PACIFIC GEMINI PARTNERS FUND GROUP
PGP Korea Growth Fund
PGP Asia Growth Fund
633 W. Fifth Street, Suite 3600
Los Angeles, CA 90071
The PGP Korea Growth Fund & PGP Asia Growth Fund (the "Funds") are mutual funds
with the investment objective of seeking long-term growth of capital. The Funds
seek to achieve their objective by investing their assets in the securities of
Korean issuers (Korea Growth Fund) and Asian issuers (Asia Growth Fund) as
defined in this prospectus. Under normal circumstances, at least 65% of their
assets will be invested in securities of Korean/Asian issuers respectively. To
the extent permitted by laws and regulations of Korean and Asian nations, the
Funds may also invest in debt securities and other types of investments if
Pacific Gemini Partners, L.L.C. ("Pacific Gemini" or the "Advisor") believes
they would help achieve the Funds' objectives.
There can be no assurance that the Funds will achieve their investment
objective. Each Fund is an investment company designed for long-term investors
and not as a trading vehicle. The Funds do not present a complete investment
program nor are they suitable for all investors. An investment in either of the
Funds is subject to special risk factors, related primarily to the Funds'
investment in Korean and Asian issuers and in other emerging markets. These
markets and the Funds are subject to greater potential volatility and other
risks than in the more developed market of the U.S. and in funds that invest in
more geographically diverse emerging markets. The Korean economy is currently
experiencing an economic and currency crisis which has had a substantial adverse
effect on its securities markets. There can be no assurance as to whether or
when the Korean economic and market conditions will improve. Such factors should
be reviewed carefully by potential investors. See "Appendix-Korean Risk
Factors."
This Prospectus sets forth basic information about the Funds that prospective
investors should know before investing. It should be read and retained for
future reference. A Statement of Additional Information dated February 9, 1998
as may be amended from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available without charge upon written request to each
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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated February 9, 1998
TABLE OF CONTENTS
Expense Table 2
Philosophy, Objective and Investment
Approach of the Funds 3
Risk Factors 7
Management and Administration 9
Distribution Plan 11
How to Invest in the Funds 11
How to Redeem an Investment in the Funds 13
Services Available to the Funds' Shareholders 15
How the Funds' Per Share Value is Determined 15
Distributions and Taxes 16
General Information 16
Appendix: Korean Risk Factors 17
EXPENSE TABLE
Expenses are one of several factors to consider when investing in the Funds. 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 Funds. Actual expenses may be more or less than those shown. Shares will be
redeemed at net asset value per share.
Shareholder Transaction Expenses Korea Asia
Growth Fund Growth Fund
Maximum Sales Load Imposed on
Purchases 2.50% 2.50%
Maximum Sales Load Imposed on
Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fees 2.00% 2.00%
Annual Fund Operating Expenses
(As a percentage of average net assets)
Advisory Fees 1.25% 1.25%
12b-1 Expenses 0.65% 0.65%
Other Expenses
(after advisor reduction) 0.90%* 0.90%*
Total Fund Operating Expenses
(after advisor reduction) 2.80%* 2.80%*
*The Advisor has undertaken to reduce its fees or make payments of fund expenses
to assure that each Fund's ratio of operating expenses to average net assets
will not exceed 2.80% of average net assets annually. Without the Advisor's
undertaking, it is estimated that "Other Expenses" in the above table would be
1.40% and "Total Operating Expenses" would be 3.30%. If the Advisor does waive
fees or pay Funds' expenses, the Funds may reimburse the Advisor within the
following three years. See "Management of the Funds." Each Fund has adopted a
Distribution Plan under which it will pay the Advisor a fee at an annual rate of
up to 0.65% of the Funds' net assets for distribution expenses and services.
Over an extended period of time, 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
Regulation, Inc. ("NASD"). This is recognized and permitted by the NASD.
Example
This table illustrates the net transaction and operating expenses that would be
incurred for an investment in each Fund over different time periods assuming a
$1,000 investment, a 5% annual return, and redemption at the end of each time
period.
1 year 3 years
$28 $85
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 a Fund's actual return may be higher or lower. See "Management of the
Funds."
Each Fund is a non-diversified series of Professionally Managed Portfolios (the
"Trust"), an open-end management investment company offering redeemable shares
of beneficial interest. Shares of the Funds may be purchased at their net asset
value per share plus the applicable sales charge. The minimum initial investment
in each Fund is US $10,000 with subsequent investments of US $100 or more.
Shares will be redeemed at net asset value per share.
Philosophy, Objective, and Investment Approach of the Funds
PGP Korea Growth Fund & PGP Asia Growth Fund (collectively, the "Funds",
separately, "Korea Growth Fund" and "Asia Growth Fund", respectively).
Philosophy
At Pacific Gemini Partners, L.L.C., ("Pacific Gemini" or the "Advisor") we
believe that investing in emerging markets, given their unique risks, requires a
thorough understanding of the economic and political factors specific to the
region and each country. As experts on Korea and Asia, our ability to seek out
superior investment returns is based upon a combination of two factors. First,
we believe that the investment process must start through the use of objective,
measurable data used in a systematic way. Combined with this quantitative
approach is our "insider's" knowledge of the markets, itself a combination of
our personnel's long experience in the region and our strategic tie with
Ssanyong Investment and Securities Co. (see Investment Approach). This is
essential for the evaluation of subjective, qualitative factors. Through this
differentiated and focused approach, we seek to unlock exceptional investment
values supported by excellent growth prospects at advantageous prices due to the
pricing inefficiency of securities in these markets.
Objective
The Funds' objectives are to seek long-term growth of capital. They invest
primarily in securities of Korean companies in the Korea Growth Fund and Asian
companies in the Asia Growth Fund. The objective is a fundamental policy of each
Fund and may not be changed without shareholder approval. There is no assurance
that the Funds' objectives will be achieved. With respect to Asian issuers, the
Morgan Stanley Capital Asia Pacific ex-Japan Index is used as the benchmark for
choosing the countries in which the Asia Fund will invest. This includes issuers
from the following countries: Australia, China, Hong Kong, India, Indonesia,
Korea, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka,
Taiwan and Thailand. However, investments may be made in other markets in the
Asia Pacific region which are not included in the index.
