MATRIX GROWTH FUND
MATRIX EMERGING GROWTH FUND
MATRIX GROWTH FUND (the "Growth Fund") is a no-load mutual fund with the
investment objective of long-term growth of capital, with a secondary objective
of conserving principal. The Growth Fund invests in common stocks which the
Adviser believes present opportunity for above average growth of capital.
MATRIX EMERGING GROWTH FUND (the "Emerging Growth Fund") is a no-load
mutual fund with the investment objective of seeking long-term capital
appreciation. The Emerging Growth Fund invests primarily in the common stocks of
companies with long term growth potential, particularly smaller companies
considered to be in the developing or emerging growth phase.
Sena Weller Rohs Williams, Inc. (the "Adviser"), serves as investment
adviser to both of the Funds.
For information concerning the Funds call: Fund shares may be purchased from:
Sena Weller Rohs Williams, Inc. Matrix Growth Fund
300 Main Street Matrix Emerging Growth Fund
Cincinnati, OH 45202 American Data Services
(513) 621-2875 or 150 Motor Parkway, Suite 109
(800) 877-3344 Hauppauge, NY 11788
(800) 282-2340
This Prospectus sets forth basic information about the Funds that
prospective investors should know before investing. It should be read and
retained for future reference. The Funds are series of Professionally Managed
Portfolios. A Statement of Additional Information dated May 1, 1998, as may be
amended from time to time, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. This Statement of Additional
Information is available without charge upon written request to the Funds at the
address or telephone number given above. The SEC maintains an internet site
(http://www.sec.gov) that contains the SAI, other material incorporated by
reference and other information about companies that file electronically with
the SEC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated May 1, 1998
TABLE OF CONTENTS
Expense Table 3
Financial Highlights 4
Objective and Investment Approach of the Funds 5
Other Investment Policies of the Funds 7
Management of the Funds 8
Distribution Plan 9
How To Invest in the Funds 9
How To Redeem an Investment in the Funds 11
Services Available to the Funds' Shareholders 12
How the Funds' Per Share Value Is Determined 13
Dividends, Distributions and Taxes 13
General Information 14
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 a Fund. Actual expenses may be more or less than those shown.
Shareholder Transaction Expenses (for each of the Funds)
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
12b-1 Fee 0.25%
Annual Fund Operating Expenses (for each Fund)
(As a percentage of average net assets) Emerging
Growth Growth
Fund Fund
Investment Advisory Fee 0.90% 0.90%
12b-1 Distribution Fee 0.25% 0.25%
Other expenses (after reimbursement) 0.60%* 0.85%*
Total Fund Operating Expenses (after reimbursement) 1.75%* 2.00%*
*The Adviser has undertaken to limit the operating expenses for the Growth
Fund to no more than 1.75% of average net assets annually and for the Emerging
Growth Fund to no more than 2.00% of average net assets annually. During the
fiscal year ended December 31, 1997, operating expenses before the Adviser's
limitation amounted to 1.98% for the Growth Fund and 2.71% for the Emerging
Growth Fund.
Example
This table illustrates the net transaction and operating expenses that
would be incurred by an investment in either of the Funds over different time
periods, assuming a $1,000 investment, a 5% annual return, and redemption at the
end of each time period.
One year Three years Five years Ten years
Growth Fund $18 $55 $ 95 $206
Emerging Growth Fund $20 $63 $108 $233
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." The MATRIX GROWTH FUND (the "Growth Fund") and MATRIX EMERGING
GROWTH FUND (The "Emerging Growth Fund") are diversified series of
Professionally Managed Portfolios (the "Trust"), an open-end management
investment company offering redeemable shares of beneficial interest. Shares may
be purchased and redeemed without a sales or redemption charge at their net
asset value. The minimum initial investment is $1,000 with subsequent
investments of $100 or more ($500 and $100, respectively, for retirement plans).
The Funds have adopted a plan of distribution under which each Fund will pay the
Adviser as Distribution Coordinator a fee at an annual rate of up to 0.25% of
the Funds' net assets. A long-term shareholder may pay more, directly and
indirectly, in sales charges and such fees than the maximum sales charge
permitted under the rules of the National Association of Securities Dealers. A
Fund's shares may be redeemed without a charge at net asset value per share.
Financial Highlights
For a share outstanding throughout each period.
The following information for the year ended December 31, 1997 has been
audited by Tait, Weller & Baker, independent accountants, whose unqualified
report covering that period is incorporated by reference herein and appears in
the Funds' annual report to shareholders. The information for periods ended on
or prior to December 31, 1996, was audited by other independent public
accountants. This information should be read in conjunction with the financial
statements and accompanying notes which appear in the Statement of Additional
Information. Further information about the Funds' performance is contained in
their annual report to shareholders, which may be obtained without charge by
writing or calling the address or telephone number of the Adviser on the cover
page of this Prospectus.
<TABLE>
<CAPTION>
Matrix Growth Fund Year Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $15.09 $14.96 $13.45 $14.51 $14.05 $14.01 $11.03 $11.76 $ 9.67 $ 9.96
Net investment (loss)
income (.06) (.01) .10 .05 .06 .09 .15 .18 .33 .08
Net realized and unrealized
gain (loss) on investments 5.24 2.69 3.06 (.75) 1.25 .60 3.62 (.71) 3.16 (.28)
Total from investment
operations 5.18 2.68 3.16 (.70) 1.31 .69 3.77 (.53) 3.49 (.20)
Dividends from net
investment income -0- -0- (.10) (.05) (.06) (.09) (.14) (.20) (.29) (.08)
Distributions from net
capital gains (1.63) (2.55) (1.55) (.31) (.79) (.56) (.65) -0- (1.11) -0-
Returns of capital -0- -0- -0- -0- -0- -0- -0- -0- -0- (.01)
Total distributions (1.63) (2.55) (1.65) (.36) (.85) (.65) .79 .20 (1.40) (.09)
Net asset value,
end of year $18.64 $15.09 $14.96 $13.45 $14.51 $14.05 $14.01 $11.03 $11.76 $ 9.67
Total return 34.57% 17.93% 23.52% (4.82)% 9.32% 4.92% 34.21% (4.50)% 36.27% (2.00)%
Ratios/supplemental data:
Net assets,
end of year (millions) $12.60 $12.10 $12.30 $15.50 $19.10 $18.95 $17.44 $11.41 $9.12 $3.59
Ratio of expenses to
average net assets:*
Before expense
reimbursement 1.98% 1.75% 1.76% 1.84% 1.67% 1.50% 1.50% 1.50% 1.50% 1.49%
After expense reimbursement 1.75% 1.75% 1.76% 1.84% 1.67% 1.50% 1.50% 1.50% 1.50% 1.49%
Ratio of net investment
(loss) income to average
net assets:
Before expense reimbursement (0.57)% (0.08)% 0.47% 0.29% 0.40% 0.69% 1.17% 1.59% 2.99% 0.78%
After expense reimbursement (0.34)% (0.08)% 0.47% 0.29% 0.40% 0.69% 1.17% 1.59% 2.99% 0.78%
Portfolio turnover rate 0% 0% 27% 25% 30% 51% 70% 79% 130% 132%
Average commission rate
paid per share+ $.1239 $.0665 - - - - - - - -
</TABLE>
*The ratios of expenses to average net assets would have increased and net
income to average net assets would have decreased by 0.24%, 0.01%, 0.18%, 0.25%,
0.39%, 1.01%, 2.37%, and 1.72% in 1996, 1995, 1992, 1991, 1990, 1989, 1988, and
1987 had the Adviser not waived expenses.
