive, Suite 660
Houston, TX 77024
(713) 688-6881
This Statement of Additional Information ("SAI") is not a prospectus and it
should be read in conjunction with the Prospectus of the Lighthouse Contrarian
Fund (the "Fund"). A copy of the Fund's Prospectus dated November 16, 1998 is
available by calling the number listed above or (626) 852-1033.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
The Trust.......................................................................................................B-2
Investment Objective And Policies ..............................................................................B-2
Investment Restrictions.........................................................................................B-6
Distributions and Tax Information...............................................................................B-7
Trustees And Executive Officers................................................................................B-10
The Fund's Investment Advisor..................................................................................B-12
The Fund's Administrator.......................................................................................B-13
The Fund's Distributor.........................................................................................B-13
Execution of Portfolio Transactions............................................................................B-14
Additional Purchase and Redemption Information.................................................................B-16
Determination of Share Price...................................................................................B-17
Performance Information........................................................................................B-17
General Information............................................................................................B-18
Financial Statements...........................................................................................B-19
</TABLE>
Lighthouse SAI B-1
<PAGE>
THE TRUST
Professionally Managed Portfolios (the "Trust") is an open-end
management investment company organized as a Massachusetts business trust. The
Trust consists of various series which represent separate investment portfolios.
This SAI relates only to the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Lighthouse Contrarian Fund is a mutual fund with the investment
objective of seeking growth of capital. The following discussion supplements the
discussion of the Fund's investment objective and policies as set forth in the
Prospectus. There can be no assurance the objective of the Fund will be
attained. The Fund was formerly known as the Lighthouse Growth Fund.
Repurchase Agreements
The Fund may enter into repurchase agreements as discussed in the
Prospectus. Under such agreements, the seller of the security agrees to
repurchase it at a mutually agreed upon time and price. The repurchase price may
be higher than the purchase price, the difference being income to the Fund, or
the purchase and repurchase prices may be the same, with interest at a stated
rate due to the Fund together with the repurchase price on repurchase. In either
case, the income to the Fund is unrelated to the interest rate on the U.S.
Government security itself. Such repurchase agreements will be made only with
banks with assets of $500 million or more that are insured by the Federal
Deposit Insurance Corporation or with Government securities dealers recognized
by the Federal Reserve Board and registered as broker-dealers with the
Securities and Exchange Commission ("SEC") or exempt from such registration. The
Fund will generally enter into repurchase agreements of short durations, from
overnight to one week, although the underlying securities generally have longer
maturities. The Fund may not enter into a repurchase agreement with more than
seven days to maturity if, as a result, more than 15% of the value of the Fund's
net 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, Lighthouse Capital
Lighthouse SAI B-2
<PAGE>
Management, Inc. (the "Advisor") seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligor, in this
case the seller of the U.S. Government security.
Apart from the risk of bankruptcy or insolvency proceedings, there is
also the risk that the seller may fail to repurchase the security. However, the
Fund will always receive as collateral for any repurchase agreement to which it
is a party securities acceptable to it, the market value of which is equal to at
least 100% of the amount invested by the Fund plus accrued interest, and the
Fund will make payment against such securities only upon physical delivery or
evidence of book entry transfer to the account of its Custodian. If the market
value of the U.S. Government security subject to the repurchase agreement
becomes less than the repurchase price (including interest), the Fund will
direct the seller of the U.S. Government security to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement will equal or exceed the repurchase price. It is possible that the
Fund will be unsuccessful in seeking to impose on the seller a contractual
obligation to deliver additional securities.
Other Investment Practices
The Fund is authorized to make use of the following investment
practices, but only to the extent of up to 5% of its net assets (10% with in the
case of options transactions) with respect to any given practice.
