SECURITIES ACT FILE NO. 33-12213
INVESTMENT COMPANY ACT FILE NO. 811-5037
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post Effective Amendment No. 45 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 46 [X]
(Check appropriate box or boxes)
PROFESSIONALLY MANAGED PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
479 West 22nd Street
New York, NY 10011
Registrant's Telephone Number, including Area Code:
(212) 633-9700
Steven J. Paggioli
Professionally Managed Portfolios
479 West 22nd Street
New York, NY 10011
(Name and Address of Agent for Service)
Copy to:
Julie Allecta, Esq.
Paul, Hastings, Janofsky & Walker
345 California Street
San Francisco, CA 94104
------------------------
It is proposed that this filing will become effective (check appropriate box)
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] On pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
N-1A Item No. Location
Part A
Item 1. Cover Page........................... Cover Page
Item 2. Synopsis............................. Expense
Table
Item 3. Financial Highlights................. N/A
Item 4. General Description of Registrant.... Objectives and
Investment
Principles
Item 5. Management of the Fund............... Management
of the Funds
Item 5A Management's Discussion of Fund N/A
Performance
Item 6. Capital Stock and Other Securities. . . Distributions
and Taxes;
How a
Fund's Per
Share Value
is Determined
Item 7. Purchase of Securities Being Offered . . How to Invest
in a Fund;
How a
Fund's Per
Share Value
is Determined
Item 8. Redemption or Repurchase. . . . . . . . How to Redeem
an Investment
in a Fund
Item 9. Pending Legal Proceedings . . . . . . . N/A
Part B
Item 10. Cover Page ............................. Cover Page
Item 11. Table of Contents....................... Table of
Contents
Item 12. General Information and History . . . . The Trust;
General
Information
Item 13 Investment Objectives and Policies .... Investment
Objective and
Policies;
Investment
Restrictions
Item 14. Management of the Fund................... Trustees and
Executive Officers
Item 15. Control Persons and Principal Holders
of Securities............................ General Information
Item 16. Investment Advisory and Other Services.... The Funds' Investment
Advisor; the Funds'
Administrator; General
Information
Item 17. Brokerage Allocation...................... Execution of
Portfolio
Transactions
Item 18. Capital Stock and Other Securities........ General
Information
Item 19. Purchase, Redemption and Pricing of
Shares Being Offered.............. Additional
Purchase &
Redemption
Information
Item 20. Tax Status.............................. Distributions
& Tax Infor-
mation
Item 21. Underwriters............................ The Funds'
Distributor
Item 22. Performance Information.................. Performance
Information
Item 23. Financial Statements.................... N/A
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
any offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities law of any State.
Harris Bretall Sullivan & Smith L.L.C.
One Sansome Street, Suite 3300
San Francisco, CA 94104
800-385-7003
This Prospectus sets forth basic information about the Funds described below
that a prospective investor should know before investing. It should be read and
retained for future reference. A Statement of Additional Information dated June
30, 1998, as may be amended from time to time, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
Statement of Additional Information is available without charge by calling or
writing the Funds at the number or address given above. Harris Bretall
Sullivan & Smith L.L.C. serves as investment advisor (the "Advisor") to each
Fund.
THE HEALTH CARE FUND seeks to achieve long-term capital appreciation
by emphasizing investments in companies in the health care industry.
THE AGGRESSIVE GROWTH EQUITY FUND seeks to achieve long-term capital
appreciation by emphasizing investments in companies which the Advisor
believes offer the best potential for long- term growth of capital.
THE TECHNOLOGY FUND seeks to achieve long-term capital appreciation by
emphasizing investments in the technology industries.
THE TAX-ADVANTAGED FUND seeks to achieve long-term capital
appreciation by investing in the common stocks of major U.S. companies
while reducing shareholders' exposure to income taxes on the Fund's total
return. This is not a tax-exempt fund. Distributions by this Fund, unless
made to a tax-deferred account or tax-exempt investor, will be subject to
state and federal income taxes. This Fund may not be appropriate for IRAs
or other tax-deferred accounts or for tax-advantaged investors.
THE SOCIALLY RESPONSIBLE FUND seeks to achieve long-term capital
appreciation by investing in companies that pass commonly-applied social
screens.
Given their specialized focus, these Funds should not be
considered a complete investment program
TABLE OF CONTENTS
Expense Table . . . . 2
Objectives and Investment Principles . . . . . . . . . . . . 3
Management of the Funds. . . . . . . . . . . . . . . . . . . 12
Distribution Plan. . . 13
How To Invest in a Fund. . . . . . . . . . . . . . . . . . . 14
How To Redeem an Investment in a Fund. . . . . . . . . . . . 15
Services Available to the Funds' Shareholders. . . . . . . . 16
How the Funds' Per Share Value Is Determined . . . . . . . . 17
Distributions and Taxes. . . . . . . . . . . . . . . . . . . 17
General Information. . 18
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 June 30, 1998
Each Fund is a non-diversified series of Professionally Managed Portfolios
(the "Trust"), an open-end management investment company offering redeemable
shares of beneficial interest. Shares of the Funds may be purchased at their
net asset value per share. The minimum initial investment is $10,000 with
subsequent investments of $1,000 or more. Shares will be redeemed at net asset
value per share.
EXPENSE TABLE
Expenses are one of several factors to consider when investing in the Funds.
The purpose of the following fee table is to provide an understanding of the
various costs and expenses that may be borne directly or indirectly by an
investment in the Funds. Actual expenses may be more or less than those shown.
The Funds have adopted a plan of distribution under which the Funds will pay the
Advisor, as Distribution Coordinator, a fee at the annual rate of up to 0.25% of
each Fund's net assets. A long-term shareholder may pay more, directly and
indirectly, in such fees than the maximum sales charge permitted under the rules
of the NASD Regulation, Inc. Shares will be redeemed as net asset value per
share.
<TABLE>
<CAPTION>
Shareholder The Health The The The Tax- The Socially
Transaction Care Fund Aggressive Technology Advantaged Responsible
Expenses Growth Fund Fund Fund
Equity
Fund
<S> <C> <C> <C> <C> <C>
Maximum Sales Load
Imposed on Purchases None None None None None
Maximum Sales Load
Imposed on
Reinvestments None None None None None
Dividends None None None None None
Deferred Sales Load None None None None None
Redemption Fees None None None None None
Annual Fund The Health The The The Tax- The Socially
Operating Expenses Care Fund Aggressive Technology Advantaged Responsible
(as a percentage Growth Fund Fund Fund
of net assets) Equity
Fund
Advisory Fees 0.75% 0.90% 0.80% 0.75% 0.75%
12b-1 Expenses 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses (after
reimbursement) 0.29%* 0.14%* 0.24%* 0.29%* 0.29%*
Total Fund Operating
Expenses (after
reimbursement) 1.29%* 1.29%* 1.29%* 1.29%* 1.29%*
</TABLE>
*The Advisor has undertaken to reduce its fees or make payments (to
reimburse Fund expenses) to assure that each Fund's ratio of operating expenses
to average net assets will not exceed 1.29% for the current fiscal year.
Example
This table illustrates the net transaction and operating expenses that would be
incurred for an investment in any 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.
1 year 3 years
$13 $40
The Example shown above should not be considered a representation of past or
future expenses and actual expenses may be greater or less than shown. In
addition, federal regulations require the Example to assume a 5% annual return,
but a Fund's actual return may be higher or lower. See "Management of the
Fund."
OBJECTIVES AND INVESTMENT PRINCIPLES
The Aggressive Growth Equity Fund
The investment objective of the Aggressive Growth Equity Fund is to
aggressively seek the growth of capital. The Fund seeks to achieve its
objective by investing with leverage in a non-diversified portfolio of equity
securities. Under normal circumstances at least 65% of the Fund's total assets
will be invested in equity securities with capital growth potential. The
Aggressive Growth Equity Fund is designed for investors who want long-term asset
growth and are willing to accept stock market volatility.
The Fund emphasizes investments in growth companies with market
capitalizations in excess of $100 million, and typically over $1 billion, that
have a superior potential for long-term appreciation.
The Advisor uses fundamental and quantitative disciplines to select
investments for the Fund. The Advisor estimates that annual portfolio turnover
will not exceed 200%. The Fund will incur increased brokerage costs with this
higher portfolio turnover rate. Higher portfolio turnover may also result in
more realized gains and more shorter-term realized gains.
The portfolio managers who are responsible for the day-to-day investment
decisions are David S. Post and Henri W. Moudi. Mr. Post served as the
Advisor's Director of Research between 1994 and 1997. In 1997, Mr. Post became
an Executive Vice President and a Partner. Mr. Moudi joined the Advisor in 1997
as an Analyst. Prior to joining the Advisor, Mr. Moudi was an Investment
Officer for T.T. Group, a privately funded venture capital firm. In 1994, Mr.
Moudi worked with the Investment Department of The World Bank in Washington,
D.C. as a Research Analyst.
The Health Care Fund
The investment objective of the Health Care Fund is to seek capital
appreciation. The Fund will seek to achieve its objective, under normal
conditions, by investing at least 65% of its total assets in the equity
securities of health care companies. The Fund is designed for investors who
wish to participate in a non-diversified portfolio of securities concentrated in
the health care industry. The Advisor believes that changing demographics and
the aging population of the industrialized world presents strong growth
potential for companies within the health care industry. Examples of the types
of companies in which the Fund may invest include:
Pharmaceuticals Biotechnology
Health Care Services Health Care REITs
Research and Development Personal Care and Cosmetics
Medical Equipment, Devices Retail Drug and other Health Stores
and Supplies
Medical Information Systems
The Advisor uses fundamental and quantitative disciplines to select
investments for the Fund. The Advisor estimates that annual portfolio turnover
will be approximately 25%. The portfolio managers who are responsible for the
day-to-day investment decisions are Jack J. Sullivan and Lloyd S. Kurtz. Mr.
Sullivan has been with the Advisor as an Executive Vice President and Partner
for over five years. Mr. Kurtz has served as an Analyst for the Advisor since
1995. Prior to joining the Advisor, Mr. Kurtz had been a Senior Research
Analyst at Kinder, Lydenberg, Domini & Co. since 1991.
The value of the Fund's shares may be susceptible to factors affecting the
health care industry and to greater risk and market fluctuation than an
investment in a fund that invests in a broader range of portfolio securities not
concentrated in any particular industry. As such, the Fund may bean appropriate
investment only for individuals who are long-term investors and do not require
safety of principal or stable income from their investments.
The Technology Fund
The investment objective of the Technology Fund is to seek capital
appreciation. The Fund will seek to achieve its objective, under normal
conditions, by investing at least 65% of its total assets in the equity
securities of technology companies. The Fund will typically be leveraged. The
Fund is designed for investors who wish to participate in a non-diversified
portfolio of securities concentrated in the technology sector. The Advisor will
focus on companies that offer substantial opportunities for long- term capital
appreciation because of their ability to capitalize on the rapid advances in
technology and science. Examples of the types of companies in which the Fund
may invest include:
Communications Computers Entertainment/Media
Computer Networking Software Broadcasters
Communications Equipment Systems Manufacturers Production
Communications Services Peripherals Electronic Entertainment
Wireless Communications Semiconductors Media
Semiconductor Equipment Toys
Storage
Distribution & Services
The Fund emphasizes investments in technology companies with market
capitalizations in excess of $100 million, and typically over $1 billion, that
have a superior potential for long-term capital appreciation.
The Advisor uses fundamental and quantitative disciplines to select
investments for the Fund. The Advisor estimates that the annual portfolio
turnover will be approximately 100%. The portfolio managers who are responsible
for the day-to-day investment decisions are Susan Foley and Seth Scholar. Ms.
Foley joined the Advisor in 1989 as a Vice President and Portfolio Manager. In
1997, Ms. Foley became an Executive Vice President and Partner. Mr. Scholar as
been an Analyst with the Advisor for over five years.
The value of the Fund's shares may be susceptible to factors affecting the
technology sector and to greater risk and market fluctuation than an investment
in a fund that invests in a broader range of portfolio securities not
concentrated in any particular industry. As such, the Fund may bean appropriate
investment only for individuals who are long-term investors and do not require
safety of principal or stable income from their investments.
The Tax-Advantaged Fund
The investment objective of the Tax-Advantaged Fund is to seek capital
appreciation. The Fund will seek to achieve its objective, under normal
conditions, by investing at least 65% of its total assets in a non-diversified
portfolio of equity securities of selected large capitalization companies. The
Fund targets companies having total market capitalizations of $1 billion or
more. The Fund seeks to achieve its objective in a manner that reduces
shareholders' exposure to income taxes on their distributions from the Fund
(increasing "tax efficiency"). The Fund may use certain investment techniques in
an attempt to increase tax efficiency. These techniques may include:
delaying the sale of a security until any gains would
qualify as medium or long term capital gains;
accelerating recognition of losses to offset recognized
gains, or accelerating the recognition of short or medium term
capital gains to offset losses;
reducing turnover to minimize realization and distribution
of taxable capital gains (annual portfolio turnover is estimated to
not exceed 15%);
when selling part of holding, strategically selling first
those securities with a higher (or lower) cost basis to reduce
(increase when there is an offsetting loss) recognized gains. Federal
income tax law permits the Fund to specify which shares of stock the
Fund will treat as being sold; while most mutual funds use a first in,
first out (FIFO) method, the Fund will individually identify which
shares to sell based upon the effect of the sale on: the realization
of capital gains; whether the sale will result in short , medium or
long term capital gains; and the proximity of the shares held to a
preferential category of capital gains (e.g., how close specific
shares are to moving from short-to-medium or from medium-to-long-term
capital gains); and purchasing low yielding or non dividend paying
stocks.
The use of the foregoing techniques may reduce, but will not eliminate,
shareholder taxes incurred as a result of investing in the Fund. It will not be
possible to use all of these techniques at all times. For example, the Advisor
may have to choose between selling higher cost but more recently purchased
shares in order to realize a smaller gain and selling earlier purchased but
lower cost shares that will result in a longer term gain. The Advisor will use
its best judgment in choosing investment techniques that, in the Advisor's
opinion, will achieve the greatest benefit to the shareholders of the Fund as a
whole.