+For fiscal years beginning on or after September 1, 1995, a fund is required to
disclose its average commission rate per share for security trades on which
commissions are charged. This amount may vary from period to period and fund to
fund depending on the mix of trades executed in various markets where trading
practices and commission rate structures may differ.
<TABLE>
<CAPTION>
Matrix Emerging Growth Fund
Year Year April 4, 1995*
Ended Ended through
December 31, 1997 December 31, 1996 December 31,1995
<S> <C> <C> <C>
Net asset value,
beginning of period $14.24 $12.98 $10.00
Income from investment
operations:
Net investment loss (.21) (.18) (.03)
Net realized and unrealized
gain on investments 2.56 1.54 3.01
Total from investment
operations 2.35 1.36 2.98
Less distributions:
>From net capital gains (.26) (.10) -0-
Net asset value,
end of period $16.33 $14.24 $12.98
Total return 16.58% 10.47% 42.09%+
Ratios/supplemental data:
Net assets,
end of period (millions) $ 7.0 $ 5.7 $ 4.3
Ratio of expenses to
average net assets:
Before expense reimbursement 2.71% 3.13% 3.43%+
After expense reimbursement 2.00% 2.00% 2.00%+
Ratio of net investment
loss to average net assets:
Before expense reimbursement (2.19)% (2.53)% (1.87)%+
After expense reimbursement (1.48)% (1.40)% (0.43)%+
Portfolio turnover rate 41.11% 29.54% 9.95%
Average commission rate
paid per share# $.0746 $.0992 -
*Commencement of operations.
+Annualized.
</TABLE>
#For fiscal years beginning on or after September 1, 1995, a fund is required to
disclose its average commission rate per share for security trades on which
commissions are charged. This amount may vary from period to period and fund to
fund depending on the mix of trades executed in various markets where trading
practices and commission rate structures may differ.
OBJECTIVE AND INVESTMENT APPROACH OF THE FUNDS
The Growth Fund
The Growth Fund's primary investment objective is long-term growth of
capital with a secondary objective of conserving principal. Because of the risks
inherent in investing in marketable securities, however, there is no assurance
that these objectives will be achieved.
The Fund attempts to achieve its investment objective primarily by
investing in common stocks of companies which the Adviser believes will have
rising earnings and stable or rising share prices. Earnings growth is evaluated
relative to the earnings history of the company, and price trends are also
viewed relative to the long-term price behavior of the company's shares. The
Fund maintains a diversified portfolio without excessive representation in any
single industry group. The policy of the Fund is to maintain substantially all
Fund assets in common stocks.
The Adviser may at times purchase index put options in the Fund's
portfolio, principally to protect against declines in the market value of the
common stocks held in the Fund's portfolio or to attempt to retain unrealized
gains in the value of the securities held. The Fund will limit its purchases of
put options so that no more than 5% of the Fund's net assets are invested in
premiums on the purchase of put options.
Risk Factors. Opportunities to realize net gains vary from time to time
because of general market conditions, economic conditions, the Adviser's ability
to select appropriate investments and other factors. The purchase of put options
involves a risk of loss of all or part of the premium paid. If the price of the
underlying index does not decrease by a sufficient amount, the Fund will
experience a loss equal to the deficiency if it exercises the option, and a loss
of the entire premium if it does not exercise the option. Under unusual market
conditions, such as an interruption in trading in an index or certain stocks in
the index, the Adviser may be unable to hedge the Fund's portfolio effectively.
Restrictions imposed by regulations also may adversely affect the hedging
strategy. Accordingly, the Fund's total return will fluctuate, and there can be
no assurance that the Fund's investment objective will be realized.
The Emerging Growth Fund
The Investment objective of the Emerging Growth Fund is to seek long-term
capital appreciation. Current income will not be a consideration. However, the
Fund may at times make investments in short-term income producing securities.
Fund assets will primarily be invested in the common stocks of companies
with long-term growth potential, particularly smaller companies considered to be
in the emerging or developing growth phase. Investments will be directed toward
companies deemed capable of increasing earnings over an extended period of time
at an above average rate and which are in a sound financial position. In seeking
companies whose common stock will meet the Fund's investment objective, the
Adviser's analysis will be based on fundamental analysis of a company, its
industry or industries and appropriate macro-economic factors.
The Fund's investment portfolio will emphasize companies that operate in
various fields of science or technology, and other companies that have developed
innovative products or services that in the opinion of the Adviser have
significant earnings growth potential. Areas of particular interest would
include, but not be limited to, electronics, computers and services,
communications equipment and services, other productivity enhancing equipment,
and health care. In addition, investments may be made in such general areas as
aerospace, energy, natural resources, entertainment and other business and
consumer services believed to have growth potential. The list of industries and
companies given above is for illustration purposes, and the Fund's investment
portfolio is not limited to such industries or companies.
Risk Factors. Shares of the Emerging Growth Fund do not represent a
complete investment program. They are designed for investors who understand and
are willing to accept the risks involved in seeking capital appreciation in
smaller, less established companies. There can be no assurance that the Emerging
Growth Fund's investment objective will be achieved, and achievement of the
objective will be particularly difficult during periods when the prices of
securities are generally declining.
Smaller and Newer Companies. Many of the companies held by the Emerging
Growth Fund may be smaller and younger than companies whose shares are traded on
the major stock exchanges, and the Fund may invest in new public offerings.
Accordingly, shares of these companies, which typically trade over the counter,
may be more volatile than those of larger exchange-listed companies. New or
improved products or methods of development may have a substantial impact on the
earnings and revenues of such companies, and any such positive and negative
developments could have a corresponding positive or negative effect on the value
of their shares. For these reasons, when the Fund holds a substantial position
in these types of companies, the net asset value of the Fund may be more
volatile. The Fund may not be appropriate for short-term investors.