Investment Approach
With respect to the Asian Growth Fund, Pacific Gemini's research team applies
three levels of evaluation in selecting investments. First the team applies
active country asset allocation analysis. This includes an examination of
macro-economic data, such as GDP growth and inflation, in anticipation of trends
and in light of past performance. What emerges from this model are the countries
which we believe to present the greatest opportunity. Particular "drivers" of
individual markets are also studied such as, in Hong Kong, the state of the
property market. To this is added a qualitative assessment, which includes a
review of the political situation and any localized country themes that may
affect timings of an investment. In addition, the team undertakes sectoral or
industry evaluations. The starting point is the economic data used at the
country level but also includes specific analysis of industries prospects and
industrial themes across the Asia-Pacific region. Thirdly, the team conducts
analysis at the individual stock level. Earnings and balance sheet data are
examined so as to evaluate both growth (earnings growth and margin expansion,
for example) and value (price to earnings, price to book) criteria. In addition,
the team conducts qualitative research such as an assessment of the company
management and the possibility of Government interference. This screening of
countries and stocks provides a disciplined background against which undervalued
situations can be found and fully valued countries and stock can be sold.
The Fund will be invested in a minimum of four countries in the Asia-Pacific
region at all times and may substantially underweight or overweight certain
Asian-Pacific markets depending on the Advisor's assessment of these markets. In
deciding the allocation of these investments, a company is considered to be
located in the country in which it is domiciled, in which it is primarily traded
and from which it derives the largest part of its revenues.
In the Korean market, Pacific Gemini takes a similar approach. The
macro-economic picture is first studied to gain an overall picture of where the
economy is heading and at what stage of the economic cycle it has reached. From
this and from cross-referencing the rest of Asia, sectoral research is carried
out. The team evaluates individual stocks within the favored industries through
a comprehensive analysis of company fundamentals as well as growth prospects.
Moreover, by utilizing its strategic tie with Ssangyong Investment & Securities
Co., Ltd., a leading securities firm in Korea and the Advisor's co-owner, the
Advisor believes that continuous access to locally available company information
is provided and the ability to explore regulatory issues concerning a specific
company is enhanced. Finally, through real-time coverage of the Korean market,
the team executes a buy/sell transaction when intra-day timing conditions are
optimal.
Although the Advisor intends to invest primarily in equity securities, it may
invest up to 35% of each Fund's assets in Korean and Asian fixed income
securities. Due to limited liquidity and relatively high transaction costs, the
Funds will invest in Korea and Asian fixed income securities as permitted by
applicable regulations in such countries primarily as a hedging vehicle against
perceived negative stock market trends. Accordingly, the focus for such
investments will be analysis of credit risks and yield, rather than an attempt
to anticipate interest rate movements. As such fixed income markets develop
further, however, the Advisor may consider more active investment in fixed
income securities of issuers located in Korea and other Asian countries.
Investment Criteria
Pacific Gemini focuses on the following investment criteria in Korea and Asia:
1) Financial criteria (earnings, pre and after-tax, debt/equity ratio, cash flow
and book value multiples, etc.)
2) Growth prospects (technology, future competitiveness, market share, etc.)
3) Turn-around situations (cyclicality, restructuring, niche-market, etc.) 4)
Quality of management (shareholder value-driven, visionary, cost-conscious,
etc.)
Other Investment Practices
Equity Securities
The funds emphasize investments in common stock. The Funds may also invest in
other types of equity securities (such as preferred stocks or convertible
securities) and equity derivative securities.
Depository Receipts Convertible Securities and Warrants
The Funds may invest in ADRs, EDRs and GDRs and convertible securities that the
Manager regards as a form of equity security. The Funds may invest in warrants,
including those not listed on a securities exchange.
Special Situations
The Advisor believes that carefully selected investments in joint ventures,
cooperatives, partnerships, private placements, foreign government programs of
selling interests in government-controlled or owned enterprises
("privatizations"), unlisted securities and similar vehicles ("special
situations") could enhance the Funds' growth potential. The Funds may also
invest in certain vehicles or derivative securities that represent indirect
investments in foreign markets or securities in which it is impracticable for
the Funds to invest directly. Investments in special situations may be illiquid,
as determined by the Advisor based on criteria reviewed by the Trustees. Neither
Fund invests more than 15% of its net assets in illiquid investments, including
any illiquid special situations.
Investment Companies
Consistent with the provisions of the Investment Company Act of 1940 (the "1940
Act"), the Funds may invest in the securities of other investment companies that
invest in Korean/Asian securities. Absent special relief from the Securities and
Exchange Commission (the "SEC"), each Fund may invest up to 10% of its assets in
the aggregate in shares of other investment companies and up to 5% of its assets
in any one investment company, as long as that investment does not represent
more than 3% of the voting stock of the other investment company. As a
shareholder in any investment company, each Fund will bear its ratable share of
such company's expenses, including its advisory and administration fees.
Options and Futures
The Funds may purchase and write call and put options on securities, securities
indexes and on foreign currencies, and enter into futures contracts and use
options on futures contracts. The Funds also may enter into swap agreements with
other institutional investors with respect to foreign currencies, interest
rates, and securities indexes. The Funds may use these techniques to hedge
against changes in interest rates, foreign currency exchange rates or securities
prices or as part of their overall investment strategies. Each Fund segregates
liquid assets to cover its obligations under options, futures contracts and swap
agreements to avoid leveraging of the Fund.
The Fund may buy or sell interest rate futures contracts, options on interest
rate futures contracts and options on debt securities for the purpose of hedging
against changes in the value of securities which a Fund owns or anticipates
purchasing due to anticipated changes in interest rates. The Funds may also
engage in currency exchange transactions by means of buying or selling foreign
currency on a spot basis, entering into forward foreign currency exchange
contracts, and buying and selling foreign currency options, futures and options
on futures. Foreign currency exchange transactions may be entered into for the
purpose of hedging against foreign currency exchange risk arising from the
Funds' investment or anticipated investment in securities dominated in foreign
currencies. A Fund will not enter into futures contracts or options thereon for
non-hedging purposes if, immediately thereafter, the aggregate initial margin
deposits on the Fund's futures positions and premiums paid for options thereon
would exceed 5% of the liquidation value of the Fund's total assets.
