SECURITIES ACT FILE NO. 33-12213
INVESTMENT COMPANY ACT FILE NO. 811-5037
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post Effective Amendment No. 47 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 48 [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
345 California Street
San Francisco, CA 94104
------------------------
It is proposed that this filing will become effective (check appropriate box)
[ ] 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)
[X] 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>
CROSS REFERENCE SHEET
(as required by Rule 495)
N-1A Item No. Location
Part A
Item 1. Cover Page........................... Cover Page
Item 2. Synopsis............................. Expense
Table
Item 3. Financial Highlights................. Financial
Highlights
Item 4. General Description of Registrant.... Objective and
Investment
Approach of the
Funds
Item 5. Management of the Funds.............. Management
of the Funds
Item 5A Management's Discussion of Fund See Annual
Performance Reports to
Shareholders
Item 6. Capital Stock and Other Securities. . . Distributions
and Taxes;
How the
Funds' Per
Share Value
is Determined
Item 7. Purchase of Securities Being Offered . . How to Invest
in the Funds;
How the
Funds' Per
Share Value
is Determined
Item 8. Redemption or Repurchase. . . . . . . . How to Redeem
an Investment
in the Funds
Item 9. Pending Legal Proceedings . . . . . . . N/A
Part B
Item 10. Cover Page ............................. Cover Page
Item 11. Table of Contents....................... Table of
Contents
Item 12. General Information and History . . . . The Trust;
General
Information
Item 13 Investment Objectives and Policies .... Investment
Objective and
Policies;
Investment
Restrictions
Item 14. Management of the Fund................... Trustees and
Executive Officers
Item 15. Control Persons and Principal Holders
of Securities............................ General Information
Item 16. Investment Advisory and Other Services.... The Funds' Investment
Advisor; the Funds'
Administrator; General
Information
Item 17. Brokerage Allocation...................... Execution of
Portfolio
Transactions
Item 18. Capital Stock and Other Securities........ General
Information
Item 19. Purchase, Redemption and Pricing of
Shares Being Offered.............. Additional
Purchase and
Redemption
Information
Item 20. Tax Status.............................. Distributions
and Tax Infor-
mation
Item 21. Underwriters............................ The Funds'
Distributor
Item 22. Performance Information.................. Performance
Information
Item 23. Financial Statements.................... N/A
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement
<PAGE>
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. Information
contained herein is subject to completion or amendment. These securities may not
be sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of
any such jurisdiction.
RCB GROWTH AND INCOME FUND
RCB SMALL CAP FUND
11111 Santa Monica Blvd., Ste. 1700
Los Angeles, CA 90025
(800) ___-_____
RCB GROWTH AND INCOME FUND (the "Fund") is a mutual fund with the investment
objective of seeking capital appreciation, primarily through investments in mid
to large capitalization companies with growth of income as a secondary
objective. RCB SMALL CAP FUND is a mutual fund with the investment objective of
seeking capital appreciation through investment in smaller capitalization
companies. Each Fund seeks to achieve its objective by investing principally in
common stocks and other equity securities. Reed, Conner & Birdwell ("RCB") is
the Funds' investment advisor.
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 , 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 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.
1
<PAGE>
TABLE OF CONTENTS
Expense Table.................................................
Investment Objectives, Policies and Risks.....................
Management of the Funds.......................................
How To Invest in the Funds....................................
How To Redeem an Investment in the Funds......................
Services Available to the Funds' Shareholders.................
How the Funds' Per Share Value Is Determined..................
Distributions and Taxes.......................................
General Information...........................................
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 , 1998
2
<PAGE>
EXPENSE TABLE
Expenses are one of several factors to consider when investing in a 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 Funds. Actual expenses may be more or less than those shown.
Each Fund has adopted a plan of distribution under which the Fund will pay a
distribution fee at an annual rate of up to a maximum of 0.25% of the Fund's net
assets. A long-term shareholder may pay more, directly and indirectly, in sales
charges and such fees than the maximum sales charge permitted under rules of the
National Association of Securities Dealers, Inc.
Shareholder Transaction Expenses (both funds)
Maximum Sales Load Imposed on Purchases......................3.50%
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)
Growth and Small Cap
Income Fund Fund
Investment Advisory Fees 0.60% 0.85%
12b-1 Fees 0.25% 0.25%
Other expenses (after reduction) 0.40% 0.39%
Total Operating Expenses
(after reduction) 1.25% 1.49%
RCB has agreed to reduce its fees or reimburse the Fund for expenses to insure
that the expenses for the Fund will not exceed 1.25% for the Growth and Income
Fund and 1.49% for the Small Cap Fund of average net assets annually. In the
absence of RCB's undertaking, it is estimated that "Other Expenses" would be
_.__% and_.__% and "Total Fund Operating Expenses" would be _.__% and _.__%
respectively.
3
<PAGE>
Example
This table illustrates the net transaction and operating expenses that would be
incurred by an investment in the Funds 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
Growth and Income Fund $47 $73
Small Cap Fund $50 $80
The Example shown above should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown. In
addition, federal regulations require the Example to assume a 5% annual return,
but the Funds' actual return may be higher or lower. See "Management of the
Funds."
RCB GROWTH AND INCOME FUND (the "Growth and Income Fund") and RCB SMALL CAP
FUND, (the "Small Cap Fund") (collectively, the "Funds") are diversified mutual
funds that are series of Professionally Managed Portfolios (the "Trust"), an
open-end registered management investment company offering redeemable shares of
beneficial interest. Shares may be purchased at a public offering price which
includes a maximum sales charge of 3.50% of the offering price, or less
depending on the amount invested. The minimum initial investment is $25,000,
with subsequent minimum investments of $1000 or more ($2,000 and $100,
respectively, for retirement plans). Shares will be redeemed at net asset value
per share.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
Investment Objectives
The investment objective of the RCB Growth and Income Fund is capital
appreciation with growth of income as a secondary objective.
The investment objective of the RCB Small Cap Fund is capital appreciation
through investment in smaller capitalization companies.
The Growth and Income Fund will invest principally in companies with a market
capitalization of $1 billion or more. The Small Cap Fund will invest principally
in companies with a market
4
<PAGE>
capitalization of $1.5 billion or less. If the market capitalization of a
company held by the Small Cap Fund increases to over $1.5 billion, the Fund is
not required to dispose of such holding.
There is, of course, no assurance that either Fund's objective will be achieved.
Investments in equity securities in general are subject to market risks that may
cause their prices to fluctuate over time and the value of an investment in the
Funds will vary as the market value of their investment portfolio changes.
Investments in a fund may be more suitable for long-term investors who can bear
the risk of short-term principal fluctuations.
Each 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 it may hold no more than 10% of the voting securities of
another issuer. There are special risks involved in investing in smaller
companies. See pages____.
The Funds invest principally in common stocks. The Funds' investments may also
include preferred stocks, warrants, convertible debt obligations and other debt
obligations that, in RCB's opinion, offer the possibility of capital growth.
During those times when equity securities cannot be found that meet RCB's
investment criteria, for temporary defensive purposes or pending longer-term
investments, the Funds may invest any amount of their assets in short-term money
market instruments, including securities issued by the U.S. Government, its
agencies and instrumentalities or such other instruments rated in the top two
grades by Moody's or S & P or, if unrated, instruments deemed to be of
comparable quality by RCB.
Investment Approach.
RCB uses an investment approach that is substantially the same for both Funds.
RCB's overall investment philosophy for both Funds involves a value-oriented
focus on preservation of capital over the long-term and a "bottom-up" approach,
analyzing companies on their individual characteristics, prospects and financial
conditions.
The universe of potential companies for investment is determined through RCB's
systematic screening of companies for attractive valuation characteristics and
the prospects of fundamental changes, as well as information derived by RCB from
a variety
5
<PAGE>
of sources, including but not limited to regional brokerage research, trade
publications and industry conferences.
Companies within this universe are evaluated by RCB in terms of fundamental
characteristics such as:
-Return on capital trends
-Cash flow and/or Earnings Growth
-Free cash flow
-Balance Sheet Integrity
-Intrinsic Value Analysis
RCB's research effort in evaluating companies also encompasses an investigation
of the strength of companies' business franchises, and management commitment to
shareholders through direct contacts and company visits.
Factors that may initiate a sale of a Fund's portfolio holdings include
management disappointment or changes in the course of business, changes in
company fundamentals, or RCB's assessment that a particular company's stock is
extremely overvalued. A 15% or greater decline in a company's stock price would
result in an intensive re-evaluation of the holding and a possible sale.
Small Cap Fund: Risks of Investing in Smaller Companies
With respect to the Small Cap Fund objective, RCB believes that smaller
companies can provide an opportunity for superior returns because they are not
as well-known to the investing public, have smaller investor following and a
limited dissemination of information about them or their industry. Therefore,
they may provide the potential for investment gains due to the inefficiencies in
this sector of the market. These companies also may offer unique products,
services or technologies and often serve special or expanded market niches that
contribute to their gain potential.
However, investments in smaller companies may be speculative and volatile and
involve greater risks than are customarily associated with larger companies.
Many smaller companies are more vulnerable than larger companies to adverse
business or economic developments. They may have limited product lines, markets
or financial resources. New and improved products or methods of development may
have a substantial impact on the earnings and revenues of such companies and any
such positive or negative developments could have a corresponding positive or
negative impact on the value of their shares.
6
<PAGE>
Small company shares, some of which trade on the over-the counter market, may
have fewer market makers, wider spreads between their quoted bid and asked
prices and lower trading volumes, resulting in comparatively greater price
volatility and less liquidity than the securities of companies that have larger
market capitalizations and/or that are traded on the major stock exchanges or
than the market averages in general. In addition, it is possible that the Fund
and other client accounts of RCB, on a collective basis, may hold a significant
percentage of a small company's outstanding shares. When making larger sales,
the Fund might have to sell assets at discounts from quoted prices or may have
to make a series of small sales over an extended period of time.
For these reasons, the net asset value of the Small Cap Fund may be more
volatile and the Fund may not be appropriate for short-term investors. The Fund
is appropriate for investors who understand and can bear the risks of investing
in smaller companies. Like all equity mutual funds, there can be no assurance
that the Fund's objective will be attained or that the value of its portfolio
will not decline.
Other Investment Techniques which may be used by the Funds
Repurchase Agreements. The Funds may enter into repurchase agreements in order
to earn additional income on available cash, or as a defensive investment in
periods when the Funds are primarily in short-term maturities. A repurchase
agreement is a short-term investment in which the purchaser (i.e., a 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 a 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, a Fund 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 the most creditworthy registered securities dealers pursuant to
procedures adopted and regularly reviewed by the Trust's Board of Trustees. RCB
monitors the creditworthiness of the banks and securities dealers with whom the
Funds engage in repurchase transactions, and neither Fund will invest more than
7
<PAGE>
15% of its total assets in illiquid securities, including repurchase agreements
maturing in more than seven days. Illiquid and Restricted Securities. Neither
Fund may invest more than 15% of its net assets in illiquid securities,
including (i) securities for which there is no readily available market; (ii)
securities the disposition of which would be subject to legal restrictions
(so-called "restricted securities"); and (iii) repurchase agreements having more
than seven days to maturity. A considerable period of time may elapse between a
Fund's decision to dispose of such securities and the time when the Fund is able
to dispose of them, during which time the value of the securities could decline.