The Fund emphasizes investments in common stock. The Advisor uses
fundamental and quantitative disciplines to select investments for the Fund.
Current income from dividends, interest and other sources is only incidental.
During periods that the Advisor deems appropriate, the Fund may take a more
defensive position and be significantly invested in cash and cash equivalents.
The portfolio managers who are responsible for the day-to-day investment
decisions are Henry B.D. Smith and William Vaughan. Mr. Smith has been with
the Advisor as an Executive Vice President and Partner for over five years. Mr.
Vaughn has served as a portfolio manager for the Advisor since 1995. Mr.
Vaughn worked as a financial consultant for Merrill Lynch Pierce Feener & Smith
between 1992 and 1995.
The Fund is designed only for long term investors who expect to own shares
of the Fund for several years or more.
The Socially Responsible Fund
The investment objective of the Socially Responsible Fund is capital
appreciation. The Fund seeks to achieve its objective by investing in a
non-diversified portfolio of the equity securities of companies that meet
commonly-applied social screens. Under normal circumstances at least 65% of the
Fund's total assets will be invested in equity securities of such companies.
The criteria used in identifying socially responsible companies involve the
subjective judgment of the Advisor. The Advisor, based on available data, seeks
to exclude the following types of companies: firms that derive more than 2% of
their gross revenues from the sale of military weapons; firms that derive any
revenues from the manufacture of tobacco products or alcoholic beverages; firms
that derive any revenues from gambling enterprises; and firms that have an
ownership share in, or operate, nuclear power plants, or participate in
businesses related to the nuclear fuel cycle. The Advisor also considers
criteria such as corporate citizenship, employee relations, environmental
performance, and product-related issues when evaluating stocks for inclusion in
the Fund. The corporate citizenship criteria include a company's record with
regard to its philanthropic activities and its community relations in general.
The employee relations criteria include a company's record with regard to labor
matters, workplace safety, equal employment opportunity, employee benefit
programs, and meaningful participation in company profits either through stock
purchase or profit sharing plans. The environmental performance criteria include
a company's record with regard to fines or penalties, waste disposal, toxic
emissions, efforts in waste reduction and emissions reduction, recycling, and
environmentally beneficial fuels, products and services. The product-related
criteria include a company's record with regard to product safety, marketing
practices, and commitment to quality.
After applying its social screens, the Advisor uses fundamental and
quantitative disciplines to select investments for the Fund. The Advisor
focuses on socially responsible companies with consistently superior growth in
revenues and earnings, strong product lines and proven management ability
demonstrated over a variety of business cycles. The portfolio managers who are
responsible for the day-to-day investment decisions are Henry B. D. Smith and
Lloyd S. Kurtz. Mr. Smith has been with the Advisor as an Executive Vice
President and Partner for over five years. Mr. Kurtz has served as an Analyst
for the Advisor since 1995. Prior to joining the Advisor, Mr. Kurtz had been a
Senior Research Analyst at Kinder, Lydenberg, Domini & Co. since 1991.
PORTFOLIO SECURITIES The following describes in more detail the types of
portfolio securities in which the Funds may invest: Equity Securities
Each Fund will invest most of its assets, most of the time, in common stocks,
but may also invest in other types of equity securities (such as preferred
stocks or convertible securities) as well as equity derivative securities. The
Technology and Aggressive Growth Equity Funds may also invest in warrants.
Depositary Receipts and Foreign Securities
To the extent consistent with its investment objectives, each Fund may invest in
foreign securities typically in the form of both sponsored and unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
other similar global instruments. ADRs typically are issued by a United States
bank or trust company and evidence ownership of underlying securities issued by
a foreign corporation. EDRs, sometimes called Continental Depositary Receipts,
are issued in Europe, typically by foreign banks and trust companies, and
evidence ownership of either foreign or domestic underlying securities.
Unsponsored ADR and EDR programs are organized without the cooperation of the
issuer of the underlying securities. As a result, available information
concerning the issuer may not be as current as for sponsored ADRs and EDRs, and
the prices of unsponsored ADRs and EDRs may be more volatile. The Aggressive
Growth Fund and the Technology Fund may invest up to 30% of their total assets
in foreign companies. The Tax-Advantaged Fund may invest up to 35% of its
total assets in foreign securities.
Initial Public Offerings
When appropriate and consistent with a Fund's investment objective and policies,
each Fund may invest in initial public offerings that the Advisor believes offer
good long-term investment prospects or an opportunity for immediate price
appreciation.
Cash and Short-Term Investments
Each Fund may hold a portion of its assets (typically 25% or less) in the form
of cash, cash equivalents and short-term investments. A money market fund may
also be used to provide a cash position for a Fund or the Fund may enter into a
short term repurchase agreement. For temporary defensive purposes, each Fund
may invest up to 100% of its assets in cash positions or short term investments.
Each Fund may be substantially invested in cash and cash equivalents for up to
several months after commencing operations.
Other Investment Practices
Each Fund also may engage in the investment practices described below, each of
which may involve certain risks. The Statement of Additional Information, under
the heading "Investment Objectives and Policies of the Funds," contains more
detailed information about certain of these practices, including limitations
designed to reduce risks.
Leverage and Borrowing
The Aggressive Growth Equity Fund and the Technology Fund typically leverage
their portfolios by 25% to 33% in an effort to increase return. Although
leverage creates an opportunity for increased income and gain, it also creates
special risk considerations. For example, leveraging may magnify changes in the
net asset value of the Fund's shares and in the yield on its portfolio. Although
the principal of such borrowings will be fixed, the Fund's assets may change in
value while the borrowing is outstanding. Leveraging creates interest expenses
that can exceed the income from the assets retained. In addition, each Fund may
borrow money from banks, in an aggregate amount not to exceed one-third of the
value of the Fund's total assets, for temporary or emergency purposes. A Fund
may pledge its assets in connection with such borrowings. No Fund will purchase
any security while any such bank borrowings exceed 10% of the value of its total
assets.
When-Issued and Forward Commitment Securities
The Funds may purchase U.S. government or other securities on a "when-issued"
basis and may purchase or sell securities on a "forward commitment" or
"delayed-delivery" basis. The price is fixed at the time the commitment is made,
but delivery and payment for the securities take place at a later date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but the Funds will enter into when-issued and forward
commitments only with the intention of actually receiving or delivering the
securities, as the case may be. No income accrues on securities that have been
purchased pursuant to a forward commitment or on a when-issued basis prior to
delivery to a Fund. At the time a Fund enters into a transaction on a
when-issued or forward commitment basis, it supports its obligation with
collateral assets equal to the value of the when-issued or forward commitment
securities and causes the collateral assets to be marked-to-market daily. There
is a risk that the securities may not be delivered and that the Fund may incur a
loss.
Options on Securities
The Aggressive Growth and Technology Funds may purchase put and call options on
securities traded on U.S. exchanges. These Funds may purchase call options on
securities that they intend to purchase in order to limit the risk of a
substantial increase in the market price of such security. These Funds may
purchase put options on particular securities in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option. Put options allow a Fund to protect
unrealized gain in an appreciated security that it owns without selling that
security. Prior to expiration, most options are expected to be sold in a closing
sale transaction. Profit or loss from the sale depends upon whether the amount
received is more or less than the premium paid plus transaction costs.
The Aggressive Growth and Technology Funds also may purchase put and call
options on stock indices in order to hedge against the risks of stock market or
industry wide stock price fluctuations. Short Selling
Each Fund may sell securities short by borrowing securities it does not own and
selling them. The Fund is then obligated to replace the securities borrowed by
purchasing them at the market price at the time of replacement. If the
securities sold short increase in value between the time of sale and the time
the Fund purchases them, the Fund will incur a loss. On the other hand, if the
securities decline in value, the Fund may repurchase them at a lower price and
realize a profit. As a matter of policy, the Board of Directors has determined
that a Fund will not make short sales of securities or maintain a short position
if to do so would create liabilities or require collateral deposits and
segregation of assets aggregating more than 30% of the applicable Fund's total
assets, taken at market value.
Illiquid Securities
None of the Funds expects to invest in illiquid securities i.e., securities
which are restricted as to resale or are otherwise not readily marketable. Real
Estate Investment Trusts
The Health Care Fund and the Aggressive Growth Equity Fund may invest in real
estate investment trusts ("REITs"). REITs are pooled investment vehicles which
invest primarily in income-producing real estate or real estate related loans or
interests. Investments in REITs may be subject to risks similar to those
associated with the direct ownership of real estate (in addition to securities
markets risks). These include declines in the value of real estate, risks
related to general and local economic conditions, dependency on management
skill, increase in interest rates, possible lack of availability of mortgage
funds, overbuilding, extended vacancies of properties, increased competition,
increases in property taxes and operating expenses, changes in zoning laws,
losses due to costs resulting from the clean up of environmental problems,
casualty or condemnation losses, limitations on rents, changes in neighborhood
values and the appeal of properties to tenants. Certain REITs have relatively
small capitalization, which may tend to increase the volatility of the market
price of securities issued by such REITs. See "Risk Considerations."
Investment Restrictions
The investment objectives of the Funds are fundamental and may not be changed
without shareholder approval but, unless otherwise stated, the Fund's investment
policies and other stated practices may be changed with approval of the Board of
Trustees. If there is a material change in the investment objective or policies
of a Fund, shareholders will be notified. A shareholder should then consider
whether the Fund remains an appropriate investment in light of its then-current
financial positions and needs. The Funds are subject to additional investment
policies and restrictions described in the Statement of Additional Information,
some of which are fundamental.
Risk Considerations
The following describes certain risks involved with investing in the Funds.
Tax Efficiency
In pursuing its objective of seeking capital appreciation, the Tax-Advantaged
Fund may employ investment techniques or devices that may have an adverse effect
on, and increase shareholder exposure to, income taxes. The Advisor will use
its best judgment in determining which investment techniques to employ to
achieve the Fund's objective of seeking capital appreciation while maintaining a
practical level of tax efficiency for the Fund.
In addition, strategies and techniques employed in attempting to increase the
tax efficiency of the Fund may have an adverse effect on the Fund's performance.
For example, delay in disposing of a stock may delay the recognition of gain,
but also would expose the Fund to declines in the value of that stock. Small
Companies
The Funds may make investments in smaller companies (but typically not companies
with market capitalizations of less than $100 million) that may benefit from the
development of new products and services. Such smaller companies may present
greater opportunities for capital appreciation but may involve greater risk than
larger, more mature issuers. Such smaller companies may have limited product
lines, markets or financial resources, and their securities may trade less
frequently and in more limited volume than those of larger, more mature
companies. As a result, the prices of their securities may fluctuate more than
those of larger issuers.
Non-Diversification and Sector Concentration
The Funds are "non-diversified" investment companies, and may invest their
assets in a more limited number of issuers than may other investment companies.
Under the Internal Revenue Code, an investment company, including a
non-diversified investment company, generally may not invest more than 25% of
its assets in obligations of any one issuer other than U.S. Government
obligations and, with respect to 50% of its total assets, a Fund may not invest
more than 5% of its total assets in the securities of one issuer (except U.S.
Government securities). Thus, each of the Funds may invest up to 25% of its
total assets in the securities of any two issuers. This practice involves
increased risk of loss to a Fund if the market value of a security should
decline or its issuer were otherwise not to meet its obligations. Technology
Fund and the Health Care Fund will invest more than 25% of their assets in
securities of issuers in their respective market sectors. The Aggressive Growth
Fund and the Tax-Advantaged Fund also may invest more than 25% of their assets
in a particular sector if the Advisor believes the investment return available
from concentration in that sector justifies any additional risk associated with
concentration in that sector. When a Fund concentrates its investments in a
market sector, financial, economic, business and other developments affecting
issuers in that sector will have a greater effect on a Fund than if it had not
concentrated its assets in that sector.
Health Care Companies
An investment in the Health Care Fund may involve a greater degree of risk than
an investment in other mutual funds that seek capital appreciation by investing
in a broader mix of issuers. Companies engaged in biotechnology, drugs and
medical devices are affected by, among other things, limited patent duration,
intense competition, obsolescence brought about by rapid technological change
and regulatory requirements. In addition, many health care companies are
smaller and less seasoned, suffer from inexperienced management, offer limited
product lines (or may not yet offer products), and may have persistent losses or
erratic revenue patterns. Securities of these smaller companies may have more
limited marketability and, thus, may be more volatile.
Other health care companies, including pharmaceutical companies, companies
undertaking research and development, and operators of health care facilities
and their suppliers are subject to government regulation, product or service
approval and, with respect to medical devices, the receipt of necessary
reimbursement codes, which could have a significant effect on the price and
availability of such products and services, and may adversely affect the
revenues of these companies. These companies are also susceptible to product
liability claims and competition from manufacturers and distributors of generic
products. Companies engaged in the ownership or management of health care
facilities receive a substantial portion of their revenue from federal and state
governments through Medicare and Medicaid payments. These sources of revenue
are subject to extensive regulation and government appropriations to fund these
expenditures are under intense scrutiny. Numerous federal and state legislative
initiatives are being considered that seek to control health care costs and
consequently, could affect the profitability and stock prices of companies
engaged in the health care industry.
Technology Companies
An investment in the Technology Fund may also involve a greater degree of risk
than an investment in other mutual funds that seek capital appreciation by
investing in a broader mix of issuers. Companies in the rapidly changing field
of technology face special risks. For example, their products or services may
not prove commercially successful or may become obsolete quickly. The
technology industry may be subject to greater governmental regulation than many
other areas and changes in governmental policies and the need for regulatory
approvals may have a material adverse effect on these areas. Additionally
companies in these areas may be subject to risks of developing technologies,
competitive pressures and other factors and are dependent upon consumer and
business acceptance as new technologies evolve.