Illiquid Securities
Neither Fund may invest nor hold more than 15% of its net assets in illiquid
securities. Each Fund will treat any Korean securities that are subject to
restrictions on repatriation for more than seven days as illiquid securities for
purposes of this limitation. The Funds will also treat as illiquid for this
purpose repurchase agreements with maturities in excess of seven days,
securities subject to conversion and transfer restrictions, securities in which
a Fund cannot receive the approximate amount at which it values such securities
within seven days, securities of Korean companies that are not publicly traded
and over-the-counter options and their underlying securities.
Restricted securities issued pursuant to Rule 144A under the Securities Act of
1933 that have a readily available market are not deemed illiquid for purposes
of this limitation. Investing in Rule 144A securities could result in increasing
the level of a Fund's illiquidity if qualified institutional buyers become, for
a time, uninterested in purchasing these securities. The Adviser will monitor
the liquidity of such securities subject to review by the Board of Trustees.
Short-term Investments
At times, the Funds may invest in short-term cash-equivalent securities either
for temporary or defensive purposes when the market is significantly overvalued.
These consist of high quality debt obligations maturing in one year or less from
the date of purchase, such as securities issued by the U.S. Government, its
agencies and instrumentalities, certificates of deposit, banker's acceptances
and commercial paper. High quality means that the obligations have been rated at
least A-1 by Standard & Poor's Corporation ("S&P") or Prime-1 by Moody's
Investor's Service, Inc. (Moody's), that the issuer has an outstanding issue of
debt securities rated at least AA by S&P or Aa by Moody's, or are of comparable
quality in the opinion of the Advisor.
Repurchase Agreements
The Funds may enter into repurchase agreements in order to earn additional
income on available cash, or as a defensive investment in which the purchaser
(i.e., the Funds) 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 Funds engage 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 Funds could experience both delays in liquidating the underlying
security and losses in value. However, the Funds intend 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 with the most creditworthy
registered securities dealers with all such transactions governed by procedures
adopted and regularly reviewed by the Trust's Board of Trustees. The Advisor
monitors the creditworthiness of the banks and securities dealers with whom the
Funds engage in repurchase transactions.
When-Issued Securities
The Funds may purchase securities on a when-issued basis, for payment and
delivery at a later date, generally from 15 to 45 days after the transaction.
The price and yield are generally fixed on the date of commitment to purchase,
and the value of the security is thereafter reflected in the Funds' net asset
value. During the period between purchase and settlement, no payment is made by
the Funds and no interest accrues to the Funds. There is a risk in these
transactions that the value of the securities at settlement may be more or less
than the agreed-upon price, or that the party with which a Fund enters into such
transaction may not perform its commitment. When a Fund purchases securities on
a when-issued basis, it segregates liquid assets with its Custodian in an amount
equal to the purchase price as long as the obligation to purchase continues.
Portfolio Turnover
The annual rate of portfolio turnover for each Fund is not expected to exceed
75%. 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 Funds' objectives.
RISK FACTORS
Non-Diversification. Each Fund is a non-diversified investment company
portfolio, which means that the Fund is required to comply only with the
diversification requirements of the Internal Revenue Code (the "Code') (and in
the case of the Korea Growth Fund, certain Korean regulatory requirements set
forth below) so that each Fund will not be subject to U.S. taxes on its net
investment income. These provisions, among others, require that at the end of
each calendar quarter, (1) not more than 25% of the value of a Fund's total
assets can be invested in the securities of a single issuer, and (2) with
respect to 50% of the value of a Fund's total assets, no more than 5% of the
value of its total assets can be invested in the securities of a single issuer
and a Fund may not own more than 10% of the outstanding voting securities of a
single issuer. Since each Fund, as a non-diversified investment company
portfolio, could invest in a smaller number of individual issuers than a
diversified investment company, the value of a Fund's investments could be more
affected by any single adverse occurrence than would the value of the
investments of a diversified investment company.
Risk Factors: the Korean Markets. The Korea Growth Fund's portfolio will be
subject to economic, political and regulatory developments in Korea. Korea is
currently experiencing a severe currency and economic crisis, and the value of
Korean securities has dropped substantially in recent months. In connection with
the intervention and economic assistance package on the part of the
International Monetary Fund ("IMF"), the Korean economic system may be expected
to undergo painful restructuring in the short-term, and there can be no
assurance as to whether or when Korean economy will overcome the current crisis.
See "Appendix--Korean Risk Factors." While the relatively greater investment in
securities of particular companies permitted to the Korea Growth Fund as a
non-diversified company is expected to increase risk, and could result in
greater fluctuation in the Fund's net asset value than for a diversified
company, it also reflects the composition of the Korean securities market, in
that securities of relatively few companies account for a greater share of the
total capitalization of such market and trading in those securities represents a
greater share of the total trading market than is the case in the United States.
A Fund's investment in Korean issuers involves certain risk factors not
typically associated with investing in most U.S. issuers. The securities market
is substantially smaller, less developed, less liquid and more volatile than the
major securities markets in the United States. Disclosure and regulatory
standards are in many respects less stringent that U.S. standards. Furthermore,
there is a lower level of monitoring and regulation of the markets and the
activities of investors in such markets, and enforcement of existing regulations
has been extremely limited.
The limited size of the Korean securities market and limited trading volume in
issues compared to volume of trading in U.S. securities could cause prices to be
erratic for reasons apart from factors that affect the quality of the
securities. For example, limited market size may cause prices to be unduly
influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of portfolio securities, especially in these
markets.
Risk Factors: The Korean and Asian Markets
Further, there is a risk that an emergency situation may arise in the Korean or
Asian market as a result of which prices for portfolio securities in such
markets may not be readily available. Section 22(e) of the Investment Company
Act of 1940 (the "1940 Act") permits registered investment companies such as the
Funds to suspend redemption of its shares for any period during which an
emergency, as determined by the SEC, exists. Accordingly, if the Funds believe
that appropriate circumstances exist, they will promptly apply to the SEC for a
determination that an emergency, within the meaning of Section 22(e) of the 1940
Act, is present. During the period commencing from the Fund's identification of
such conditions until the date of SEC action, the Fund's portfolio securities in
the affected markets will be valued at fair value in good faith by or under the
direction of the Board of Trustees.
Because the Funds invest in securities denominated in Korean Won, changes in the
value of the Korean Won against the U.S. dollar will result in corresponding
changes in the U.S. dollar value of a Fund's assets denominated in Korean Won.