Securities Lending
Although the Fund's objective is growth of capital, the Fund reserves
the right to lend its portfolio securities in order to generate income from time
to time. Securities may be loaned to broker-dealers, major banks or other
recognized domestic institutional borrowers of securities who are not affiliated
with the Advisor or Distributor and whose creditworthiness is acceptable to the
Advisor. The borrower must deliver to the Fund cash or cash equivalent
collateral, or provide to the Fund an irrevocable letter of credit equal in
value to at least 100% of the value of the loaned securities at all times during
the loan, marked-to-market daily. During the time the portfolio securities are
on loan, the borrower pays the Fund any interest paid on such securities. The
Fund may invest the cash collateral and earn additional income, or it may
receive an agreed-upon amount of interest income if the borrower has delivered
equivalent collateral or a letter of credit. The Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the income earned on the cash to the borrower or placing
broker. Loans are subject to termination at the option of the Fund or the
borrower at any time.
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.
Lighthouse SAI B-3
<PAGE>
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 a 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 the purchase of securities on a when-issued basis.
The Fund will designate liquid securities equal in value to commitments for
when-issued securities. Such assets either will mature or, if necessary, be sold
on or before the settlement date.
Foreign Investments
The Fund may invest in foreign securities. Foreign investments can involve
significant risks in addition to the risks inherent in U.S. investments. The
value of securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity than
U.S. markets, and prices on some foreign markets can be highly volatile. Many
foreign countries lack uniform accounting and disclosure standards comparable to
those applicable to U.S. companies, and it may be more difficult to obtain
reliable information regarding an issuer's financial condition and operations.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions, and custodial costs, generally are higher than for U.S.
investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may invoke increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It also may be difficult to enforce legal rights
in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that the Advisor will be able to
anticipate or counter these potential events and their impacts on the Fund's
share price.
Lighthouse SAI B-4
<PAGE>
American Depositary Receipts and European Depositary Receipts ("ADRs"
and "EDRs") are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed for
use in U.S. and European securities markets, respectively, ADRs and EDRs are
alternatives to the purchase of the underlying securities in their national
market and currencies.
ADR's and closed-end investment companies traded in U.S. markets are
not considered foreign securities for purposes of the 5% limitation on
investments in foreign issuers noted above.
Options Transactions
The Fund may purchase and write call and put options on securities and
securities indices. Transactions in options on securities and on indices 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 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.
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 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.
Lighthouse SAI B-5
<PAGE>
Leverage Through Borrowing
The Fund may borrow money for leveraging purposes. Leveraging creates
an opportunity for increased net income but, at the same time, creates special
risk considerations. For example, leveraging may exaggerate changes in the net
asset value of Fund shares and in the yield on the Fund's portfolio. Although
the principal of such borrowings will be fixed, the Fund's assets may change in
value during the time the borrowing is outstanding. Leveraging will create
interest expenses for the Fund which can exceed the income from the assets
retained. To the extent the income derived from securities purchased with
borrowed funds exceeds the interest the Fund will have to pay, the Fund's net
income will be greater than if leveraging were not used. Conversely, if the
income from the assets retained with borrowed funds is not sufficient to cover
the cost of leveraging, the net income of the Fund will be less than if
leveraging were not used, and therefore the amount available for distribution to
stockholders as dividends will be reduced.
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)
through the lending of its portfolio securities as described above and in its
Prospectus, or (c) 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 SAI.
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 real estate or commodities or commodity contracts
(the Board of Trustees may in the future authorize the Fund to engage in certain
activities regarding futures contracts for bona fide hedging purposes; any such
authorization will be accompanied by appropriate notification to shareholders).
Lighthouse SAI B-6
<PAGE>
5. Invest 25% or more of the market value of its assets in the
securities of companies engaged in any one industry. (Does not apply to
investment in the securities of the U.S.
Government, its agencies or instrumentalities.)
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, mortgages or pledges, or (b) entering into options,
futures or repurchase transactions.
7. Invest in any issuer for purposes of exercising control or
management.
The Fund observes the following policies, which are not deemed
fundamental and which may be changed without shareholder vote. The Fund may not:
1. Invest in securities of other investment companies or purchase any
other investment company's voting securities or make any other investment in any
other investment in other investment companies except to the extent permitted by
federal law.
2. Invest, in the aggregate, more than 15% of its net assets in
securities with legal or contractual restrictions on resale, securities which
are not readily marketable and repurchase agreements with more than seven days
to maturity.
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
with respect to policies on borrowing and illiquid securities or as otherwise
noted.