Securities which meet the requirements of Securities Act Rule 144A are
restricted, but may be determined to be liquid by the Trustees based on such
factors as trading activity and availability of reliable price information for
such securities.
Foreign Securities. Each Fund may invest its assets in securities of foreign
issuers, including American Depositary Receipts with respect to securities of
foreign issuers, with the Growth and Income Fund limited to 25% of assets and
the Small Cap Fund limited to 35% of assets.
There are various potential risks associated with foreign investing. There may
be less publicly available information about these issuers than is available
about companies in the U.S. and foreign auditing requirements may not be
comparable to those in the U.S. In addition, the value of the foreign securities
may be adversely affected by movements in the exchange rates between foreign
currencies and the U.S. dollar, as well as other political and economic
developments, including the possibility of expropriation, confiscatory taxation,
exchange controls or other foreign governmental restrictions.
Options Transactions. The Funds may buy call and put options on individual
securities and write covered call and put options, and engage in related closing
transactions. A call option gives the purchaser of the option the right to buy,
and obligates the writer to sell, the underlying security at the exercise price
at any time during the option period. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy, the
underlying security at the exercise price at any time during the option period.
A covered call option sold by the Fund, which is a call option with respect to
which the Fund owns the underlying security, exposes the Fund during the term of
the option to possible loss of opportunity to realize appreciation in the market
price of the underlying security or to possible continued holding of a
8
<PAGE>
security which might otherwise have been sold to protect against depreciation in
the market price of the security. A covered put option sold by the Fund exposes
the Fund during the term of the option to a decline in the price of the
underlying security. A put option sold by the Fund is covered when, among other
things, liquid assets are segregated with the Fund's custodian to fulfill the
obligation undertaken.
To close out a position when writing covered options, the Fund may make a
"closing purchase transaction," which involves purchasing an option on the same
security with the same exercise price and expiration date as the option which it
has previously written on the security. To close out a position as a purchaser
of an option, the Fund may make a "closing sale transaction," which involves
liquidating the Fund's position by selling the option previously purchased. The
Fund will realize a profit or loss from a closing purchase or sale transaction
depending upon the difference between the amount paid to purchase an option and
the amount received from the sale thereof. See the Statement of Additional
Information.
Portfolio Turnover. The annual rate of portfolio turnover is not expected to
exceed 30% for the Growth and Income Fund and 40% for the Small Cap Fund. In
general, RCB 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 a Fund's objective.
Year 2000. Like other mutual funds, financial and business organizations around
the world, the Funds could be adversely affected if the computer systems used by
them, RCB and other service providers and entities with computer systems that
are linked to fund records do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 issue." The Funds and RCB are taking steps that are reasonably
designed to address the Year 2000 issue with respect to the computer systems
they use and to obtain satisfactory assurances that comparable steps are being
taken by each of the Funds' other major service providers. However. there can be
no assurance that these steps will be sufficient to avoid any adverse impact on
the Funds.
The Funds have adopted certain investment restrictions, which are described
fully in the Statement of Additional Information. Like each Fund's investment
objective, certain of these restrictions are fundamental and may be changed only
by a majority vote of a Fund's outstanding shares.
9
<PAGE>
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust establishes the Funds' policies and
supervises and reviews the management of the Funds. RCB has been an independent
investment advisor since 1959. RCB provides investment advisory services to
individual and institutional accounts with a value in excess of $1 billion. An
investment team, headed by Mr. Donn B. Conner, Principal and President of RCB,
and Mr. Victor F. Hawley, Vice President, Portfolio Management and Research of
RCB will direct the investments of the Growth and Income Fund. They have been
associated with RCB since 1972, and 1994, respectively. Prior to 1994, Mr.
Hawley was associated with The Boston Company. The team also includes James C.
Reed, Executive Vice President, James P. Birdwell, Executive Vice President,
Jeffrey Bronchick, Executive Vice President, and Thomas D. Kerr, Vice President.
Mr. Jeffrey Bronchick, Executive Vice President, Principal and Chief Investment
Officer of RCB and Mr. Thomas D. Kerr, Vice President, Portfolio Management and
Research of RCB are principally responsible for the management of the Small Cap
Fund. They have been associated with RCB since 1989 and 1994, respectively.
Prior to 1994, Mr. Kerr was associated with the Fuji Bank, Ltd.
Under an Investment Advisory Agreement, RCB provides the Fund 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, the Funds pay RCB a
monthly management fee (accrued daily) based upon the average daily net assets
of the Fund at the annual rate of 0.60% for the Growth and Income Fund and 0.85%
for the Small Cap Fund.
Under an Administration Agreement, Investment Company Administration Corporation
(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:
Assets Fee or Fee Rate
Less than $15 million $30,000
$15,000,000 to $50,000,000 0.20%
$50,000,000 to $100,000,000 0.15%
10
<PAGE>
$100,000,000 to $200,000,00 0.10%
$200,000,000 and above 0.05%
Each Fund is responsible for its own operating expenses. RCB has agreed to
reduce its fees or reimburse each Fund for its annual operating expenses which
exceed 1.25% for the Growth and Income Fund and 1.49% for the Small Cap Fund.
RCB also may reimburse additional amounts to either Fund at any time in order to
reduce the Fund's expenses. Reductions made by RCB in its fees or payments or
reimbursements of expenses which are a Fund's obligation are subject to
reimbursement within the following three years by the Fund provided the Fund is
able to do so and remain in compliance with any applicable expense limitations
then in effect.
RCB 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 RCB may lawfully and
appropriately use in its investment management and advisory capacities. Provided
the Funds receive prompt execution at competitive prices, RCB may also consider
the sale of Fund shares as a factor in selecting broker-dealers for the Funds'
portfolio transactions.
HOW TO INVEST IN THE FUND
The minimum initial investment is $25,000. Subsequent investments must be at
least $1,000. Investments in retirement plans may be for minimums of $1,000 and
$100, respectively. 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 the Funds 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
Funds or investment dealers prior to the time of the next determination of the
Funds' net asset value and, in the case of orders placed with dealers,
transmitted properly to the Transfer Agent. 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 public offering price per share is equal to the net asset value per share,
plus a sales charge, which is reduced on
11
<PAGE>
purchases involving amounts of $50,000 or more, as set forth in the table below.
The reduced sales charges apply to quantity purchases made at one time by (i) an
individual, (ii) members of a family (i.e., an individual, spouse and children
under age 21), or (iii) a trustee or fiduciary of a single trust estate or a
single fiduciary account. In addition, purchases of shares made during a
thirteen month period pursuant to a written Letter of Intent are eligible for a
reduced sales charge. Reduced 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
as of sales
percent of charge
net retained
offering asset by
Amount of Purchase price value dealers
- ------------------ ----- ----- -------
Less than $50,000 . . . . . 3.50% 3.63% 3.25%
$50,000 but less than $100,000... 3.00% 3.09% 2.75%
$100,000 but less than $200,000.. 2.50% 2.56% 2.25%
$200,000 but less than $300,000.. 2.00% 2.04% 1.75%
$300,000 but less than $400,000. 1.50% 1.52% 1.25%
$400,000 but less than $500,000 1.00% 1.01% 0.75%
$500,000 or more . . . . . .. .. None None None
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)
___-____. 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 Fund. If the order is placed with the dealer by 4:00 p.m. Eastern time and
forwarded promptly to the Transfer Agent or other service agent, it will be
confirmed at the applicable offering price on that day. The dealer is
responsible for placing orders promptly with the Transfer Agent and for
forwarding payment promptly.
Purchases Sent to the Transfer Agent
Investors may purchase shares by sending an Application Form
12
<PAGE>
directly to the Transfer Agent, with payment made either by
check or by wire.
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 RCB Growth and Income Fund" or RCB Small Cap
Fund" should be mailed to the Funds' Transfer Agent: P.O. Box 640856,
Cincinnati, OH 45264-0856. For investments sent by overnight mail, please
contact the Transfer Agent at (800) ___-____ for instructions.
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 RCB Growth and Income Fund or
RCB Small Cap Fund mailed to the Transfer Agent in the envelope provided at the
address indicated above. The investor's account number should be written on the
check. By Wire: For initial investments, before wiring funds, an investor should
call the Transfer Agent at (800) ___-____ between the hours of 9:00 a.m. and
4:00 p.m. Eastern time, on a day when the New York Stock Exchange 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 Routing Number 0420-0001-3,
DDA #__________, for credit to DDA # ________for credit to RCB Growth and Income
Fund RCB Small Cap Fund [investor name & acc't. number] [investor name &
acc't.number]
The investor should also insure 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 complete and mail the
Form promptly to the Transfer Agent.
For all wire investments, the investor must call the Transfer
Agent at (800) ___-____ when the wire is sent. Failure to do so
13
<PAGE>
may cause the purchase not to be credited. 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: (1) officers, trustees, directors and full time employees of the
Trust, RCB, the Distributor affiliates of such companies, and by their family
members; (2) institutions, their employees and individuals who are direct
investment advisory clients of RCB under investment advisory agreements and
their family members; (3) registered representatives and employees of firms
which have sales agreements with the Distributor; (4) 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; (5) clients of such investment
advisors, financial planners or other intermediaries who place trades for their
own accounts if the 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; (6) 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; (7)
such other persons who are determined to have acquired shares under
circumstances not involving any sales expense to the Funds or Distributor.
Investors may be charged a fee if they effect transactions in fund shares
through a broker or agent.
Investors also may purchase shares of the Funds at net asset value to the extent
that the investment represents the proceeds from the redemption, within the
previous sixty days, of shares (the purchase price of which included a sales
charge) of another mutual fund. When making a purchase at net asset value under
this provision, the investor should forward to the Transfer Agent either (i) the
redemption check representing the proceeds of shares redeemed, endorsed to the
order of the Fund in which investment is to be made, or (ii) a copy of the
confirmation from the other fund, showing the redemption transaction.
General. 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 Funds. 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.
14
<PAGE>
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 New York Stock Exchange (normally 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
New York Stock Exchange 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 Funds' Account Application
for further information concerning this requirement. The Funds do not issue
share certificates. All shares are 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 FUND
A shareholder has the right to have the Funds redeem all or any portion of his
outstanding shares at their current net asset value on each day the New York
Stock Exchange is open for trading. The redemption price is the net asset value
per share next determined after the shares are validly tendered for redemption.
Direct Redemption. A written request for redemption must be received by the
Transfer Agent in order to constitute a valid tender for redemption. 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 Funds and their
shareholders, a signature guarantee is required for certain transactions,
including redemptions of amounts over $5,000. 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 a signature
must be a member of a clearing corporation or maintain net capital of at least
15
<PAGE>
$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 New York Stock Exchange is open by calling the
Funds' Transfer Agent at (800) ___-____ before 4:00 p.m. Eastern time.