Such changes also will affect that Fund's income.
The economy of Korea may differ favorably or unfavorably from the U.S. economy
in such respects as the rate of growth of domestic product, the rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. Companies in Korea are subject to accounting, auditing, and
financial standards and requirements that differ from those applicable to U.S.
companies. There is substantially less publicly available information about
Korean companies and the Korean government that there is about U.S. companies
and the U.S. Government. See "Appendix--Korean Risk Factors."
Since foreign securities are normally denominated and traded in foreign
currencies, the value of fund assets may be affected favorably or unfavorably by
changes in currency exchange rates relative to the U.S. dollar. There may be
less information publicly available about a foreign issuer than about a U.S.
issuer, and foreign issuers may not be subject to accounting standards
comparable to those in the United States.
The securities of some foreign companies are less liquid and at times more
volatile than securities of comparable U.S. companies. Foreign brokerage
commissions and other fees are also generally higher than in the United States.
Foreign settlement procedures and trade regulations may involve certain risks
(such as delay in payment or delivery of securities or in the recovery of fund
assets held abroad) and expenses not present in the settlement of domestic
investments.
In addition, there may be a possibility of nationalization or expropriation of
assets, imposition of currency exchange controls, confiscatory taxation,
political or financial instability and diplomatic developments that could affect
the value of investments in certain foreign countries.
Legal remedies available to investors in certain foreign countries may be
limited. The laws of some foreign countries may limit investments in securities
of certain issuers located in those foreign countries. Special tax
considerations apply to foreign securities.
Prior Government approval for foreign investments may be required under certain
circumstances in some foreign countries, and the extent of foreign investment in
foreign companies may be subject to limitation. Foreign ownership limitations
also may be imposed by the charters of individual companies to prevent, among
other concerns, violation of foreign investment limitations. Repatriation of
investment income, capital and the proceeds of sales by foreign investors may
require government registration and approval in some foreign countries. A Fund
could be adversely affected by delays in or a refusal to grant any required
governmental approval for such repatriation.
The risks described above are typically greater in less developed nations,
sometimes referred to as "emerging markets." For instance, political and
economic structures in these countries may be in their infancy and developing
rapidly, causing instability. High rates of inflation may adversely affect the
economies and securities markets of such countries. In addition, the small size,
limited trading volume and relative inexperience of the securities markets in
these countries may make investments in such countries less liquid and more
volatile than investments in more developed countries. Investments in emerging
markets are regarded as speculative, and in non-geographically diverse emerging
markets as especially speculative.
The Funds have adopted certain investment restrictions, which are described
fully in the Statement of Additional Information. Like the Funds' investment
objectives, certain of these restrictions are fundamental and may be changed
only by a majority vote of a Fund's outstanding shares.
MANAGEMENT AND ADMINISTRATION
Investment Advisor
Pacific Gemini Partners, L.L.C. (the "Advisor" or "Pacific Gemini") has been
appointed to act as investment advisor to the Funds pursuant to the Investment
Advisory Agreement. The Investment Advisor, on a fully discretionary and
on-going basis, will be responsible for the investment management of the Funds'
portfolio.
Overview
Pacific Gemini is a financial services firm specializing in global asset
management services. The firm was founded in 1995 as a joint venture between
Ssangyong Investment & Securities Co., Ltd. ("SISC") and White Tiger Capital,
Inc.("WTC") As of February 1, 1998, Pacific Gemini managed over US$55 million in
assets.
Ssangyong Investment & Securities Co., Ltd. is one of the leading securities
firms in Korea with approximately US$1 billion in assets and is a major
international broker of Korean equity transactions.
White Tiger Capital, Inc. is a collection of investment management professionals
that comprise the team at Pacific Gemini Partners. Over 90% of the common stock
of White Tiger Capital, Inc. is owned by Pacific Gemini employees.
Management of the Funds
The Fund's investments are to be managed by the portfolio management team at
Pacific Gemini. In its role as investment adviser, Pacific Gemini is responsible
for the continuing management of the affairs of the Funds, including the
investment of the assets of the Funds on a discretionary basis. Information
gathered during the initial investment screening process will serve as the basis
for closely tracking the performance of each security. The Funds' Advisor will
continuously gather additional information and perform fundamental sector and
individual company analysis to support its monitoring efforts. Pacific Gemini
became a registered investment advisor with the United States Securities and
Exchange Commission in August of 1995. Pacific Gemini has not previously managed
a registered investment company.
Pacific Gemini Team
Stewart M. Kim, Managing Partner
Mr. Kim is responsible for the overall strategy and management of Pacific Gemini
with a day-to-day focus on administration, marketing and the evaluation of
acquisition opportunities. He is also the head of the Company's Investment
Policy Committee. Mr. Kim spent six years in the Mergers & Acquisitions
Department at Merrill Lynch & Co. before establishing White Tiger Capital, Inc.
and Pacific Gemini Partners, L.L.C. in 1995. While at Merrill Lynch, Mr. Kim
worked on a variety of high yield financings, restructurings, divestitures and
acquisitions. As a Vice President in the 72-employee Mergers & Acquisitions
Group, Mr. Kim had formal management responsibility for project assignments,
performance reviews, and recruiting. Prior to joining Merrill Lynch, Mr. Kim
graduated from Dartmouth College and received his MBA from the Wharton School.
Hugh W.E. Ferrand, Portfolio Manager
Mr. Ferrand is the Senior Portfolio Manager at Pacific Gemini and oversees the
investment management policies and procedures at the firm. He also manages the
investment team consisting of the Korea portfolio manager and research analysts
and sits on the Investment Policy Committee. Before joining Pacific Gemini, Mr.
Ferrand was a senior manager on the international portfolio team at Blairlogie
Capital Management from June 1993 to June 1996. His primary country
responsibilities were Hong Kong, Taiwan, China, Australia, New Zealand, India,
Pakistan, and Sri Lanka. Mr. Ferrand had secondary oversight for Singapore,
Malaysia, Thailand, Indonesia, Philippines and all of Latin America. Mr. Ferrand
attended and graduated from Oxford University in 1981.
Young Kim, Vice President/Portfolio Manager
Mr. Kim manages the daily activities of Pacific Gemini's Korean portfolios of
$90 million. He is also a member of the Company's Investment Policy Committee.