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 Advisor is located at
One Sansome Street, Suite 3300, San Francisco, CA 94104. The Advisor was
founded in 1971 and is a majority-owned affiliate of Value Asset Management,
Inc. ("VAM"). VAM is a Connecticut-based holding company owned by Banc Boston
Ventures, Inc., which is a subsidiary of Bank Boston, N.A. VAM invests in
privately-owned asset management firms. The Advisor provides investment
advisory and sub-advisory services to individual and institutional investors and
investment companies with assets of approximately $2.7 billion.
The Advisor provides each Fund with advice on buying and selling
securities, manages the investments of each Fund, furnishes each Fund with
office space and certain administrative services, and provides most of the
personnel needed by the Funds. As compensation, each Fund pays the Advisor a
monthly management fee (accrued daily) based upon the average daily net assets
of that Fund at the annual rates shown below. The management fees for the
Technology Fund and the Aggressive Growth Equity Fund are higher than for most
mutual funds, but believed by the Advisor to be comparable to the management
fees for similar funds.
The Health Care Fund 0.75%
The Tax-Advantaged Fund 0.75%
The Socially Responsible Fund 0.75%
The Technology Fund 0.80%
The Aggressive Growth Equity Fund 0.90%
Investment Company Administration Corporation (the "Administrator') acts as each
Fund's Administrator under an Administration Agreement. Under that agreement,
the Administrator prepares various federal and state regulatory filings, reports
and returns for each Fund, prepares reports and materials to be supplied to the
trustees, monitors the activities of each Fund's custodian, transfer agent and
accountants, and coordinates the preparation and payment of Fund expenses and
reviews's expense accruals. For its services, the Administrator receives an
annual fee equal to 0.12% of each Fund's average daily net assets up to $25
million, 0.07% of the next $25 million of net assets, 0.05% of the next $50
million of net assets and 0.03% on assets over $100 million, with a minimum fee
per Fund of $30,000.
Each Fund is responsible for its own operating expenses. The Advisor is
undertaking to limit each Fund's ratio of operating expenses to average net
assets to 1.29% for each Fund's current year. The Advisor may reimburse
additional amounts to a Fund at any time in order to reduce such Fund's
expenses. Reductions made by the Advisor in its fees or payments or
reimbursement of expenses which are a Fund's obligation may be subject to
reimbursement by such Fund provided the Fund is able to do so and remain in
compliance with applicable expense limitations. The Advisor generally seeks
reimbursement for the oldest reductions and waivers before payment by a Fund for
fees and expenses for the current year.
The Advisor considers a number of factors in determining which brokers or
dealers to use for a Fund's portfolio transactions. While these are more fully
discussed in the Statement of Additional Information, the factors include, but
are not limited to, the reasonableness of commissions, quality of services and
execution, and the availability of research which the Advisor may lawfully and
appropriately use in its investment management and advisory capacities.
Provided the Fund receives prompt execution at competitive prices, the Advisor
may also consider the sale of Fund shares as a factor in selecting
broker-dealers for the Fund's portfolio transactions.
DISTRIBUTION PLAN
Each Fund has adopted a distribution plan pursuant to Rule 12b-1. The
Plan provides that each Fund may pay for distribution and related expenses at an
annual rate of up to 0.25% of that Fund's average net assets to the Advisor as
Distribution Coordinator. Expenses permitted to be paid by a 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, advisors or other third parties for their assistance with
respect to the distribution of the Fund's shares; payments to financial
intermediaries for shareholder support; administrative and accounting services
with respect to the shareholders of the Fund; and such other expenses as may be
approved from time to time by the Board of Trustees.
The Rule 12b-1 Distribution Plan allows excess distribution expenses to be
carried forward by the Advisor, as Distribution Coordinator, and resubmitted in
a subsequent fiscal year provided that (i) distribution expenses cannot be
carried forward for more than three years following initial submission; (ii) the
Board of Trustees has made a determination at the time of initial submission
that the distribution expenses are appropriate to be carried forward; and (iii)
the Board of Trustees makes a further determination, at the time any
distribution expenses which have been carried forward are 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 A FUND
The minimum initial investment in a Fund is $10,000. Subsequent
investments must be at least $1,000. First Fund Distributors, Inc. (the
"Distributor"), acts as Distributor of the Fund shares. The Distributor may, at
its discretion, waive the minimum investment requirements for purchases in
conjunction with certain group or periodic plans. In addition to cash
purchases, shares may be purchased by tendering payment in kind in the form of
shares of stock, bonds or other securities, provided that any such tendered
security is readily marketable, its acquisition is consistent with a Fund's
objective and it is otherwise acceptable to the Advisor.
Shares of each Fund are offered continuously for purchase at their net
asset value per share next determined after a purchase order is received. The
public offering price is effective for orders received by a Fund prior to the
time of the next determination of a 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 be charged a fee if they effect transactions through a broker or agent.
Investors may purchase shares of a Fund by check or wire:
By Check: For initial investments, and investor should complete the Fund's
Account Application (included with this Prospectus). The completed application,
together with a check payable to "Harris Bretall Sullivan & Smith [name of
Fund]," should be mailed to the Fund's Transfer Agent: Harris Bretall Sullivan &
Smith [name of Fund], _____________________. For purchases by overnight mail,
please contact the Transfer Agent at (___) ___-____ for instructions.
A stub is attached to the account statement sent to shareholders after each
transaction. For subsequent investments the stub should be detached from the
statement and, together with a check payable to "Harris Bretall Sullivan & Smith
[name of Fund]," mailed to the Fund in the envelope provided at the address
indicated above. The investor's account number should be written on the check.
By Wire: For initial investments, before wiring Funds, an investor should
call the Fund at (___) ___-____ between the hours of 9:00 a.m. and 4:00 p.m.
Eastern time, on a day when the NYSE is open for trading in order to receive an
account number. It is necessary to notify the Fund prior to each wire purchase.
Wires sent without notifying the Fund will result in a delay of the effective
date of your purchase. The Transfer Agent will request the investor's name,
address, taxpayer identification number, amount being wired and wiring bank.
The investor should then instruct the wiring bank to transfer Funds by wire
to:_______________________, for credit to Harris Bretall Sullivan & Smith [name
of Fund], DDA #___________, for further credit to [investor's name and account
number]. The investor should also ensure that the wiring bank includes the name
of the Fund and the account number with the wire. If the funds are received by
the Transfer Agent prior to the time that the applicable Fund's net asset value
is calculated, the funds will be invested on that day; otherwise they will be
invested on the next business day. Finally, the investor should write the
account number provided by the Transfer Agent on the Application Form and mail
the Form promptly to the Transfer Agent.
For subsequent investments, the investor should first notify the Fund and
then the investor's bank should wire Funds as indicated above. It is essential
that complete information regarding 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. Each Fund and the
Distributor reserve the right to reject any purchase order in whole or in part.
If an order, together with payment in proper form, is received by the Transfer
Agent by the close of trading on the NYSE (generally 4:00 p.m., Eastern time,
unless trading closes earlier), 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 applicable
Fund and that Fund's Transfer Agent for the account of the shareholder.
HOW TO REDEEM AN INVESTMENT IN A FUND
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 Fund's Transfer Agent in order to constitute a valid tender for redemption.
Redemption requests should be sent of Harris Bretall Sullivan & Smith [name of
Fund] at______________________. To protect the Fund and its shareholders, a
signature guarantee is required for certain transactions, including redemptions.
Signature(s) on the redemption request must be guaranteed by an "eligible
guarantor institution" as defined in the federal securities laws. These
institutions include banks, broker-dealers, credit unions and savings
institutions. A broker-dealer guaranteeing signatures must be a member of a
clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees. Signature guarantees
will be accepted from any eligible guarantor institution which participates in a
signature guarantee program. A notary public is not an acceptable guarantor.
Telephone Redemption. Shareholders who complete the Redemption by
Telephone portion of the Fund's Account Application may redeem shares on any
business day the NYSE is open by calling the Fund's Transfer Agent at (___)
___-____ between the hours of 9:00 a.m. and 4:00 p.m., Eastern time.
Redemptions proceeds will be mailed to the address of record or wired at the
shareholder's direction the next business day to the predesignated account. The
minimum amount that may be wired is $1,000 (wire charges, if any, will be
deducted from redemption proceeds). By establishing telephone redemption
privileges, a shareholder authorizes the Fund and its Transfer Agent to act upon
the instruction of any person by telephone to redeem from the account for which
such service has been authorized and send the proceeds to the address of record
on the account or transfer the proceeds to the bank account designated in the
Authorization. The Fund and the Transfer Agent will use procedures to confirm
that redemption instructions received by telephone are genuine, including
recording of telephone instructions and requiring a form of personal
identification before acting on such instructions. If these identification
procedures are followed, neither the Fund nor its agents will be liable for any
loss, liability or cost which results from acting upon instructions of a person
believed to be a shareholder with respect to the telephone redemption privilege.
A Fund may change, modify, or terminate these privileges at any time upon at
least 60 days notice to shareholders.
Shareholders may request telephone redemption after an account is opened;
however, the authorization form will require a separate signature guarantee.
Shareholders may experience delays in exercising telephone redemption privileges
during periods of abnormal market activity.
General. Payment of 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. A Fund may
suspend the right of redemption under certain extraordinary circumstances in
accordance with the Rules of the SEC. In the case of shares purchased by check
and redeemed shortly after purchase, 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, a Fund reserves the right to redeem shares in any account,
other than retirement plan or Uniform Gift to Minors Act accounts, if at any
time, due to redemptions by the shareholder, the total value of a shareholder's
account does not equal at least $5,000. If a Fund determines to make such an
involuntary redemption, the shareholder will first be notified that the value of
his account is less than $5,000 and will be allowed 30 days to make an
additional investment to bring the value of his account to at least $5,000
before the Fund takes any action.
SERVICES AVAILABLE TO THE FUNDS' SHAREHOLDERS
Retirement Plans. Each Fund offers a prototype Individual Retirement
Account ("IRA") plan and information is available from the Distributor or from
your securities dealer with respect to other retirement plans offered.
Investors should consult a tax advisor before establishing any retirement plan.
Automatic Investment Plan. For the convenience of shareholders, each Fund
offers a preauthorized check service under which a check is automatically drawn
on the shareholder's personal checking account each month for a predetermined
amount (but not less than $100), as if the shareholder had written it directly.
Upon receipt of the withdrawn funds, the Fund automatically invests the money in
additional shares of the Fund at the current offering price. Applications for
this service are available from the Distributor. There is no charge by the Fund
for this service. The Distributor may terminate or modify this privilege at any
time, and shareholders may terminate their participation by notifying the
Transfer Agent in writing, sufficiently in advance of the next scheduled
withdrawal.
Automatic Withdrawals. As another convenience, each Fund offers a
Systematic Withdrawal Program whereby shareholders may request that a check
drawn in a predetermined amount be sent to them each month or calendar quarter.
A shareholder's account must have Fund shares with a value of at least $10,000
in order to start a Systematic Withdrawal Program, and the minimum amount that
may be withdrawn each month or quarter under the Systematic Withdrawal Program
is $100. This Program may be terminated or modified by a shareholder or a Fund
at any time without charge or penalty.
A withdrawal under the Systematic Withdrawal Program is treated as a
redemption of shares, and may result in a gain or loss for federal income tax
purposes. In addition, if the amounts withdrawn exceed the dividends credited
to the shareholder's account, the account ultimately may be depleted.
HOW A FUND'S PER SHARE VALUE IS DETERMINED
The net asset value of a Fund's share is determined once daily as of the
close of the public trading on the NYSE (generally 4:00 p.m. Eastern time,
unless trading closes earlier) on each day the NYSE is open for trading. Net
asset value per share is calculated by dividing the value of a 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.
DISTRIBUTIONS AND TAXES
Dividends and Distributions. Any dividends from net investment income
(which includes realized short term capital gains) are declared and paid at
least annually, typically at the end of a Fund's fiscal year (March 31). Any
undistributed long term net capital gains realized during the 12-month period
ended each October 31, as well as any additional undistributed capital gains
realized during 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 distributions be made
in cash. Any dividend or distribution paid by a Fund has the effect of reducing
the net asst 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 elect and qualify 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 so qualify, and as long as
the Fund distributes all of its income each year to the shareholders, that Fund
will not be subject to any federal income tax or excise taxes based on net
income. Distributions made by that Fund will be taxable to shareholders
whether received in shares (through dividend reinvestment) or in cash.
Distributions derived from net investment income, including net short-term
capital gains, are taxable to shareholders as ordinary income. A portion of
these distributions may qualify for the intercorporate dividends-received
deduction. Distributions designated as capital gains dividends are taxable as
long-term capital gains regardless of the length of the time shares of a Fund
have been held. Although distributions are generally taxable when received,
certain distributions made in January are taxable as if received the prior
December. Shareholders will be informed annually of the amount and nature of
their 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 tax consequences of investing in a
Fund.
GENERAL INFORMATION
The Trust. The Trust was organized as a Massachusetts business trust on
February 17, 1987. The Agreement and Declaration of Trust permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest, without par value, which may be issued in any number of
series. The Board of Trustees may from time to time issue other series, the
assets and liabilities of which will be separate and distinct from any other
series.
Shareholder Rights. Shares issued by the Funds have no preemptive,
conversion, or subscription rights. Shareholders have equal and exclusive
rights as to dividends and distributions as declared by their respective Fund
and to the net assets of that Fund upon liquidation or dissolution. Each Fund,
as a separate series of the Trust, votes separately on matters affecting only
that Fund (e.g., approval of the Management Agreement); all series of the Trust
vote as a single class on matters affecting all series jointly or the Trust as a
whole (e.g., election or removal of Trustees). Voting rights are not
cumulative, so that the holders of more than 50% of the shares voting in any
election or Trustees can, if they so choose, elect all of the Trustees. While
the Trust is not required and does not intend to hold annual meetings of
shareholders, such meetings may be called by the Trustees in their discretion,
or upon demand by the holders of 10% or more of the outstanding shares of the
Trust for the purpose of electing or removing Trustees.
Performance Information. From time to time, a Fund may publish its total
return in advertisements and communications to investors. Total return
information will include a Fund's average annual compounded rate of return over
the most recent year and over the period from that Fund's inception of
operations. A Fund may also advertise aggregate and average total return
information over different periods of time. A Fund's total return will be based
upon the value of the shares acquired through a hypothetical $1,000 investment
at the beginning of the specified period and the net asset value of such shares
at the end of the period, assuming reinvestment of all distributions. Total
return figures will reflect all recurring charges against Fund income.
Investors should note that the investment results of a Fund will fluctuate over
time, and any presentation of a Fund's total return for any prior period should
not be considered as a representation of what an investor's total return may be
in any future period.
Custodian and Transfer Agent.
[To be identified]
Advisor
Harris Bretall Sullivan & Smith L.L.C.
One Sansome Street, Suite 3300
San Francisco, CA 94104
(415) 765-8300
Account Inquiries (800) 385-7003
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Rd., Suite 261E
Phoenix, AZ 85018
Transfer and Dividend Disbursing Agent
[To be identified]
Auditors
[To be identified]
Legal Counsel
Paul, Hastings, Janofsky & Walker LLP
345 California Street.
San Francisco, CA 94104
Harris Bretall Sullivan & Smith
Aggressive Growth Equity Fund
Health Care Fund
Technology Fund
Tax-Advantaged Fund
Socially Responsible Fund
Prospectus
June 30, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
June 30, 1998
HARRIS BRETALL SULLIVAN & SMITH GROWTH EQUITY FUND
HARRIS BRETALL SULLIVAN & SMITH AGGRESSIVE GROWTH EQUITY FUND
HARRIS BRETALL SULLIVAN & SMITH HEALTH CARE FUND
HARRIS BRETALL SULLIVAN & SMITH TECHNOLOGY FUND
HARRIS BRETALL SULLIVAN & SMITH TAX-ADVANTAGED FUND
HARRIS BRETALL SULLIVAN & SMITH SOCIALLY RESPONSIBLE FUND
each a series of Professionally Managed Portfolios
One Sansome Street, Suite 3300
San Francisco, CA 94104
(800) 685-4277
(800) 385-7003
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus of the respective Fund. A copy of the
prospectus for the respective Fund is available by calling either of the numbers
listed above.
TABLE OF CONTENTS
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . .B-2
Investment Objective and Policies . . . . . . . . . . . . . .B-2
Investment Restrictions. . . . . . . . . . . . . . . . . . . .B-8
Distributions and Tax Information. . . . . . . . . . . . . . B-10
Trustees and Executive Officers. . . . . . . . . . . . . . . B-12
The Funds' Investment Advisor. . . . . . . . . . . . . . . . B-14
The Funds' Administrator . . . . . . . . . . . . . . . . . . B-16
The Funds' Distributor . . . . . . . . . . . . . . . . . . . B-16
Execution of Portfolio Transactions. . . . . . . . . . . . . B-17
Additional Purchase and Redemption Information . . . . . . . B-19
Determination of Share Price . . . . . . . . . . . . . . . . B-20
Performance Information. . . . . . . . . . . . . . . . . . . B-21
General Information. . . . . . . . . . . . . . . . . . . . . B-22
Financial Statements . . . . . . . . . . . . . . . . . . . . B-23
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 following six Funds:
1. Harris Bretall Sullivan & Smith Growth Equity Fund (the
"Growth Fund");
2. Harris Bretall Sullivan & Smith Aggressive Growth Equity Fund
(the "Aggressive Growth Fund");
3. Harris Bretall Sullivan & Smith Health Care Fund (the "Health
Care Fund");
4. Harris Bretall Sullivan & Smith Technology Fund (the
"Technology Fund");
5. Harris Bretall Sullivan & Smith Tax-Advantaged Fund (the
"Tax-Advantaged Fund"); and
6. Harris Bretall Sullivan & Smith Socially Responsible Fund (the
"Socially Responsible Fund").
INVESTMENT OBJECTIVE AND POLICIES
The investment objectives and policies of the Funds are described in
detail in their respective Prospectuses. The following discussion supplements
the discussion of the Funds' investment objectives and policies as set forth in
the respective Prospectuses. There can be no assurance that any of the Funds
will achieve their objectives.
Depositary Receipts
A Fund may hold securities of foreign issuers in the form of American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global
Depository Receipts ("GDRs"), and other similar global instruments available in
emerging markets, or other securities convertible into securities of eligible
issuers. These securities may not necessarily be denominated in the same
currency as the securities for which they may be exchanged. Generally, ADRs in
registered form are designed for use in U.S. securities markets, and EDRs and
other similar global instruments in bearer form are designed for use in European
securities markets. For purposes of a Fund's investment policies, a Fund's
investments in ADRs, EDRs and similar instruments will be deemed to be
investments in the equity securities representing the securities of foreign
issuers into which they may be converted.
Warrants
The Technology and Aggressive Growth Funds may invest a portion of their
assets in warrants. A warrant gives the holder the right to purchase at any
time during a specified period a predetermined number of shares of common stock
at a fixed price. Investing in warrants can provide a greater potential for
profit or loss than an equivalent instrument in the underlying security, and,
thus, can be a speculative investment. The value of a warrant may decline
because of a decline in the value of the underlying security, the passage of
time, changes in interest rates or the dividend or other policies of the company
whose equity underlies the warrant or a change in the perception as to the
future price of the underlying security, or any combination thereof. Warrants
generally pay no dividends and confer no voting or other rights other than to
purchase the underlying security.
Repurchase Agreements
Each Fund may enter into repurchase agreements as discussed in the
Prospectuses. Under such agreements, the seller of the security agrees to
repurchase it at a mutually agreed upon time and price. The repurchase price
may be higher than the purchase price, the difference being income to the Fund,
or the purchase and repurchase prices may be the same, with interest at a stated
rate due to the Fund together with the repurchase price on repurchase. In
either case, the income to the Fund is unrelated to the interest rate on the
U.S. Government security itself. Such repurchase agreements will be made only
with banks with assets of $500 million or more that are insured by the Federal
Deposit Insurance Corporation or with Government securities dealers recognized
by the Federal Reserve Board and registered as broker-dealers with the
Securities and Exchange Commission ("SEC") or exempt from such registration. A
Fund will generally enter into repurchase agreements of short durations, from
overnight to one week, although the underlying securities generally have longer
maturities. A Fund may not enter into a repurchase agreement with more than
seven days to maturity if, as a result, more than 15% of the value of the Fund's
total assets would be invested in illiquid securities including such repurchase
agreements.
For purposes of the Investment Company Act of 1940 (the "1940 Act"), a
repurchase agreement is deemed to be a loan from the Fund to the seller of the
U.S. Government security subject to the repurchase agreement. It is not clear
whether a court would consider the U.S. Government security acquired by the
Fund subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the U.S. Government security before its repurchase under a repurchase
agreement, the Fund may encounter delays and incur costs before being able to
sell the security. Delays may involve loss of interest or a decline in price of
the U.S. Government security. If a court characterizes the transaction as a loan
and the Fund has not perfected a security interest in the U.S. Government
security, the Fund may be required to return the security to the seller's estate
and be treated as an unsecured creditor of the seller. As an unsecured
creditor, the Fund would be at the risk of losing some or all of the principal
and income involved in the transaction. As with any unsecured debt instrument
purchased for a Fund, the Advisor seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligor, in this
case the seller of the U.S. Government security.
Apart from the risk of bankruptcy or insolvency proceedings, there is also
the risk that the seller may fail to repurchase the security. However, the Fund
will always receive as collateral for any repurchase agreement to which it is a
party securities acceptable to it, the market value of which is equal to at
least 100% of the amount invested by the Fund plus accrued interest, and the
Fund will make payment against such securities only upon physical delivery or
evidence of book entry transfer to the account of its Custodian. If the market
value of the U.S. Government security subject to the repurchase agreement
becomes less than the repurchase price (including interest), the Fund will
direct the seller of the U.S. Government security to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement will equal or exceed the repurchase price. It is possible that the
Fund will be unsuccessful in seeking to impose on the seller a contractual
obligation to deliver additional securities.
When-Issued Securities
Each Fund may from time to time purchase securities on a "when-issued"
basis. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
for the when-issued securities take place at a later date. Normally, the
settlement date occurs within one month of the purchase; during the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. To the extent that assets of the Fund are
held in cash pending the settlement of a purchase of securities, the Fund would
earn no income; however, it is each Fund's intention to be fully invested to the
extent practicable and subject to the policies stated above. While when-issued
securities may be sold prior to the settlement date, each Fund intends to
purchase such securities with the purpose of actually acquiring them unless a
sale appears desirable for investment reasons. At the time a Fund makes the
commitment to purchase a security on a when-issued basis, it will record the
transaction and reflect the value of the security in determining its net asset
value. The market value of the when-issued securities may be more or less than
the purchase price. The Funds do not believe that their net asset value or
income will be adversely affected by purchase of securities on a when-issued
basis. Each Fund will segregate liquid assets with its Custodian 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.
Short-Term Investments; U.S. Government and Mortgage Related Securities
As indicated in the prospectuses, the Advisor expects that under normal
market conditions, each Fund will stay fully invested and cash levels typically
will not exceed 5% of total assets. However, at times a Fund may invest in
short-term cash equivalent securities either for temporary, defensive purposes
or when the Advisor views the market as significantly overvalued. The
Aggressive Growth, Health Care, Technology, Tax-Advantaged, and Socially
Responsible Funds may be substantially invested in cash and cash equivalents for
up to several months after commencing operations.
These securities may include U.S. Government securities. U.S. Government
securities include direct obligations issued by the U.S. Treasury, such as
Treasury bills, certificates of indebtedness, notes and bonds. U.S. Government
agencies and instrumentalities that issue or guarantee securities include, but
are not limited to, the Federal National Mortgage Association ("FNMA"), Federal
Home Loan Banks, Federal Financing Bank and Student Loan Marketing Association.
All Treasury securities are backed by the full faith and credit of the
United States. Obligations of U.S. Government agencies and instrumentalities may
or may not be supported by the full faith and credit of the United States. Some,
such as the Federal Home Loan Banks, are backed by the right of the agency or
instrumentality to borrow from the Treasury. Others, such as securities issued
by the FNMA, are supported only by the credit of the instrumentality and not by
the Treasury. If the securities are not backed by the full faith and credit of
the United States, the owner of the securities must look principally to the
agency issuing the obligation for repayment and may not be able to assert a
claim against the United States in the event that the agency or instrumentality
does not meet its commitment.
Short-term securities may also include mortgage pass-through securities.
Mortgage pass-through securities are securities representing interests in pools
of mortgages in which payments of both interest and principal on the securities
are generally made monthly, in effect "passing through" monthly payments made by
the individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the securities).
Early repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to the sale of underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose the Fund to
a lower rate of return upon reinvestment of principal. Also, if a security
subject to repayment has been purchased at a premium, in the event of prepayment
the value of the premium would be lost.
As noted above, payment of principal and interest on some mortgage-related
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U. S. Government (in the case of
securities guaranteed by the Government National Mortgage Association ("GNMA")
or by agencies or instrumentalities of the U.S. Government (in the case of
securities guaranteed by FNMA or the Federal Home Loan Mortgage Corporation
("FHLMC"), which are supported only by the discretionary authority of the U.S.
Government to purchase the agency's obligations). Mortgage pass-through
securities created by non- governmental issuers (such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers) may be supported by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance, and letters of credit, which may be issued by governmental entities,
private insurers or the mortgage poolers.
Collateralized mortgage obligations ("CMO's") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal on a CMO are
paid, in most cases, semi-annually. CMO's may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC, or FNMA. CMO's are
structured into multiple classes, with each class bearing a different stated
maturity. Monthly payments of principal, including prepayments, are first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. Other mortgage-related securities include those that directly or
indirectly represent a participation in or are secured by and payable from
mortgage loans on real property, such as CMO residuals or stripped
mortgage-backed securities, and may be structured in classes with rights to
receive varying proportions of principal and interest.
In certain mortgage-related securities, all interest payments go to one
class of holders-- "interest only" or "IO"--and all of the principal goes to a
second class of holders--"principal only" or "PO". The yield to maturity on an
IO class is extremely sensitive to the rate of principal prepayments on the
related underlying mortgage assets, and a rapid rate of principal payments will
have a material adverse effect on yield to maturity. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, the Fund
may fail to fully recoup its initial investment in these securities, even when
the securities are rated AA or the equivalent. Conversely, if the underlying
mortgage assets experience less than anticipated prepayments of principal, the
yield on a PO class would be materially adversely affected. As interest rates
rise and fall, the value of IO's tends to move in the same direction as interest
rates. The value of the other mortgage-related securities described herein,
like other debt instruments, will tend to move in the opposite direction from
interest rates. In general, the Fund treats IO's and PO's as subject to the
restriction on investments in illiquid instruments except that IO's and PO's
issued by the U.S. Government, its agencies and instrumentalities and backed by
fixed-rate mortgages may be excluded from this limit if, in the judgment of the
Advisor and subject to the oversight of the Trustees such IO's and PO's are
readily marketable.
Options on Securities
A Fund may purchase put and call options on securities in which it has
invested. A Fund also may enter into closing sales transactions in order to
realize gains or minimize losses on options they have purchased.
A Fund normally will purchase call options in anticipation of an increase in
the market value of securities of the type in which it may invest. The purchase
of a call option would entitle a Fund, in return for the premium paid, to
purchase specified securities at a specified price during the option period.
A Fund may purchase and sell options traded on U.S. and foreign exchanges.
Although a Fund will generally purchase only those options for which there
appears to be an active secondary market, there can be no assurance that a
liquid secondary market on an exchange will exist for any particular option or
at any particular time. For some options, no secondary market on an exchange may
exist. In such event, it might not be possible to effect closing transactions in
particular options, with the result that a Fund would have to exercise its
options in order to realize any profit and would incur transaction costs upon
the purchase or sale of the underlying securities.
Secondary markets on an exchange may not exist or may not be liquid for a
variety of reasons including: (i) insufficient trading interest in certain
options; (ii) restrictions on opening transactions or closing transactions
imposed by an exchange; (iii) trading halts, suspensions or other restrictions
may be imposed with respect to particular classes or series of options; (iv)
unusual or unforeseen circumstances which interrupt normal operations on an
exchange; (v) inadequate facilities of an exchange or the Options Clearing
Corporation to handle current trading volume at all times; or (vi)
discontinuance in the future by one or more exchanges for economic or other
reasons, of trading of options (or of a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options) would cease to exist, although outstanding options on that exchange
that had been issued by the Options Clearing Corporation as a result of trades
on that exchange would continue to be exercisable in accordance with their
terms.
Although the Funds do not currently intend to do so, they may, in the
future, write (i.e., sell) covered put and call options on securities,
securities indices and currencies in which they may invest. A covered call
option involves a Fund's giving another party, in return for a premium, the
right to buy specified securities owned by that Fund at a specified future date
and price set at the time of the contract. A covered call option serves as a
partial hedge against a price decline of the underlying security. However, by
writing a covered call option, a Fund gives up the opportunity, while the option
is in effect, to realize gain from any price increase (above the option exercise
price) in the underlying security. In addition, a Fund's ability to sell the
underlying security is limited while the option is in effect unless that Fund
effects a closing purchase transaction.
Each Fund also may write covered put options that give the holder of the
option the right to sell the underlying security to the Fund at the stated
exercise price. A Fund will receive a premium for writing a put option but will
be obligated for as long as the option is outstanding to purchase the underlying
security at a price that may be higher than the market value of that security at
the time of exercise. In order to "cover" put options it has written, a Fund
will cause its custodian to segregate cash, cash equivalents, U.S. Government
securities or other liquid equity or debt securities with at least the value of
the exercise price of the put options.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of the
Options Clearing Corporation inadequate, and result in the institution by an
exchange of special procedures that may interfere with the timely execution of
the Funds' orders.
Foreign Securities
Investors in Funds that may invest in foreign securities should consider
carefully the substantial risks involved in securities of companies located or
doing business in, and governments of, foreign nations, which are in addition to
the usual risks inherent in domestic investments. There may be less publicly
available information about foreign companies comparable to the reports and
ratings published regarding companies in the United States. Foreign companies
are often not subject to uniform accounting, auditing and financial reporting
standards, and auditing practices and requirements often may not be comparable
to those applicable to U.S. companies. Many foreign markets have substantially
less volume than either the established domestic securities exchanges or the OTC
markets. Securities of some foreign companies are less liquid and more volatile
than securities of comparable U.S. companies. Commission rates in foreign
countries, which may be fixed rather than subject to negotiation as in the U.S.,
are likely to be higher. In many foreign countries there is less government
supervision and regulation of securities exchanges, brokers and listed companies
than in the U.S., and capital requirements for brokerage firms are generally
lower. Settlement of transactions in foreign securities may, in some instances,
be subject to delays and related administrative uncertainties.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by each
Fund and (unless otherwise noted) are fundamental and cannot be changed without
the affirmative vote of a majority of a Fund's outstanding voting securities as
defined in the 1940 Act. The Fund may not:
1. Make loans to others, except (a) through the purchase of debt
securities in accordance with its investment objectives and policies and (b) to
the extent the entry into a repurchase agreement is deemed to be a loan.
2. (a) Borrow money, except as stated in the applicable Prospectus and
this Statement of Additional Information. Any such borrowing will be made only
if immediately thereafter there is an asset coverage of at least 300% of all
borrowing.
(b) Mortgage, pledge or hypothecate any of its assets except in
connection with any such borrowing.
3. Except as disclosed in the applicable Prospectus or required in
connection with permissible hedging activities, purchase securities on margin,
participate on a joint or joint and several basis in any securities trading
account, or underwrite securities. (Does not preclude a Fund from obtaining
such short-term credit as may be necessary for the clearance of purchases and
sales of its portfolio securities.)
4. Purchase or sell real estate, commodities or commodity contracts
(however each Fund reserves the right in the future to engage in futures
contracts and options on futures contracts upon authorization by the Board of
Trustees and notification to shareholders).
5. With regard to the Growth Fund only, invest 25% or more of the market
value of its assets in the securities of companies engaged in any one industry.
(Does not apply to investment in the securities of the U.S. Government, its
agencies or instrumentalities.)
6. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Fund from (a) making any permitted
borrowing, mortgages or pledges, or (b) entering into options, futures or
repurchase transactions.
7. Invest in any issuer for purposes of exercising control or management.
The Funds observe the following policies, which are not deemed fundamental and
which may be changed without shareholder vote. The Funds may not:
8. Invest in securities of other investment companies which would result
in a Fund owning more than 3% of the outstanding voting securities of any one
such investment company, a Fund owning securities of another investment company
having an aggregate value in excess of 5% of the value of that Fund's total
assets, or a Fund owning securities of investment companies in the aggregate
which would exceed 10% of the value of a Fund's total assets.
9. Invest, in the aggregate, more than 15% of its net assets in securities
with legal or contractual restrictions on resale, securities which are not
readily marketable and repurchase agreements with more than seven days to
maturity.
If a percentage restriction is adhered to at the time of investment, a
subsequent increase or decrease in a percentage resulting from a change in the
values of assets will not constitute a violation of that restriction, except
with respect to the Funds' policies on borrowing and on illiquid securities, or
as otherwise noted.
DISTRIBUTIONS AND TAX INFORMATION
Distributions
Any dividends from net investment income (including realized short term
capital gains) are declared and paid at least annually, typically at the end of
each Fund's fiscal year (March 31). Any undistributed long term net capital
gains realized during the 12-month period ended each October 31, as well as any
additional undistributed long term capital gains realized during a Fund's fiscal
year, will also be distributed to shareholders on or about December 31 of each
year.
Each distribution by a Fund is accompanied by a brief explanation of the
form and character of the distribution. In January of each year the Funds will
issue to each shareholder a statement of the federal income tax status of all
distributions.
Tax Information
Each series of the Trust is treated as a separate entity for federal income
tax purposes. Each Fund intends to continue to qualify and elect to be treated
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), provided they comply with all applicable
requirements regarding the source of their income, diversification of their
assets and timing of distributions. The Funds' policy is to distribute to their
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 a Fund.
Distributions of net investment income and net short-term capital gains are
taxable to shareholders as ordinary income. In the case of corporate
shareholders, a portion of the distributions may qualify for the intercorporate
dividends-received deduction to the extent a Fund designates the amount
distributed as a qualifying dividend. The aggregate amount so designated
cannot, however, exceed the aggregate amount of qualifying dividends received
by a Fund for its taxable year. In view of each Fund's investment policy, it
is expected that dividends from domestic corporations will be part of each
Fund's gross income and that, accordingly, part of the distributions by a Fund
may be eligible for the dividends-received deduction for corporate shareholders.
However, the portion of a Fund's gross income attributable to qualifying
dividends is largely dependent on that Fund's investment activities for a
particular year and therefore cannot be predicted with any certainty. The
deduction may be reduced or eliminated if Fund shares held by a corporate
investor are treated as debt-financed or are held for less than 46 days.
Distributions of the excess of net long-term capital gains over net
short-term capital losses are taxable to shareholders as long-term capital
gains, regardless of the length of time they have held their shares. Capital
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 Fund are purchased (through reinvestment
of distributions or otherwise) within 30 days before or after the redemption or
exchange.
Under the Code, the Funds will be required to report to the Internal Revenue
Service ("IRS") all distributions of taxable income and capital gains as well as
gross proceeds from the redemption or exchange of Fund shares, except in the
case of exempt shareholders, which includes most corporations. Pursuant to the
backup withholding provisions of the Internal Revenue Code, distributions of any
taxable income and capital gains and proceeds from the redemption of Fund shares
may be subject to withholding of federal income tax at the rate of 31 percent in
the case of non-exempt shareholders who fail to furnish the Fund with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld. Corporate and other exempt shareholders should provide the Fund with
their taxpayer identification numbers or certify their exempt status in order to
avoid possible erroneous application of backup withholding. The Funds reserve
the right to refuse to open an account for any person failing to provide a
certified taxpayer identification number.
The Funds will not be subject to tax in the Commonwealth of Massachusetts as
long as they qualify as a regulated investment company for federal income tax
purposes. Distributions and the transactions referred to in the preceding
paragraphs may be subject to state and local income taxes, and the tax treatment
thereof may differ from the federal income tax treatment. Moreover, the above
discussion is not intended to be a complete discussion of all applicable federal
tax consequences of an investment in a Fund. Shareholders are advised to
consult with their own tax advisers concerning the application of federal, state
and local taxes to an investment in a Fund.
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 a Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income.
This discussion and the related discussion in the prospectus have been
prepared by Fund management, and counsel to the 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 each Fund. The Trustees, in turn, elect the officers of the Trust, who are
responsible for administering the day-to-day operations of the Trust and its
separate series. The current Trustees and officers and their affiliations and
principal occupations for the past five years are set forth below.
Steven J. Paggioli,* 47 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
40 Maple Lane, Copake, NY 12516. President, Talon Industries (venture capital
and business consulting); formerly Chief Operating Officer, Integrated Asset
Management (investment advisor and manager) and formerly President, Value Line,
Inc., (investment advisory and financial publishing firm).
Wallace L. Cook, 57 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. Formerly President and Founder, National
Investor Data Services, Inc. (investment related computer software).
Rowley W.P. Redington, 53 Trustee
1191 Valley Road, Clifton, New Jersey 07103. President; Intertech (consumer
electronics and computer service and marketing); formerly Vice President, PRS of
New Jersey, Inc. (management consulting), and Chief Executive Officer, Rowley
Associates (consultants).
Eric M. Banhazl*, 40 Treasurer
2025 E. Financial Way, Suite 101, Glendora, California 91741. Senior Vice
President, The Wadsworth Group, Senior Vice President of ICAC and Vice President
of FFD since 1990.
Robin Berger*, 40 Secretary
479 West 22nd St., New York, New York 10011. Vice President, The Wadsworth Group
since June, 1993; formerly Regulatory and Compliance Coordinator, Equitable
Capital Management, Inc. (1991-93).
Robert H. Wadsworth*, 57 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 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 $1,000 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 any portfolios of the Trust.
Name of Trustee Total Annual Compensation
Dorothy A. Berry $22,000
Wallace L. Cook $17,500
Carl A. Froebel $17,500
Rowley W.P. Redington $17,500
During the fiscal year ended March 31, 1997, trustees' fees and expenses in
the amount of $2,791 were allocated to the Growth Fund. As of the date of this
Statement of Additional Information, the Trustees and Officers of the Trust as a
group did not own more than 1% of the outstanding shares of any Fund.
THE FUNDS' INVESTMENT ADVISOR
The Board of Trustees of the Trust establishes each Fund's policies and
supervises and reviews the management of each Fund. The Advisor is located at
One Sansome Street, Suite 3300, San Francisco, CA 94104. The Advisor provides
investment advisory services to individual and institutional investors with
assets of approximately $2.7 billion. Each Fund's portfolio is managed by the
following individuals:
Growth Fund: Mr. John J. Sullivan, Executive Vice President and
Partner and Mr. Gordon J. Ceresino, also Executive
Vice President and Partner.
Aggressive Growth Fund: David Post, Executive Vice President and Partner,
and Henri Moudi, Analyst.
Health Care Fund: Jack Sullivan, Executive Vice President and
Partner, and Lloyd Kurtz, Analyst.
Technology Fund: Susan Foley, Executive Vice President and Partner,
and Seth Scholar, Analyst
Tax-Advantaged Fund: Henry B.D. Smith, Executive Vice President and
Partner, and William Vaughan, Portfolio Manager.
Socially Responsible
Fund: Henry B.D. Smith, Executive Vice President and
Partner, and Lloyd Kurtz, Analyst.
The Advisor is a majority-owned affiliate of Value Asset Management, Inc.
("VAM"). VAM is a Connecticut-based holding company owned by Banc Boston
Ventures, Inc., which is a subsidiary of Bank Boston, N.A. VAM invests in
privately-owned asset management firms.
Under the Investment Advisory Agreement with each Fund, the Advisor provides
each Fund with advice on buying and selling securities, manages the investments
of each Fund, furnishes each Fund with office space and certain administrative
services, and provides most of the personnel needed by the Funds. As
compensation, each Fund pays the Advisor a monthly management fee (accrued
daily) based upon its average daily net assets at the following annual rates:
Growth Fund 0.75%
Health Care Fund 0.75%
Socially Responsible Fund 0.75%
Tax-Advantaged Fund 0.75%
Technology Fund 0.80%
Aggressive Growth Fund 0.90%
The Advisor has undertaken to limit each Fund's operating expenses to an
annual level of 1.29% of that Fund's average net assets. With regard to the
Growth Fund, the Advisor waived its fees of $15,020 and reimbursed the Fund in
the amount of $74,252 for the fiscal period ended March 31, 1997.
The Investment Advisory Agreement continues in effect for successive annual
periods so long as such continuation is approved at least annually by the vote
of (1) the Board of Trustees of the Trust (or a majority of the outstanding
shares of the Fund to which the agreement applies), and (2) a majority of the
Trustees who are not interested persons of any party to the Agreement, in each
case cast in person at a meeting called for the purpose of voting on such
approval. Any such agreement may be terminated at any time, without penalty, by
either 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 Administration Agreement
provides that the Administrator will prepare and coordinate reports and other
materials supplied to the Trustees; prepare and/or supervise the preparation and
filing of all securities filings, periodic financial reports, prospectuses,
statements of additional information, marketing materials, tax returns,
shareholder reports and other regulatory reports or filings required of each
Fund; prepare all required filings necessary to maintain each Fund's
qualification and/or registration to sell shares in all states where each Fund
currently does, or intends to do business; coordinate the preparation, printing
and mailing of all materials (e.g., Annual Reports) required to be sent to
shareholders; coordinate the preparation and payment of Fund related expenses;
monitor and oversee the activities of each Fund's servicing agents (i.e.,
transfer agent, custodian, fund accountants, etc.); review and adjust as
necessary each Fund's daily expense accruals; and perform such additional
services as may be agreed upon by a Fund and the Administrator. For its
services, ICAC receives an annual fee equal to 0.12% of each Fund's average
daily net assets up to $25 million, 0.07% of the next $25 million of net assets,
0.05% of the next $50 million of net assets and 0.03% on assets over $100
million, with a minimum fee of $30,000. ICAC received fees of $28,351 from the
Growth Fund for the fiscal period ended March 31, 1997.
THE FUNDS' DISTRIBUTOR
First Fund Distributors, Inc., (the "Distributor"), a corporation owned by
Mr. Banhazl, Mr. Paggioli and Mr. Wadsworth, acts as the Funds' principal
underwriter in a continuous public offering of the Funds' shares. The
Distribution Agreement between the Funds and the Distributor continues in effect
for periods not exceeding one year if approved at least annually by (i) the
Board of Trustees or the vote of a majority of the outstanding shares of the
applicable Fund (as defined in the 1940 Act) and (ii) a majority of the Trustees
who are not interested persons of any such party, in each case cast in person at
a meeting called for the purpose of voting on such approval. The Distributing
Agreement may be terminated without penalty by the parties thereto upon sixty
days' written notice, and is automatically terminated in the event of its
assignment as defined in the 1940 Act.
Each Fund has adopted a Distribution Plan in accordance with Rule 12b-1
under the 1940 Act. The Plan provides that each Fund will pay a fee to 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 year ended March 31, 1997, the Growth Fund paid fees of $5,007 to the
Distributor, of which $4,816 was for selling compensation, and $191 related to
Distributor printing expenses.
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Advisor determines which
securities are to be purchased and sold by a Fund and which broker-dealers will
be used to execute a Fund's portfolio transactions. Purchases and sales of
securities in the over-the-counter market will be executed directly with a
"market-maker" unless, in the opinion of the Advisor, a better price and
execution can otherwise be obtained by using a broker for the transaction.
Purchases of portfolio securities for a Fund also may be made directly from
issuers or from underwriters. Where possible, purchase and sale transactions
will be effected through dealers (including banks) which specialize in the types
of securities which the Fund will be holding, unless better executions are
available elsewhere. Dealers and underwriters usually act as principal for
their own account. Purchases from underwriters will include a concession paid
by the issuer to the underwriter and purchases from dealers will include the
spread between the bid and the asked price. If the execution and price offered
by more than one broker, dealer or underwriter are comparable, the order may be
allocated to a broker, dealer or underwriter that has provided research or other
services as discussed below.
In placing portfolio transactions, the Advisor will use its best efforts to
choose a broker- dealer capable of providing the services necessary to obtain
the most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm's risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that more
than one broker- dealer can offer the most favorable price and execution
available, consideration may be given to those broker-dealers which furnish or
supply research and statistical information to the Advisor that it may lawfully
and appropriately use in its investment advisory capacities, as well as provide
other services in addition to execution services. The Advisor considers such
information, which is in addition to and not in lieu of the services required to
be performed by it under its Agreement with each Fund, to be useful in varying
degrees, but of indeterminable value. Portfolio transactions may be placed with
broker-dealers who sell shares of a Fund subject to rules adopted by the
National Association of Securities Dealers Regulation, Inc.
While it is each Fund's general policy to seek first to obtain the most
favorable price and execution available, in selecting a broker-dealer to execute
portfolio transactions for a Fund, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services to the Fund or to the
Advisor, even if the specific services are not directly useful to the Fund and
may be useful to the Advisor in advising other clients. In negotiating
commissions with a broker or evaluating the spread to be paid to a dealer, a
Fund may therefore pay a higher commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services, provided
that the amount of such commission or spread has been determined in good faith
by the Advisor to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. The standard of
reasonableness is to be measured in light of the Advisor's overall
responsibilities to the Funds.
Investment decisions for each Fund are made independently from those of
other client accounts or mutual funds managed or advised by the Advisor.
Nevertheless, it is possible that at times identical securities will be
acceptable for both a Fund and one or more of such client accounts. In such
event, the position of a Fund and such client account(s) in the same issuer may
vary and the length of time that each may choose to hold its investment in the
same issuer may likewise vary. However, to the extent any of these client
accounts seeks to acquire the same security as a Fund at the same time, a Fund
may not be able to acquire as large a portion of such security as it desires, or
it may have to pay a higher price or obtain a lower yield for such security.
Similarly, a Fund may not be able to obtain as high a price for, or as large an
execution of, an order to sell any particular security at the same time. If one
or more of such client accounts simultaneously purchases or sells the same
security that a Fund is purchasing or selling, each day's transactions in such
security will be allocated between that Fund and all such client accounts in a
manner deemed equitable by the Advisor, taking into account the respective sizes
of the accounts and the amount being purchased or sold. It is recognized that
in some cases this system could have a detrimental effect on the price or value
of the security insofar as a Fund is concerned. In other cases, however, it is
believed that the ability of a Fund to participate in volume transactions may
produce better executions for that Fund.
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 use the Distributor to execute their portfolio
transactions. For the fiscal period ended March 31, 1997 the aggregate
brokerage commissions paid by the Growth Fund were $4,429.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Trust reserves the right in its sole discretion (i) to suspend the
continued offering of each Fund's 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 a Fund, and (iii) to reduce or waive the
minimum for initial and subsequent investments for certain fiduciary accounts or
under circumstances where certain economies can be achieved in sales of a Fund's
shares.
Payments to shareholders for shares of a Fund redeemed directly from a Fund
will be made as promptly as possible but no later than seven days after receipt
by that Fund's Transfer Agent of the written request in proper form, with the
appropriate documentation as stated in the Prospectuses, except that a Fund may
suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the New York Stock Exchange is restricted as
determined by the SEC or such Exchange is closed for other than weekends and
holidays; (b) an emergency exists as determined by the SEC making disposal of
portfolio securities or valuation of net assets of a Fund not reasonably
practicable; or (c) for such other period as the SEC may permit for the
protection of a Fund's shareholders. At various times, a Fund may be
requested to redeem shares for which it has not yet received confirmation of
good payment; in this circumstance, the Fund may delay the redemption until
payment for the purchase of such shares has been collected and confirmed to the
Fund.
The 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. Each Fund has
elected to be governed by the provisions of Rule 18f-1 under the 1940 Act, which
contains a formula for determining the minimum redemption amounts that must be
paid in cash.
The value of shares on redemption or repurchase may be more or less than the
investor's cost, depending upon the market value of a Fund's portfolio
securities at the time of redemption or repurchase.
Check-A-Matic
As discussed in the Prospectuses, each Fund provides a Check-A-Matic Plan
for the convenience of investors who wish to purchase shares of a Fund on a
regular basis. All record keeping and custodial costs of the Check-A-Matic Plan
are paid by the respective Fund. The market value of a Fund's shares is
subject to fluctuation, so before undertaking any plan for systematic
investment, the investor should keep in mind that this plan does not assure a
profit nor protect against depreciation in declining markets.
DETERMINATION OF SHARE PRICE
As noted in the Prospectuses, the net asset value and offering price of
shares of each Fund 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, 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 their portfolio securities on such days to materially
affect the net asset value per share.
In valuing a Fund's assets for calculating net asset value, readily
marketable portfolio securities listed on a national securities exchange or on
NASDAQ are valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such exchange or on
NASDAQ on such day, the security is valued at the closing bid price on such day.
Readily marketable securities traded only in the over-the-counter market and not
on NASDAQ are valued at the current or last bid price. If no bid is quoted on
such day, the security is valued by such method as the Board of Trustees of the
Trust shall determine in good faith to reflect the security's fair value. All
other assets of each Fund are valued in such manner as the Board of Trustees in
good faith deems appropriate to reflect their fair value.
The net asset value per share of each Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
which includes accrued but undistributed income; the resulting net assets are
divided by the number of shares of the Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
PERFORMANCE INFORMATION
From time to time, a Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
will be accompanied by information on the Fund's average annual compounded rate
of return over the most recent four calendar quarters and the period from the
Fund's inception of operations. A Fund may also advertise aggregate and average
total return information over different periods of time.
A Fund's total return may be compared to relevant indices, including
Standard & Poor's 500 Composite Stock Index and indices published by Lipper
Analytical Services, Inc. From time to time, evaluations of a Fund's
performance by independent sources may also be used in advertisements and in
information furnished to present or prospective investors in the Funds.
Investors should note that the investment results of a Fund will fluctuate
over time, and any presentation of a Fund's total return for any period should
not be considered as a representation of what an investment may earn or what an
investor's total return may be in any future period.
A Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial purchase order of $1,000 from which the
maximum sales load is deducted
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at the
end of the period
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period and gives effect to the maximum applicable sales charge.
The Growth Fund's total return since its inception on May 1, 1996 through
the period ending September 30, 1997 was 25.64% and for the 12-month period
ending September 30, 1997 was 34.02%.
GENERAL INFORMATION
Investors in each Fund will be informed of their Fund's progress through
periodic reports. Financial statements certified by independent public
accountants will be submitted to shareholders at least annually.
Star Bank N.A., 425 Walnut Street, Cincinnati, OH 45202 acts as Custodian of
the securities and other assets of the Growth Fund. The Custodian does not
participate in decisions relating to the purchase and sale of securities by the
Growth Fund. American Data Services, Inc., P.O. Box 5536, Hauppauge, NY
11788-0132 is the Growth Fund's Transfer and Dividend Disbursing Agent.
Ernst & Young, 515 S. Flower St., Los Angeles, CA 90071 are the independent
auditors for the Growth Fund.
Paul, Hastings, Janofsky & Walker, 345 California Street, 29th Floor, San
Francisco, California 94104, are legal counsel to the Funds.
The following persons are beneficial owners of more than 5% of the Growth
Fund's outstanding voting securities as of December 3, 1997. An asterisk (*)
denotes an account affiliated with the Growth Fund's investment advisor,
officers or trustees:
Fidelity Investments Operations Co. as agent for certain benefit plans,
Covington, KY 41015; 40.17%
Charles Schwab & Co., Inc., account for Exclusive Benefit of Photon
Research Retirement Plan, San Francisco, CA 94104; 25.68%
Charles Schwab & Co., Inc., Special Custody Account for Exclusive
Benefit of Customers, San Francisco, CA 94104; 5.94%
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 applicable Fund's assets for any
shareholder held personally liable for obligations of a Fund or Trust. The
Agreement and Declaration of Trust provides that the Trust shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of a Fund or Trust and satisfy any judgment thereon. All such
rights are limited to the assets of the applicable Fund. The Agreement and
Declaration of Trust further provides that the Trust may maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance) for
the protection of the Trust, its shareholders, trustees, officers, employees and
agents to cover possible tort and other liabilities. Furthermore, the
activities of the Trust as an investment company would not likely give rise to
liabilities in excess of the Trust's total assets. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance exists and the
applicable Fund itself is unable to meet its obligations.
The Trust is registered with the SEC as a management investment company.
Such a registration does not involve supervision of the management or policies
of the Funds. The Prospectuses 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 Growth Fund for the fiscal year
ended March 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.
<PAGE>
PROFESSIONALLY MANAGED PORTFOLIOS
FORM N-1A
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements for the fiscal year ended June 30, 1997:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended June 30, 1997 (Boston Managed Growth Fund,
Leonetti Balanced Fund and U.S. Global Leaders Growth Fund Series).
Financial Statements: Financial Statements for the fiscal year ended
March 31, 1997: Incorporated by reference from the annual reports to
shareholders for the fiscal year ended March 31, 1997) (Avondale Total
Return, Harris Bretall Sullivan & Smith Growth Equity, Hodges,
Osterweis, Perkins Opportunity and Women's Equity Mutual Fund Series).
Financial Statements for the fiscal year ended April 30, 1997:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended April 30, 1997 (Pzena Focused Value Fund and
Titan Financial Services Fund series).
Financial Statements for the fiscal year ended August 31, 1997:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended August 31, 1997 (Academy Value, Lighthouse
Contrarian and Trent Equity Fund Series).
Financial Statements for the fiscal year ended December 31, 1996;
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended December 31, 1996 (Matrix Growth Fund Series,
Matrix Emerging Growth Fund Series)
(b) Exhibits:
(1) Agreement and Declaration of Trust--1
(2) By-Laws--1
(3) Voting Trust Agreement -- Not applicable
(4) Specimen Share Certificate-2
(5) Form of Investment Advisory Agreement
--to be filed by amendment
(6) Form of Distribution Agreement
(7) Benefit Plan -- Not applicable
(8) Form of Custodian and Transfer Agent
Agreements--to be filed by amendment
(9) Form of Administration Agreement
(10) Consent and Opinion of Counsel as to legality of
shares--to be filed by amendment
(11) Consent of Accountants--not applicable
(12) All Financial Statements omitted from Item 23 --
Not applicable
(13) Letter of Understanding relating to initial
capital--2
(14) Model Retirement Plan Documents - Not applicable
(15)(a) Form of Plan pursuant to Rule 12b-1
--to be filed by amendment
(b) Form of Shareholder Service Plan--3
(16) Schedule for Computation of Performance
Quotations--4
1 Incorporated by reference from Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A, filed on December 29, 1995.
2 Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on April 13, 1987.
3 Incorporated by reference from Pre-Effective Amendment No. 44 to the
Registration Statement on Form N-1A, filed on February 6, 1998.
4 Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A filed on June 17, 1992.
Item 25. Persons Controlled by or under Common Control with Registrant.
As of the date of this Amendment to the Registration Statement, there
are no persons controlled or under common control with the Registrant.
Item 26. Number of Holders of Securities.
Number of Record
Holders as of
Title of Class April 8, 1998
Shares of Beneficial Interest, no par value:
Academy Value Fund 218
Avondale Total Return Fund 145
Boston Balanced Fund 251
Hodges Fund 1041
Osterweis Fund 128
PGP Korea Growth Fund 23
Perkins Opportunity Fund 6,307
Pro-Conscience Women's Equity Mutual Fd. 602
Trent Equity Fund 149
Matrix Growth Fund 388
Matrix Emerging Growth Fund 83
Leonetti Balanced Fund 355
Lighthouse Contrarian Fund 406
U.S.Global Leaders Growth Fund 459
Harris, Bretall, Sullivan & Smith
Growth Equity Fund 110
Pzena Focused Value Fund 230
Titan Financial Services Fund 980
Item 27. Indemnification
The information on insurance and indemnification is incorporated by
reference to Pre-Effective Amendment No. 1 and Post-Effective Amendment No. 1 to
the Registrant's Registration Statement.
In addition, insurance coverage for the officers and trustees of the
Registrant also is provided under a Directors and Officers/Errors and Omissions
Liability insurance policy issued by ICI Mutual Insurance Company with a
$1,000,000 limit of liability.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
With respect to Investment Advisors, the response to this item is
incorporated by reference to their Form ADVs as amended:
Herbert R. Smith & Co, Inc. File No. 801-7098
Hodges Capital Management, Inc. File No. 801-35811
Perkins Capital Management, Inc. File No. 801-22888
Osterweis Capital Management File No. 801-18395
Pro-Conscience Funds, Inc. File No. 801-43868
Trent Capital Management, Inc. File No. 801-34570
Academy Capital Management File No. 801-27836
Sena, Weller, Rohs, Williams File No. 801-5326
Leonetti & Associates, Inc. File No. 801-36381
Lighthouse Capital Management File No. 801-32168
Yeager, Wood & Marshall, Inc. File No. 801-4995
Harris Bretall Sullivan & Smith File No. 801-7369
Pzena Investment Management LLC File No. 801-50838
Titan Investment Advisers, LLC File No. 801-51306
Pacific Gemini Partners LLC File No. 801-50007
With respect to United States Trust Company of Boston, the response to this
item is incorporated by reference to the responses to Item 5 of Part A and Item
16 of Part B ("Management")of Post-Effective Amendment No. 20 to the
Registration Statement.
Item 29. Principal Underwriters.
(a) First Fund Distributors, Inc. (the "Distributor") is the principal
underwriter all series of the Registrant except for the Hodges Fund, the Matrix
Growth Fund and the Matrix Emerging Growth Fund. The Distributor acts as
principal underwriter for the following other investment companies:
Advisors Series Trust
Guinness Flight Investment Funds
Fremont Mutual Funds, Inc.
Fleming Capital Mutual Fund Group, Inc.
The Purisima Funds
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group, Inc.
UBS Private Investor Funds
First Dallas Securities, Inc., 2311 Cedar Springs Rd., Ste. 100, Dallas, TX
75201, an affiliate of Hodges Capital Management, acts as Distributor of the
Hodges Fund. The President and Chief Financial Officer of First Dallas
Securities, Inc. is Don W. Hodges. First Dallas does not act as principal
underwriter for any other investment companies. Reynolds, DeWitt Securities Co.,
an affiliate of Sena Weller Rohs Williams, 300 Main St., Cincinnati, OH 45202,
acts as Distributor for the Matrix Growth Fund and Matrix Emerging Growth Fund.
(b) The officers of First Fund Distributors, Inc. are:
Robert H. Wadsworth President & Treasurer
Eric Banhazl Vice President
Steven J. Paggioli Secretary
Each officer's business address is 4455 E. Camelback Rd., Ste. 261-E,
Phoenix, AZ 85018. Mr. Paggioli serves as President and a Trustee of the
Registrant. Mr. Wadsworth serves as Vice President of the Registrant. Mr.
Banhazl serves as Treasurer of the Registrant.
c. Incorporated by reference from the Statement of Additional
Information filed herewith as Part B.
Item 30. Location of Accounts and Records.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession the Registrant's
custodian and transfer agent, except those records relating to portfolio
transactions and the basic organizational and Trust documents of the Registrant
(see Subsections (2) (iii). (4), (5), (6), (7), (9), (10) and (11) of Rule
31a-1(b)), which, with respect to portfolio transactions are kept by each Fund's
Advisor at its address set forth in the prospectus and statement of additional
information and with respect to trust documents by its administrator at 479 West
22nd Street, New York, NY 10011 and 2020 E. Financial Way, Ste. 100, Glendora,
CA 91741.
Item 31. Management Services.
There are no management-related service contracts not discussed in
Parts A and B.
Item 32. Undertakings
(a) File a post-effective amendment for the Perkins Discovery
Fund series, using financial statements which may not be
certified, within four to six months of the effective date of
this Registration Statement as such requirement is interpreted
by the staff of the Commission; and
(b) Furnish each person to whom a Prospectus is delivered a copy
of Registrant's latest annual report to shareholders, upon
request and without charge.
(c) If requested to do so by the holders of at least 10% of the
Trust's outstanding shares, call a meeting of shareholders for
the purposes of voting upon the question of removal of a
director and assist in communications with other shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York in the State of New York on
April 9, 1998.
PROFESSIONALLY MANAGED PORTFOLIOS
By /S/ Steven J. Paggioli
Steven J. Paggioli
President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
/S/ Steven J. Paggioli Trustee April 9, 1998
Steven J. Paggioli
/S/ Eric M. Banhazl Principal April 9, 1998
Eric M. Banhazl Financial
Officer
Dorothy A. Berry Trustee April 9, 1998
*Dorothy A. Berry
Wallace L. Cook Trustee April 9, 1998
*Wallace L. Cook
Carl A. Froebel Trustee April 9, 1998
*Carl A. Froebel
Rowley W. P. Redington Trustee April 9, 1998
*Rowley W. P. Redington
* By /S/ Steven J. Paggioli
Steven J. Paggioli, Attorney-in-Fact under powers of
attorney as filed with Post-Effective Amendment No. 20 to the
Registration Statement filed on May 17, 1995
EXHIBIT 6
PROFESSIONALLY MANAGED PORTFOLIOS
DISTRIBUTION AGREEMENT
This Agreement, made as of the 28th day of June, 1998 between
PROFESSIONALLY MANAGED PORTFOLIOS, a Massachusetts business trust (the "Trust"),
and FIRST FUND DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
l940 (the "1940 Act"), and it is in the interest of the Trust to offer its
classes of shares entitled the the Harris Bretall Sullivan & Smith Aggressive
Growth Equity Fund, the Harris Bretall Sullivan & Smith Health Care Fund, the
Harris Bretall Sullivan & Smith Technology Fund, the Harris Bretall Sullivan &
Smith Tax-Advantaged Fund, and the Harris Bretall Sullivan & Smith Socially
Responsible Fund (the "Funds") for sale continuously; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of l934 (the "1934 Act") and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
and
WHEREAS, the Trust and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the shares of
beneficial interest of the Funds (the "Shares"), to commence after the
effectiveness of amendment to the registration statement filed pursuant to the
Securities Act of 1933 (the "1933 Act") and the 1940 Act relating to the Funds.
NOW, THEREFORE, the parties agree as follows:
l. Appointment of Distributor. The Trust hereby appoints the
Distributor as its exclusive agent to sell and to arrange for the sale of the
Shares, on the terms and for the period set forth in this Agreement, and the
Distributor hereby accepts such appointment and agrees to act hereunder directly
and/or through the Trust's transfer agent in the manner set forth in the
Prospectuses (as defined below). It is understood and agreed that the services
of the Distributor hereunder are not exclusive, and the Distributor may act as
principal underwriter for the shares of any other registered investment company.
2. Services and Duties of the Distributor
(a) The Distributor agrees to sell the Shares, as agent for the Trust,
from time to time during the term of this Agreement upon the terms described in
the Funds' Prospectus. As used in this Agreement, the term "Prospectus" shall
mean the prospectus and statement of additional information of the Funds
included as part of the Trust's Registration Statement, as such prospectus and
statement of additional information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the Registration
Statement most recently filed from time to time by the Trust with the
Securities and Exchange Commission and effective under the 1933 Act and the 1940
Act, as such
1
<PAGE>
Registration Statement is amended by any amendments thereto at the time in
effect. The Distributor shall not be obligated to sell any certain number of
Shares.
(b) Upon commencement of the Funds' operations, the Distributor will
hold itself available to receive orders, satisfactory to the Distributor, for
the purchase of the Shares and will accept such orders and will transmit such
orders and Funds received by it in payment for such Shares as are so accepted to
the Trust's transfer agent or custodian, as appropriate, as promptly as
practicable. Purchase orders shall be deemed effective at the time and in the
manner set forth in the Prospectus. The Distributor shall not make any short
sales of Shares.
(c) The offering price of the Shares shall be the net asset value per
share of the Shares (as defined in the Declaration of Trust), plus the sales
charge, if any, (determined as set forth in the prospectus). The Trust shall
furnish the Distributor, with all possible promptness, an advice of each
computation of net asset value and offering price.
3. Duties of the Trust.
(a) Maintenance of Federal Registration. The Trust shall, at its
expense, take, from time to time, all necessary action and such steps, including
payment of the related filing fees, as may be necessary to register and maintain
registration of a sufficient number of Shares under the 1933 Act. The Trust
agrees to file from time to time such amendments, reports and other documents as
may be necessary in order that there may be no untrue statement of a material
fact in a registration statement or prospectus, or necessary in order that there
may be no omission to state a material fact in the registration statement or
prospectus which omission would make the statements therein misleading.
(b) Maintenance of "Blue Sky" Qualifications. The Trust shall, at its
expense, use its best efforts to qualify and maintain the qualification of an
appropriate number of Shares for sale under the securities laws of such states
as the Distributor and the Trust may approve, and, if necessary or appropriate
in connection therewith, to qualify and maintain the qualification of the Trust
as a broker or dealer in such states; provided that the Trust shall not be
required to amend its Declaration of Trust or By-Laws to comply with the laws of
any state, to maintain an office in any state, to change the terms of the
offering of the Shares in any state, to change the terms of the offering of the
Shares in any state from the terms set forth in its Prospectuses, to qualify as
a foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering and sale of
the Shares. The Distributor shall furnish such information and other material
2
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relating to its affairs and activities as may be required by the
Trust in connection with such qualifications.
(c) Copies of Reports and Prospectuses. The Trust shall, at its
expense, keep the Distributor fully informed with regard to its affairs and in
connection therewith shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, including such
reasonable number of copies of its Prospectuses and annual and interim reports
as the Distributor may request and shall cooperate fully in the efforts of the
Distributor to sell and arrange for the sale of the Shares and in the
performance of the Distributor under this Agreement.
4. Conformity with Applicable Law and Rules. The Distributor agrees
that in selling Shares hereunder it shall conform in all respects with the laws
of the United States and of any state in which Shares may be offered, and with
applicable rules and regulations of NASD Regulation, Inc.
5. Independent Contractor. In performing its duties hereunder, the
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, directors, employees, or representatives is or shall be an
employee of the Trust in the performance of the Distributor's duties hereunder.
The Distributor shall be responsible for its own conduct and the employment,
control, and conduct of its agents and employees and for injury to such agents
or employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employee taxes thereunder.
6. Indemnification.
(a) Indemnification of Trust. The Distributor agrees to indemnify and
hold harmless the Trust and each of its present or former trustees, officers,
employees, representatives and each person, if any, who controls or previously
controlled the Trust within the meaning of Section l5 of the 1933 Act against
any and all losses, liabilities, damages, claims or expenses (including the
reasonable costs of investigating or defending any alleged loss, liability,
damage, claims or expense and reasonable legal counsel fees incurred in
connection therewith) to which the Trust or any such person may become subject
under the 1933 Act, under any other statute, at common law, or otherwise,
arising out of the acquisition of any Shares by any person which (I) may be
based upon any wrongful act by the Distributor or any of the Distributor's
directors, officers, employees or representatives, or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other information
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covering Shares filed or made public by the Trust or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to the Trust by the Distributor. In no case (I) is the
Distributor's indemnity in favor of the Trust, or any person indemnified to be
deemed to protect the Trust or such indemnified person against any liability to
which the Trust or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of his obligations and duties under this
Agreement or (ii) is the Distributor to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against the Trust or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Distributor in writing of the claim within a reasonable
time after the summons or other first written notification giving information of
the nature of the claim shall have been served upon the Trust or upon such
person (or after the Trust or such person shall have received notice to such
service on any designated agent). However, failure to notify the Distributor of
any such claim shall not relieve the Distributor from any liability which the
Distributor may have to the Trust or any person against whom such action is
brought otherwise than on account of the Distributor's indemnity agreement
contained in this Paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense, or, if the Distributor so elects, to assume the defense of any
suit brought to enforce any such claim, but, if the Distributor elects to assume
the defense, such defense shall be conducted by legal counsel chosen by the
Distributor and satisfactory to the Trust, to the persons indemnified defendant
or defendants, in the suit. In the event that the Distributor elects to assume
the defense of any such suit and retain such legal counsel, the Trust, the
persons indemnified defendant or defendants in the suit, shall bear the fees and
expenses of any additional legal counsel retained by them. If the Distributor
does not elect to assume the defense of any such suit, the Distributor will
reimburse the Trust and the persons indemnified defendant or defendants in such
suit for the reasonable fees and expenses of any legal counsel retained by them.
The Distributor agrees to promptly notify the Trust of the commencement of any
litigation of proceedings against it or any of its officers, employees or
representatives in connection with the issue or sale of any Shares.
(b) Indemnification of the Distributor. The Trust agrees to indemnify and hold
harmless the Distributor and each of its present or former directors, officers,
employees, representatives and each person, if any, who controls or previously
controlled the
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Distributor within the meaning of Section l5 of the 1933 Act against any and all
losses, liabilities, damages, claims or expenses (including the reasonable costs
of investigating or defending any alleged loss, liability, damage, claim or
expense and reasonable legal counsel fees incurred in connection therewith) to
which the Distributor or any such person may become subject under the 1933 Act,
under any other statute, at common law, or otherwise, arising out of the
acquisition of any Shares by any person which (I) may be based upon any wrongful
act by the Trust or any of the Trust's trustees, officers, employees or
representatives, or (ii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, shareholder report or other information covering Shares filed or
made public by the Trust or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading unless
such statement or omission was made in reliance upon information furnished to
the Trust by the Distributor. In no case (I) is the Trust's indemnity in favor
of the Distributor, or any person indemnified to be deemed to protect the
Distributor or such indemnified person against any liability to which the
Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of his obligations and duties under this
Agreement, or (ii) is the Trust to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against Distributor,
or person indemnified unless the Distributor, or such person, as the case may
be, shall have notified the Trust in writing of the claim within a reasonable
time after the summons or other first written notification giving information of
the nature of the claim shall have been served upon the Distributor or upon such
person (or after the Distributor or such person shall have received notice of
such service on any designated agent). However, failure to notify the Trust of
any such claim shall not relieve the Trust from any liability which the Trust
may have to the Distributor or any person against whom such action is brought
otherwise than on account of the Trust's indemnity agreement contained in this
Paragraph.
The Trust shall be entitled to participate, at its own expense, in the
defense, or, if the Trust so elects, to assume the defense of any suit brought
to enforce any such claim, but if the Trust elects to assume the defense, such
defense shall be conducted by legal counsel chosen by the Trust and satisfactory
to the Distributor, to the persons indemnified defendant or defendants, in the
suit. In the event that the Trust elects to assume the defense of any such suit
and retain such legal counsel, the Distributor, the persons indemnified
defendant or defendants in the suit, shall bear the fees and expenses of any
additional legal counsel retained by them. If the Trust does not elect to
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assume the defense of any such suit, the Trust will reimburse the Distributor
and the persons indemnified defendant or defendants in such suit for the
reasonable fees and expenses of any legal counsel retained by them. The Trust
agrees to promptly notify the Distributor of the commencement of any litigation
or proceedings against it or any of its trustees, officers, employees or
representatives in connection with the issue or sale of any Shares.
7. Authorized Representations. The Distributor is not authorized by the
Trust to give on behalf of the Trust any information or to make any
representations in connection with the sale of Shares other than the information
and representations contained in a registration statement or prospectus filed
with the Securities and Exchange Commission ("SEC") under the 1933 Act and/or
the 1940 Act, covering Shares, as such registration statement and prospectus may
be amended or supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on behalf of the Trust for
the Distributor's use. This shall not be construed to prevent the Distributor
from preparing and distributing tombstone ads and sales literature or other
material as it may deem appropriate. No person other than the Distributor is
authorized to act as principal underwriter (as such term is defined in the 1940
Act) for the Funds.
8. Term of Agreement. The term of this Agreement shall begin on the
date first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect for a period of two years from the date
first above written. Thereafter, this Agreement shall continue in effect from
year to year, subject to the termination provisions and all other terms and
conditions thereof, so long as such continuation shall be specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Funds and, concurrently with such approval
by the Board of Trustees or prior to such approval by the holders of the
outstanding voting securities of the Funds, as the case may be, by the vote,
cast in person at a meeting called for the purpose of voting on such approval,
of a majority of the trustees of the Trust who are not parties to this
Agreement or interested persons of any such party. The Distributor shall
furnish to the Trust, promptly upon its request, such information as may
reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal or amendment hereof.
9. Amendment or Assignment of Agreement. This Agreement may not be
amended or assigned except as permitted by the 1940 Act, and this Agreement
shall automatically and immediately terminate in the event of its assignment.
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10. Termination of Agreement. This Agreement may be terminated by
either party hereto, without the payment of any penalty, on not more than upon
60 days' nor less than 30 days' prior notice in writing to the other party;
provided, that in the case of termination by the Trust such action shall have
been authorized by resolution of a majority of the trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, or by
vote of a majority of the outstanding voting securities of the Funds.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Trust to take
any action contrary to its Declaration of Trust or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the Trust of
responsibility for and control of the conduct of the affairs of the Trust.
12. Definition of Terms. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission
validly issued pursuant to the 1940 Act. Specifically, the terms "vote of a
majority of the outstanding voting securities", "interested persons",
"assignment", and "affiliated person", as used in Paragraphs 8, 9 and 10 hereof,
shall have the meanings assigned to them by Section 2(a) of the 1940 Act. In
addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is relaxed by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
13. Compliance with Securities Laws. The Trust represents that it is
registered as an open-end management investment company under the 1940 Act, and
agrees that it will comply with all the provisions of the 1940 Act and of the
rules and regulations thereunder. The Trust and the Distributor each agree to
comply with all of the applicable terms and provisions of the 1940 Act, the 1933
Act and, subject to the provisions of Section 4(d), all
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applicable "Blue Sky" laws. The Distributor agrees to comply with all of the
applicable terms and provisions of the Securities Exchange Act of 1934.
14. Notices. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, to the Distributor at 4455 E. Camelback Rd., Ste. 261-E, Phoenix, AZ
85018 or to the Funds on behalf of the Trust at One Sansome Street, Suite 3300
San Francisco, CA 94104 800-385-7003
15. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York.
16. No Shareholder Liability. The Distributor understands that the
obligations of this Agreement are not binding upon any shareholder of the Trust
personally, but bind only the Trust's property; the Distributor represents that
it has notice of the provisions of the Declaration of Trust disclaiming
shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.
PROFESSIONALLY MANAGED PORTFOLIOS
By:
Attest:
FIRST FUND DISTRIBUTORS, INC.
By: ______________________
Attest:
EXHIBIT 9
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of the 8th day of March, 1996 by and between
PROFESSIONALLY MANAGED PORTFOLIOS (the "Trust")a Massachusetts Business Trust
and INVESTMENT COMPANY ADMINISTRATION CORPORATION, a Delaware Corporation (the
"Administrator").
WITNESSETH
WHEREAS, the Trust is an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), with shares of
beneficial interest organized into separate series ("series" or "portfolios");
and
WHEREAS, the Trust wishes to retain the Administrator to provide certain
administrative services in connection with the management of the operations of
the various portfolio series of the Trust and the Administrator is willing to
furnish such services:
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Administrator to provide
certain administrative services, hereinafter enumerated, in connection with the
management of the portfolios' operations for the period and on the terms set
forth in this Agreement. The Administrator agrees to comply with all relevant
provisions of the 1940 Act, applicable rules and regulations thereunder, and
other applicable law.
2. Services on a Continuing Basis. The Administrator will perform the
following services on a regular basis which would be daily weekly or as
otherwise appropriate:
(A) prepare and coordinate reports and other materials to be supplied to
the Board of Trustees of the Trust;
(B) 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 Trust and the portfolios.
(C) prepare all required filings necessary to maintain the Trust's and
portfolios' qualification and/or registration to sell shares in all states where
the Trust and portfolios currently do, or intend to do business;
<PAGE>
(D) coordinate the preparation, printing and mailing of all materials
(e.g., Annual Reports) required to be sent to shareholders;
(E) coordinate the preparation and payment of Trust and portfolio related
expenses;
(F) monitor and oversee the activities of the Trust's and the portfolios'
servicing agents (i.e., transfer agent, custodian, fund accountants, etc.);
(G) review and adjust as necessary the portfolios' daily expense
accruals; and
(H) perform such additional services as may be agreed upon by the Trust
and the Administrator.
3. Responsibility of the Administrator. The Administrator shall be under no
duty to take any action on behalf of the Trust or the portfolios except as set
forth herein or as may be agreed to by the Administrator in writing. In the
performance of its duties hereunder, the Administrator shall be obligated to
exercise reasonable care and diligence and to act in good faith and to use its
best efforts. Without limiting the generality of the foregoing or any other
provision of this Agreement, the Administrator shall not be liable for delays or
errors or loss of data occurring by reason of circumstances beyond the
Administrator's control.
4. Reliance Upon Instructions. The Trust agrees that the Administrator
shall be entitled to rely upon any instructions, oral or written, actually
received by the Administrator from the Board of Trustees of the Trust and shall
incur no liability to the Trust or the investment adviser to any portfolio in
acting upon such oral or written instructions, provided such instructions
reasonably appear to have been received from a person duly authorized by the
Board of Trustees of the Trust to give oral or written instructions on behalf of
the Trust or any portfolio.
5. Confidentiality; Maintenance of Records. The Administrator agrees on
behalf of itself and its employees to treat confidentially all records and other
information relative to the Trust and portfolios and all prior, present or
potential shareholders of any and all portfolios, except after prior
notification to, and approval of release of information in writing by, the
Trust, which approval shall not be unreasonably withheld where the Administrator
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the Trust or by a portfolio. Any records required to be
maintained and preserved by the Trust or any of its portfolios which are
maintained or preserved by the Administrator under this Agreement are property
of the Trust and
<PAGE>
its portfolios and will be surrendered to the Trust or its
portfolios promptly upon request.
6. Equipment Failures. In the event of equipment failures or the occurrence
of events beyond the Administrator's control which render the performance of the
Administrator's functions under this agreement impossible, the Administrator
shall take reasonable steps to minimize service interruptions and is authorized
to engage the services of third parties to prevent or remedy such service
interruptions.
7. Compensation. As compensation for services rendered by the Administrator
during the term of this agreement, each portfolio of the Trust will pay to the
Administrator a monthly fee at the annual rate determined on Schedule A to this
agreement.
8. Indemnification. The Trust and portfolios agree to indemnify and hold
harmless the Administrator from all taxes, filing fees, charges, expenses,
assessments, claims and liabilities (including without limitation, liabilities
arising under the Securities Act of 1933, the Securities Exchange Act of 1934,
the 1940 Act, and any state and foreign securities laws, all as amended from
time to time) and expenses, including (without limitation) reasonable attorneys
fees and disbursements, arising directly or indirectly from any action or thing
which the Administrator takes or does or omits to take or do at the request of
or in reliance upon the advice of the Board of Trustees of the Trust, provided
that the Administrator will not be indemnified against any liability to a
Portfolio or to shareholders (or any expenses incident to such liability)
arising out of the Administrator's own willful misfeasance, bad faith,
negligence or reckless disregard of its duties and obligations under this
Agreement. The Administrator agrees to indemnify and hold harmless the Trust and
each of its Trustees from all claims and liabilities (including without
limitation, liabilities under the Securities Act of 1933, the Securities
Exchange Act of 1934, the 1940 Act, and any state and foreign securities laws,
all as amended from time to time) and expenses, including (without limitation)
reasonable attorneys fees and disbursements, arising directly or indirectly from
any action or thing which the Administrator takes or does or omits to take or do
which is in violation of this Agreement or not in accordance with instructions
properly given to the Administrator, or arising out of the Administrator's own
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations under this Agreement.
9. Duration and termination. This Agreement shall continue until
termination by the Trust on behalf of any portfolio (through the Board of
Trustees) or the Administrator on 60 days' written notice to the other. All
notices and other communications hereunder shall be in writing.
<PAGE>
10. Amendments. This Agreement or any part hereof may be changed or waived
only by instrument in writing signed by the party against which enforcement of
such change or waiver is sought.
11. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties thereto with respect to the services to be
performed hereunder, and supersedes all prior agreements and understandings,
relating to the subject matter hereof. The captions in this Agreement are
included for convenience of reference only and in no way define or limit any of
the provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in New York and governed by New
York law. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first written
above.
By:________________________________________
Title:____________________________________
PROFESSIONALLY MANAGED PORTFOLIOS
By:________________________________________
Title:_____________________________________
INVESTMENT COMPANY ADMINISTRATION CORPORATION
<PAGE>
Schedule A
FEE RATES APPLICABLE TO PORTFOLIOS OF PROFESSIONALLY MANAGED
PORTFOLIOS
I.
Academy Value Fund Leonetti Balanced Fund
Hodges Fund Matrix Growth Fund
Matrix Emerging Growth Fund Pro-Conscience Womens Equity
Lighthouse Contrarian Fund Mutual Fund
Osterweis Fund Titan Financial Services Fund
U.S. Global Leaders Growth Fund Pzena Focused Value Fund
PGP Korea Growth Fund PGP Asia Growth Fund
Administration fee paid monthly at the following annual rate:
Average net assets of 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 million to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
II. Avondale Total Return Fund
0.15% of average net assets or $30,000, whichever is greater
III. Perkins Opportunity Fund
Perkins Discovery Fund
Average net assets of fund Fee or Fee Rate
Under $12 million $30,000
$12 million to $50 million 0.25% of average net assets
$50 million to $100 million 0.20% of average net assets
$100 million to $200 million 0.15% of average net assets
Over $200 million 0.10% of average net assets
IV. Trent Equity Fund
0.25% of average net assets or $15,000, whichever is greater
V. Harris Bretall Sullivan & Smith Growth Equity Fund
Harris Bretall Sullivan & Smith Aggressive Growth Equity Fund
Harris Bretall Sullivan & Smith Health Care Fund
Harris Bretall Sullivan & Smith Technology Fund
Harris Bretall Sullivan & Smith Tax-Advantaged Fund
Harris Bretall Sullivan & Smith Socially Responsible Fund
Average net assets of fund Fee or Fee Rate
Under $25 million 0.12% of average net assets
$25 million to $50 million 0.07% of average net assets
$50 million to $100 million 0.05% of average net assets
Over $100 million 0.03% of average net assets
Minimum fee of $30,000 annually
VI. Boston Balanced Fund
0.10% of average net assets or $30,000, whichever is greater
April, 1998