Redemption proceeds will be mailed or wired at the shareholder's direction the
next business day to the predesignated account. The minimum amount that may be
wired is $1,000 (wire charges, if any, will be deducted from redemption
proceeds). By establishing telephone redemption privileges, a shareholder
authorizes the Funds and their Transfer Agent to act upon the instruction of any
person by telephone to redeem from the account for which such service has been
authorized and transfer the proceeds to the bank account designated in the
Authorization. The 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 normal
identification procedures are followed, neither the Funds nor the Transfer Agent
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 during
periods of abnormal market activity.
Exchange Privilege. You may exchange investments between the Funds without
additional sales charges by mailing or delivering written instructions to the
Transfer Agent at the address set forth above. Please specify the number of
shares or dollar amount to be exchanged, and your name and account number. You
may also exchange shares by telephoning the Transfer Agent at (800) ___-_____
between the hours of 9:00 AM and 4:00 PM Eastern time on a day when the New York
Stock Exchange is open for normal trading. The Funds reserve the right to limit
the number of exchanges a shareholder may make in any year to avoid
16
<PAGE>
excessive Fund expenses, and may terminate or modify the
exchange privilege at any time.
Other Redemption Information. 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 Funds may suspend the right of redemption under certain extraordinary
circumstances in accordance with the Rules of the Securities and Exchange
Commission. In the case of shares purchased by check and redeemed shortly after
purchase, the 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
$2,500. If the Funds determine to make such an involuntary redemption, the
shareholder will first be notified that the value of the account is less than
$2,500 and will be allowed 30 days to make an additional investment to bring the
value of the account to at least $2,500 before the Funds take any action.
Distribution Plan. The Funds have adopted a Distribution Plan pursuant to Rule
12b-1 under the 1940 Act (the "Plan") under which each Fund pays RCB as
Distribution Coordinator an amount which is accrued daily and paid monthly, at
an annual rate of up to 0.25% of the average daily net assets of the Fund.
Amounts paid under the Plan by the Funds are paid to the Distribution
Coordinator to pay for the services it provides and the expenses it bears in the
distribution of the Funds' shares, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Funds' shares to prospective investors; preparation,
printing and distribution of sales literature advertising materials; and
compensation of dealers engaged in the sale and promotion of fund shares and of
other intermediaries who provide administrative, accounting and record keeping
services with respect to fund shareholders.
Plan payments will be reviewed by the Trustees. However, it is
possible that at times the amount of the Distribution
17
<PAGE>
Coordinator's compensation could exceed its Distribution Expenses, resulting in
a profit. If the Plan is terminated, the Funds will not be required to make
payments for expenses incurred after the termination.
SERVICES AVAILABLE TO THE FUND'S SHAREHOLDERS
Retirement Plans. The minimum initial investment for such plans is $1,000, with
minimum subsequent investments of $100. The Funds offer prototype Individual
Retirement Account ("IRA" and "Roth IRA") plans and information is available
from the Distributor or from securities dealers with respect to Keogh, Section
403(b) and other retirement plans offered. Investors should consult a tax
adviser before establishing any retirement plan. Automatic Check Investment
Plan. For the convenience of shareholders, the Funds offer 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 directly. Upon receipt of the withdrawn
funds, the Funds automatically invest the money in additional shares at the
current offering price. Applications for this service are available from the
Distributor. There is no charge by the Funds 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 withdrawal. Systematic Withdrawal Program.
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 must have Fund
shares with a value of at least $10,000 in order to start a Systematic
Withdrawal Program, and the minimum amount that may be withdrawn each month or
quarter under the Systematic Withdrawal Program is $100. This Program may be
terminated or modified by a shareholder or the Fund at any time without charge
or penalty. A withdrawal under the Systematic Withdrawal Program involves a
redemption of shares, and may result in a gain or loss for federal income tax
purposes. In addition, if the amount withdrawn exceed the dividends credited to
the shareholder's account, the account ultimately may be depleted.
HOW THE FUND'S PER SHARE VALUE IS DETERMINED
18
<PAGE>
The net asset value of a Fund share is determined once daily as of the close of
public trading on the New York Stock Exchange (currently 4:00 p.m. Eastern time)
on each day the New York Stock Exchange is open for trading. Net asset value per
share is calculated by dividing the value of each 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 expected
to be paid in December. Capital gains distributions are also normally made in
December, but the Funds may make an additional payment of dividends or
distributions if it is necessary at another time during any year. Dividends and
capital gain distributions (net of any required tax withholding) are
automatically reinvested in additional shares of the Funds at the net asset
value per share on the reinvestment date unless the shareholder has previously
requested in writing to the Transfer Agent that payment be made in cash. Any
dividend or distribution paid by 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. The Funds intend to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As long as the Funds continue to qualify, and as long as
the Funds distribute all of their income each year to the shareholders, the
Funds will not be subject to any federal income or excise taxes. The
distributions made by the Funds will be taxable to shareholders whether received
in shares (through dividend reinvestment ) or in cash. Distributions derived
from net
19
<PAGE>
investment income, including net short-term capital gains, are taxable to
shareholders as ordinary income. A portion of these distributions may qualify
for the intercorporate dividends-received deduction. Distributions designated as
capital gains dividends are taxable as long-term or mid-term capital gains
regardless of the length of time shares of the Fund have been held. The maximum
federal capital gains rate for individuals is 28% with respect to capital assets
held for more than 12 months, but not more than 18 months, and 20% with respect
to capital assets held more than 18 months. The maximum capital gains rate for
corporate shareholders is the same as the maximum tax rate for ordinary income.
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. Additional information about taxes is set forth in the Statement
of Additional Information. Shareholders should consult their own advisors
concerning federal, state and local taxation of distributions from 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 issue other series, the assets and
liabilities of which will be separate and distinct from any other series. The
fiscal year of the Funds ends on June 30.
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. The Funds, as separate series of the
Trust, vote separately on matters affecting only an individual Fund (e.g.,
approval of the Investment 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
20
<PAGE>
of the outstanding shares of the Trust for the purpose of
electing or removing Trustees.
Performance Information. From time to time, the Funds may publish their total
return in advertisements and communications to investors. Total return
information will include a Fund's average annual compounded rate of return over
the most recent year and over the period from the Funds' inception of
operations. The Funds may also advertise aggregate and average total return
information over different periods of time. The Funds' total return will be
based upon the value of the shares acquired through a hypothetical $1,000
investment (at the maximum public offering price) at the beginning of the
specified period and the net asset value of such shares at the end of the
period, assuming reinvestment of all distributions and after giving effect to
the maximum applicable sales charge. Total return figures will reflect all
recurring charges against Fund income. Investors should note that the investment
results of the Fund will fluctuate over time, and any presentation of 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. Shareholder
Inquiries. Shareholder inquiries should be directed to the Transfer Agent at
(800) ___-____.
21
<PAGE>
Investment Advisor
Reed, Conner & Birdwell, Inc.
11111 Santa Monica Blvd., Suite 1700
Los Angeles, CA 90025
(310) 478-4005
(800) ___-____
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Rd., Ste. 261-E
Phoenix, AZ 85018
Custodian
Star Bank, N.A.
425 Walnut St.
Cincinnati, Ohio 45202
Transfer and Dividend Disbursing Agent
[ ]
[ ]
[ ]
(800) ___-____
Auditors
Tait, Weller & Baker
8 Penn Center Plaza
Philadelphia, PA 19103
Legal Counsel
Paul, Hastings, Janofsky & Walker
345 California Street
San Francisco, CA 94104
22
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
____________ , 1998
RCB GROWTH AND INCOME FUND
RCB SMALL CAP FUND
series of
PROFESSIONALLY MANAGED PORTFOLIOS
11111 Santa Monica Blvd., Ste. 1700
Los Angeles, CA 90025
(800) ___-____
This Statement of Additional Information is not a prospectus and it
should be read in conjunction with the prospectus of the RCB Growth and Income
Fund and RCB Small Cap Fund a "Fund or the "Funds"). A copy of the prospectus of
the Funds dated _____ __, 1998 is available by calling either of the numbers
listed above.
<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 Funds' Investment Advisor..................................................................................B-12
The Funds' Administrator.......................................................................................B-12
The Funds' Distributor.........................................................................................B-13
Execution of Portfolio Transactions............................................................................B-13
Additional Purchase and Redemption Information.................................................................B-15
Determination of Share Price...................................................................................B-16
Performance Information........................................................................................B-17
General Information............................................................................................B-18
Financial Statements...........................................................................................B-19
</TABLE>
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 Statement of Additional Information relates only to the Funds. Reed, Conner
& Birdwell ("RCB") is the Funds' investment advisor.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Funds'
investment objectives and policies as set forth in the Prospectus. There can be
no assurance the objectives of the Funds will be attained.
Repurchase Agreements
The Funds 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 Funds, 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 Funds 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
Funds will generally enter into repurchase agreements of short durations, from
overnight to one week, although the underlying securities generally have longer
maturities. Neither Fund may enter into a repurchase agreement with more than
seven days to maturity if, as a result, more than 15% of the value of the Fund's
total assets would be invested in illiquid securities including such repurchase
agreements.
For purposes of the Investment Company 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. In the event of a
default on the part of the seller, 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. As with any
B-2
<PAGE>
unsecured debt instrument purchased for the Fund, RCB 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.
There is also the risk that the seller may fail to repurchase the
security. However, a 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 a Fund may be unsuccessful in seeking to impose on the seller a
contractual obligation to deliver additional securities.
When-Issued Securities
The Funds may from time to time purchase securities on a "when-issued"
basis. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
for the when-issued securities take place at a later date. Normally, the
settlement date occurs within one month of the purchase; during the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. To the extent that assets of a Fund are
held in cash pending the settlement of a purchase of securities, the Fund would
earn no income; however, it is the Funds' 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 Funds intend 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 Funds do not believe that their net asset value or
income will be adversely affected by the purchase of securities on a when-issued
basis. The Funds will segregate liquid assets with the Custodian equal in value
to commitments for when-issued securities. Such
B-3
<PAGE>
segregated assets either will mature or, if necessary, be sold on or before the
settlement date.
Foreign Investments
The Funds 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 RCB will be able to
anticipate or counter these potential events and their impacts on the Funds'
share price.
The Funds may make use of American Depositary Receipts and
European Depositary Receipts ("ADRs" and "EDRs"). These are
B-4
<PAGE>
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.
Options on Securities
The Funds may engage in certain purchases and sales of options on
securities. The Funds may write (i.e., sell) call options ("calls") on equity
securities if the calls are "covered" throughout the life of the option. A call
is "covered" if a Fund owns the optioned securities. When a Fund writes a call,
it receives a premium and gives the purchaser the right to buy the underlying
security at any time during the call period at a fixed exercise price regardless
of market price changes during the call period. If the call is exercised, the
Fund will forgo any gain from an increase in the market price of the underlying
security over the exercise price.
A Fund may purchase a call on securities to effect a "closing purchase
transaction" which is the purchase of a call covering the same underlying
security and having the same exercise price and expiration date as a call
previously written by the Fund on which it wishes to terminate its obligation.
If the Fund is unable to effect a closing purchase transaction, it will not be
able to sell the underlying security until the call previously written by the
Fund expires (or until the call is exercised and the Fund delivers the
underlying security).