Prior to coming to Pacific Gemini's Los Angeles office, Mr. Kim assumed various
responsibilities at Ssangyong Investment & Securities Co. Starting his career as
an electronics analyst in Ssangyong's Research Department, he has forecasted
corporate earnings and analyzed industry performance since 1987. While at
Ssangyong, Mr. Kim also worked in Corporate Finance, leading the marketing teams
on two major equity-linked financings for Sunkyong Industries and Jinro Group in
1992 and 1991 respectively. Before joining Ssangyong, he worked at Samsung
Aerospace Industries on its new business project team. Mr. Kim attended Seoul
National University for his BA in economics, and received his MBA from Yonsei
University.
Sokho Jung, Associate
Mr. Jung is primarily responsible for extensive company research and portfolio
analysis. He is also responsible for compliance issues involving Pacific
Gemini's off-shore funds as well as the US mutual funds. Mr. Jung previously
worked at Bankers Trust International PLC in Seoul, structuring financing
vehicles for domestic institutions and orchestrating catapulation of foreign
capital investment funds into Korea. He attended the Seoul National University
for his BA in economics, and the Stern School of New York University for his
MBA.
Michelle S. Lee, Associate
Ms. Lee is involved in company research and data analysis for Pacific Gemini's
portfolios. She also administers and tracks Pacific Gemini's other funds. Ms.
Lee on a daily basis communicates with the funds' custodians and administrators
in order to control cash movements and to resolve any trade settlement related
issues. She graduated from the University of California at Berkeley with a BA in
Sociology.
Martin S.C. Lee, Analyst
Mr. Lee performs industry research and stock valuation analysis, and executes
trades with a variety of Korean equity brokers. In conjunction with the
Investment Policy Committee, he oversees Pacific Gemini's approach for
investments in the U.S. securities market. Mr. Lee received his BA in economics
from the University of Chicago.
Pacific Gemini provides the Funds with advice on buying and selling securities,
manages the investments of the Funds, furnishes the Funds with office space and
certain administrative services, and provides most of the personnel needed by
the Funds. As compensation, each Fund pays the Adviser a monthly management fee
(accrued daily) based upon the average daily net assets of that Fund at the rate
of 1.25% annually.
Investment Company Administration Corporation (the "Administrator") acts as the
Funds' Administrator under an Administration Agreement. Under that agreement,
the Administrator prepares various federal and state regulatory filings, reports
and returns for the Funds, prepares reports and materials to be supplied to the
trustees, monitors the activities of the Funds' custodian, transfer agent and
accountants, and coordinates the preparation and payment of Fund expenses and
reviews the Funds' expense accruals. For its services, the Administrator
receives a monthly fee from each Fund at the following annual rate:
Fee rate (% of
Average net assets of the Funds Average net assets)
Less than $15 million $30,000
$15 to $50 million 0.20%
$50 to $100 million 0.15%
$100 million to $150 million 0.10%
More than $150 million 0.05%
Each Fund is responsible for its own operating expenses. The Advisor has agreed
to limit each Fund's operating expenses to assure that each Fund's ratio of
operating expenses to average net assets will not exceed 2.80%. The Advisor also
may waive fees or reimburse additional amounts to a Fund at any time in order to
reduce the Fund's expenses. Reductions made by the Advisor in its fees or
payments or reimbursement of expenses which are the Fund's obligation are
subject to reimbursement within the following three years by that Fund provided
that the Fund is able to do so and remain in compliance with applicable expense
limitations then in effect.
The Advisor considers a number of factors in determining which brokers or
dealers to use for the Funds' portfolio transactions. While these are more fully
discussed in the Statement of Additional Information, the factors include, but
are not limited to, the reasonableness of commissions, quality of services and
execution, and the availability of research which the Adviser may lawfully and
appropriately use in its investment management and advisory capacities. Provided
the Fund receives prompt execution at competitive prices, the Adviser may also
consider the sale of Fund shares as a factor in selecting broker-dealers for a
Fund's portfolio transactions.
DISTRIBUTION PLAN
Each Fund has adopted a distribution plan pursuant to Rule 12b-1. The Plan
provides that each Fund will pay for distribution and related expenses at an
annual rate of 0.65% of the Fund's average net assets to the Advisor as
distribution coordinator. Activities covered by the Funds under the 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 Funds' shares; payments to financial intermediaries for
shareholder support; administrative and accounting services with respect to Fund
shareholders; and such other expenses related to the distribution of the Fund's
shares.
Plan payments will be reviewed by the Trustees. However, it is possible that at
times the amount of the Advisor's compensation could exceed the Advisor's
distribution expenses, resulting in a profit to the Advisor. If the Plan is
terminated, the Fund will not be required to make payments for expenses incurred
after the termination.
HOW TO INVEST IN THE FUNDS
The minimum initial investment in each Fund is US$10,000. Subsequent investments
must be at least $100. First Fund Distributors, Inc. (the "Distributor"), acts
as Distributor of the Funds' shares. The Distributor may, at its discretion,
waive the minimum investment requirements for purchases in conjunction with
certain group or periodic plans. Shares of each Fund are offered continuously
for purchase at the public offering price next determined after a purchase order
is received. The public offering price is effective for orders received by the
Fund or investment dealers prior to the time of the next determination of the
Fund's net asset value and, in the case of orders placed with dealers,
transmitted properly to the Transfer Agent or other authorized agent of the
Fund. Orders received after the time of the next determination of the applicable
Fund's net asset value will be entered at the next calculated public offering
price. The Advisor and the Distributor reserve the right to reject any order, to
instruct the transfer agent to temporarily halt the acceptance of new orders, or
to fair value price some or all of a Fund's portfolio if events occuring since
the close of the Asian markets have rendered the market price stale.
The public offering price per share is equal to the net asset value per share
plus a sales charge, which is reduced on purchases of $50,000 or more, as set
forth in the table below. The reduced sales charges apply to quantity purchases
made at one time by a"person," which means ( i) an individual, (ii) members of a
family (i.e., an individual, spouse, children under age 21), or (iii) a trustee
or fiduciary of a single trust estate or a single fiduciary account. In
addition, purchases of shares made during a thirteen month period pursuant to a
written Letter of Intent are eligible for a reduced sales charge. Reduced sales
charges are also applicable to subsequent purchases by a "person," based on the
aggregate of the amount being purchased and the value, at offering price, of
shares owned at the time of investment.