OTHER INVESTMENT POLICIES OF THE FUNDS
Cash Investments and Repurchase Agreements. Cash which is held by the Funds
for the purpose of paying expenses and effecting share redemptions, or when the
Adviser determines that temporary reduction or liquidation of stock holdings is
appropriate, is invested in securities of the U.S. Government or government
agencies, bankers' acceptances, commercial paper, certificates of deposit of
U.S. branches of domestic banks or repurchase agreements. For temporary
defensive purposes, a Fund may hold up to 100% of its assets in such
instruments.
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, each Fund intends to enter into
repurchase agreements only with banks with assets of $500 million or more that
are insured by the Federal Deposit Insurance Corporation and the most
creditworthy registered securities dealers pursuant to procedures adopted and
regularly reviewed by the Trust's Board of Trustees. The Adviser monitors the
creditworthiness of the banks and securities dealers with which each Fund
engages in repurchase transactions.
Illiquid and Restricted Securities. A Fund may not invest more than 15% of
its net assets in illiquid securities, including (i) securities for which there
is no readily available market, (ii) securities the disposition of which would
be subject to legal restrictions (so-called "restricted securities"), and (iii)
repurchase agreements having more than seven days to maturity. A considerable
period of time may elapse between 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. Restricted securities do not
include those which meet the requirements of Rule 144A under the Securities Act
of 1933 and which the Trustees have determined to be liquid based on the
applicable trading markets.
Portfolio Turnover. The Adviser believes that the Funds' goals of capital
appreciation can best be achieved by investments in carefully selected companies
with investments most often planned to be long-term in nature. Investment
positions will be monitored continuously, however, and the determination to sell
will be made whenever the Adviser deems the security held to have become
incompatible with a Fund's objective, or if the stock appears excessively
valued.
It is not generally the policy of the Funds to invest for short term
trading purposes. Nonetheless, it is difficult to predict what the portfolio
turnover rate will be, and the Adviser may make portfolio changes without regard
to the holding period. The Adviser expects that the annual rate of portfolio
turnover will generally not exceed 100% for the Growth Fund and 50% for the
Emerging Growth Fund.
Each Fund has 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 the Fund's outstanding shares.
MANAGEMENT OF THE FUNDS
The Board of Trustees of the Trust establishes the Funds' policies and
supervises and reviews the management of the Funds. The Adviser, whose offices
are at 300 Main Street, Cincinnati, Ohio 45202, is a registered investment
adviser under the Investment Advisers Act of 1940, and has provided investment
supervisory services to its clients since 1968. The Adviser is controlled by Mr.
William O. DeWitt Jr., and Mr. Mercer Reynolds. The Adviser currently manages
approximately $1.4 billion for investment companies, individuals, retirement
benefit plans, trusts, charitable organizations and corporations. Peter H.
Williams and Robert S. Castellini are responsible for management of the Growth
Fund portfolio. Mr. Williams, Senior Vice President of the Adviser, has managed
the Growth Fund's portfolio since December, 1988. Mr. Castellini joined the
Adviser in June, 1996. He began managing the Growth Fund's portfolio in April
1998. From June, 1994 to June, 1996, he was employed by the investment brokerage
firm of Hilliard and Lyons. Fred W. Weller and Michael A. Coombe are responsible
for management of the Emerging Growth Fund portfolio. Mr. Weller is Senior Vice
President of the Adviser, with which he has been associated since 1968. He has
managed the Adviser's Emerging Growth limited partnerships since 1981. Mr.
Coombe, Vice President, joined the Adviser in 1994. He was previously associated
with the investment management firm of Gradison & Company.
The Adviser provides the Funds with advice on buying and selling
securities, manages the investments of the Funds, furnishes the Funds with
office space and certain administrative services, and provides most of the
personnel needed by the Funds. As compensation, each Fund pays the Adviser a
monthly management fee (accrued daily) based upon the average daily net assets
of the Fund at the annual rate of 0.9% of the first $50 million of the Fund's
average daily net assets, 0.7% of the Fund's average daily net assets in excess
of $50 million and up to $100 million and 0.6% of the Fund's average daily net
assets in excess of $100 million.
Investment Company Administration Corporation (the "Administrator") acts as
the Funds' Administrator under an Administration Agreement. Under that
agreement, the Administrator prepares various federal and state regulatory
filings, reports and returns for the Funds, prepares reports and materials to be
supplied to the trustees, monitors the activities of the Funds' custodian,
transfer agent and accountants, and coordinates the preparation and payment of
the Funds' expenses and reviews the Funds' expense accruals. For its services,
the Administrator receives a fee from each Fund at the following annual rate:
Average net assets of each Fund Fee or fee rate
Under $15 million $30,000
$15 to $50 million 0.20% of average net assets
$50 to $100 million 0.15% of average net assets
$100 to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
The Funds are responsible for their own operating expenses. The Adviser has
voluntarily undertaken to limit the Growth Fund's operating expenses to 1.75%
and the Emerging Growth Fund's operating expenses to 2.00% of each Fund's
average net assets annually. This undertaking may be modified or withdrawn by
the Adviser upon notice to a Fund's shareholders. The Adviser also may reimburse
additional amounts to the Funds at any time in order to reduce their expenses,
or to the extent required by applicable law. Any reductions made by the Adviser
in its fees or payments or reimbursements of expenses which are a Fund's
obligation are subject to reimbursement by the Fund within the following three
years provided the Fund is able to effect such reimbursement and remain in
compliance with any applicable limitations then in effect. With respect to the
Growth Fund, the Adviser may recapture any fee waiver or expense absorption only
if that Fund could make such repayment and still stay within the total operating
expense limit, if any, then established for it. For purposes of this recapture
provision with respect to the Growth Fund, the Adviser has agreed that the
expense limit will remain at 1.75% or lower through December 31, 1999.
The Adviser considers a number of factors in determining which brokers or
dealers to use for the Funds' portfolio transactions. While these are more fully
discussed in the Statement of Additional Information, the factors include, but
are not limited to, the reasonableness of commissions, quality of services and
execution, and the availability of research which the Adviser may lawfully and
appropriately use in its investment management and advisory capacities. Provided
a Fund receives prompt execution at competitive prices, the Adviser may also
consider the sale of Fund shares as a factor in selecting broker-dealers for the
Fund's portfolio transactions.
DISTRIBUTION PLAN
The Funds have adopted a distribution plan pursuant to Rule 12b-1. The Plan
provides that each Fund may pay distribution and related expenses of up to an
annual rate of 0.25% of the Fund's average net assets to the Adviser as
distribution coordinator. Expenses permitted to be paid by each Fund under its
Plan include: preparation, printing and mailing of prospectuses; shareholder
reports such as semi-annual and annual reports, performance reports and
newsletters; sales literature and other promotional material to prospective
investors; direct mail solicitation; advertising; public relations; compensation
of sales personnel, advisers or other third parties for their assistance with
respect to the distribution of the Fund's shares; payments to financial
intermediaries for shareholder support; administrative and accounting services
with respect to the shareholders of the Fund; and such other expenses as may be
approved from time to time by the Board of Trustees.
The Rule 12b-1 Distribution Plan allows excess distribution expenses to be
carried forward by the Adviser, as distribution coordinator, and resubmitted for
payment by a Fund in a subsequent fiscal year provided that (i) distribution
expenses cannot be carried forward for more than three years following initial
submission; (ii) the Board of Trustees has made a determination at the time of
initial submission that the distribution expenses are appropriate to be carried
forward; and (iii) the Board of Trustees makes a further determination, at the
time any distribution expenses which have been carried forward are resubmitted
for payment, to the effect that payment at the time is appropriate, consistent
with the objectives of the Plan and in the current best interests of
shareholders.
HOW TO INVEST IN THE FUNDS
The minimum initial investment in a Fund is $1,000. Subsequent investments
must be at least $100. Initial and subsequent minimum investments for retirement
plans are $500 and $100, respectively. Reynolds, DeWitt Securities Company, a
division of the Adviser, (the "Distributor"), acts as Distributor of the Fund's
shares. The Distributor may, at its discretion, waive the minimum investment
requirements for purchases in conjunction with certain group or periodic plans.
Shares of the Funds are offered continuously for purchase at their net
asset value per share next determined after a purchase order is received. The
public offering price is effective for orders received by a Fund prior to the
time of the next determination of the Fund's net asset value. Orders received
after the time of the next determination of the applicable Fund's net asset
value will be entered at the next calculated public offering price. Investors
may purchase shares of the Funds by check or wire:
By Check: For initial investments, an investor should complete the Fund's
Account Application (included with this Prospectus). The completed application,
together with a check payable to "Matrix Growth Fund," or "Matrix Emerging
Growth Fund," should be mailed to Matrix Growth Fund or Matrix Emerging Growth
Fund, P.O. Box 640856, Cincinnati, OH 45264-0856. For purchases by overnight
mail, please contact the Transfer Agent at (800) 282-2340 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 "Matrix Growth Fund," or
"Matrix Emerging Growth Fund," mailed to the Funds in the envelope provided at
the address indicated above. The investor's account number should be written on
the check. All investments sent by overnight or other courier services should be
sent to Matrix Growth Fund or Matrix Emerging Growth Fund, c/o Star Bank, N.A.,
425 Walnut Street, Mutual Fund Custody Department M.L. 6118, Cincinnati, OH
45202.
By Wire: Before wiring funds, an investor should call the Fund's Transfer
Agent at (800) 282-2340 to advise that an investment will be made by wire and to
receive an account number. The Transfer Agent will request the investor's name
and the dollar amount to be invested and provide an order confirmation number.
The investor should then complete the Fund's Account Application (included with
this Prospectus), including the date and the order confirmation number on the
application. The completed Account Application should be mailed to the address
shown at the top of the Account Application. The investor's bank should transmit
immediately available funds by wire for purchase of shares, in the investor's
name to the Funds' Custodian, as follows:
Star Bank, N.A. Cinti/Trust
ABA #0420-001-3
Attn: Matrix Growth Fund OR Matrix Emerging Growth Fund
DDA #483897989 DDA #483897997
Account name (shareholder name)
Shareholder account number
For subsequent investments, the investor's bank should wire funds as
indicated above. Investors should be sure to notify the Fund's Transfer Agent
before each wire purchase. It is essential that complete information regarding
the investor's account be included in all wire instructions in order to
facilitate prompt and accurate handling of investments. Investors may obtain
further information from the Transfer Agent about remitting funds in this manner
and from their own banks about any fees that may be imposed.
General. Investors will not be permitted to redeem any shares purchased
with an initial investment made by wire until one business day after the
completed Account Application is received by the Fund. All investments must be
made in U.S. dollars and, to avoid fees and delays, checks should be drawn only
on U.S. banks and should not be made by third party check. A charge may be
imposed if any check used for investment does not clear. The 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 ("NYSE")
(currently 4:00 p.m., New York City time), Fund shares will be purchased at the
offering price determined as of the close of trading on that day. Otherwise,
Fund shares will be purchased at the offering price determined as of the close
of trading on the NYSE on the next business day.
Federal tax law requires that investors provide a certified Taxpayer
Identification Number and certain other required certifications upon opening or
reopening an account in order to avoid backup withholding of taxes at the rate
of 31% on taxable distributions and proceeds of redemptions. See the Fund's
Account Application for further information concerning this requirement.
The Funds are not required to issue share certificates. All shares are
normally held in non-certificated form registered on the books of the Funds and
the Funds' Transfer Agent for the account of the shareholder.
HOW TO REDEEM AN INVESTMENT IN THE FUNDS
A shareholder has the right to have a Fund redeem all or any portion of his
outstanding shares at their current net asset value on each day the NYSE is open
for trading. The redemption price is the net asset value per share next
determined after the shares are validly tendered for redemption.
Direct Redemption. A written request for redemption must be received by the
Funds' Transfer Agent in order to constitute a valid tender for redemption.
Written redemption requests should be sent to Matrix Growth Fund or Matrix
Emerging Growth Fund, American Data Services, P.O. Box 5536, Hauppauge, NY
11788-0132. To protect the Funds and their shareholders, a signature guarantee
is required for certain transactions, including redemptions. Signature(s) on the
redemption request must be guaranteed by an "eligible guarantor institution" as
defined in the federal securities laws. These institutions include banks,
broker-dealers, credit unions and savings institutions. A broker-dealer
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program. A
notary public is not an acceptable guarantor.
Telephone Redemption. Shareholders who complete the Redemption by Telephone
portion of a Fund's Account Application may redeem shares on any business day
the NYSE is open by calling the Fund's Transfer Agent at (800) 282-2340 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. Neither the Funds nor the Transfer Agent will be liable for
any loss, expense, or cost arising out of any telephone redemption or exchange
request, including any fraudulent or unauthorized requests, that are reasonably
believed to be genuine, provided that such procedures are followed. 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 privileges after an account
is opened; however, the authorization form will require a separate signature
guarantee. Shareholders may experience delays in exercising telephone redemption
during periods of abnormal market activity.
General. Payment of redemption proceeds will be made promptly, but not
later than seven days after the receipt of all documents in proper form,
including a written redemption order with appropriate signature guarantee in
cases where telephone redemption privileges are not being utilized. The 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, a Fund will
not mail redemption proceeds until it has been notified that the check used for
the purchase has been collected, which may take up to 15 days from the purchase
date. To minimize or avoid such delay, investors may purchase shares by
certified check or federal funds wire. A redemption may result in recognition of
a gain or loss for federal income tax purposes.
Due to the relatively high cost of maintaining smaller accounts, the Funds
reserve the right to redeem shares in any account, other than retirement plan or
Uniform Gifts/Transfers to Minors Act accounts, if at any time, due to
redemptions by the shareholder, the total value of a shareholder's account does
not equal at least $1,000. If a Fund determines to make such an involuntary
redemption, the shareholder will first be notified that the account value is
less than $1,000 and will be allowed 30 days to make an additional investment to
bring the value of the account to at least $1,000 before the Fund takes any
action.
SERVICES AVAILABLE TO THE FUNDS' SHAREHOLDERS
Retirement Plans. The minimum initial investment for retirement plans is
$500 and $100 for subsequent investments. The Funds offer a prototype Individual
Retirement Account ("IRA") plan and information is available from the
Distributor or from your securities dealer with respect to Keogh, Section 403(b)
and other retirement plans offered. Investors should consult a tax adviser
before establishing any retirement plan.
Exchange Privilege. Shareholders may exchange shares between the Growth
Fund and Emerging Growth Fund by mailing or delivering written instructions to
the Transfer Agent. Please specify the name of the applicable Fund, 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) 282-2340
between the hours of 9:00AM and 4:00PM (Eastern time) on a day when the NYSE is
open for normal trading. Telephone exchanges are subject to the identification
procedures noted with respect to telephone redemptions above. The Funds reserve
the right to modify, restrict or terminate the Exchange Privilege at any time.
Shareholders also are permitted to exchange their shares for shares of the
Star Treasury Fund which is managed by Star Bank, the Funds' custodian. Any
exchange is conditioned upon the shares of the Star Treasury Fund being
qualified for sale in an investor's state of residence. Prior to making such an
exchange, investors must obtain and carefully read the current prospectus for
the Star Treasury Fund. The exchange privilege does not constitute an offering
or recommendation on the part of the Funds or the Adviser of an investment in
the Star Treasury Fund.
Automatic Investment Check 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, a Fund automatically invests
the money in additional shares of the Fund at the current offering price.
Applications for this service are available from the Distributor. There is no
charge by the 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
scheduled 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
Funds 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 exceeds the dividends credited to the
shareholder's account, the account ultimately may be depleted.
HOW THE FUNDS' PER SHARE VALUE IS DETERMINED
The net asset value of each Fund share is determined once daily as of the
close of public trading on the NYSE (currently 4:00 p.m. Eastern time) on each
day the New York Stock Exchange is open for trading. Net asset value per share
is calculated by dividing the value of the Fund's total assets, less its
liabilities, by the number of Fund shares outstanding.
Portfolio securities are valued using current market values, if available.
Securities for which market quotations are not readily available are valued at
fair values as determined in good faith by or under the supervision of the
Trust's officers in accordance with methods which are specifically authorized by
the Board of Trustees. Short-term obligations with remaining maturities of 60
days or less are valued at amortized cost as reflecting fair value.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. Any dividends from net investment income are
declared and paid annually, typically at the end of each Fund's fiscal year
(December 31). Any undistributed net capital gains realized during the 12-month
period ended each October 31, as well as any additional undistributed capital
gains realized during a Fund's fiscal year, will also be distributed to
shareholders on or about December 31 of each year.
Dividends and capital gain distributions (net of any required tax
withholding) are automatically reinvested in additional shares of a Fund at the
net asset value per share on the reinvestment date unless the shareholder has
previously requested in writing to the Transfer Agent that 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. Each Fund intends to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As long as a Fund continues to qualify, and as long as a
Fund distributes all of its income each year to its shareholders, the Fund will
not be subject to any federal income tax or excise taxes based on its net
income. Distributions made by a Fund will be taxable to shareholders whether
received in shares (through dividend reinvestment) or in cash. Distributions
derived from net investment income, including net short-term capital gains, are
taxable to shareholders as ordinary income. A portion of these distributions may
qualify for the intercorporate dividends-received deduction. Any long-term or
mid-term capital gain distributions are taxable to shareholders as long-term or
mid-term capital gains, respectively, regardless of the length of time shares
have been held. Although distributions are generally taxable when received,
certain distributions made in January are taxable as if received the prior
December. Shareholders will be informed annually of the amount and nature of the
Fund's distributions. Additional information about taxes is set forth in the
Statement of Additional Information. Shareholders should consult their own
advisers concerning federal, state and local taxation of distributions from the
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 end of each Fund is December 31.
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 Funds upon liquidation or dissolution. A Fund, as a separate series of
the Trust, votes separately on matters affecting only that Fund (e.g., approval
of the Management and Advisory Agreements); all series of the Trust vote as a
single class on matters affecting all series jointly or the Trust as a whole
(e.g., election or removal of Trustees). Voting rights are not cumulative, so
that the holders of more than 50% of the shares voting in any election of
Trustees can, if they so choose, elect all of the Trustees. While the Trust is
not required and does not intend to hold annual meetings of shareholders, such
meetings may be called by the Trustees in their discretion, or upon demand by
the holders of 10% or more of the outstanding shares of the Trust for the
purpose of electing or removing Trustees.
Performance Calculation. From time to time, each Fund may publish its total
return in advertisements and communications to investors. Total return
information will include the Fund's average annual compounded rate of return
over the most recent four calendar quarters and over the period from the Fund's
inception of operations. The 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 beginning of the specified period and the net asset
value of such shares at the end of the period, assuming reinvestment of all
distributions. Total return figures will reflect all recurring charges against
the Funds income. Investors should note that the investment results of the Funds
will fluctuate over time, and any presentation of the Funds' total return for
any prior period should not be considered as a representation of what an
investor's total return may be in any future period.
Year 2000. Like other business organizations around the world, the Fund
could be adversely affected if the computer systems used by its Adviser and
other service providers do not properly process and calculate information
related to dates beginning January 1, 2000. This is commonly known as the "Year
2000 Issue." The Fund's Adviser is taking steps that it believes are reasonably
designed to address the Year 2000 Issue with respect to its own computer
systems, and it has obtained assurances from the Fund's other service providers
that they are taking comparable steps. However, there can be no assurance that
these actions will be sufficient to avoid any adverse impact on the Fund.
Shareholder Inquiries. Shareholder inquiries should be directed to the
Transfer Agent at (800) 282-2340.
Adviser
Sena Weller Rohs Williams, Inc.
300 Main Street
Cincinnati, OH 45202
(513) 621-2875
(800) 877-3344
Distributor
Reynolds DeWitt Securities Company
a division of Sena Weller Rohs Williams, Inc.
300 Main Street
Cincinnati, OH 45202
(513) 621-2875
(800) 877-3344
Custodian
Star Bank
425 Walnut Street
Cincinnati, OH 45202
Transfer Agent
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
Auditors
Tait, Weller & Baker
8 Penn Center Plaza, Suite 800
Philadelphia, PA 19103
Legal Counsel
Paul, Hastings, Janofsky & Walker, LLP
345 California Street, 29th Floor
San Francisco, CA 94104
Prospectus Dated May 1, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1998
MATRIX GROWTH FUND
MATRIX EMERGING GROWTH FUND
series of
PROFESSIONALLY MANAGED PORTFOLIOS
300 Main St., Cincinnati, OH 45202-4123
(513) 621-2875
(800) 282-2340
This Statement of Additional Information is not a prospectus and it should be
read in conjunction with the prospectus of the Matrix Growth Fund or the Matrix
Emerging Growth Fund (the "Funds"). A copy of the prospectus of the Funds dated
May 1, 1998 is available by calling the numbers listed above or (212) 633-9700.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
The Trust.......................................................................................................B-2
Investment Objective and Policies...............................................................................B-2
Investment Restrictions.........................................................................................B-5
Distributions and Tax Information...............................................................................B-7
Trustees And Executive Officers.................................................................................B-9
The Funds' Investment Advisor..................................................................................B-11
The Funds' Administrator.......................................................................................B-11
The Funds' Distributor.........................................................................................B-12
Execution of Portfolio Transactions............................................................................B-13
Additional Purchase And Redemption Information.................................................................B-15
Determination of Share Price...................................................................................B-16
Performance Information........................................................................................B-16
General Information............................................................................................B-17
Financial Statements...........................................................................................B-18
</TABLE>
Matrix SAI B-1
<PAGE>
THE TRUST
Professionally Managed Portfolios (the "Trust") is an open-end
management investment company organized as a Massachusetts business trust. The
Trust consists of various series which represent separate investment portfolios.
This Statement of Additional Information relates only to the Funds.
INVESTMENT OBJECTIVE AND POLICIES
The Matrix Growth Fund is a mutual fund with the investment objective
of long-term growth of capital with a secondary objective of conserving
principal. The Matrix Emerging Growth Fund is a mutual fund with the investment
objective of seeking long-term capital appreciation. The following discussion
supplements the discussion of the Funds' investment objectives and policies as
set forth in the Prospectus. There can be no assurance the objective of either
Fund 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 Funds 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. The Funds may not enter into a repurchase agreement with more than
seven days to maturity if, as a result, more than 15% of the value of the Funds'
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 Funds to the seller of the
U.S. Government security subject to the repurchase agreement. It is not clear
whether a court would consider the U.S. Government security acquired by the
Funds subject to a repurchase agreement as being owned by the Funds or as being
collateral for a loan by the Funds to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the U.S. Government security before its repurchase under a repurchase
agreement, the Funds may encounter delays and incur costs before being able to
sell the security. Delays may involve loss of interest or a decline in price of
the U.S. Government security. If a court characterizes the transaction as a loan
and the Funds have not perfected a security interest in the U.S. Government
security, the Funds may be required to return the security to the seller's
estate and be treated as an unsecured creditor of the seller. As an
Matrix SAI B-2
<PAGE>
unsecured creditor, the Funds would be at the risk of losing some or all of the
principal and income involved in the transaction. As with any unsecured debt
instrument purchased for the Funds, the investment advisor seeks to minimize the
risk of loss through repurchase agreements by analyzing the creditworthiness of
the obligor, in this case the seller of the U.S. Government security.
Apart from the risk of bankruptcy or insolvency proceedings, there is
also the risk that the seller may fail to repurchase the security. However, the
Funds 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 Funds plus accrued interest, and the
Funds 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 Funds will
direct the seller of the U.S. Government security to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement will equal or exceed the repurchase price. It is possible that the
Funds will 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 Funds to the issuer
and no interest accrues to the Funds. To the extent that assets of the Funds are
held in cash pending the settlement of a purchase of securities, the Funds 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 the Funds make the
commitment to purchase a security on a when-issued basis, they 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 their purchase of securities on a
when-issued basis. The Funds will establish a segregated account with their
Custodian in which they will maintain liquid assets equal in value to
commitments for when-issued securities. Such segregated assets either will
mature or, if necessary, be sold on or before the settlement date.
Foreign Securities
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
Matrix SAI B-3
<PAGE>
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 securities trading practices, including those
involving the release of assets in advance of payment, may involve 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 can be no assurance that the Advisor will be able
to anticipate or counter these potential events and their impacts on the Funds'
share price.
Securities of foreign issuers may be held by the Funds in the form of
American Depositary Receipts and European Depositary Receipts ("ADRs" and
"EDRs"). These are certificates evidencing ownership of shares of a
foreign-based issuer held in trust by a bank or similar financial institution.
Designed for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national market and currencies.
The Funds may invest without limitation in securities of foreign
issuers which are listed and traded on a domestic national securities exchange.
Options Transactions
As indicated in the Prospectus, the Adviser may at time purchase index
put options with respect to the Matrix Growth Funds' portfolio, principally to
protect against declines in the value of the common stocks held in the Funds'
portfolio or to attempt to retain unrealized gains in the value of the
securities held.
When the Funds purchase a put, they pay 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. The Funds' option positions may
Matrix SAI B-4
<PAGE>
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.
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
the Funds and (unless otherwise noted) are fundamental and cannot be changed
without the affirmative vote of a majority of the Funds' outstanding voting
securities as defined in the 1940 Act. The Funds 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 temporarily for extraordinary or emergency
purposes from a bank and then not in excess of 10% of its total assets (at the
lower of cost or fair market value; any such borrowing will be made only if
immediately thereafter there is an asset coverage of at least 300% of all
borrowings and no additional investments may be made while any borrowings are in
excess of 5% of total assets.
(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 Funds from obtaining
Matrix SAI B-5
<PAGE>
such short-term credit as may be necessary for the clearance of purchases and
sales of its portfolio securities.)
4. Purchase or sell real estate, commodities or commodity contracts (As
a matter of operating policy, the Board of Trustees may in the future authorize
the Funds 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 more than 25% 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 Funds from (a) making any
permitted borrowings, mortgages or pledges, or (b) entering into repurchase
transactions.
7. Invest in any issuer for purposes of exercising control or
management.
8. Buy or sell interests in oil, gas, mineral exploration or
development programs or leases, or real estate, provided that this restriction
does not preclude the investment in marketable securities of issuers engaged in
real estate related activities.
The Funds observe the following policies, which are not deemed
fundamental and which may be changed without shareholder vote. The Funds may
not:
9. Invest in securities of other investment companies which would
result in the Funds owning more than 3% of the outstanding voting securities of
any one such investment company, the Funds owning securities of another
investment company having an aggregate value in excess of 5% of the value of the
Funds' total assets, or the Funds owning securities of investment companies in
the aggregate which would exceed 10% of the value of the Funds' total assets.
10. 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 a violation of that restriction, except
with respect to borrowing and illiquid securities, or as otherwise noted.
Matrix SAI B-6
<PAGE>
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 Funds' 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. The Funds intend 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
their assets and timing of distributions. The Funds' policy is to distribute to
its 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 their ordinary income for such year,
(ii) at least 98% of the excess of their realized capital gains over their
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.
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 Funds designate 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 their taxable year. In view of the Funds' investment policy, it is
expected that dividends from domestic corporations will 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 the Funds' gross income attributable to qualifying
dividends is largely
Matrix SAI B-7
<PAGE>
dependent on that Funds' 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.
Any long-term or mid-term capital gain distributions are taxable to
shareholders as long-term or mid-term capital gains, respectively, regardless of
the length of time shares have been held. 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. Any loss realized upon a redemption or exchange of shares
within six months from the date of their purchase will be treated as a long-term
capital loss to the extent of any amounts treated as distributions of long-term
capital gains during such six-month period. 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 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 Funds 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 Funds
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.
Matrix SAI B-8
<PAGE>
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
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 Funds. The Trustees, in turn, elect the officers of
the Trust, who are responsible for administering the day-to-day operations of
the Trust and its separate series. The current Trustees and officers and their
affiliations and principal occupations for the past five years are set forth
below.
Steven J. Paggioli,* 48 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, 54 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).
Matrix SAI B-9
<PAGE>
Wallace L. Cook, 58 Trustee
One Peabody Lane, Darien, CT 06820. Retired. Formerly Senior Vice President,
Rockefeller Trust Co. Financial Counselor, Rockefeller & Co.
Carl A. Froebel, 59 Trustee
2 Crown Cove Lane, Savannah, GA 31411. Private Investor. Formerly Managing
Director, Premier Solutions, Ltd. (asset management computer and software
products). Formerly President and Founder, National Investor Data Services, Inc.
(investment related computer software).
Rowley W.P. Redington, 53 Trustee
202 North Mountain Avenue, Montclair, New Jersey 07042. 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*, 40 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*, 41 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.
(investment management) (1991-93).
Robert H. Wadsworth*, 58 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 the Funds and all other portfolios of the Trust. This total amount
is allocated among the portfolios. Disinterested 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 Funds or any other portfolios
of the Trust.
Matrix SAI B-10
<PAGE>
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
During the fiscal year ended December 31, 1997, trustees fees and expenses of
$3,734 were allocated to the Matrix Growth Fund and $3,879 to the Matrix
Emerging Growth Fund. As of the date of this Statement of Additional
Information, the Trustees and Officers of the Trust as a group owned less than
1% of each of the Funds outstanding shares.
THE FUNDS' INVESTMENT ADVISOR
As stated in the Prospectus, investment advisory services are provided
to the Funds by Sena, Weller, Rohs Williams., (the "Advisor"), pursuant to an
Investment Advisory Agreement. The Advisor is in the business of furnishing
investment advice to institutional and private clients and currently manages
approximately $1.4 billion for such clients.
During the Matrix Emerging Growth Fund's fiscal years ended December
31, 1997, December 31, 1996 and initial fiscal period ended December 31, 1995,
the Fund incurred advisory fees of $57,805, $47,212 and $20,219, respectively.
For these periods the Advisor waived advisory fees and reimbursed expenses
totaling $40,592, $59,007 and $32,234, respectively, in accordance with its
voluntary undertaking to limit the Fund's expenses to 2.00% annually.
During the Matrix Growth Fund's fiscal years ended December 31, 1997,
December 31, 1996 and December 31, 1995, the Fund incurred advisory fees of
$104,356, $109,054 and $141,358, respectively. For these periods, the Advisor
reimbursed expenses of $26,619, $31,096 and $1,060, respectively, in accordance
with its voluntary undertaking to limit the Fund's expenses to 1.75% annually.
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 Funds to which the agreement applies), and (2) a majority of the
Trustees who are not interested persons of any party to the Agreement, in each
case cast in person at a meeting called for the purpose of voting on such
approval. Any such agreement may be terminated at any time, without penalty, by
either party to the agreement upon sixty days' written notice and is
automatically terminated in the event of its "assignment," as defined in the
1940 Act.
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 4455 E.
Camelback Rd., Ste. 261-E, Phoenix, AZ 85018. The
Matrix SAI B-11
<PAGE>
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 the Funds; prepare all required filings necessary to
maintain the Funds' qualification and/or registration to sell shares in all
states where the Funds currently do, 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 at the
following annual rate:
<TABLE>
<CAPTION>
Average net assets Fee or Fee rate
<S> <C>
under$15million $30,000
$15 million to $50 million 0.20% of average net assets
$50 million to $100 million 0.15% of average net assets
$100 million to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
</TABLE>
For the fiscal years ended December 31,1997 and December 31, 1996, the
Administrator received fees of $30,000 and $30,082, respectively, from the
Matrix Emerging Growth Fund and $30,000 and $30,331,respectively, from the
Matrix Growth Fund. During the Matrix Emerging Growth Fund's initial fiscal
period from May 1, 1995 to December 31, 1995, and for the Matrix Growth Fund's
fiscal year ended on that date, Southampton Investment Management Company, Inc.,
a corporation owned by the same individuals, which previously served as the
Funds' administrator, received fees of $22,356 from the Matrix Emerging Growth
Fund and $36,750 from the Matrix Growth Fund.
THE FUNDS' DISTRIBUTOR
Reynolds, DeWitt Securities Company, (the "Distributor"), an affiliate
of the Advisor, acts as the Funds' principal underwriter in a continuous public
offering of the Funds' shares. The Distribution Agreement between the Funds and
the Distributor continues in effect from year to year if approved at least
annually by (i) the Board of Trustees or the vote of a majority of the
outstanding shares of the Funds (as defined in the 1940 Act) and (ii) a majority
of the Trustees who are not interested persons of any such party, in each case
cast in person at a meeting called for the purpose of voting on such approval.
The Distribution Agreement may be terminated without penalty by the parties
thereto upon sixty days' written notice, and is automatically terminated in the
event of its assignment as defined in the 1940 Act.
Matrix SAI B-12
<PAGE>
The Funds have adopted a Distribution Plan in accordance with Rule
12b-1 under the 1940 Act. The Plan provides that the Funds will pay a fee to the
Distributor at an annual rate of up to 0.25% of the average daily net assets of
each Fund. The fee is paid to the Distributor as reimbursement for or in
anticipation of, expenses incurred for distribution related activities. During
the fiscal year ended December 31, 1997, the Emerging Growth Fund and Growth
Fund paid fees of $16,057 and $28,988, respectively, to the Distributor for
selling compensation.
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Manager 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 the opinion of the Manager, 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 dealers will
include the spread between the bid and the asked price. If the execution and
price offered by more than one broker, dealer or underwriter are comparable, the
order may be allocated to a broker, dealer or underwriter that has provided
research or other services as discussed below.
In placing portfolio transactions, the Manager 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 the Manager that
it may lawfully and appropriately use in its investment advisory capacities, as
well as provide other services in addition to execution services. The Manager
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 the Funds,
Matrix SAI B-13
<PAGE>
weight is also given to the ability of a broker-dealer to furnish brokerage and
research services to the Funds or to the Manager, even if the specific services
are not directly useful to the Funds and may be useful to the Manager in
advising other clients. In negotiating commissions with a broker or evaluating
the spread to be paid to a dealer, the Funds may therefore pay a higher
commission or spread than would be the case if no weight were given to the
furnishing of these supplemental services, provided that the amount of such
commission or spread has been determined in good faith by the Manager to be
reasonable in relation to the value of the brokerage and/or research services
provided by such broker-dealer. The standard of reasonableness is to be measured
in light of the Manager's overall responsibilities to the Funds.
Investment decisions for the Funds are made independently from those of
other client accounts or mutual Funds managed or advised by the Manager.
Nevertheless, it is possible that at times identical securities will be
acceptable for both the Funds and one or more of such client accounts. In such
event, the position of the Funds and such client account(s) in the same issuer
may vary and the length of time that each may choose to hold its investment in
the same issuer may likewise vary. However, to the extent any of these client
accounts seeks to acquire the same security as the Funds at the same time, the
Funds 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 Funds may not be able to obtain as high a price for, or
as large an execution of, an order to sell any particular security at the same
time. If one or more of such client accounts simultaneously purchases or sells
the same security that the Funds are purchasing or selling, each day's
transactions in such security will be allocated between the Funds and all such
client accounts in a manner deemed equitable by the Manager, taking into account
the respective sizes of the accounts and the amount being purchased or sold. It
is recognized that in some cases this system could have a detrimental effect on
the price or value of the security insofar as the Funds are concerned. In other
cases, however, it is believed that the ability of the Funds to participate in
volume transactions may produce better executions for the Funds.
The Funds do not effect securities transactions through brokers solely
for selling shares of the Funds, 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 generally use the Distributor to execute their
portfolio transactions. However, during the fiscal year ended December 31, 1996,
brokerage commissions received by the Distributor from the Matrix Emerging
Growth Fund and Matrix Growth Fund totaled $502 and $20, respectively. For the
fiscal years ended December 31, 1997 and December 31, 1996, aggregate brokerage
commissions paid by the Matrix Emerging Growth Fund were $4,420 and $3,261,
respectively, and the Matrix Growth Fund were $7,012 and $5,060, respectively.
During the Matrix Growth Fund's initial fiscal period ended December 31, 1995,
aggregate brokerage commissions paid by the Fund were $3,539. During the fiscal
year ended December 31, 1995, the Matrix Growth Fund's aggregate brokerage
commissions were $27,494.
Matrix SAI B-14
<PAGE>
Of the total commissions paid for the Matrix Emerging Growth and Matrix
Growth Funds during the fiscal year ended December 31, 1997, $2,231 (50.48%) and
$240 (3.42%), respectively, were paid to firms for research, statistical or
other services provided to the Advisor.
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 the Manager or the Distributor such rejection
is in the best interest of the 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 it has 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.
Matrix SAI B-15
<PAGE>
Check-A-Matic
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 their 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 the Funds is calculated as follows:
all liabilities incurred or accrued are deducted from the valuation of total
assets which includes accrued but undistributed income; the resulting net assets
are divided by the number of shares of the Funds outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
PERFORMANCE INFORMATION
From time to time, the Funds may state their 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 Funds'
average annual compounded rate of return over the most recent four calendar
quarters and the period
Matrix SAI B-16
<PAGE>
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 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 the Funds' total return for any
period should not be considered as a representation of what an investment may
earn or what an investor's total return may be in any future period.
The Funds' 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
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at
the end of the period
Aggregate total return is calculated in a similar manner, except that
the results are not annualized.
The Matrix Emerging Growth Fund's average annual total return for the
twelve months ending December 31, 1997, and for the period from inception on
April 4, 1995 through December 31, 1997 were 16.58% and 20.59%, respectively.
The Matrix Growth Fund's average annual total returns for the one-year,
five-year and ten-year periods ending December 31, 1997 were 34.57%, 15.30% and
13.83%, respectively.
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.
The Star Bank, located at 425 Walnut St., Cincinnati, Ohio 45201 acts
as Custodian of the securities and other assets of the Fund. American Data
Services, P.O. Box 5536, Hauppauge, NY 11788-0132 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
Fund.
Matrix SAI B-17
<PAGE>
Tait, Weller & Baker, 121 South Broad Street, Philadelphia, PA 19107,
are the independent auditors for the Funds.
Paul, Hastings, Janofsky & Walker, 345 California Street, 29th Floor,
San Francisco, California 94104, are legal counsel to the Fund.
As of April 16, 1998, R Westheimer FBO IFW RIW, Saxon & Co.,
Philadelphia, PA 19182, and Peter H. Williams, c/o Star Bank as Custodian,
Cincinnati, OH 45208, owned of record 10.89% and 5.30%, respectively, of the
outstanding shares of the Matrix Growth Fund.
As of April 16, 1998, Saxon & Co., Philadelphia, PA 19182 owned of
record the following percentages of the outstanding shares of the Matrix
Emerging Growth Fund: Rep #4 Acct., 44.64%; Rep. #13 Acct., 7.49%; Rep. #14
Acct., 5.66%.
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 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 for the Funds for the fiscal period
ended December 31, 1997 is a separate document supplied with this Statement of
Additional Information and the financial statements, accompanying notes and
report of independent accountants appearing therein are incorporated by
reference in this Statement of Additional Information.
Matrix SAI B-18