A Fund also may write and purchase put options ("puts"). When the Fund
writes a put, it receives a premium and gives the purchaser of the put the right
to sell the underlying security to the Fund at the exercise price at any time
during the option period. When the Fund purchases a put, it pays a premium in
return for the right to sell the underlying security at the exercise price at
any time during the option period. If any put is not exercised or sold, it will
become worthless on its expiration date. When a Fund writes a put, it will
segregate liquid assets at all times during the option period equal in value to
the exercise price of the put.
The Funds' option positions may be closed out only on an exchange which
provides a secondary market for options of the same series, but there can be no
assurance that a liquid secondary market will exist at a given time for any
particular option.
B-5
<PAGE>
The Funds' custodian, or a securities depository acting for it,
generally acts as escrow agent as to the securities on which the Funds have
written puts or calls, or as to other securities acceptable for such escrow so
that no margin deposit is required of the Fund. Until the underlying securities
are released from escrow, they cannot be sold by the Funds.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation has the authority to
permit other, generally comparable securities to be delivered in fulfillment of
option exercise obligations. If the Options Clearing Corporation exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and
rate movements may take place in the underlying markets that cannot be reflected
in the options markets. The purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by
each 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
Statement of Additional Information. Any such borrowing will
B-6
<PAGE>
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 real estate, commodities or commodity contracts (As a
matter of operating policy, the Board of Trustees may authorize the Fund in the
future to engage in certain activities regarding futures contracts for bona fide
hedging purposes; any such authorization will be accompanied by appropriate
notification to shareholders).
5. Invest 25% or more of the market value of its assets in the
securities of companies engaged in any one industry. (Does not apply to
investment in the securities of the U.S. Government, its agencies or
instrumentalities.)
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.
The Fund observes the following policies, which are not deemed
fundamental and which may be changed without shareholder vote. The
Fund may not:
7. Invest in any issuer for purposes of exercising control or
management.
8. Invest in securities of other investment companies except as
permitted under the Investment Company Act of 1940.
9. Invest, in the aggregate, more than 15% of its total assets in
securities with legal or contractual restrictions on resale, securities which
are not readily marketable and repurchase agreements with more than seven days
to maturity.
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
B-7
<PAGE>
a violation of that restriction, except with respect to borrowing or the
purchase of restricted or illiquid securities.
DISTRIBUTIONS AND TAX INFORMATION
Distributions
Dividends from net investment income and distributions from net profits
from the sale of securities are generally made annually, as described in the
Prospectus after the conclusion of the Fund's fiscal year (December 31). Also,
the Funds expect to distribute any undistributed net investment income on or
about December 31 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 Funds is accompanied by a brief explanation of
the form and character of the distribution. In January of each year the Funds
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. Each Fund intends to continue 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"), provided it complies with all
applicable requirements regarding the source of its income, diversification of
its assets and timing of distributions. The Funds' policy is to distribute to
shareholders all of their 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 Funds will not be subject to
any federal income or excise taxes. To comply with the requirements, the Funds
must also distribute (or be deemed to have distributed) by December 31 of each
calendar year (i) at least 98% of ordinary income for such year, (ii) at least
98% of the excess of realized capital gains over 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 Funds paid no
federal income tax.
Net investment income consists of interest and dividend income, less
expenses. Net realized capital gains for a fiscal period are computed by taking
into account any capital loss carryforward of the Funds.
B-8
<PAGE>
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
Funds for its taxable year. In view of the Funds' investment policy, it is
expected that dividends from domestic corporations may be part of the Funds'
gross income and that, accordingly, part of the distributions by the Funds may
be eligible for the dividends-received deduction for corporate shareholders.
However, the portion of a 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 during
the 90-day period that begins 45 days before the stock becomes ex-dividend with
respect to the dividend.
Distributions of the excess of net long-term capital gains over net
short-term capital losses are taxable to shareholders as long-term or mid-term
capital gains, regardless of the length of time they have held their shares. The
maximum federal capital gains rate for individuals is 28% with respect to
capital assets held for more than 12 months, but not more than 18 months, and
20% with respect to capital assets held more than 18 months. The maximum capital
gains rate for corporate shareholders is the same as the maximum tax rate for
ordinary income. Capital gains distributions are not eligible for the
dividends-received deduction referred to in the previous paragraph.
Distributions of any net investment income and net realized capital gains will
be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date. Distributions
are generally taxable when received. However, distributions declared in October,
November or December to shareholders of record on a date in such a month and
paid the following January are taxable as if received on December 31.
Distributions are includable in alternative minimum taxable income in computing
a shareholder's liability for the alternative minimum tax.
A redemption or exchange of Fund shares may result in recognition of a
taxable gain or loss. In determining gain or loss from an exchange of Fund
shares for shares of another mutual fund, the sales charge incurred in
purchasing the shares that are
B-9
<PAGE>
surrendered will be excluded from their tax basis to the extent that a sales
charge that would otherwise be imposed in the purchase of the shares received in
the exchange is reduced. Any portion of a sales charge excluded from the basis
of the shares surrendered will be added to the basis of the shares received. Any
loss realized upon a redemption or exchange may be disallowed under certain wash
sale rules to the extent shares of the same Fund are purchased (through
reinvestment of distributions or otherwise) within 30 days before or after the
redemption or exchange.
Under the Code, the Funds will be required to report to the Internal
Revenue Service ("IRS") 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 Internal Revenue 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 Funds with
their taxpayer identification numbers or certify their exempt status in order to
avoid possible erroneous application of backup withholding. The Funds reserve
the right to refuse to open an account for any person failing to provide a
certified taxpayer identification number.
The Funds will not be subject to tax in the Commonwealth of
Massachusetts as long as they qualify as regulated investment companies 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 Funds.
Shareholders are advised to consult with their own tax advisers concerning the
application of federal, state and local taxes to an investment in the Funds.
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
Funds, including the possibility that such a shareholder may be
B-10
<PAGE>
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 Funds 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, their
affiliations, dates of birth 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, New York 10011. Executive Vice President, The
Wadsworth Group (consultants) since 1986; Executive Vice President of Investment
Company Administration Corporation ("ICAC") (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, 08/12/43 Chairman and Trustee
14 Five Roses East, Ancram, NY 12502. President, Talon Industries (venture
capital and business consulting); formerly Chief Operating Officer, Integrated
Asset Management (investment advisor and manager) and formerly President, Value
Line, Inc., (investment
advisory and financial publishing firm).
Wallace L. Cook 09/10/39 Trustee
B-11
<PAGE>
One Peabody Lane, Darien, CT 06820. Retired. Formerly Senior Vice
President, Rockefeller Trust Co. Financial Counselor, Rockefeller
& Co.
Carl A. Froebel 05/23 /38 Trustee
2 Crown Cove Lane, Savannah, GA 31411. Private Investor. Formerly
Managing Director, Premier Solutions, Ltd. 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, New Jersey 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).
Eric M. Banhazl* 08/05/57 Treasurer
2020 E. Financial Way, Suite 100, Glendora, California 91741.
Senior Vice President, The Wadsworth Group, Senior Vice President
of ICAC and Vice President of FFD since 1990.
Robin Berger* 11/17/56 Secretary
479 West 22nd St., New York, New York 10011. Vice President, The
Wadsworth Group since June, 1993; formerly Regulatory and
Compliance Coordinator, Equitable Capital Management, Inc. (1991-
93).
Robert H. Wadsworth* 01/25/40 Vice President
4455 E. Camelback Road, Suite 261E, Phoenix, Arizona 85018. President of The
Wadsworth Group since 1982, President of ICAC 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 all other portfolios of the Trust. This
total amount is allocated among the portfolios. Disinterested
B-12
<PAGE>
trustees receive an annual retainer of $7,500 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 $4,500. 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.
Name of Trustee Total Annual Compensation
Dorothy A. Berry $22,000
Wallace L. Cook $17,500
Carl A. Froebel $17,500
Rowley W.P. Redington $17,500
It is estimated that during the first fiscal year of the Funds,
trustees fees and expenses to be allocated to it should not exceed $3,000. As of
the date of this Statement of Additional Information, the Trustees and Officers
of the Trust as a group did not own more than 1% of the outstanding shares of
the Fund.
THE FUNDS' INVESTMENT ADVISOR
As stated in the Prospectus, investment advisory services are provided
to the Fund by Reed, Conner & Birdwell, Inc., the Advisor, pursuant to an
Investment Advisory Agreement. The use of the name "RCB" by the Funds is
pursuant to a license granted by RCB, and in the event the Investment Advisory
Agreement with the Funds is terminated, RCB has reserved the right to require
the Funds to remove any references to the name "RCB," "Reed, Conner & Birdwell,"
or other name derived from RCB.
After its initial two year term, 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. Any such agreement may be
terminated at any time, without penalty, by either
B-13
<PAGE>
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.
THE FUNDS' ADMINISTRATOR
The Funds have an Administration Agreement with Investment Company
Administration Corporation (the "Administrator"), a corporation owned and
controlled by Messrs. Banhazl, Paggioli and Wadsworth with offices at 2020 East
Financial Way, Ste. 100, Glendora, CA 91741 and 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, statements of
additional information, marketing materials, tax returns, shareholder reports
and other regulatory reports or filings required of each Fund; prepare all
required filings necessary to maintain the Funds' ability to sell shares in all
states where each 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 Funds'
servicing agents (i.e., transfer agent, custodian, fund accountants, etc.);
review and adjust as necessary the Funds' daily expense accruals; and perform
such additional services as may be agreed upon by the Funds and the
Administrator.
For its services, the Administrator receives a monthly fee from each Fund at
the following annual rate:
Less than $15,000,000 $30,000
$15 million to $50 million 0.20%
$50 million to $100 millio 0.15%
$100 million to $150 million 0.10%
Over $150 million 0.05%
B-14
<PAGE>
THE FUND'S DISTRIBUTOR
First Fund Distributors, Inc., (the "Distributor"), a corporation owned
by Mr. Banhazl, Mr. Paggioli and Mr. Wadsworth, acts as the Funds' principal
underwriter in a continuous public offering of the Fund's shares. After its
initial two year term, 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 Distributing 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.
Each Fund has adopted a Distribution Plan in accordance with Rule
12b-1 under the 1940 Act. The Plan provides that each Fund will pay a fee to RCB
as Distribution Coordinator at an annual rate of up to 0.25% of the average
daily net assets of the Fund. The fee is paid to RCB as reimbursement for, or in
anticipation of, expenses incurred for distribution related activity.
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, RCB determines which
securities are to be purchased and sold by the Funds and which broker-dealers
will be used to execute the Funds' portfolio transactions. Purchases and sales
of securities in the over-the-counter market will be executed directly with a
"market-maker" unless, in RCB's opinion, a better price and execution can
otherwise be obtained by using a broker for the transaction.
Purchases of portfolio securities for the Funds 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 Funds 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
B-15
<PAGE>
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, RCB will use its best efforts to
choose a broker-dealer capable of providing the services necessary to obtain the
most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm's risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that more
than one broker-dealer can offer the most favorable price and execution
available, consideration may be given to those broker-dealers which furnish or
supply research and statistical information to RCB that it may lawfully and
appropriately use in its investment advisory capacities, as well as provide
other services in addition to execution services. RCB 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 Funds, to be useful in varying
degrees, but of indeterminable value. Portfolio transactions may be placed with
broker-dealers who sell shares of the Funds subject to rules adopted by the
National Association of Securities Dealers, Inc.