Sales Charge Portion of
as percent of sales charge
offering net asset retained by
Amount of Purchase price value dealers
Less than $50,000 2.50% 2.56% 2.00%
$50,000 but less
than $250,000 2.00% 2.04% 1.60%
$200,000 but less
than $350,000 1.50% 1.52% 1.20%
$500,000 but less
than $1,500,000 1.00% 1.01% 0.80%
$1,500,000 but less
than $3,000,000 0.75% 0.76% 0.60%
$3,000,000 or more 0.60% 0.60% 0.48%
Purchase Order Placed with Investment Dealers
Dealers who have a sales agreement with the Distributor may place orders for
shares of the Funds on behalf of clients at the offering price next determined
after receipt of the client's order by calling the Transfer Agent at (800)
841-0980. Shares are also available for purchase by financial intermediaries
through brokers or dealers which have service or sales agreements with the Funds
or the Distributor. The Distributor or its affiliates, at their expense may
provide additional compensation to dealers in connection with sales of shares of
the Funds. If the order is placed with the dealer by 4:00 p.m. New York City
time and forwarded promptly to the Transfer Agent or other service agent, it
will be confirmed at the applicable offering price on that date. The dealer is
responsible for placing orders promptly and for forwarding payment promptly.
Investors may purchase shares of the Funds by sending an application form
directly to the Funds, with payment made by either check or wire.
Purchases Sent To The Transfer Agent
By Check: For initial investments, an investor should complete the Funds'
Account Application (included with this Prospectus). The completed application,
together with a check payable to "PGP Korea Growth Fund," or "PGP Asia Growth
Fund" and should be mailed to the Funds at P.O. Box 5354, Cincinnati, OH
45201-5354. For purchases by overnight mail, please contact the Transfer Agent
at (800) 841-0980 for instructions. A stub is attached to the account statement
sent to shareholders after each transaction. For subsequent investments the stub
should be detached from the statement and, together with a check payable to "PGP
Korea Growth Fund," or "PGP Asia Growth Fund" and mailed to the Fund 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
(800) 841-0980 between the hours of 8:30 a.m. and 7:00 p.m. Eastern time, on a
day when the NYSE is open for trading in order to receive an account number. It
is necessary to notify the Funds prior to each wire purchase. Wires sent without
notifying the Funds will result in a delay of the effective date of your
purchase. The Funds' Transfer Agent will request the investor's name, address,
taxpayer identification number, amount being wired and wiring bank. The investor
should then instruct the wiring bank to transfer funds by wire to: Star Bank,
N.A. Cinti/Trust, ABA #0420-0001-3, for credit to PGP Korea Growth Fund , DDA
#4838-99457 or PGP Asia Growth Fund, DDA #4838-49457 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 a 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.
It is essential that complete information regarding the investor's account be
included in all wire instructions in order to facilitate prompt and accurate
handling of investments. Investors may obtain further information from the
Transfer Agent about remitting funds in this manner and from their own banks
about any fees that may be imposed.
Purchase at Net Asset Value. Shares of the Funds may be purchased at net asset
value by officers, trustees, directors and full time employees of the Trust, the
Advisor, the Administrator, the Distributor and affiliates of such companies, by
their family members, by persons and their family members who are direct
investment advisory clients of the Advisor, by registered representatives and
employees of firms which have sales agreements with the Distributor, by
investment advisors, financial planners or other intermediaries who place trades
for their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services, by clients of such
investment advisors, financial planners or other intermediaries who place trades
for their own accounts if the client accounts are linked to the master account
of such investment advisor, financial planner or other intermediaries on the
books and records of the broker or agent, by retirement and deferred
compensation plans and trusts used to fund such plans, including, but not
limited to, those defined in Section 401(a), 403(b) or 457 of the Internal
Revenue Code and "rabbi trusts" and by such other persons who are determined to
have acquired shares under circumstances not involving any sales expense to the
Funds or Distributor. Investors who are entitled to make purchases at net asset
value may nevertheless may be charged a fee if they effect transactions in fund
shares through a broker or agent.
General. Payments of redemption proceeds will not be made with respect to any
shares of a Fund purchased with an initial investment made by wire until one
business day after the completed Account Application is received by the Fund.
All investments must be made in U.S. dollars and, to avoid fees and delays,
checks should be drawn only on U.S. banks and should not be made by third party
check. A charge may be imposed if any check used for investment does not clear.
The Funds and the Distributor reserve the right to reject any purchase order in
whole or in part.
If an order, together with payment in proper form, is received by the Transfer
Agent by the close of trading on the NYSE (currently 4:00 p.m., New York City
time), Fund shares will be purchased at the offering price determined as of the
close of trading on that day. Otherwise, Fund shares will be purchased at the
offering price determined as of the close of trading on the NYSE on the next
business day.
Federal tax law requires that investors provide a certified Taxpayer
Identification Number and certain other required certifications upon opening or
reopening an account in order to avoid backup withholding of taxes at the rate
of 31% on taxable distributions and proceeds of redemptions. See the Fund's
Account Application for further information concerning this requirement.
The Funds do not intend to issue share certificates. All shares are normally
held in non-certificated form registered on the books of the Funds and the
Funds' Transfer Agent for the account of the shareholder.
HOW TO REDEEM AN INVESTMENT IN THE FUNDS
A shareholder has the right to have a Fund redeem all or any portion of his
outstanding shares at their current net asset value on each day the NYSE is open
for trading, subject to a 2% redemption fee imposed on redemptions of shares
within six months of purchase. These fees are paid to the Fund and are designed
to reduce transaction costs and disruptive effects of short-term investment in
the Funds. 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
Funds' Transfer Agent in order to constitute a valid tender for redemption.
Requests for redemption of fund shares should be mailed to the Funds at P.O. Box
5354, Cincinnati, OH 45201-5354. To protect the Funds and their 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 Funds' Account Application may redeem shares on any business day
the NYSE is open by calling the Funds' Transfer Agent at (800) 841-0980 between
the hours of 8:30 a.m. and 7:00 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 Funds
and the 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 Funds and the Transfer Agent
will use procedures to confirm that redemption instructions received by
telephone are genuine, including recording of telephone instructions and
requiring a form of personal identification before acting on such instructions.