DISTRIBUTIONS AND TAX INFORMATION
Distributions
Dividends from net investment income and distributions from net profits
from the sale of securities are generally made annually. Also, the Fund expects
to distribute any undistributed net investment income in December of each year.
Any net capital gains realized through the 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 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
Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund intends to continue to qualify and elect to be
treated as a regulated investment company under
Lighthouse SAI B-7
<PAGE>
Subchapter M of the Internal Revenue Code (the "Code"), provided it complies
with all applicable requirements regarding the source of its income,
diversification of its assets and timing of 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 or excise taxes. To comply with the
requirements, the Fund must also 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 and on which the Fund paid no federal income tax.
Net investment income consists of interest and dividend income, less
expenses, and dividends paid on short sales. 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 net short-term capital gains
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 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 that 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 they have held their shares. Capital
gain 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.
Lighthouse SAI B-8
<PAGE>
The Fund may write, purchase or sell certain options, futures, and
foreign currency 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 taxation of the Fund's
transactions in options, futures and foreign currency contracts. Under Section
1092 of the Code, the Fund may be required to postpone recognition for
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 federal income tax law. 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 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 federal 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.
Lighthouse SAI B-9
<PAGE>
The foregoing discussion of U.S. federal income tax law 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.
TRUSTEES AND EXECUTIVE OFFICERS
The Trustees of the Trust, who were elected for an indefinite term by
the initial shareholders of the Trust, are responsible for the overall
management of the Trust, including general supervision and review of the
investment activities of the Fund. The Trustees, in turn, elect the officers of
the Trust, who are responsible for administering the day-to-day operations of
the Trust and its separate series. The current Trustees and officers and their
affiliations and principal occupations for the past five years are set forth
below.
Steven J. Paggioli,* 04/03/50 President and Trustee
479 West 22nd Street, New York, NY 10011. Executive Vice President, The
Wadsworth Group (consultants) since 1986; Executive Vice President of Investment
Company Administration, LLP ("ICA") (mutual fund administrator and the Trust's
Administrator), and Vice President of First Fund Distributors, Inc. ("FFD") (a
registered broker-dealer and the Fund's Distributor) since 1990.
Dorothy A. Berry, 09/12/43 Trustee
14 Five Roses East, Ancram, NY 12517. 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, 09/10/39 Trustee
One Peabody Lane, Darien, CT 06820. Retired. Formerly Senior Vice President,
Rockefeller Trust Co. Financial Counselor, Rockefeller & Co.
Lighthouse SAI B-10
<PAGE>
Carl A. Froebel, 05/23/38 Trustee
2 Crown Cove Lane, Savannah, GA 31411. Private Investor. Formerly Managing
Director, Premier Solutions, Ltd. (asset management computer and software
products). Formerly President and Founder, National Investor Data Services, Inc.
(investment related computer software).
Rowley W.P. Redington, 06/01/44 Trustee
1191 Valley Road, Clifton, NJ 07103. President, Intertech (consumer electronics
and computer service and marketing); formerly Vice President, PRS of New Jersey,
Inc. (management consulting), and Chief Executive Officer, Rowley Associates
(consultants).
Robert M. Slotky*, 6/17/47, Treasurer
2020 E. Financial Way, Suite 100, Glendora, California 91741. Senior Vice
President, ICA since May 1997; former instructor of accounting at California
State University-Northridge (1997); Chief Financial Officer, Wanger Asset
Management L.P. and Treasurer of Acorn Investment Trust (1992- 1996).
Robin Berger*, 11/17/56 Secretary
479 West 22nd St., New York, NY 10011. Vice President, The Wadsworth Group since
June, 1993.
Robert H. Wadsworth*, 01/25/40 Vice President
4455 E. Camelback Road, Suite 261E, Phoenix, AZ 85018. President of The
Wadsworth Group since 1982, President of ICA and FFD since 1990.
*Indicates an "interested person" of the Trust as defined in the 1940 Act.
Set forth below is the rate of 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 receive an annual
retainer of $10,000 and a fee of $2,500 for each regularly scheduled meeting.