While it is the Funds' general policy to seek first to obtain the most
favorable price and execution available, in selecting a broker-dealer to execute
portfolio transactions for a Fund, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services to the Fund or to RCB,
even if the specific services are not directly useful to the Fund and may be
useful to RCB in advising other clients. In negotiating commissions with a
broker or evaluating the spread to be paid to a dealer, RCB 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 RCB 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
RCB's overall responsibilities to the Funds.
B-16
<PAGE>
Investment decisions for the Funds are made independently from those of
other client accounts or mutual funds managed or advised by RCB. Nevertheless,
it is possible that at times identical securities will be acceptable for both a
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 a 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 a 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 RCB, 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 a 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 Funds do not effect securities transactions through brokers solely
for selling shares of the Fund, although the Funds may consider the sale of
shares as a factor in allocating brokerage. However, as stated above,
broker-dealers who execute brokerage transactions may effect purchases of shares
of the Funds for their customers.
The Funds do not use the Distributor to execute portfolio transactions.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Trust reserves the right in its sole discretion (I) to suspend the
continued offering of the Funds' shares, (ii) to reject purchase orders in whole
or in part when in the judgment of RCB or the Distributor such rejection is in
the best interest of the
B-17
<PAGE>
Funds, 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 Funds' shares.
Payments to shareholders for shares of the Funds redeemed directly from
the Funds will be made as promptly as possible but no later than seven days
after receipt by the Funds' Transfer Agent of the written request in proper
form, with the appropriate documentation as stated in the Prospectus, except
that the Funds may suspend the right of redemption or postpone the date of
payment during any period when (a) trading on the New York Stock Exchange is
restricted as determined by the SEC or such Exchange is closed for other than
weekends and holidays; (b) an emergency exists as determined by the SEC making
disposal of portfolio securities or valuation of net assets of the Funds not
reasonably practicable; or (c) for such other period as the SEC may permit for
the protection of the Funds' shareholders. At various times, the Funds may be
requested to redeem shares for which they have not yet received confirmation of
good payment; in this circumstance, the Funds may delay the redemption until
payment for the purchase of such shares has been collected and confirmed to the
Funds.
The Funds intend to pay cash (U.S. dollars) for all shares redeemed,
but, under abnormal conditions which make payment in cash unwise, the Funds may
make payment partly in securities with a current market value equal to the
redemption price. Although the Funds do not anticipate that they 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
Funds have 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 Funds'
portfolio securities at the time of redemption or repurchase.
Automatic Check Investment
B-18
<PAGE>
As discussed in the Prospectus, the Funds provide a Check-A-Matic Plan
for the convenience of investors who wish to purchase shares of the Funds on a
regular basis. All record keeping and custodial costs of the Check-A-Matic Plan
are paid by the Funds. The market value of the Funds' 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 Funds will be 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 the Exchange is open for trading. It is expected that the Exchange
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 Funds do not expect to determine
the net asset value of shares on any day when the Exchange is not open for
trading even if there is sufficient trading in its portfolio securities on such
days to materially affect the net asset value per share.
In valuing the Funds' assets for calculating net asset value, readily
marketable portfolio securities listed on a national securities exchange or on
NASDAQ are valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such exchange or on
NASDAQ on such day, the security is valued at the closing bid price on such day.
Readily marketable securities traded only in the over-the-counter market and not
on NASDAQ are valued at the current or last bid price. If no bid is quoted on
such day, the security is valued by such method as the Board of Trustees of the
Trust shall determine in good faith to reflect the security's fair value. All
other assets of each Fund are valued in such manner as the Board of Trustees in
good faith deems appropriate to reflect their fair value.
The net asset value per share of each Fund is calculated as follows:
all liabilities incurred or accrued are deducted from the valuation of total
assets which includes accrued but undistributed
B-19
<PAGE>
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, each 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. Each Fund may
also advertise aggregate and average total return information over different
periods of time.
Each Fund's total return may be compared to relevant indices, including
Standard & Poor's 500 Composite Stock Index and indices published by Lipper
Analytical Services, Inc. From time to time, evaluations of a Fund's performance
by independent sources may also be used in advertisements and in information
furnished to present
or prospective investors in the Funds.
Investors should note that the investment results of the Funds will
fluctuate over time, and any presentation of a 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.
Each Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial purchase order of $1,000 from
which the maximum sales load is deducted
T = average annual total return
B-20
<PAGE>
n = number of years
ERV = ending redeemable value of the hypothetical $1,000
purchase at the end of the period
Aggregate total return is calculated in a similar manner, except that
the results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period and gives effect to the maximum applicable sales charge.
GENERAL INFORMATION
Investors in the Funds will be informed of the Funds' progress through
periodic reports. Financial statements certified by independent public
accountants will be submitted to shareholders at least annually.
Star Bank, 425 Walnut Street, Cincinnati, OH 45202 acts as
Custodian of the securities and other assets of the Funds.
[ ], , acts as the
Fund's transfer and shareholder service agent. The Custodian and Transfer Agent
do not participate in decisions relating to the purchase and sale of securities
by the Funds.
Tait, Weller & Baker, 121 South Broad Street, Philadelphia, PA 19107,
are the independent auditors for the Fund.
Paul, Hastings, Janofsky & Walker, 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 of the Trust. The
Agreement and Declaration of Trust also provides for indemnification and
reimbursement of expenses out of the Funds' assets for any shareholder held
personally liable for obligations of the Funds 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 Funds or
B-21
<PAGE>
Trust and satisfy any judgment thereon. All such rights are limited to the
assets of the Funds. 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 Funds themselves are unable to meet their 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 Funds. The Prospectus of the Funds and this Statement of
Additional Information omit certain of the information contained in the
Registration Statement filed with the SEC. Copies of such information may be
obtained from the SEC upon payment of the prescribed fee.
FINANCIAL STATEMENTS
The annual report to shareholders of the Funds for its first fiscal
year will be a separate document supplied with this Statement of Additional
Information and the financial statements, accompanying notes and report of
independent accountants appearing therein will be incorporated by reference in
future Statements of Additional Information.
B-22
<PAGE>
PROFESSIONALLY MANAGED PORTFOLIOS
FORM N-1A
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements for the fiscal year ended June 30, 1997:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended June 30, 1997 (Boston Managed Growth Fund,
Leonetti Balanced Fund and U.S. Global Leaders Growth Fund Series).
Financial Statements: Financial Statements for the fiscal year ended
March 31, 1997: Incorporated by reference from the annual reports to
shareholders for the fiscal year ended March 31, 1997) (Avondale Total
Return, Harris Bretall Sullivan & Smith Growth Equity, Hodges,
Osterweis, Perkins Opportunity Fund Series).
Financial Statements: Financial Statements for the fiscal year ended
March 31, 1998: Incorporated by reference from the annual report to
shareholders for the fiscal year ended March 31, 1998) (Pro-Conscience
Women's Equity Mutual Fund Series).
Financial Statements for the fiscal year ended April 30, 1997:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended April 30, 1997 (Pzena Focused Value Fund and
Titan Financial Services Fund series).
Financial Statements for the fiscal year ended August 31, 1997:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended August 31, 1997 (Academy Value, Lighthouse
Contrarian and Trent Equity Fund Series).
Financial Statements for the fiscal year ended December 31, 1997;
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended December 31, 1997 (Matrix Growth Fund Series,
Matrix Emerging Growth Fund Series)
(b) Exhibits:
(1) Agreement and Declaration of Trust (2)
(2) By-Laws (2)
(3) Voting Trust Agreement--Not applicable
(4) Specimen stock certificate (3)
(5) Form of Investment Advisory Agreement
(6) Form of Distribution Agreement
(7) Benefit Plan--Not applicable
(8) Form of Custodian Agreement (1)
(9) (1) Form of Administration Agreement with Investment
Company Administration Corporation (5)
(2)(a) Fund Accounting Service Agreement with
American Data Services (1)
(2)(b) Transfer Agency and Service Agreement with
American Data Services (1)
(3) Transfer Agency and Fund Accounting Agreement with
Countrywide Fund Services (6)
(4) Transfer Agency Agreement with Provident Financial
Processing Corporation (1)
(10) Opinion and consent of counsel (1)
(11) Consent of Independent Auditors--not applicable
(12) All financial statements omitted from Item 23
--Not applicable
(13) Letter of understanding relating to initial capital (3)
(14) Model Retirement Plan Documents--Not applicable
(15) Form of Plan pursuant to Rule 12b-1 (1)
(16) Schedule for Computation of Performance
Quotations (4)
(17) Financial Data Schedule (3)
1 To be filed by Amendment.
2 Incorporated by reference from Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A, filed on December 29, 1995.
3 Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on April 13, 1987.
4 Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A filed on June 17, 1992.
5 Incorporated by reference from Post-Effective Amendment No. 35 to the
Registration Statement on Form N-1A, filed on April 24, 1997.
6 Incorporated by reference from Post-Effective Amendment No. 43 to the
Registration Statement on Form N-1A, filed on February 5, 1998.
Item 25. Persons Controlled by or under Common Control with Registrant.
As of the date of this Amendment to the Registration Statement, there
are no persons controlled or under common control with the Registrant.
Item 26. Number of Holders of Securities.
Number of Record
Holders as of
Title of Class April 8, 1998
Shares of Beneficial Interest, no par value:
Academy Value Fund 218
Avondale Total Return Fund 145
Boston Balanced Fund 251
Hodges Fund 1041
Osterweis Fund 128
PGP Korea Growth Fund 23
Perkins Opportunity Fund 6,307
Pro-Conscience Women's Equity Mutual Fd. 602
Trent Equity Fund 149
Matrix Growth Fund 388
Matrix Emerging Growth Fund 83
Leonetti Balanced Fund 355
Lighthouse Contrarian Fund 406
U.S.Global Leaders Growth Fund 459
Harris, Bretall, Sullivan & Smith
Growth Equity Fund 110
Pzena Focused Value Fund 230
Titan Financial Services Fund 980
Item 27. Indemnification
The information on insurance and indemnification is incorporated by
reference to Pre-Effective Amendment No. 1 and Post-Effective Amendment No. 1 to
the Registrant's Registration Statement.
In addition, insurance coverage for the officers and trustees of the
Registrant also is provided under a Directors and Officers/Errors and Omissions
Liability insurance policy issued by ICI Mutual Insurance Company with a
$1,000,000 limit of liability.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
With respect to Investment Advisors, the response to this item is
incorporated by reference to their Form ADVs as amended:
Herbert R. Smith & Co, Inc. File No. 801-7098
Hodges Capital Management, Inc. File No. 801-35811
Perkins Capital Management, Inc. File No. 801-22888
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 29. Principal Underwriters.