If these procedures are followed, neither the Funds nor their 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 Funds 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 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 Funds 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 Funds will not mail redemption proceeds until they
have 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 Funds
reserve the right to redeem shares in any account, other than retirement plan or
Uniform Gift to Minors Act accounts, if at any time, due to redemptions by the
shareholder, the total value of a shareholder's account does not equal at least
$5,000. If a Fund determines to make such an involuntary redemption, the
shareholder will first be notified that the value of the account is less than
$5,000 and will be allowed 30 days to make an additional investment to bring the
value of the account to at least $5,000 before the Fund takes any action.
SERVICES AVAILABLE TO THE FUND'S SHAREHOLDERS
Retirement Plans. The Funds offer a prototype Individual Retirement Account
("IRA") plan and information is available from the Distributor or from your
securities dealer with respect to other retirement plans offered. Investors
should consult a tax adviser before establishing any retirement plan.
Automatic Investment Plan. For the convenience of shareholders, the Funds offer
an automatic investment plan whereby a preauthorized amount is automatically
drawn on the shareholder's personal checking account each month (but not less
than $100). Upon receipt of the withdrawn funds, a Fund automatically invests
the money in additional shares of the Fund at the current offering price.
Applications for this service are available from the Distributor. There is no
charge by the Fund for this service. The Distributor may terminate or modify
this privilege at any time, and shareholders may terminate their participation
by notifying the Transfer Agent in writing, sufficiently in advance of the next
scheduled withdrawal.
Automatic Withdrawals. As another convenience, the Funds offer a Systematic
Withdrawal Program whereby shareholders may request that a check drawn in a
predetermined amount be sent to them each month or calendar quarter. A
shareholder's account in a Fund must have shares with a value of at least
$10,000 in order to start a Systematic Withdrawal Program, and the minimum
amount that may be withdrawn each month or quarter under the Systematic
Withdrawal Program is $100. This Program may be terminated or modified by a
shareholder or the Funds at any time without charge or penalty.
A withdrawal under the Systematic Withdrawal Program is treated as a redemption
of shares, and may result in a gain or loss for federal income tax purposes. In
addition, if the amounts withdrawn exceed the dividends credited to the
shareholder's account, the account ultimately may be depleted.
HOW THE FUND'S PER SHARE VALUE IS DETERMINED
The net asset value of a Fund share is determined once daily as of the close of
public trading on the New York Stock Exchange currently 4:00 p.m. Eastern time)
on each day that Exchange is open for trading. Net asset value per share is
calculated by dividing the value of the Fund's total assets, less its
liabilities, by the number of Fund shares outstanding.
Portfolio securities are valued using current market values, if available.
Securities for which market quotations are not readily available or for which
market quotations are stale are valued at fair values as determined in good
faith by or under the supervision of the Trust's officers in accordance with
methods which are specifically authorized by the Board of Trustees. Short-term
obligations with remaining maturities of 60 days or less are valued at amortized
cost as reflecting fair value.
Because both Funds' portfolio securities are listed primarily on the Korean and
other Asian Stock Exchanges, which trade on days when the NYSE may be closed
(such as a Saturday), the net asset values of the Funds may be significantly
affected by such trading on days when shareholders have no access to the Funds.
With respect to Korean securities, currently the Korean government imposes
significant restrictions and controls on foreign investors. As a result, the
Funds may be limited in their investments or precluded from investing in certain
Korean companies. This limitation may adversely affect the performance of the
Funds. Under Korean Stock Exchange ("KSE") regulations, total foreign investment
is currently limited to 55% of each class of a company's shares listed on the
KSE and a single foreign investor may only purchase up to 50% of such shares.
The 50% and 55% limitations are reduced to 1% and 25%, respectively, for certain
government-designated public corporations with shares listed on the KSE. These
limits are subject to change. As a result of these limitations, some of the
securities trade among non-Korean residents at a premium over the market price.
The Funds may effect transactions with other foreign investors off the KSE in
the shares of companies that have reached the maximum aggregate foreign
ownership limit through a securities company in Korea. These transactions
typically occur at a premium over prices on the KSE. There can be no assurance
that the Funds, when they purchase shares at a premium, will be able to realize
such premium on the sale of shares, or that such premium will not be adversely
affected by changes in regulations or otherwise. Accordingly, this premium will
generally not be included in calculating the Funds' net asset value.
Current restrictions which govern the Korean stock market provide that on any
given trading day, a security's price is permitted to move a maximum of 8% from
the previous day's closing price. The Trustees will give consideration as to
whether any such restriction on the price movement of a particular security
affects the accuracy of such a security's valuation in determining a Fund's net
asset value per share.
DISTRIBUTIONS AND TAXES
Dividends and Distributions. Any dividends from net investment income (which
includes realized short term capital gains) are declared and paid at least
annually, typically at the end of each Fund's fiscal year (August 31). Any
undistributed long term net capital gains realized during the 12-month period
ended each October 31, as well as any additional undistributed capital gains
realized during the Fund's fiscal year, will also be distributed to shareholders
on or about December 31 of each year.
Dividends and capital gain distributions (net of any required tax withholding)
are automatically reinvested in additional shares of a 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 a 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. Each Fund intends to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As long as each fund continues to so qualify, and as long
as each Fund distributes all of its income each year to the shareholders, the
Fund will not be subject to any federal income tax or excise taxes based on net
income. Distributions made by the Funds 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. Distributions designated as capital
gains dividends are taxable as long-term capital gains regardless of the length
of time shares of the Fund have been held. Although distributions are generally
taxable when received, certain distributions made in January are taxable as if
received the prior December. Shareholders will be informed annually of the
amount and nature of the Funds' distributions.
Portions of each Fund's investment income may subject to foreign income taxes
withheld at the source. If a Fund meets certain requirements, it may elect to
"pass-through" to shareholders any such foreign taxes, which may enable
shareholders to claim a foreign tax credit or a deduction with respect to their
share thereof. Additional information about taxes is set forth in the Statement
of Additional Information. Shareholders should consult their own advisers
concerning federal, state and local tax consequences of investing in the Funds.
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 classify shares and issue other series,
the assets and liabilities of which will be separate and distinct from any other
series.
Shareholder Rights. Shares issued by the Funds have no preemptive, conversion,
or subscription rights. Shareholders have equal and exclusive rights as to
dividends and distributions as declared by the Funds and to the net assets of
the Fund upon liquidation or dissolution. Each Fund, as a separate series of the
Trust, votes separately on matters affecting only that Fund (e.g., approval of
the Advisory Agreement); all series of the Trust vote as a single class on
matters affecting all series jointly or the Trust as a whole (e.g., election or
removal of Trustees). 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, a 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. A Fund may
also advertise aggregate and average total return information over different
periods of time. A 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, and any applicable sales
charges. Investors should note that the investment results of each Fund will
fluctuate over time, and any presentation of a Fund's total return for any prior
period should not be considered as a representation of what an investor's total
return may be in any future period.
Custodian and Transfer Agent; Shareholder Inquiries. Star Bank, N.A., 425 Walnut
St., Cincinnati, OH 45202, serves as custodian of the Funds' assets. CountryWide
Services, P. O. Box 5354, Cincinnati, OH 45201-5354 is the Funds' Transfer and
Dividend Disbursing Agent. Shareholder inquiries should be directed to the
Transfer Agent at (800) 841-2858.
APPENDIX: KOREAN RISK FACTORS
Investing in securities of Korean companies and of the government (the
"Government") of the Republic of Korea (the "Republic" or "Korea") involves
certain risks not typically associated with investing in securities of United
States companies or the United States Government, in addition to those discussed
under "Investment Objective, Policies and Risks."
Investment and Repatriation Restrictions.
Under current Korean Stock Exchange regulations, total foreign investment is
limited to 55% of each class of a company's shares listed on the Korean Stock
Exchange ("KSE") and a single foreign investor may purchase up to 50% of such
shares. These limitations are subject to change. These limitations are reduced
to 1% and 25%, respectively, for certain government-listed designated public
corporations with shares listed on the KSE.
Transfer of funds from Korea to foreign countries and repatriation of foreign
capital invested in Korea are subject to certain regulatory approvals pursuant
to foreign exchange control laws and regulations. Generally, as long as the
original investment was approved or allowed under the applicable laws and
regulations of Korea, the conversion and remittance of cash or cash equivalents
into U.S. dollars in relation to such investment will be freely allowed upon
receipt of the appropriate payment approvals from the Bank of Korea or a
designated Class A foreign exchange bank depending on the type of transaction.
Currency Fluctuations. The Korea Fund's assets will be invested primarily in
Korean securities, the market value of which is determined in Won, and
substantially all of its income will be received or realized in Korean Won. The
Fund will be required, however, to compute its net asset value and income, and
to distribute its income, in U.S. dollars. As a result, the Fund's net asset
value and its distribution amounts will be subject to foreign exchange rate
fluctuations relative to the Won.
The Korean Won was devalued against the U.S. dollar in the early 1980's to reach
approximately Won 890 to the US dollar by the end of 1985. The Korean Won
appreciated against the US dollar from 1986 to approximately 665 Won per US
dollar by May 1989. Since then the Korean Won has slowly lost value against the
US dollar until late October 1997 and suddenly plunged thereafter due to the
foreign currency crisis which resulted in the International Monetary Fund
intervention in December, 1997. The exchange rate stood at approximately 1606
Won per US dollar as of the date of this Prospectus.
The Fund expects to incur certain transaction costs in connection with its
conversions between currencies and, in light of the history of the fluctuating
currency values of the Korean Won relative to the dollar, it is impossible to
predict what effect currency conversion costs may have on the operations of this
Fund.
Potential Market Volatility. The Korean securities market is still relatively
small in comparison to the Japanese, United States and other major securities
markets. Because of its small size and low trading volume, the Korean securities
market is subject to greater price volatility and less liquidity than is usual
in the Japanese, United States or major European securities markets. Because of
these liquidity limitations and the Fund's investment policies, it may be more
difficult for the Fund to purchase and sell portfolio positions than would be
the case in the United States. Accordingly, in periods of rising market prices,
the Fund may be unable to participate fully in such price increases to the
extent that it is unable to acquire desired portfolio positions quickly;
conversely, the Fund's inability to dispose fully and promptly of positions in
declining markets will cause its net asset value to decline as the value of
unsold positions is determined by references to lower prices.
Political and Economic Factors. The partition of Korea following World War II
has created a political risk to the Republic. The Demilitarized Zone at the
boundary between the Republic and North Korea established after the Korean War
of 1950-53 is supervised by United Nations forces. The United States maintains a
significant military force in the Republic. The situation remains a source of
tension, although negotiations to resolve the political division of the Korean
peninsula have been carried on intermittently for several years, and in recent
years there have been several meetings between representatives of the Republic
and of North Korea on political, economic and humanitarian issues.
Amid the economic crisis which began in the fall of 1997, Dae Joong Kim, a
leader of an opposition party, was elected as president of Korea in December,
1997. Despite somewhat negative views about him prior to the election, he has so
far stabilized the financial markets' reaction to the crisis even before his
inauguration by assuring his commitment to the agreement with the IMF and by
accelerating a timetable for structural reforms in the Korean economy.
Under the IMF bailout package and its conditions, the Korean economic system
will undergo unprecedented changes. Starting from December, 1997, the Korean
government has already begun to implement the measures suggested by the IMF such
as increasing foreign investment ceiling for stocks, opening of Korean fixed
income securities markets, and reforming the financial sector. Many observers
believe that Korea will suffer from painful restructuring of its economy in the
short term, but also believe that the Korean economy will eventually benefit
from the restructuring in the long run, if it can overcome the current crisis.
Advisor
Pacific Gemini Partners, L.L.C.
633 West Fifth St., Suite 3600
Los Angeles, CA 90071
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Rd., Ste. 261E
Phoenix, AZ 85018
Custodian
Star Bank, N.A.
425 Walnut St.
Cincinnati, Ohio 45202
Transfer and Dividend Disbursing Agent
CountryWide Fund Services
P.O. Box 5354
Cincinnati, OH 45201-5354
(800) 841-0980
Auditors
Tait, Weller & Baker
8 Penn Center Plaza, Suite 800
Philadelphia, PA 19103
Legal Counsel
Paul, Hastings, Janofsky & Walker LLP
345 California St.
San Francisco, CA 94104
Pacific Gemini Partners
Fund Group
PROSPECTUS
February 9, 1998