These Trustees also receive a fee of $1000 for any special meeting attended. The
Chairman of the Board of Trustees receives an additional annual retainer of
$5,000. 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.
Lighthouse SAI B-11
<PAGE>
Name of Trustee Total Annual Compensation
Dorothy A. Berry $25,000
Wallace L. Cook $20,000
Carl A. Froebel $20,000
Rowley W.P. Redington $20,000
During the fiscal year ended August 31, 1998, trustees' fees and
expenses in the amount of $6,927 were allocated to the Fund. As of the date of
this SAI, the Trustees and officers of the Trust as a group did not own more
than 1% of the outstanding shares of the Fund.
THE FUND'S INVESTMENT ADVISOR
Under the Investment Advisory Agreement with the Fund, the Advisor
provides the Fund with advice on buying and selling securities, manages the
investments of the Fund, furnishes the Fund with office space and certain
administrative services, and provides most of the personnel needed by the Fund.
As compensation, the Fund pays the Advisor a monthly management fee (accrued
daily) based upon the average daily net assets of the Fund at the rate of 1.25%
annually. During the Fund's initial fiscal period ended August 31, 1996 and its
fiscal years ended August 31, 1997 and 1998, advisory fees totaled $92,926,
$277,492 and $398,634, respectively; during these periods, the Advisor
reimbursed the Fund for expenses in the amounts of $71,298, $53,616 and $41,466,
respectively, in order to limit the Fund's operating expenses to no more than
2.00% of average net assets.
The Investment Advisory Agreement 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. The 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.
Lighthouse SAI B-12
<PAGE>
THE FUND'S ADMINISTRATOR
The Fund has an Administration Agreement with Investment Company
Administration, LLC (the "Administrator"), a corporation owned and controlled by
Messrs. Banhazl, Paggioli and Wadsworth with offices at 4455 E. Camelback Rd.,
Ste. 261-E, Phoenix, AZ 85018. The Administration Agreement provides that the
Administrator will prepare and coordinate reports and other materials supplied
to the Trustees; prepare and/or supervise the preparation and filing of all
securities filings, periodic financial reports, Prospectuses, SAIs, 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, the Administrator receives a monthly fee at the following annual rate:
Average net assets of the Fund Fee or fee rate
Under $15 million $30,000
$15 to $50 million 0.20% of average net assets
$50 to $100 million 0.15% of average net assets
$100 to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
During the Fund's initial fiscal period ended August 31, 1996 and its
fiscal years ended August 31,1997 and 1998, the Administrator received fees of
$24,698, $43,889 and $63,781, respectively.
THE FUND'S DISTRIBUTOR
First Fund Distributors, Inc., (the "Distributor"), a corporation owned
by Messrs. Banhazl, Paggioli and Wadsworth, acts as the Fund's principal
underwriter in a continuous public offering of the Fund's shares. The
Distribution Agreement between the Fund and the Distributor continues in effect
for periods not exceeding one 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.
Lighthouse SAI B-13
<PAGE>
The Fund has adopted a Distribution Plan in accordance with Rule 12b-1
(the "Plan") under the 1940 Act. The Plan provides that the Fund will pay a fee
to the Distributor at an annual rate of up to 0.25% of the average daily net
assets of the Fund. The fee is paid to the Advisor as Distribution Coordinator
as reimbursement of, or in anticipation of, expenses incurred for distribution
related activity.
The Plan allows excess distribution expenses to be carried forward by
the Advisor, as Distribution Coordinator, and resubmitted in a subsequent fiscal
year provided that (i) distribution expenses cannot be carried forward for more
than three years following initial submission; (ii) the Board of Trustees has
made a determination at the time of initial submission that the distribution
expenses are appropriate to be carried forward; and (iii) the Board of Trustees
makes a further determination, at the time any distribution expenses which have
been carried forward are resubmitted for payment, to the effect that payment at
the time is appropriate, consistent with the objectives of the Plan and in the
current best interests of shareholders.
During the Fund's fiscal year ended August 31, 1998, the Fund paid fees
of $79,726 pursuant to the Plan, of which $27,995 was paid to the Distribution
Coordinator, $29,929 was paid out as selling compensation to dealers, $7,384 was
for reimbursement of printing expenses, $8,899 was for payment to sales
personnel and $5,429 was for reimbursement of advertising/sales literature
expenses.