(a) First Fund Distributors, Inc. (the "Distributor") is the principal
underwriter all series of the Registrant except for the Hodges Fund, the Matrix
Growth Fund 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 30. Location of Accounts and Records.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession the Registrant's
custodian and transfer agent, except those records relating to portfolio
transactions and the basic organizational and Trust documents of the Registrant
(see Subsections (2) (iii). (4), (5), (6), (7), (9), (10) and (11) of Rule
31a-1(b)), which, with respect to portfolio transactions are kept by each Fund's
Advisor at its address set forth in the prospectus and statement of additional
information and with respect to trust documents by its administrator at 479 West
22nd Street, New York, NY 10011 and 2020 E. Financial Way, Ste. 100, Glendora,
CA 91741.
Item 31. Management Services.
There are no management-related service contracts not discussed in
Parts A and B.
Item 32. 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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York in the State of New York on
June 4, 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 June 4, 1998
Steven J. Paggioli
/S/ Eric M. Banhazl Principal June 4, 1998
Eric M. Banhazl Financial
Officer
Dorothy A. Berry Trustee June 4, 1998
*Dorothy A. Berry
Wallace L. Cook Trustee June 4, 1998
*Wallace L. Cook
Carl A. Froebel Trustee June 4, 1998
*Carl A. Froebel
Rowley W. P. Redington Trustee June 4, 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
EXHIBIT 5
PROFESSIONALLY MANAGED PORTFOLIOS
INVESTMENT ADVISORY AGREEMENT
RCB Growth and Income Fund
RCB Small Cap Fund
THIS INVESTMENT ADVISORY AGREEMENT is made as of the __th day of ,
1998, by and between PROFESSIONALLY MANAGED PORTFOLIOS, a Massachusetts business
trust (hereinafter called the "Trust"), on behalf of the following series of the
Trust, the RCB Growth and Income Fund and RCB Small Cap Fund (each a "Fund") and
Reed, Conner & Birdwell, Inc., a California Corporation (hereinafter called the
"Advisor").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment
company, registered as such under the Investment Company Act of 1940, as amended
(the "Investment Company Act"); and
WHEREAS, each Fund is a series of the Trust having
separate assets and liabilities; and
WHEREAS, the Advisor is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, and is engaged in the
business of supplying investment advice as an independent contractor; and
WHEREAS, the Trust desires to retain the Advisor to render
advice and services to each Fund pursuant to the terms and provisions of this
Agreement, and the Advisor desires to furnish said advice and services;
NOW, THEREFORE, in consideration of the covenants and the
mutual promises hereinafter set forth, the parties to this Agreement, intending
to be legally bound hereby, mutually agree as follows:
1. Appointment of Advisor. The Trust hereby employs the
Advisor and the Advisor hereby accepts such employment, to render investment
advice and related services with respect to the assets of each Fund for the
period and on the terms set forth in this Agreement, subject to the supervision
and direction of the Trust's Board of Trustees.
2. Duties of Advisor.
(a) General Duties. The Advisor shall act as
investment adviser to each Fund and shall supervise investments of each Fund on
behalf of each Fund in accordance with the investment objectives, policies and
restrictions of each Fund as set forth in each Fund's and Trust's governing
documents, including, without limitation, the Trust's Agreement and Declaration
of Trust and By-Laws; each Fund's prospectus, statement of additional
E:\JA\19306\0001\AGMT\INVEMGMT
-1-
<PAGE>
information and undertakings; and such other limitations, policies and
procedures as the Trustees may impose from time to time in writing to the
Advisor. In providing such services, the Advisor shall at all times adhere to
the provisions and restrictions contained in the federal securities laws,
applicable state securities laws, the Internal Revenue Code, the Uniform
Commercial Code and other applicable law.
Without limiting the generality of the foregoing, the Advisor
shall: (i) furnish each Fund with advice and recommendations with respect to
the investment of each Fund's assets and the purchase and sale of portfolio
securities for each Fund, including the taking of such steps as may be necessary
to implement such advice and recommendations (i.e., placing the orders); (ii)
manage and oversee the investments of each Fund, subject to the ultimate
supervision and direction of the Trust's Board of Trustees; (iii) vote proxies
for each Fund, file ownership reports under Section 13 of the Securities
Exchange Act of 1934 for each Fund, and take other actions on behalf of each
Fund; (iv) maintain the books and records required to be maintained by each Fund
except to the extent arrangements have been made for such books and records to
be maintained by the administrator or another agent of each Fund; (v) furnish
reports, statements and other data on securities, economic conditions and other
matters related to the investment of each Fund's assets which each Fund's
administrator or distributor or the officers of the Trust may reasonably
request; and (vi) render to the Trust's Board of Trustees such periodic and
special reports with respect to each Fund's investment activities as the Board
may reasonably request, including at least one in-person appearance annually
before the Board of Trustees.
(b) Brokerage. The Advisor shall be responsible
for decisions to buy and sell securities for each Fund, for broker-dealer
selection, and for negotiation of brokerage commission rates, provided that the
Advisor shall not direct order to an affiliated person of the Advisor without
general prior authorization to use such affiliated broker or dealer for the
Trust's Board of Trustees. The Advisor's primary consideration in effecting a
securities transaction will be execution at the most favorable price. In
selecting a broker-dealer to execute each particular transaction, the Advisor
may take the following into consideration: the best net price available; the
reliability, integrity and financial condition of the broker-dealer; the size of
and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of each Fund on
a continuing basis. The price to each Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered.
Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have
E:\JA\19306\0001\AGMT\INVEMGMT
-2-
<PAGE>
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused each Fund to pay a broker or
dealer that provides (directly or indirectly) brokerage or research services to
the Advisor an amount of commission for effecting a portfolio transaction in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction, if the Advisor determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Advisor's overall
responsibilities with respect to the Trust. The Advisor is further authorized to
allocate the orders placed by it on behalf of each Fund to such brokers or
dealers who also provide research or statistical material, or other services, to
the Trust, the Advisor, or any affiliate of either. Such allocation shall be in
such amounts and proportions as the Advisor shall determine, and the Advisor
shall report on such allocations regularly to the Trust, indicating the
broker-dealers to whom such allocations have been made and the basis therefor.
The Advisor is also authorized to consider sales of shares as a factor in the
selection of brokers or dealers to execute portfolio transactions, subject to
the requirements of best execution, i.e., that such brokers or dealers are able
to execute the order promptly and at the best obtainable securities price.
On occasions when the Advisor deems the purchase or sale of a
security to be in the best interest of one or more of each Fund as well as of
other clients, the Advisor, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in order to
obtain the most favorable price or lower brokerage commissions and the most
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by the
Advisor in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to each Fund and to such other clients.
3. Representations of the Advisor.
(a) The Advisor shall use its best judgment and
efforts in rendering the advice and services to each Fund as
contemplated by this Agreement.
(b) The Advisor shall maintain all licenses and
registrations necessary to perform its duties hereunder in good
order.
( c) The Advisor shall conduct its operations at
all times in conformance with the Investment Advisers Act of 1940, the
Investment Company Act of 1940, and any other applicable state and/or
self-regulatory organization regulations.
E:\JA\19306\0001\AGMT\INVEMGMT
-3-
<PAGE>
(d) The Advisor shall maintain errors and
omissions insurance in an amount at least equal to that disclosed to the Board
of Trustees in connection with their approval of this Agreement.
4. Independent Contractor. The Advisor shall, for all purposes
herein, be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized to do so, have no authority to act for or
represent the Trust or each Fund in any way, or in any way be deemed an agent
for the Trust or for each Fund. It is expressly understood and agreed that the
services to be rendered by the Advisor to each Fund under the provisions of this
Agreement are not to be deemed exclusive, and the Advisor shall be free to
render similar or different services to others so long as its ability to render
the services provided for in this Agreement shall not be impaired thereby.
5. Advisor's Personnel. The Advisor shall, at its own expense,
maintain such staff and employ or retain such personnel and consult with such
other persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Advisor shall be
deemed to include persons employed or retained by the Advisor to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Advisor or the Trust's Board of Trustees may desire and reasonably request.
6. Expenses.
(a) With respect to the operation of each Fund,
the Advisor shall be responsible for (i) providing the personnel, office space
and equipment reasonably necessary for the operation of each Fund, (ii) the
expenses of printing and distributing extra copies of each Fund's prospectus,
statement of additional information, and sales and advertising materials (but
not the legal, auditing or accounting fees attendant thereto) to prospective
investors (but not to existing shareholders), and (iii) the costs of any special
Board of Trustees meetings or shareholder meetings convened for the primary
benefit of the Advisor. If the Advisor has agreed to limit the operating
expenses of each Fund, the Advisor shall also be responsible on a monthly basis
for any operating expenses that exceed the agreed upon expense limit.
(b) Each Fund is responsible for and has assumed
the obligation for payment of all of its expenses, other than as stated in
Subparagraph 6(a) above, including but not limited to: fees and expenses
incurred in connection with the issuance, registration and transfer of its
shares; brokerage and commission expenses; all expenses of transfer, receipt,
safekeeping, servicing and accounting for the cash, securities and other
E:\JA\19306\0001\AGMT\INVEMGMT
-4-
<PAGE>
property of the Trust for the benefit of each Fund including all fees and
expenses of its custodian, shareholder services agent and accounting services
agent; interest charges on any borrowings; costs and expenses of pricing and
calculating its daily net asset value and of maintaining its books of account
required under the Investment Company Act; taxes, if any; a pro rata portion of
expenditures in connection with meetings of each Fund's shareholders and the
Trust's Board of Trustees that are properly payable by each Fund; salaries and
expenses of officers and fees and expenses of members of the Trust's Board of
Trustees or members of any advisory board or committee who are not members of,
affiliated with or interested persons of the Advisor; insurance premiums on
property or personnel of each Fund which inure to its benefit, including
liability and fidelity bond insurance; the cost of preparing and printing
reports, proxy statements, prospectuses and statements of additional information
of each Fund or other communications for distribution to existing shareholders;
legal, auditing and accounting fees; trade association dues; fees and expenses
(including legal fees) of registering and maintaining registration of its shares
for sale under federal and applicable state and foreign securities laws; all
expenses of maintaining and servicing shareholder accounts, including all
charges for transfer, shareholder recordkeeping, dividend disbursing,
redemption, and other agents for the benefit of each Fund, if any; and all other
charges and costs of its operation plus any extraordinary and non-recurring
expenses, except as herein otherwise prescribed.
( c) The Advisor may voluntarily absorb certain
Fund expenses or waive the Advisor's own advisory fee.
(d) To the extent the Advisor incurs any costs by
assuming expenses which are an obligation of each Fund as set forth herein, the
Fund shall promptly reimburse the Advisor for such costs and expenses, except to
the extent the Advisor has otherwise agreed to bear such expenses. To the extent
the services for which a Fund is obligated to pay are performed by the Advisor,
the Advisor shall be entitled to recover from such Fund to the extent of the
Advisor's actual costs for providing such services. In determining the Advisor's
actual costs, the Advisor may take into account an allocated portion of the
salaries and overhead of personnel performing such services.
7. Investment Advisory and Management Fee.
(a) each Fund shall pay to the Advisor, and the
Advisor agrees to accept, as full compensation for all investment management and
advisory services furnished or provided to each Fund pursuant to this Agreement,
an annual management fee equal to 0.60% of of the RCB Growth and Income Fund's
and 0.85% of of the RCB Small Cap Fund's daily net assets, computed on the value
of the net assets of each Fund as of the close of business each day.
(b) The management fee shall be accrued daily by
each Fund and paid to the Advisor on the first business day of
the succeeding month.
E:\JA\19306\0001\AGMT\INVEMGMT
-5-
<PAGE>
( c) The initial fee under this Agreement shall be
payable on the first business day of the first month following the effective
date of this Agreement and shall be prorated as set forth below. If this
Agreement is terminated prior to the end of any month, the fee to the Advisor
shall be prorated for the portion of any month in which this Agreement is in
effect which is not a complete month according to the proportion which the
number of calendar days in the month during which the Agreement is in effect
bears to the number of calendar days in the month, and shall be payable within
ten (10) days after the date of termination.
(d) The fee payable to the Advisor under this
Agreement will be reduced to the extent of any receivable owed by the Advisor to
each Fund and as required under any expense limitation applicable to each Fund.
(e) The Advisor voluntarily may reduce any portion of
the compensation or reimbursement of expenses due to it pursuant to this
Agreement and may agree to make payments to limit the expenses which are the
responsibility of a Fund under this Agreement. Any such reduction or payment
shall be applicable only to such specific reduction or payment and shall not
constitute an agreement to reduce any future compensation or reimbursement due
to the Advisor hereunder or to continue future payments. Any such reduction will
be agreed to prior to accrual of the related expense or fee and will be
estimated daily and reconciled and paid on a monthly basis.
(f) Any fee withheld or voluntarily reduced and
any Fund expense absorbed by the Advisor voluntarily or pursuant to an agreed
upon expense cap shall be reimbursed by each Fund to the Advisor, if so
requested by the Advisor, in the first, second or third (or any combination
thereof) fiscal year next succeeding the fiscal year of the withholding,
reduction or absorption if the aggregate amount actually paid by each Fund
toward the operating expenses for such fiscal year (taking into account the
reimbursement) do not exceed the applicable limitation on Fund expenses. Such
reimbursement may be paid prior to each Fund's payment of current expenses if so
requested by the Advisor even if such practice may require the Advisor to waive,
reduce or absorb current Fund expenses.
(g) The Advisor may agree not to require payment
of any portion of the compensation or reimbursement of expenses otherwise due to
it pursuant to this Agreement. Any such agreement shall be applicable only with
respect to the specific items covered thereby and shall not constitute an
agreement not to require payment of any future compensation or reimbursement due
to the Advisor hereunder.
8. No Shorting; No Borrowing. The Advisor agrees that neither
it nor any of its officers or employees shall take any short position in the
shares of each Fund. This prohibition shall not prevent the purchase of such
shares by any of the
E:\JA\19306\0001\AGMT\INVEMGMT
-6-
<PAGE>
officers or employees of the Advisor or any trust, pension, profit-sharing or
other benefit plan for such persons or affiliates thereof, at a price not less
than the net asset value thereof at the time of purchase, as allowed pursuant to
rules promulgated under the Investment Company Act. The Advisor agrees that
neither it nor any of its officers or employees shall borrow from each Fund or
pledge or use each Fund's assets in connection with any borrowing not directly
for each Fund's benefit. For this purpose, failure to pay any amount due and
payable to each Fund for a period of more than thirty (30) days shall constitute
a borrowing.
9. Conflicts with Trust's Governing Documents and Applicable
Laws. Nothing herein contained shall be deemed to require the Trust or each Fund
to take any action contrary to the Trust's Agreement and Declaration of Trust,
By-Laws, or any applicable statute or regulation, or to relieve or deprive the
Board of Trustees of the Trust of its responsibility for and control of the
conduct of the affairs of the Trust and Fund. In this connection, the Advisor
acknowledges that the Trustees retain ultimate plenary authority over each Fund
and may take any and all actions necessary and reasonable to protect the
interests of shareholders.
10. Reports and Access. The Advisor agrees to supply such
information to each Fund's administrator and to permit such compliance
inspections by each Fund's administrator as shall be reasonably necessary to
permit the administrator to satisfy its obligations and respond to the
reasonable requests of the Trustees.
11. Advisor's Liabilities and Indemnification.
(a) The Advisor shall have responsibility for the
accuracy and completeness (and liability for the lack thereof) of the statements
in each Fund's offering materials (including the prospectus, the statement of
additional information, advertising and sales materials), except for information
supplied by the administrator or the Trust or another third party for inclusion
therein.
(b) In the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the obligations or duties
hereunder on the part of the Advisor, the Advisor shall not be subject to
liability to the Trust or each Fund or to any shareholder of each Fund for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security by each Fund.
( c) Each party to this Agreement shall indemnify
and hold harmless the other party and the shareholders, directors, officers and
employees of the other party (any such person, an "Indemnified Party") against
any loss, liability, claim, damage or expense (including the reasonable cost of
E:\JA\19306\0001\AGMT\INVEMGMT
-7-
<PAGE>
investigating and defending any alleged loss, liability, claim, damage or
expenses and reasonable counsel fees incurred in connection therewith) arising
out of the Indemnified Party's performance or non-performance of any duties
under this Agreement provided, however, that nothing herein shall be deemed to
protect any Indemnified Party against any liability to which such Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement.
(e) No provision of this Agreement shall be
construed to protect any Trustee or officer of the Trust, or officer of the
Advisor, from liability in violation of Sections 17(h) and (I) of the Investment
Company Act.
12. Non-Exclusivity; Trading for Advisor's Own Account. The
Trust's employment of the Advisor is not an exclusive arrangement. The Trust may
from time to time employ other individuals or entities to furnish it with the
services provided for herein. Likewise, the Advisor may act as investment
adviser for any other person, and shall not in any way be limited or restricted
from buying, selling or trading any securities for its or their own accounts or
the accounts of others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake no activities which
will adversely affect the performance of its obligations to each Fund under this
Agreement; and provided further that the Advisor will adhere to a code of ethics
governing employee trading and trading for proprietary accounts that conforms to
the requirements of the Investment Company Act and the Investment Advisers Act
of 1940 and has been approved by the Trust' Board of Trustees.
13. Term.
(a) This Agreement shall become effective at the
time each Fund commences operations pursuant to an effective amendment to the
Trust's Registration Statement under the Securities Act of 1933 and shall remain
in effect for a period of two (2) years, unless sooner terminated as hereinafter
provided. This Agreement shall continue in effect thereafter for additional
periods not exceeding one (l) year so long as such continuation is approved for
each Fund at least annually by (I) the Board of Trustees of the Trust or by the
vote of a majority of the outstanding voting securities of each Fund and (ii)
the vote of a majority of the Trustees of the Trust who are not parties to this
Agreement nor interested persons thereof, cast in person at a meeting called for
the purpose of voting on such approval. The terms "majority of the outstanding
voting securities" and "interested persons" shall have the meanings as set forth
in the Investment Company Act.
(b) each Fund may use the name "RCB" or any
name derived from or using the name "Reed, Conner & Birdwell"
E:\JA\19306\0001\AGMT\INVEMGMT
-8-
<PAGE>
only for so long as this Agreement or any extension, renewal or amendment hereof
remains in effect. Within sixty (60) days from such time as this Agreement shall
no longer be in effect, each Fund shall cease to use such a name or any other
name connected with the Advisor.
14. Termination; No Assignment.
(a) This Agreement may be terminated by the Trust
on behalf of each Fund at any time without payment of any penalty, by the Board
of Trustees of the Trust or by vote of a majority of the outstanding voting
securities of each Fund, upon sixty (60) days' written notice to the Advisor,
and by the Advisor upon sixty (60) days' written notice to each Fund. In the
event of a termination, the Advisor shall cooperate in the orderly transfer of
each Fund's affairs and, at the request of the Board of Trustees, transfer any
and all books and records of each Fund maintained by the Advisor on behalf of
each Fund.
(b) This Agreement shall terminate automatically
in the event of any transfer or assignment thereof, as defined in
the Investment Company Act.
15. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.
16. Notice of Declaration of Trust. The Advisor agrees that
the Trust's obligations under this Agreement shall be limited to each Fund and
to its assets, and that the Advisor shall not seek satisfaction of any such
obligation from the shareholders of each Fund nor from any trustee, officer,
employee or agent of the Trust or each Fund.
17. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
18. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to the conflict of laws principles thereof; provided that nothing herein
shall be construed to preempt, or to be inconsistent with, any federal law,
regulation or rule, including the Investment Company Act and the Investment
Advisors Act of 1940 and any rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers, all on the day
and year first above written.
E:\JA\19306\0001\AGMT\INVEMGMT
-9-
<PAGE>
PROFESSIONALLY MANAGED REED, CONNER & BIRDWELL, INC.
PORTFOLIOS on behalf of the
RCB Growth and Income Fund and
RCB Small Cap Fund
By: By:
EXHIBIT 6
PROFESSIONALLY MANAGED PORTFOLIOS
DISTRIBUTION AGREEMENT
This Agreement, made as of the 9th day of February, 1998 between
PROFESSIONALLY MANAGED PORTFOLIOS, a Massachusetts business trust (the "Trust"),
and FIRST FUND DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
l940 (the "1940 Act"), and it is in the interest of the Trust to offer its
classes of shares entitled the RCB GROWTH AND INCOME FUND and RCB SMALL CAP FUND
(each a "Fund") for sale continuously; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of l934 (the "1934 Act") and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
and
WHEREAS, the Trust and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the shares of
beneficial interest of each Fund (the "Shares"), to commence after the
effectiveness of amendment to the registration statement filed pursuant to the
Securities Act of 1933 (the "1933 Act") and the 1940 Act relating to each Fund.
NOW, THEREFORE, the parties agree as follows:
l. Appointment of Distributor. The Trust hereby appoints the
Distributor as its exclusive agent to sell and to arrange for the sale of the
Shares, on the terms and for the period set forth in this Agreement, and the
Distributor hereby accepts such appointment and agrees to act hereunder directly
and/or through the Trust's transfer agent in the manner set forth in the
Prospectuses (as defined below). It is understood and agreed that the services
of the Distributor hereunder are not exclusive, and the Distributor may act as
principal underwriter for the shares of any other registered investment company.
2. Services and Duties of the Distributor
(a) The Distributor agrees to sell the Shares, as agent for the Trust,
from time to time during the term of this Agreement upon the terms described in
each Fund's Prospectus. As used in this Agreement, the term "Prospectus" shall
mean the prospectus and statement of additional information of each Fund
included as part of the Trust's Registration Statement, as such prospectus and
statement of additional information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the Registration
Statement most recently filed from time to time by the Trust with the Securities
and Exchange Commission and effective under the 1933 Act and the 1940 Act, as
such
1
<PAGE>
Registration Statement is amended by any amendments thereto at the time in
effect. The Distributor shall not be obligated to sell any certain number of
Shares.
(b) Upon commencement of each Fund's operations, the Distributor will
hold itself available to receive orders, satisfactory to the Distributor, for
the purchase of the Shares and will accept such orders and will transmit such
orders and Fund received by it in payment for such Shares as are so accepted to
the Trust's transfer agent or custodian, as appropriate, as promptly as
practicable. Purchase orders shall be deemed effective at the time and in the
manner set forth in the Prospectus. The Distributor shall not make any short
sales of Shares.