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Advisor determines
which securities are to be purchased and sold by the Fund and which
broker-dealers will be used to execute the Fund's portfolio transactions.
Purchases and sales of securities in the over-the-counter market will 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 broker, dealer or underwriter are comparable, the
order may be allocated to a broker, dealer or underwriter that has provided
research or other services as discussed below.
In placing portfolio transactions, the Advisor will use its best
efforts to choose a broker-dealer capable of providing the services necessary to
obtain the most favorable price and execution available. The full range and
quality of services available will be considered in making these determinations,
such as the size of the order, the difficulty of execution, the operational
facilities of
Lighthouse SAI B-14
<PAGE>
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 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. Portfolio transactions may be placed with
broker-dealers who sell shares of the Fund subject to rules adopted by the
National Association of Securities Dealers, Inc.
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 is also 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 are not directly useful to the Fund and
may be useful to the Advisor in advising other clients. In negotiating
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 Advisor to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. 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 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. In such
event, the position of the Fund and such client account(s) 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 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 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 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.
The Fund does not effect securities transactions through brokers solely
for selling shares of the Fund, although the Fund may consider the sale of
shares as a factor in allocating brokerage.
Lighthouse SAI B-15
<PAGE>
However, as stated above, broker-dealers who execute brokerage transactions may
effect purchases of shares of the Fund for their customers. During the Fund's
initial fiscal period ended August 31, 1996 and for its fiscal years ended
August 31,1997 and 1998, brokerage commissions paid by the Fund totaled $31,341,
$58,519 and $56,794, 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 ("NYSE") is restricted as
determined by the SEC or the NYSE is closed for other than weekends and
holidays; (b) an emergency exists as determined by the SEC making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable; or (c) for such other period as the SEC may permit for the
protection of the Fund's shareholders. At various times, the Fund may be
requested to redeem shares for which it has not yet received confirmation of
good payment; in this circumstance, the Fund may delay the redemption until
payment for the purchase of such shares has been collected and confirmed to the
Fund.
The Fund intends to pay cash (U.S. dollars) for all shares redeemed,
but, under abnormal conditions which make payment in cash unwise, the Fund may
make payment partly in securities with a current market value equal to the
redemption price. Although the Fund does not anticipate that it will make any
part of a redemption payment in securities, if such payment were made, an
investor may incur brokerage costs in converting such securities to cash. The
Fund has elected to be governed by the provisions of Rule 18f-1 under the 1940
Act, which contains a formula for determining the minimum redemption amounts
that must be paid in cash.
The value of shares on redemption or repurchase may be more or less
than the investor's cost, depending upon the market value of the Fund's
portfolio securities at the time of redemption or repurchase.
Automatic Investment Plan
As discussed in the Prospectus, the Fund provides an Automatic
Investment Plan for the convenience of investors who wish to purchase shares of
the Fund on a regular basis. All record keeping and custodial costs of the
Automatic Investment Plan are paid by the Fund. The market
Lighthouse SAI B-16
<PAGE>
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 and offering price of
shares of the Fund will be determined once daily as of the close of public
trading on the NYSE (normally 4:00 p.m. Eastern time) on each day that the NYSE
is open for trading. It is expected that the NYSE will be closed on Saturdays
and Sundays and on New Year's Day, Martin Luther King, Jr. 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 NYSE 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 reported sale price on the business day as of
which such value is being determined. If there has been no sale on such exchange
or on NASDAQ on such day, the security is valued at the last reported bid price
on such day. Readily marketable securities traded only in the over-the-counter
market and not on NASDAQ are valued at the last reported 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 the Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
which includes accrued but undistributed income; the resulting net assets are
divided by the number of shares of the Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
PERFORMANCE INFORMATION
From time to time, the Fund may state its total return in
advertisements and investor communications. Total return may be stated for any
relevant period as specified in the advertisement or communication. Any
statements of total return will be accompanied by information on the Fund's
average annual compounded rate of return over the most recent four calendar
quarters and the period from the Fund's inception of operations. The Fund may
also advertise aggregate and average total return information over different
periods of time.
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.
Lighthouse SAI B-17
<PAGE>
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.
The Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial purchase order of $1,000 from which the
maximum sales load is deducted
T = average annual total return n = number of years
ERV = ending redeemable value of the hypothetical $1,000
purchase at the end of the period
Aggregate total return is calculated in a similar manner, except that
the results are not annualized. The Fund's average annual total return since its
inception on September 29, 1995 through September 30, 1998 was 1.61% and for the
1 year period ending on that date was -26.76%. Certain fees and expenses of the
Fund have been reimbursed during this period. Accordingly, return figures are
higher than they would have been had such fees and expenses not been reimbursed.
GENERAL INFORMATION
Investors in the Fund will be informed of the Fund's progress through
periodic reports. Financial statements certified by independent public
accountants will be submitted to shareholders at least annually.
Star Bank, N.A., 425 Walnut St., Cincinnati, OH 45202 acts as Custodian
of the securities and other assets of the Fund. The Custodian does not
participate in decisions relating to the purchase and sale of securities by the
Fund. American Data Services, Inc., P.O. Box 5536, Hauppauge, NY 11788-0132 acts
as the Fund's transfer and shareholder service agent.
Ernst & Young LLP, 515 South Flower St., Los Angeles, CA 90071 are the
independent auditors for the Fund.
Paul, Hastings, Janofsky & Walker LLP, 345 California Street, 29th
Floor, San Francisco, California 94104, are legal counsel to the Fund.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Trust's Agreement and Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations
Lighthouse SAI B-18
<PAGE>
of the Trust. The Agreement and Declaration of Trust also provides for
indemnification and reimbursement of expenses out of the Fund's assets for any
shareholder held personally liable for obligations of the Fund or Trust. The
Agreement and Declaration of Trust provides that the Trust shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the Fund or Trust and satisfy any judgment thereon. All such
rights are limited to the assets of the Fund. The Agreement and Declaration of
Trust further provides that the Trust may maintain appropriate insurance (for
example, fidelity bonding and errors and omissions insurance) for the protection
of the Trust, its shareholders, Trustees, officers, employees and agents to
cover possible tort and other liabilities. Furthermore, the activities of the
Trust as an investment company would not likely give rise to liabilities in
excess of the Trust's total assets. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance exists and the Fund itself is unable to meet
its obligations.
The Trust is registered with the SEC as a management investment
company. Such a registration does not involve supervision of the management or
policies of the Fund. The Prospectus of the Fund and this SAI 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 August 31, 1998 is a separate document supplied with this SAI and the
financial statements therein are incorporated by reference in this SAI.
Lighthouse SAI B-19
<PAGE>
PROFESSIONALLY MANAGED PORTFOLIOS
FORM N-1A
PART C
Item 23. Exhibits.
(1) Agreement and Declaration of Trust (1)
(2) By-Laws (1)
(3) Specimen stock certificate (6)
(4) Form of Investment Advisory Agreement
(5) Form of Distribution Agreement (2)
(6) Not applicable
(7) Form of Custodian Agreement with Star Bank, NA (5)
(8) (1) Form of Administration Agreement with Investment
Company Administration Corporation (3)
(2)(a) Fund Accounting Service Agreement with
American Data Services (5)
(2)(b) Transfer Agency and Service Agreement with
American Data Services (5)
(3) Transfer Agency and Fund Accounting Agreement with
Countrywide Fund Services (4)
(4) Transfer Agency Agreement with Provident Financial
Processing Corporation (8)
(9) Opinion of Counsel (7)
(10) Consent of Independent Auditors
(11) Not applicable
(12) No undertaking in effect
(13) Form of Plan pursuant to Rule 12b-1 (2)
(14) Financial Data Schedule
(filed as Exhibit 27 for electronic filing purposes)
(15) Not applicable
1 Incorporated by reference from Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A, filed on December 29, 1995.
2 Incorporated by reference from Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A, filed on January 16, 1996.
3 Incorporated by reference from Post-Effective Amendment No. 35 to the
Registration Statement on Form N-1A, filed on April 24, 1997.
4 Incorporated by reference from Post-Effective Amendment No. 43 to the
Registration Statement on Form N-1A, filed on February 5, 1998.
5 Incorporated by reference from Post-Effective Amendment No. 48 to the
Registration Statement on Form N-1A, filed on June 15, 1998.
6 Incorporated by reference from Post-Effective Amendment No. 52 to the
Registration Statement on Form N-1A, filed on October 29, 1998.
7 Incorporated by reference from Post-Effective Amendment No. 53 to the
Registration Statement on Form N-1A, filed on November 3, 1998.
8 To be filed by amendment.
Item 24. 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 25. Indemnification
The information on insurance and indemnification is incorporated by
reference to Pre-Effective Amendment No. 1 and Post-Effective Amendment No. 1 to
the Registrant's Registration Statement.
In addition, insurance coverage for the officers and trustees of the
Registrant also is provided under a Directors and Officers/Errors and Omissions
Liability insurance policy issued by ICI Mutual Insurance Company with a
$1,000,000 limit of liability.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 26. 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
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
Sena, Weller, Rohs, Williams File No. 801-5326
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
Pacific Gemini Partners LLC File No. 801-50007
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 27. 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 and the Matrix Emerging Growth Fund. The Distributor acts as
principal underwriter for the following other investment companies:
Advisors Series Trust
Brandes Investment Trust
Fleming Mutual Fund Group
Fremont Mutual Funds
Guinness Flight Investment Funds
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Purisima Funds
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group
UBS Private Investor Funds
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.
(b) The officers of First Fund Distributors, Inc. are:
Robert H. Wadsworth President & Treasurer
Eric Banhazl Vice President
Steven J. Paggioli Secretary
Each officer's business address is 4455 E. Camelback Rd., Ste. 261-E,
Phoenix, AZ 85018. Mr. Paggioli serves as President and a Trustee of the
Registrant. Mr. Wadsworth serves as Vice President of the Registrant. Mr.
Banhazl serves as Treasurer of the Registrant.
c. Incorporated by reference from the Statement of Additional
Information filed herewith as Part B.
Item 28. 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 and 2020 E. Financial Way, Ste. 100, Glendora,
CA 91741.
Item 29. Management Services.
There are no management-related service contracts not discussed in
Parts A and B.
Item 30. Undertakings
The registrant undertakes:
(a) To furnish each person to whom a Prospectus is delivered a
copy of Registrant's latest annual report to shareholders,
upon request and without charge.
(b) If requested to do so by the holders of at least 10% of the
Trust's outstanding shares, to call a meeting of shareholders
for the purposes of voting upon the question of removal of a
director and assist in communications with other shareholders.
<PAGE>
EXHIBITS
Index No. Description
99.B10 Consent of Independent Accountants
27.18 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this amendment to this registration statement
pursuant to Rule 485(b) under the Securities Act of 1933 and 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 November 9, 1998.
PROFESSIONALLY MANAGED PORTFOLIOS
By /S/ 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.
/S/ Steven J. Paggioli Trustee November 9, 1998
Steven J. Paggioli
/S/ Robert Slotky Principal November 9, 1998
Robert Slotky Financial
Officer
Dorothy A. Berry Trustee November 9, 1998
*Dorothy A. Berry
Wallace L. Cook Trustee November 9, 1998
*Wallace L. Cook
Carl A. Froebel Trustee November 9, 1998
*Carl A. Froebel
Rowley W. P. Redington Trustee November 9, 1998
*Rowley W. P. Redington
* By /S/ 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 filed on May 17, 1995
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "General Information" in Post-Effective Amendment No. 54 under
the Securities Act of 1933 and Amendment No. 55 under the Investment Company Act
of 1940 to the Registration Statement (Form N-1A), No. 33-12213) and related
Prospectus and Statement of Additional Information of Professionally Managed
Portfolios and to the incorporation by reference therein of our report dated
September 30, 1998, with respect to the financial statements and financial
highlights of Lighthouse Contrarian Fund, included in the Annual Report for the
year ended August 31, 1998 filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Los Angeles, California
November 10, 1998
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