(c) The offering price of the Shares shall be the net asset value per
share of the Shares (as defined in the Declaration of Trust), plus the sales
charge, if any, (determined as set forth in the prospectus). The Trust shall
furnish the Distributor, with all possible promptness, an advice of each
computation of net asset value and offering price.
3. Duties of the Trust.
(a) Maintenance of Federal Registration. The Trust shall, at its
expense, take, from time to time, all necessary action and such steps, including
payment of the related filing fees, as may be necessary to register and maintain
registration of a sufficient number of Shares under the 1933 Act. The Trust
agrees to file from time to time such amendments, reports and other documents as
may be necessary in order that there may be no untrue statement of a material
fact in a registration statement or prospectus, or necessary in order that there
may be no omission to state a material fact in the registration statement or
prospectus which omission would make the statements therein misleading.
(b) Maintenance of "Blue Sky" Qualifications. The Trust shall, at its
expense, use its best efforts to qualify and maintain the qualification of an
appropriate number of Shares for sale under the securities laws of such states
as the Distributor and the Trust may approve, and, if necessary or appropriate
in connection therewith, to qualify and maintain the qualification of the Trust
as a broker or dealer in such states; provided that the Trust shall not be
required to amend its Declaration of Trust or By-Laws to comply with the laws of
any state, to maintain an office in any state, to change the terms of the
offering of the Shares in any state, to change the terms of the offering of the
Shares in any state from the terms set forth in its Prospectuses, to qualify as
a foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering and sale of
the Shares. The Distributor shall furnish such information and other material
2
<PAGE>
relating to its affairs and activities as may be required by the
Trust in connection with such qualifications.
(c) Copies of Reports and Prospectuses. The Trust shall, at its
expense, keep the Distributor fully informed with regard to its affairs and in
connection therewith shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, including such
reasonable number of copies of its Prospectuses and annual and interim reports
as the Distributor may request and shall cooperate fully in the efforts of the
Distributor to sell and arrange for the sale of the Shares and in the
performance of the Distributor under this Agreement.
4. Conformity with Applicable Law and Rules. The Distributor agrees
that in selling Shares hereunder it shall conform in all respects with the laws
of the United States and of any state in which Shares may be offered, and with
applicable rules and regulations of NASD Regulation, Inc.
5. Independent Contractor. In performing its duties hereunder, the
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, directors, employees, or representatives is or shall be an
employee of the Trust in the performance of the Distributor's duties hereunder.
The Distributor shall be responsible for its own conduct and the employment,
control, and conduct of its agents and employees and for injury to such agents
or employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employee taxes thereunder.
6. Indemnification.
(a) Indemnification of Trust. The Distributor agrees to indemnify and
hold harmless the Trust and each of its present or former trustees, officers,
employees, representatives and each person, if any, who controls or previously
controlled the Trust within the meaning of Section l5 of the 1933 Act against
any and all losses, liabilities, damages, claims or expenses (including the
reasonable costs of investigating or defending any alleged loss, liability,
damage, claims or expense and reasonable legal counsel fees incurred in
connection therewith) to which the Trust or any such person may become subject
under the 1933 Act, under any other statute, at common law, or otherwise,
arising out of the acquisition of any Shares by any person which (I) may be
based upon any wrongful act by the Distributor or any of the Distributor's
directors, officers, employees or representatives, or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other information
3
<PAGE>
covering Shares filed or made public by the Trust or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to the Trust by the Distributor. In no case (I) is the
Distributor's indemnity in favor of the Trust, or any person indemnified to be
deemed to protect the Trust or such indemnified person against any liability to
which the Trust or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of his obligations and duties under this
Agreement or (ii) is the Distributor to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against the Trust or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Distributor in writing of the claim within a reasonable
time after the summons or other first written notification giving information of
the nature of the claim shall have been served upon the Trust or upon such
person (or after the Trust or such person shall have received notice to such
service on any designated agent). However, failure to notify the Distributor of
any such claim shall not relieve the Distributor from any liability which the
Distributor may have to the Trust or any person against whom such action is
brought otherwise than on account of the Distributor's indemnity agreement
contained in this Paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense, or, if the Distributor so elects, to assume the defense of any
suit brought to enforce any such claim, but, if the Distributor elects to assume
the defense, such defense shall be conducted by legal counsel chosen by the
Distributor and satisfactory to the Trust, to the persons indemnified defendant
or defendants, in the suit. In the event that the Distributor elects to assume
the defense of any such suit and retain such legal counsel, the Trust, the
persons indemnified defendant or defendants in the suit, shall bear the fees and
expenses of any additional legal counsel retained by them. If the Distributor
does not elect to assume the defense of any such suit, the Distributor will
reimburse the Trust and the persons indemnified defendant or defendants in such
suit for the reasonable fees and expenses of any legal counsel retained by them.
The Distributor agrees to promptly notify the Trust of the commencement of any
litigation of proceedings against it or any of its officers, employees or
representatives in connection with the issue or sale of any Shares.
(b) Indemnification of the Distributor. The Trust agrees to indemnify and hold
harmless the Distributor and each of its present or former directors, officers,
employees, representatives and each person, if any, who controls or previously
controlled the
4
<PAGE>
Distributor within the meaning of Section l5 of the 1933 Act against any and all
losses, liabilities, damages, claims or expenses (including the reasonable costs
of investigating or defending any alleged loss, liability, damage, claim or
expense and reasonable legal counsel fees incurred in connection therewith) to
which the Distributor or any such person may become subject under the 1933 Act,
under any other statute, at common law, or otherwise, arising out of the
acquisition of any Shares by any person which (I) may be based upon any wrongful
act by the Trust or any of the Trust's trustees, officers, employees or
representatives, or (ii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, shareholder report or other information covering Shares filed or
made public by the Trust or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading unless
such statement or omission was made in reliance upon information furnished to
the Trust by the Distributor. In no case (I) is the Trust's indemnity in favor
of the Distributor, or any person indemnified to be deemed to protect the
Distributor or such indemnified person against any liability to which the
Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of his obligations and duties under this
Agreement, or (ii) is the Trust to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against Distributor,
or person indemnified unless the Distributor, or such person, as the case may
be, shall have notified the Trust in writing of the claim within a reasonable
time after the summons or other first written notification giving information of
the nature of the claim shall have been served upon the Distributor or upon such
person (or after the Distributor or such person shall have received notice of
such service on any designated agent). However, failure to notify the Trust of
any such claim shall not relieve the Trust from any liability which the Trust
may have to the Distributor or any person against whom such action is brought
otherwise than on account of the Trust's indemnity agreement contained in this
Paragraph.
The Trust shall be entitled to participate, at its own expense, in the
defense, or, if the Trust so elects, to assume the defense of any suit brought
to enforce any such claim, but if the Trust elects to assume the defense, such
defense shall be conducted by legal counsel chosen by the Trust and satisfactory
to the Distributor, to the persons indemnified defendant or defendants, in the
suit. In the event that the Trust elects to assume the defense of any such suit
and retain such legal counsel, the Distributor, the persons indemnified
defendant or defendants in the suit, shall bear the fees and expenses of any
additional legal counsel retained by them. If the Trust does not elect to
5
<PAGE>
assume the defense of any such suit, the Trust will reimburse the Distributor
and the persons indemnified defendant or defendants in such suit for the
reasonable fees and expenses of any legal counsel retained by them. The Trust
agrees to promptly notify the Distributor of the commencement of any litigation
or proceedings against it or any of its trustees, officers, employees or
representatives in connection with the issue or sale of any Shares.
7. Authorized Representations. The Distributor is not authorized by the
Trust to give on behalf of the Trust any information or to make any
representations in connection with the sale of Shares other than the information
and representations contained in a registration statement or prospectus filed
with the Securities and Exchange Commission ("SEC") under the 1933 Act and/or
the 1940 Act, covering Shares, as such registration statement and prospectus may
be amended or supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on behalf of the Trust for
the Distributor's use. This shall not be construed to prevent the Distributor
from preparing and distributing tombstone ads and sales literature or other
material as it may deem appropriate. No person other than the Distributor is
authorized to act as principal underwriter (as such term is defined in the 1940
Act) for each Fund.
8. Term of Agreement. The term of this Agreement shall begin on the
date first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect for a period of two years from the date
first above written. Thereafter, this Agreement shall continue in effect from
year to year, subject to the termination provisions and all other terms and
conditions thereof, so long as such continuation shall be specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
outstanding voting securities of each Fund and, concurrently with such approval
by the Board of Trustees or prior to such approval by the holders of the
outstanding voting securities of each Fund, as the case may be, by the vote,
cast in person at a meeting called for the purpose of voting on such approval,
of a majority of the trustees of the Trust who are not parties to this Agreement
or interested persons of any such party. The Distributor shall furnish to the
Trust, promptly upon its request, such information as may reasonably be
necessary to evaluate the terms of this Agreement or any extension, renewal or
amendment hereof.
9. Amendment or Assignment of Agreement. This Agreement may not be
amended or assigned except as permitted by the 1940 Act, and this Agreement
shall automatically and immediately terminate in the event of its assignment.
6
<PAGE>
10. Termination of Agreement. This Agreement may be terminated by
either party hereto, without the payment of any penalty, on not more than upon
60 days' nor less than 30 days' prior notice in writing to the other party;
provided, that in the case of termination by the Trust such action shall have
been authorized by resolution of a majority of the trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, or by
vote of a majority of the outstanding voting securities of each Fund.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Trust to take
any action contrary to its Declaration of Trust or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the Trust of
responsibility for and control of the conduct of the affairs of the Trust.
12. Definition of Terms. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission
validly issued pursuant to the 1940 Act. Specifically, the terms "vote of a
majority of the outstanding voting securities", "interested persons",
"assignment", and "affiliated person", as used in Paragraphs 8, 9 and 10 hereof,
shall have the meanings assigned to them by Section 2(a) of the 1940 Act. In
addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is relaxed by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
13. Compliance with Securities Laws. The Trust represents that it is
registered as an open-end management investment company under the 1940 Act, and
agrees that it will comply with all the provisions of the 1940 Act and of the
rules and regulations thereunder. The Trust and the Distributor each agree to
comply with all of the applicable terms and provisions of the 1940 Act, the 1933
Act and, subject to the provisions of Section 4(d), all
7
<PAGE>
applicable "Blue Sky" laws. The Distributor agrees to comply with all of the
applicable terms and provisions of the Securities Exchange Act of 1934.
14. Notices. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, to the Distributor at 4455 E. Camelback Rd., Ste. 261-E, Phoenix, AZ
85018 or to each Fund on behalf of the Trust at 11111 Santa Monica Blvd., Ste.
1700, Los Angeles, CA 90025.
15. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York.
16. No Shareholder Liability. The Distributor understands that the
obligations of this Agreement are not binding upon any shareholder of the Trust
personally, but bind only the Trust's property; the Distributor represents that
it has notice of the provisions of the Declaration of Trust disclaiming
shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.
PROFESSIONALLY MANAGED PORTFOLIOS
By:
Attest:
FIRST FUND DISTRIBUTORS, INC.
By: ______________________
Attest:
