SECURITIES ACT FILE NO. 33-12213
INVESTMENT COMPANY ACT FILE NO. 811-5037
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post Effective Amendment No. 51 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 52 [X]
(Check appropriate box or boxes)
PROFESSIONALLY MANAGED PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
479 West 22nd Street
New York, NY 10011
Registrant's Telephone Number, including Area Code:
(212) 633-9700
Steven J. Paggioli
Professionally Managed Portfolios
479 West 22nd Street
New York, NY 10011
(Name and Address of Agent for Service)
Copy to:
Julie Allecta, Esq.
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, CA 94104
------------------------
It is proposed that this filing will become effective (check appropriate box)
[X] Immediately upon filing pursuant to paragraph (b)
[ ] On pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
N-1A Item No. Location
Part A
Item 1. Cover Page........................... Cover Page
Item 2. Synopsis............................. Expense
Table
Item 3. Financial Highlights................. Financial
Highlights
Item 4. General Description of Registrant.... Investment
Objective, Policies
and Risks
Item 5. Management of the Funds.............. Management
of the Fund
Item 5A Management's Discussion of Fund See Annual
Performance Report to
Shareholders
Item 6. Capital Stock and Other Securities. . . Distributions
and Taxes;
How the
Fund's Per
Share Value
is Determined
Item 7. Purchase of Securities Being Offered . . How to Invest
in the Fund;
How the
Fund's Per
Share Value
is Determined
Item 8. Redemption or Repurchase. . . . . . . . How to Redeem
an Investment
in the 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 Fund's Investment
Advisor; the Fund's
Administrator; General
Information
Item 17. Brokerage Allocation...................... Execution of
Portfolio
Transactions
Item 18. Capital Stock and Other Securities........ General
Information
Item 19. Purchase, Redemption and Pricing of
Shares Being Offered.............. Additional
Purchase and
Redemption
Information
Item 20. Tax Status.............................. Distributions
and Tax Infor-
mation
Item 21. Underwriters............................ The Fund's
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>
PZENA FOCUSED VALUE FUND
830 Third Avenue
14th Floor
New York, NY 10022
(212) 355-1600
PZENA FOCUSED VALUE FUND (the "Fund") is a mutual fund with the
investment objective of seeking long-term growth of capital. The Fund seeks
its objective through investment in undervalued equity securities. Pzena
Investment Management, LLC (the "Adviser"), acts as investment adviser to the
Fund.
This Prospectus sets forth basic information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. The Fund is a series of Professionally Managed
Portfolios. A Statement of Additional Information dated August 31, 1998, as
may be amended from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available without charge upon written request to the
Fund at the address or telephone number given above. The SEC maintains an
internet site (http://www.sec.gov) that contains the SAI, other material
incorporated by reference and information about other companies that file
electronically with the SEC.
TABLE OF CONTENTS
Expense Table 2
Financial Highlights 3
Investment Objective, Policies and Risks 4
Management of the Fund 7
How To Invest in the Fund 8
How To Redeem an Investment in the Fund 9
Retirement Plans 10
How the Fund's Per Share Value is Determined 10
Distributions and Taxes 11
General Information 11
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Prospectus dated August 31, 1998
EXPENSE TABLE
Expenses are one of several factors to consider when investing in the
Fund. The purpose of the following fee table is to provide an understanding of
all the various costs and expenses which may be borne directly or indirectly
by an investment in the Fund. No other costs or expenses will be borne by the
investors in the Fund.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses (after waiver)
(As a percentage of average net assets)
Investment Advisory Fee 1.25%
12b-1 Fee None
Other expenses (after waiver) 0.50%
Total Fund Operating Expenses (after waiver) 1.75%
The Adviser has voluntarily undertaken to limit the total operating
expenses of the Fund to no more than 1.75% of average net assets annually.
Without this limitation, the Fund's ratio of operating expenses to average net
assets for the fiscal year ended April 30, 1998 would have been 2.69%.
Example
Operating Expenses
1 year 3 years 5 years 10 years
$18 $55 $95 $206
This table illustrates the net transaction and operating expenses that
would be incurred by an investment in the Fund over different time periods,
assuming a $1,000 investment, a 5% annual return, and redemption at the end of
each time period. Amounts in the table could increase, if the Adviser's
limitation of expenses were to be terminated.
The Example shown above should not be considered a representation of
past or future expenses and actual expenses may be greater or less than those
shown. In addition, federal regulations require the Example to assume a 5%
annual return, but the Fund's actual return may be higher or lower. See
"Management of the Fund."
The PZENA FOCUSED VALUE FUND (the "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
may be purchased and redeemed without a sales or redemption charge at their
net asset value. The minimum initial investment is $5,000 ($2,000 for
retirement plan accounts) with subsequent investments of $1,000 or more.
Because the prices of equity securities and other investments held by the Fund
fluctuate, the value of an investment in the Fund will vary as the market
value of its investment portfolio changes, and when shares are redeemed, they
may be worth more or less than their original cost.
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
The following information has been audited by Tait, Weller & Baker,
independent accountants, whose unqualified report covering the period ended
April 30, 1998 is incorporated by reference herein and appears in the annual
report to shareholders. This information should be read in conjunction with
the financial statements and accompanying notes which appear in the annual
report and are incorporated by reference into the Statement of Additional
Information. Further information about the Fund's performance is contained in
its annual report, which may be obtained without charge by writing or calling
the Adviser at the number on the Prospectus cover page.
Year June 24, 1996*
Ended through
April 30, 1998 April 30, 1997
Net asset value, beginning of period $11.56 $10.00
Income from investment operations:
Net investment (loss) income (0.03) 0.00
Net realized and unrealized gain on investments 3.93 1.59
Total from investment operations 3.90 1.59
Less distributions:
From net investment income 0.00 (0.01)
From net capital gains (1.06) (0.02)
Total distributions (1.06) (0.03)
Net asset value, end of period $14.40 $11.56
Total return 35.10% 15.88%
Ratios/supplemental data:
Net assets, end of period (millions) $9.7 $3.9
Ratio of expenses to average net assets:
Before expense reimbursement and waiver 2.69% 5.82%+
After expense reimbursement and waiver 1.75% 1.75%+
Ratio of net investment loss to average net assets:
Before expense reimbursement and waiver (1.26)% (4.16)%+
After expense reimbursement and waiver (0.32)% (0.09)%+
Portfolio turnover rate 53.95% 22.06%
Average commission rate paid per share $.0597 $.0598
*Commencement of operations.
+Annualized.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The investment objective of the Fund is long term growth of capital.
This objective is fundamental and may not be changed without the affirmative
vote of the holders of the majority of the Fund's outstanding securities.
There can be no assurance that the Fund's objective will be met.
Investment Policies
The Fund seeks to attain its objective through investment in undervalued
equity securities. The Fund invests in securities that, in the opinion of its
investment adviser, Pzena Investment Management, LLC, (the "Adviser"), are
undervalued in the marketplace in relation to estimated future earnings and
cash flow. These companies generally sell at price to book value ratios below
market average, as defined by the Standard & Poor's 500 Composite Price Index
("S&P 500").
The Fund invests at least 80% of its assets in equity securities, which
consist of common stocks, preferred stocks and securities convertible into
common stocks. The Fund changes its portfolio securities for long-term
investment considerations and not for trading considerations.
The Fund invests primarily in the equity securities of domestic
companies. The Adviser uses fundamental research and a proprietary
computerized quantitative model to identify companies that are currently
undervalued in relation to estimated future earnings and cash flow. The
investment process also involves an assessment of business risk, including the
Adviser's analysis of the strength of a company's balance sheet, the
accounting practices a company follows, the volatility of a company's earnings
over time and the vulnerability of earnings to changes in external factors,
such as the general economy, the competitive environment, governmental action
and technological change.
Based on such information, the Adviser estimates normal earnings power;
that is, an estimate of ongoing earnings of a company over a full economic or
business cycle. The Adviser's quantitative approach is designed to identify
companies which are inexpensive in relation to their long-term intrinsic value
and minimize the influence of short-term market factors.
While a broad range of investments are considered, only those that, in
the Adviser's opinion, are selling at a comparatively low price as compared to
normal earnings will be purchased for the Fund. It is anticipated that the
prices of the Fund's investments will rise as a result of both earnings growth
and, to a lesser extent, rising price-earnings ratios over time.
While the Fund emphasizes U.S. investments, it can invest its assets in
securities of foreign companies which meet the same criteria applicable to
domestic investments. The Fund may invest up to 20% of its total assets in
debt obligations, including zero coupon securities, and may enter into
repurchase agreements. In addition, the Fund may, in limited cases, engage in
certain investment techniques including the use of options and futures
contracts. See "Additional Information About Policies and Investments" for
more information about these investment techniques.
From time to time, for temporary defensive or emergency purposes, the
Fund may invest a portion of its assets in cash and cash equivalents when the
Adviser deems such a position advisable in light of economic or market
conditions.
Why Invest in the Fund?
The Fund provides investors with convenient, low-cost access to a
portfolio of stocks believed to be undervalued by the Adviser. These companies
tend to have below-market price to book value ratios yet, in the opinion of
the Adviser, will reward investors with above-average appreciation over time.
The Fund is distinctive in the manner in which it combines systematic and
disciplined valuation techniques with intensive, traditional fundamental
research. In addition to identifying undervalued securities, the Adviser's
proprietary quantitative valuation model also provides the discipline required
to sell appreciated securities as their prices rise to reflect their earnings
potential. The model utilizes many sources of earnings information and
forecasts, as well as the Adviser's independent equity research effort, for
estimates of future earnings and dividend growth and quality ratings. The Fund
is appropriate for investors who understand the risks of stock market
investing. Although the Fund emphasizes securities of companies the Adviser
believes are undervalued, movements of the stock market will affect the Fund's
share price.
While the Fund may invest in a broad range of industries, it is not, by
itself, a complete investment program. Nonetheless, it can serve as a core
component of an investment program that includes money market, bond and
specialized equity investments.
Additional Information About Policies and Investments
Debt Securities. Consistent with the Fund's investment of long-term
capital growth, the Fund may purchase investment grade debt securities, which
are those rated Baa or better by Moody's Investors Service, Inc. ("Moody's")
or BBB or better by S&P or, if unrated, of equivalent quality as determined by
the Adviser. Securities rated BBB or BAA are considered investment grade, but
may have speculative characteristics. The Fund also may purchase debt
securities which are rated below investment-grade. See "Risk Factors" at page
6. Capital appreciation in such debt securities may arise from a favorable
change in relative interest rate levels, or in the creditworthiness of
issuers. Receipt of income from debt securities is incidental to the Fund's
objective of long-term growth of capital. See "Risk Factors."
Repurchase Agreements. A repurchase agreement is a short-term investment
in which the purchaser acquires ownership of a U.S. Government security (which
may be of any maturity) and the seller agrees to repurchase the obligation at
a future time at a set price, thereby determining the yield during the
purchaser's holding period (usually not more than seven days from the date of
purchase). Any repurchase transaction in which the Fund engages as a purchaser
will require full collateralization of the seller's obligation during the
entire term of the repurchase agreement. In the event of a bankruptcy or other
default of the seller, the Fund could experience both delays in liquidating
the underlying security and losses in value. However, the Fund intends to
enter into repurchase agreements only with the most creditworthy banks and
registered securities dealers pursuant to procedures adopted and regularly
reviewed by the Trust's Board of Trustees. The Adviser monitors the
creditworthiness of the banks and securities dealers with whom the Fund
engages in repurchase transactions.
Convertible Securities. The Fund may invest in convertible securities
(bonds, notes, debentures, preferred stocks and other securities convertible
into common stocks) that may offer higher income than the common stocks into
which they are convertible. The convertible securities in which the Fund may
invest include fixed-income or zero coupon debt securities, which may be
converted or exchanged at a stated or determinable exchange ratio into
underlying shares of common stock. Prior to their conversion, convertible
securities may have characteristics similar to non-convertible debt
securities. While convertible securities generally offer lower yields than
non-convertible debt securities of similar quality, their prices may reflect
changes in the value of the underlying common stock. Convertible securities
generally entail less credit risk than the issuer's common stock.
Illiquid and Restricted Securities. The Fund may not invest more than 5%
of its net assets in illiquid securities, including (i) securities for which
there is no readily available market; (ii) securities the disposition of which
would be subject to legal restrictions (so-called "restricted securities");
and (iii) repurchase agreements having more than seven days to maturity. A
considerable period of time may elapse between the Fund's decision to dispose
of such securities and the time when the Fund is able to dispose of them,
during which time the value of the securities could decline. Securities which
meet the requirements of Securities Act Rule 144A are restricted, but may be
determined to be liquid by the Trustees, based on an evaluation of the
applicable trading markets.
Foreign Securities. The Fund may invest up to 20% of its assets in
securities of foreign issuers, including American Depositary Receipts with
respect to securities of foreign issuers. There may be less publicly available
information about these issuers than is available about companies in the U.S.
and foreign auditing requirements may not be comparable to those in the U.S.
In addition, the value of foreign securities may be adversely affected by
movements in the exchange rates between foreign currencies and the U.S.
dollar, as well as other political and economic developments, including the
possibility of expropriation, confiscatory taxation, exchange controls or
other foreign governmental restrictions. The Fund may invest without regard to
this 20% limitation in securities of foreign issuers which are listed and
traded on a domestic national securities exchange.
Other Investment Techniques. The Fund may purchase put and call options
and engage in the writing of covered call options and secured put options on
securities, and employ a variety of other investment techniques, including the
purchase and sale of market index futures contracts, financial futures
contracts and options on such futures. These policies and techniques may
involve a greater degree of risk than those inherent in more conservative
investment approaches. The Fund will engage in futures contracts and related
options only for hedging purposes. It will not engage in such transactions for
speculation or leverage. The Fund maintains an operating policy that it may
not invest in options and futures contracts if as a result more than 5% of its
assets would be at risk.
Portfolio Turnover. The annual rate of portfolio turnover is not
expected to exceed 80%. In general, the Adviser will not consider the rate of
portfolio turnover to be a limiting factor in determining when or whether to
purchase or sell securities in order to achieve the Fund's objective.
The Fund has the right to modify the investment policies described above
without shareholder approval; however, the Fund does not presently contemplate
making any such modifications.
Risk Factors
Equity Securities. Securities in which the Fund invests, and its share
price and returns, are subject to fluctuation. Equities are subject to market
risks which cause their prices to fluctuate. In addition, there may be a
substantial period of time before equities held by the Fund realize the
appreciation potential the Adviser believes them to have.
Debt Securities. The Fund may invest up to 20% of its assets in debt
securities, including securities which are rated below investment-grade, or if
unrated, are considered by the Adviser to be equivalent to below
investment-grade securities (commonly referred to as "junk bonds").
The value of debt securities will change as interest rates fluctuate.
During periods of falling interest rates, the values of outstanding long term
debt obligations generally rise. Conversely, during periods of rising interest
rates, the value of such securities generally decline. The magnitude of these
fluctuations typically will be greater for securities with longer maturities.
Debt securities also are subject to credit risk relative to the ability of the
issuer to make timely interest payments and repay principal on maturity.
Lower Rated Debt Securities. Bonds rated or considered below investment
grade typically carry higher coupon rates than investment grade bonds, but
also are described as speculative by both Moody's and S&P and may be subject
to greater market price fluctuations, less liquidity and greater risk of
income or principal, including greater possibility of default or bankruptcy of
the issuer of such securities than more highly rated bonds. Lower rated bonds
also are more likely to be sensitive to adverse economic or company
developments and more subject to price fluctuations in response to changes in
interest rates. The market for lower-rated debt issues generally is thinner
and less active than that for higher quality securities, which may limit the
Fund's ability to sell such securities at fair value in response to changes in
the economy or financial markets. During periods of economic downturn or
rising interest rates, highly leveraged issuers of lower rated securities may
experience financial stress which could adversely affect their ability to make
payments of interest and principal and increase the possibility of default.
Non-Diversification. The Fund is a non-diversified investment company
portfolio, which means that the Fund is required to comply only with the
diversification requirements of the Internal Revenue Code of 1986 (the "Code")
so that the Fund will not be subject to U.S. taxes on its net investment
income. These provisions, among others, require that at the end of each
calendar quarter, (1) not more than 25% of the value of the fund's total
assets can be invested in the securities of a single issuer, and (2) with
respect to 50% of the value of the Fund's total assets, no more than 5% of the
value of its total assets can be invested in the securities of a single issuer
and the Fund may not own more than 10% of the outstanding voting securities of
a single issuer. Compliance with the diversification requirements of the Code
is a fundamental policy of the Fund and may be changed only with the
affirmative vote of the holders of the majority of the Fund's outstanding
shares.
Since the Fund, as a non-diversified investment company portfolio, could
invest in a smaller number of individual issuers than a diversified investment
company, the value of the Fund's investments could be more affected by any
single adverse occurrence than would the value of the investments of a
diversified investment company.
The Fund has adopted certain other investment restrictions, which are
described fully in the Statement of Additional Information. Like the Fund's
investment objective, certain of these restrictions are fundamental and may be
changed only by a majority vote of the Fund's outstanding shares.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust establishes the Fund's policies and
supervises and reviews the management of the Fund. The Adviser was founded in
1995 and is controlled by Mr. Richard S. Pzena, who is principally responsible
for the management of the Fund's portfolio. Mr. Pzena was formerly Director of
Research for United States equities at an investment advisory firm with
several billion dollars in investment advisory and investment company assets
under management.
The Adviser provides the Fund with advice on buying and selling
securities, manages the investments of the Fund, furnishes the Fund with
office space and certain administrative services, and provides most of the
personnel needed by the Fund. As compensation, the Fund pays the Adviser a
monthly advisory fee based upon the average daily net assets of the Fund at
the rate of 1.25% annually.
Investment Company Administration Corporation (the "Administrator") acts
as the Fund's Administrator under an Administration Agreement. Under that
agreement, the Administrator prepares various federal and state regulatory
filings, reports and returns for the Fund, prepares reports and materials to
be supplied to the trustees, monitors the activities of the Fund's custodian,
transfer agent and accountants, and coordinates the preparation and payment of
Fund expenses and reviews the Fund's expense accruals. For its services, the
Administrator receives a fee at the following rate:
Average net assets of the Fund Fee or fee rate
Under $15 million $30,000
$15 to $50 million 0.20% of average daily net assets
$50 to $100 million 0.15% of average daily net assets
$100 to $150 million 0.10% of average daily net assets
Over $150 million 0.05% of average daily net assets
The Fund is responsible for its own operating expenses. The Adviser has
voluntarily undertaken to limit the Fund's operating expenses to 1.75% of the
Fund's average net assets annually. This undertaking may be modified or
withdrawn by the Adviser upon notice to shareholders. The Adviser also may
reimburse additional amounts
to the Fund at any time in order to reduce the Fund's expenses, or to the
extent required by applicable laws. Reductions made by the Adviser in its fees
or payments or reimbursements of expenses which are the Fund's obligation are
subject to reimbursement by the Fund provided the Fund is able to do so and
remain in compliance with applicable limitations.
The Adviser considers a number of factors in determining which brokers
or dealers to use for the Fund's portfolio transactions. While these are more
fully discussed in the Statement of Additional Information, the factors
include, but are not limited to, the reasonableness of commissions, quality of
services and execution, and the availability of research which the Adviser may
lawfully and appropriately use in its investment management and advisory
capacities. Provided the Fund receives prompt execution at competitive prices,
the Adviser may also consider the sale of Fund shares as a factor in selecting
broker-dealers for the Fund's portfolio transactions.
HOW TO INVEST IN THE FUND
The minimum initial investment in the Fund is $5,000 ($2,000 for
retirement plan accounts). Subsequent investments must be at least $1,000.
First Fund Distributors, Inc. (the "Distributor"), an affiliate of the
Administrator, acts as Distributor of the Fund's shares. The Distributor may,
at its discretion, waive the minimum investment requirements for purchases in
conjunction with certain group or periodic plans.
Shares of the Fund are offered continuously for purchase at their net
asset value per share next determined after a purchase order is received.
Investors may be charged a fee if they effect a transaction in fund shares
through a broker or agent.
Investors may purchase shares of the Fund by check or wire:
By Check: For initial investments, an investor should complete the
Fund's Account Application (included with this Prospectus). The completed
application, together with a check payable to "Pzena Focused Value Fund,"
should be mailed to: Pzena Focused Value Fund, P.O. Box 640856, Cincinnati, OH
45264. For investments by overnight delivery services please call the Transfer
Agent at (800) 282-2340 for instructions.
Subsequent investments should be made by check payable to "Pzena Focused
Value Fund," and mailed to the address indicated above in the envelope
provided. The investor's account number should be written on the check.
By Wire: For initial investments, before wiring funds, an investor
should call 1-800-282-2340 to advise that an initial investment will be made
by wire and to receive an account number. The Transfer Agent will request the
investor's name and the dollar amount to be invested and provide an order
confirmation number. The investor should then complete the Fund's Account
Application (included with this Prospectus), including the date and the order
confirmation number on the application. The completed Application should be
mailed to the address shown at the top of the Account Application. The
investor's bank should transmit immediately available funds by wire for
purchase of shares, in the investor's name, to the Fund as follows:
Star Bank, N.A. Cinti/Trust
ABA Routing Number: 0420-0001-3
DDA #485776710
for further credit to Pzena Focused Value Fund
Account Number [Name of Shareholder]
For subsequent investments, an investor should call the Transfer Agent
at (800) 282-2340 before the wire is sent. Failure to do so will cause the
purchase to be credited the next day, when the Transfer Agent receives notice
of the wire. The investor's bank should wire the 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. Payment of redemption proceeds from shares that were purchased
with an initial investment made by wire may be delayed until one business day
after the completed Account Application is received by the Fund. All
investments must be made in U.S. dollars; to avoid fees and delays, checks
should be drawn only on U.S. banks and should not be made by third party
check. A charge may be imposed if any check used for investment does not
clear. The Fund and the Distributor reserve the right to reject any purchase
order in whole or in part. If an order, together with payment in proper form,
is received by the Transfer Agent by the close of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time), Fund shares will be
purchased at the offering price determined as of the close of trading on that
day. Otherwise, Fund shares will be purchased at the offering price determined
as of the close of trading on the New York Stock Exchange ("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 Fund does not issue share certificates. All shares are normally held
in non-certificated form registered on the books of the Fund and the Fund's
Transfer Agent for the account of the shareholder.
HOW TO REDEEM AN INVESTMENT IN THE FUND
A shareholder has the right to have the Fund redeem all or any portion
of outstanding shares in the account 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 to Pzena Focused Value Fund,
c/o American Data Services, P.O. Box 5536, Hauppauge, NY 11788-0132. To
protect the Fund and its shareholders, a signature guarantee is required for
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 at 1-800-282-2340 before
4:00 p.m. Eastern time. Redemption proceeds will be mailed or wired at the
shareholder's direction the next business day to the predesignated account.
The minimum amount that may be wired is $1,000 (wire charges, if any, will be
deducted from redemption proceeds).
By establishing telephone redemption privileges, a shareholder
authorizes the Fund and its agents to act upon the instruction of any person
by telephone to redeem from the account for which such service has been
authorized and transfer the proceeds to the bank account designated in the
authorization. The Fund and its agents 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,
expense, or cost which results from acting upon instructions of a person
believed to be a shareholder with respect to the telephone redemption
privilege. The Fund may change, modify, or terminate these privileges at any
time upon at least 60 days' notice to shareholders.
Shareholders may request telephone redemption privileges after an
account is opened; however, the authorization form will require a separate
signature guarantee. Shareholders may experience delays in exercising
telephone redemption privileges during periods of abnormal market activity.
General. Payment of redemption proceeds will be made promptly, but not
later than seven days after the receipt of all documents in proper form,
including a written redemption order with appropriate signature guarantee in
cases where telephone redemption privileges are not being utilized. The Fund
may suspend the right of redemption under certain extraordinary circumstances
in accordance with applicable rules of the Securities and Exchange Commission.
In the case of shares purchased by check and redeemed shortly after purchase,
the Fund will not mail redemption proceeds until it has been notified that the
check used for the purchase has been collected, which may take up to 15 days
from the purchase date. To minimize or avoid such delay, investors may
purchase shares by certified check or federal funds wire. A redemption may
result in recognition of a gain or loss for federal income tax purposes.
Investors should consult their own tax adviser as to the effect of any
redemption.
Due to the relatively high cost of maintaining smaller accounts, the
Fund reserves the right to redeem shares in any account, other than retirement
plan or Uniform Gifts/Transfers to Minors Act accounts, if at any time, due to
redemptions by the shareholder, the total value of a shareholder's account
does not equal at least $5,000. If the 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 the account to at least $5,000
before the Fund takes any action.
RETIREMENT PLANS
The Fund offers an Individual Retirement Account plan and information is
available from the Fund and the Distributor with respect to Keogh, Section
403(b) and other retirement plans offered. Investors should consult their own
tax adviser before establishing any retirement plan.
HOW THE FUND'S PER SHARE VALUE IS DETERMINED
The net asset value of a Fund share is determined once daily as of the
close of public trading on the New York Stock Exchange (currently 4:00 p.m.
Eastern time) on each day the NYSE is open for trading. Net asset value per
share is calculated by dividing the value of the Fund's total assets, less its
liabilities, by the number of Fund shares outstanding.
Portfolio securities are valued using current market values, if
available. Securities for which market quotations are not readily available
are valued at fair values as determined in good faith by or under the
supervision of the Trust's officers in accordance with methods which are
specifically authorized by the Board of Trustees. Short-term obligations with
remaining maturities of sixty days or less are valued at amortized cost as
reflecting fair value.
DISTRIBUTIONS AND TAXES
Dividends and Distributions. 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 the Fund's fiscal year (April 30). Any
undistributed long-term net capital gains realized during the 12-month period
ended each October 31, as well as any additional undistributed capital gains
realized during the Fund's fiscal year, will also be distributed to
shareholders on or about December 31 of each year.
Dividends and capital gains distributions (net of any required tax
withholding) are automatically reinvested in additional shares of the Fund at
the net asset value per share on the reinvestment date unless the shareholder
has previously requested in writing to the Transfer Agent that distributions
be made in cash.
Any dividend or distribution paid by the Fund has the effect of reducing
the net asset value per share on the reinvestment date by the amount of the
dividend or distribution. Investors should note that a dividend or
distribution paid on shares purchased shortly before such dividend or
distribution was declared will be subject to income taxes as discussed below
even though the dividend or distribution represents, in substance, a partial
return of capital to the shareholder.
Taxes. The Fund 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"). As long as the Fund continues to so
qualify, and as long as the Fund distributes all of its income each year to
the shareholders, the Fund will not be subject to any federal income tax or
excise taxes based on net income. Distributions made by the Fund will be
taxable to shareholders whether received in shares (through dividend
reinvestment) or in cash. Distributions derived from net investment income,
including net short-term capital gains, are taxable to shareholders as
ordinary income. A portion of these distributions may qualify for the
intercorporate dividends-received deduction. Distributions designated as
capital gains distributions are taxable as long-term capital gains regardless
of the length of time shares of the Fund have been held. Although
distributions are generally taxable when received, certain distributions made
in January are taxable as if received in the prior December. Shareholders will
be informed annually of the amount and nature of the Fund's distributions.
Additional information about taxes is set forth in the Statement of Additional
Information. Shareholders should consult their own advisers concerning
federal, state and local tax consequences of investment in the Fund.
GENERAL INFORMATION
The Trust. The Trust was organized as a Massachusetts business trust on
February 17, 1987. The Agreement and Declaration of Trust permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest, without par value, which may be issued in any number of
series. The Board of Trustees may from time to time issue other series, the
assets and liabilities of which will be separate and distinct from any other
series. The fiscal year of the Fund ends on April 30.
Shareholder Rights. Shares issued by the Fund have no preemptive,
conversion, or subscription rights. Shareholders have equal and exclusive
rights as to dividends and distributions as declared by the Fund and to the
net assets of the Fund upon liquidation or dissolution. The Fund, as a
separate series of the Trust, votes separately on matters affecting only the
Fund (e.g., approval of the Management and Advisory Agreements); all series of
the Trust vote as a single class on matters affecting all series jointly or
the Trust as a whole (e.g., election or removal of Trustees). Voting rights
are not cumulative, so that the holders of more than 50% of the shares voting
in any election of Trustees can, if they so choose, elect all of the Trustees.
While the Trust is not required and does not intend to hold annual meetings of
shareholders, such meetings may be called by the Trustees in their discretion,
or upon demand by the holders of 10% or more of the outstanding shares of the
Trust for the purpose of electing or removing Trustees.
Performance Information. From time to time, the Fund may publish its
total return in advertisements and communications to investors. Total return
information will include the Fund's average annual compounded rate of return
over the most recent year and over the period from the Fund's inception of
operations. The Fund may also advertise aggregate and average total return
information over different periods of time. The Fund's total return will be
based upon the value of the shares acquired through a hypothetical $1,000
investment at the beginning of the specified period and the net asset value of
such shares at the end of the period, assuming reinvestment of all
distributions. Total return figures will reflect all recurring charges against
Fund income. Investors should note that the investment results of the Fund
will fluctuate over time, and any presentation of the Fund's total return for
any prior period should not be considered as a representation of what an
investor's total return may be in any future period.
Year 2000. Like other business organizations around the world, the Fund
could be adversely affected if the computer systems used by its Adviser and
other service providers do not properly process and calculate information
related to dates beginning January 1, 2000. This is commonly known as the
"Year 2000 Issue." The Fund's Adviser is taking steps that it believes are
reasonably designed to address the Year 2000 Issue with respect to its own
computer systems, and it is obtaining assurances from the Fund's other service
providers that they are taking comparable steps. However, there can be no
assurance that these actions will be sufficient to avoid any adverse impact on
the Fund.
Shareholder Inquiries. Shareholder inquiries should be directed to the
Fund at the address and telephone number shown on the cover of this
prospectus.
Adviser
Pzena Investment Management, LLC
830 Third Avenue
14th Floor
New York, NY 10022
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261E
Phoenix, AZ 85018
Custodian
Star Bank
425 Walnut Street
Cincinnati, Ohio 45202
Shareholder Service and Transfer Agent
American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
(800) 282-2340
Auditors
Tait, Weller, & Baker
8 Penn Center Plaza, Suite 800
Philadelphia, PA 19103
Counsel to the Fund
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, CA 94104
Counsel to the Adviser
Lane Altman & Owens
101 Federal Street
Boston, MA 02110
PROSPECTUS
August 31, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
August 31, 1998
PZENA FOCUSED VALUE FUND
a series of
PROFESSIONALLY MANAGED PORTFOLIOS
830 Third Ave., 14th floor
New York, NY 10022
(212) 355-1600
This Statement of Additional Information is not a prospectus and it
should be read in conjunction with the prospectus of the Pzena Focused Value
Fund (the "Fund"). A copy of the prospectus dated August 31, 1998 is available
by calling the number listed above or (212) 633-9700.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
The Trust.......................................................................................................B-2
Investment Objective and Policies...............................................................................B-2
Investment Restrictions.........................................................................................B-7
Distributions and Tax Information...............................................................................B-8
Trustees and Executive Officers................................................................................B-11
The Fund's Administrator.......................................................................................B-14
The Fund's Distributor.........................................................................................B-14
Execution of Portfolio Transactions............................................................................B-15
Additional Purchase and Redemption Information.................................................................B-16
Determination of Share Price...................................................................................B-17
Performance Information........................................................................................B-18
General Information............................................................................................B-19
Financial Statements...........................................................................................B-20
Appendix.......................................................................................................B-21
</TABLE>
Pzena SAI B-1
<PAGE>
THE TRUST
Professionally Managed Portfolios (the "Trust") is an open-end
management investment company organized as a Massachusetts business trust. The
Trust consists of various series which represent separate investment portfolios.
This Statement of Additional Information relates only to the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Fund is a mutual fund with the investment objective of long-term
capital growth. The following discussion supplements the discussion of the
Fund's investment objective and policies as set forth in the Prospectus. There
can be no assurance the objective of the Fund will be attained.
Repurchase Agreements
The Fund may enter into repurchase agreements as discussed in the
Prospectus. Under such agreements, the seller of the security agrees to
repurchase it at a mutually agreed upon time and price. The repurchase price may
be higher than the purchase price, the difference being income to the Fund, or
the purchase and repurchase prices may be the same, with interest at a stated
rate due to the Fund together with the repurchase price on repurchase. In either
case, the income to the Fund is unrelated to the interest rate on the U.S.
Government security itself. Such repurchase agreements will be made only with
banks with assets of $500 million or more that are insured by the Federal
Deposit Insurance Corporation or with Government securities dealers recognized
by the Federal Reserve Board and registered as broker-dealers with the
Securities and Exchange Commission ("SEC") or exempt from such registration. The
Fund will generally enter into repurchase agreements of short durations, from
overnight to one week, although the underlying securities generally have longer
maturities. The Fund may not enter into a repurchase agreement with more than
seven days to maturity if, as a result, more than 10% of the value of the Fund's
total assets would be invested in illiquid securities including such repurchase
agreements.
For purposes of the Investment Company Act of 1940 (the "1940 Act"), a
repurchase agreement is deemed to be a loan from the Fund to the seller of the
U.S. Government security subject to the repurchase agreement. In the event of
the insolvency or default of the seller, the Fund could encounter delays and
incur costs before being able to sell the security. Delays may involve loss of
interest or a decline in price of the U.S. Government security. As with any
unsecured debt instrument purchased for the Fund, the Investment Advisor seeks
to minimize the risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligor, in this case the seller of the U.S.
Government security.
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
Pzena SAI B-2
<PAGE>
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
The Fund is authorized to 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 the Fund's intention to be fully invested to the extent practicable and
subject to the policies stated above. While when-issued securities may be sold
prior to the settlement date, any purchase of such securities would be made with
the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the Fund makes the commitment to purchase a
security on a when-issued basis, it will record the transaction and reflect the
value of the security in determining its net asset value. The market value of
the when-issued securities may be more or less than the purchase price. The Fund
does not believe that its net asset value or income will be adversely affected
by its purchase of securities on a when-issued basis. The 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.
Foreign Securities
The Fund may invest up to 20% of its assets in foreign securities.
Foreign investments can involve significant risks in addition to the risks
inherent in U.S. investments. The value of securities denominated in or indexed
to foreign currencies, and of dividends and interest from such securities, can
change significantly when foreign currencies strengthen or weaken relative to
the U.S. dollar. Foreign securities markets generally have less trading volume
and less liquidity than U.S. markets, and prices on some foreign markets can be
highly volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be more
difficult to obtain reliable information regarding an issuer's financial
condition and operations. In addition, the costs of foreign investing, including
withholding taxes, brokerage commissions, and custodial costs, generally are
higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign securities trading practices, including those
involving the release of assets in advance of payment, may involve
Pzena SAI B-3
<PAGE>
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It also may be difficult to
enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There can be no assurance that the Advisor will be able
to anticipate or counter these potential events and their impacts on the Fund's
share price.
Securities of foreign issuers may be held by the Fund in the form of
American Depositary Receipts and European Depositary Receipts ("ADRs" and
"EDRs"). These are certificates evidencing ownership of shares of a
foreign-based issuer held in trust by a bank or similar financial institution.
Designed for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national market and currencies.
The Fund may invest without regard to the 20% limitation in securities
of foreign issuers which are listed and traded on a domestic national securities
exchange.
Debt Securities and Ratings
Ratings of debt securities represent the rating agencies' opinions
regarding their quality, are not a guarantee of quality and may be reduced after
the Fund has acquired the security. If a security's rating is reduced while it
is held by the Fund, the Advisor will consider whether the Fund should continue
to hold the security, but the Fund is not required to dispose of it. Credit
ratings attempt to evaluate the safety of principal and interest payments and do
not evaluate the risks of fluctuations in market value. Also, rating agencies
may fail to make timely changes in credit ratings in response to subsequent
events, so that an issuer's current financial conditions may be better or worse
than the rating indicates.
The Fund reserves the right to invest up to 20% of its assets in debt
securities, which may include those rated lower than BBB by S & P or lower than
Baa by Moody's but rated at least B by S & P or Moody's (or, in either case, if
unrated, deemed by the Advisor to be of comparable quality). Lower-rated
securities generally offer a higher current yield than that available for higher
grade issues. However, lower-rated securities involve higher risks, in that they
are especially subject to adverse changes in general economic conditions and in
the industries in which the issuers are engaged, to changes in the financial
condition of the issuers and to price fluctuations in response to changes in
interest rates. During periods of economic downturn or rising interest rates,
highly leveraged issuers may experience financial stress which could adversely
affect their ability to make payments
Pzena SAI B-4
<PAGE>
of interest and principal and increase the possibility of default. In addition,
the market for lower-rated debt securities has expanded rapidly in recent years,
and its growth paralleled a long economic expansion. At times in recent years,
the prices of many lower-rated debt securities declined substantially,
reflecting an expectation that many issuers of such securities might experience
financial difficulties. As a result, the yields on lower-rated debt securities
rose dramatically, but such higher yields did not reflect the value of the
income stream that holders of such securities expected, but rather, the risk
that holders of such securities could lose a substantial portion of their value
as a result of the issuers' financial restructuring or default. There can be no
assurance that such declines will not recur. The market for lower-rated debt
issues generally is smaller and less active than that for higher quality
securities, which may limit the Fund's ability to sell such securities at fair
value in response to changes in the economy or financial markets. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of lower-rated securities,
especially in a smaller and less actively traded market.
Lower-rated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Fund may
have to replace the security with a lower-yielding security, resulting in a
decreased return to investors. Also, because the principal value of bonds moves
inversely with movements in interest rates, in the event of rising interest
rates the value of the securities held by the Fund may decline proportionately
more than a fund consisting of higher-rated securities. If the Fund experiences
unexpected net redemptions, it may be forced to sell its higher-rated bonds,
resulting in a decline in the overall credit quality of the securities held by
the Fund and increasing the exposure of the Fund to the risks of lower-rated
securities. Investments in zero-coupon bonds may be more speculative and subject
to greater fluctuations in value due to changes in interest rates than bonds
that pay interest currently.
Options and Futures Contracts
As indicated in the Prospectus, to the extent consistent with its
investment objectives and policies, the Fund may purchase and write call and put
options on securities, securities indexes and on foreign currencies and enter
into futures contracts and use options on futures contracts, to the extent of up
to 5% of its assets.
Transactions in options on securities and on indexes involve certain
risks. For example, there are significant differences between the securities and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision
as to whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. If the Fund were unable to close out an
option that it had purchased on a security, it would have to exercise the option
in order to realize any profit or the option may expire worthless. If the Fund
were unable to close out a covered call option that it had written on a
security, it would
Pzena SAI B-5
<PAGE>
not be able to sell the underlying security unless the option expired without
exercise. As the writer of a covered call option, the Fund forgoes, during the
option's life, the opportunity to profit from increases in the market value of
the security covering the call option above the sum of the premium and the
exercise price of the call.
If trading were suspended in an option purchased by the Fund, the Fund
would not be able to close out the option. If restrictions on exercise were
imposed, the Fund might be unable to exercise an option it has purchased. Except
to the extent that a call option on an index written by the Fund is covered by
an option on the same index purchased by the Fund, movements in the index may
result in a loss to the Fund; such losses may be mitigated or exacerbated by
changes in the value of the Fund's securities during the period the option was
outstanding.
Use of futures contracts and options thereon also involves certain
risks. The variable degree of correlation between price movements of futures
contracts and price movements in the related portfolio positions of the Fund
creates the possibility that losses on the hedging instrument may be greater
than gains in the value of the Fund's position. Also, futures and options
markets may not be liquid in all circumstances and certain over the counter
options may have no markets. As a result, in certain markets, the Fund might not
be able to close out a transaction at all or without incurring losses. Although
the use of options and futures transactions for hedging should minimize the risk
of loss due to a decline in the value of the hedged position, at the same time
they tend to limit any potential gain which might result from an increase in the
value of such position. If losses were to result from the use of such
transactions, they could reduce net asset value and possibly income. The Fund
may use these techniques to hedge against changes in interest rates or
securities prices or as part of its overall investment strategy. The Fund will
segregate liquid assets (or, as permitted by applicable regulation, enter into
certain offsetting positions) to cover its obligations under options and futures
contracts to avoid leveraging of the Fund.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by
the Fund and (unless otherwise noted) are fundamental and cannot be changed
without the affirmative vote of a majority of the Fund's outstanding voting
securities as defined in the 1940 Act. The Fund may not:
1. Make loans to others, except (a) through the purchase of debt
securities in accordance with its investment objectives and policies, (b) to the
extent the entry into a repurchase agreement is deemed to be a loan.
2. (a) Borrow money, except from banks for temporary or emergency
purposes. Any such borrowing will be made only if immediately thereafter there
is an asset coverage of at least 300% of all borrowings.
Pzena SAI B-6
<PAGE>
(b) Mortgage, pledge or hypothecate any of its assets except in
connection with any such borrowings.
3. Purchase securities on margin, participate on a joint or joint and
several basis in any securities trading account, or underwrite securities. (The
Fund is not precluded 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
(other than futures transactions for the purposes and under the conditions
described in the prospectus and in this Statement of Additional Information).
5. Invest 25% or more of the market value of its assets in the
securities of companies engaged in any one industry. (Does not apply to
investment in the securities of the U.S. Government, its agencies or
instrumentalities.)
6. Issue senior securities, as defined in the 1940 Act, except that
this restriction shall not be deemed to prohibit the Fund from (a) making any
permitted borrowings, mortgages or pledges, or (b) entering into options,
futures, forward or repurchase transactions.
7. (a) With respect to 50% of the Fund's assets, purchase the
securities of any issuer if more than 5% of the total assets of the Fund would
be invested in the securities of the issuer, other than obligations of the U.S.
Government, its agencies or instrumentalities.
(b) With respect to the remaining 50% of the Fund's assets,
purchase the securities of any issuer if more than 25% of the total assets of
the Fund would be invested in the securities of the issuer.
The Fund observes the following policies, which are not deemed fundamental and
which may be changed without shareholder vote. The Fund may not:
8. Purchase any security if as a result the Fund would then hold more
than 10% of any class of securities of an issuer (taking all common stock issues
of an issuer as a single class, all preferred stock issues as a single class,
and all debt issues as a single class) or more than 10% of the outstanding
voting securities of a single issuer.
9. Invest in any issuer for purposes of exercising control or
management.
10. Invest in securities of other investment companies which would
result in the Fund owning more than 3% of the outstanding voting securities of
any one such investment company, the Fund owning securities of another
investment company having an aggregate value in excess of 5% of the value of the
Fund's total assets, or the Fund owning securities of investment companies which
in the aggregate would exceed 10% of the value of the Fund's total assets.
Pzena SAI B-7
<PAGE>
11. Invest, in the aggregate, more than 5% of its total assets in
securities with legal or contractual restrictions on resale, securities which
are not readily marketable and repurchase agreements with more than seven days
to maturity.
12. Invest more than 15% of its assets in securities of foreign issuers
(including American Depositary Receipts with respect to foreign issuers, but
excluding securities of foreign issuers listed and traded on a domestic national
securities exchange).
If a percentage restriction described in the prospectus or this
statement of additional information 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 for
the policy regarding borrowing or as otherwise specifically noted.
DISTRIBUTIONS AND TAX INFORMATION
Distributions
Dividends from net investment income and distributions from net profits
from the sale of securities are generally made annually. Also, the Fund expects
to distribute any undistributed net investment income on or about December 31 of
each year. Any net capital gains realized through the period ended October 31 of
each year will also be distributed by December 31 of each year.
Each distribution by the Fund is accompanied by a brief explanation of
the form and character of the distribution. In January of each year the Fund
will issue to each shareholder a statement of the federal income tax status of
all distributions.
Tax Information
Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund intends to continue to qualify and elect to be
treated as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), provided it complies with all
applicable requirements regarding the source of its income, diversification of
its assets and timing of distributions. The Fund's policy is to distribute to
its shareholders all of its investment company taxable income and any net
realized long-term capital gains for each fiscal year in a manner that complies
with the distribution requirements of the Code, so that the Fund will not be
subject to any federal income or excise taxes. To comply with the requirements,
the Fund must also distribute (or be deemed to have distributed) by December 31
of each calendar year (i) at least 98% of its ordinary income for such year,
(ii) at least 98% of the excess of its realized capital gains over its realized
capital losses for the 12-month period ending on October 31 during such year and
(iii) any amounts from the prior calendar year that were not distributed and on
which the Fund paid no federal income tax.
Pzena SAI B-8
<PAGE>
Net investment income consists of interest and dividend income, less
expenses. Net realized capital gains for a fiscal period are computed by taking
into account any capital loss carryforward of the Fund.
Distributions of net investment income and net short-term capital gains
are taxable to shareholders as ordinary income. In the case of corporate
shareholders, a portion of the distributions may qualify for the intercorporate
dividends-received deduction to the extent the Fund designates the amount
distributed as a qualifying dividend. The aggregate amount so designated cannot,
however, exceed the aggregate amount of qualifying dividends received by the
Fund for its taxable year. In view of the Fund's investment policy, it is
expected that dividends from domestic corporations will be part of the Fund's
gross income and that, accordingly, part of the distributions by the Fund may be
eligible for the dividends-received deduction for corporate shareholders.
However, the portion of the Fund's gross income attributable to qualifying
dividends is largely dependent on that Fund's investment activities for a
particular year and therefore cannot be predicted with any certainty. The
deduction may be reduced or eliminated if the Fund shares held by a corporate
investor are treated as debt-financed or are held for less than 46 days during
the 90-day period that begins 45 days before the stock becomes ex-dividend with
respect to the dividend.
Any long-term or mid-term capital gain distributions are taxable to
shareholders as long-term or mid-term capital gains, respectively, regardless of
the length of time shares have been held. Capital gains distributions are not
eligible for the dividends-received deduction referred to in the previous
paragraph. Distributions of any net investment income and net realized capital
gains will be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date. Distributions
are generally taxable when received. However, distributions declared in October,
November or December to shareholders of record on a date in such a month and
paid the following January are taxable as if received on December 31.
Distributions are includable in alternative minimum taxable income in computing
a shareholder's liability for the alternative minimum tax.
The Fund may write, purchase or sell certain option, futures, and
foreign currency contracts. Such transactions are subject to special tax rules
that may affect the amount, timing and character of distributions to
shareholders. Unless the Fund is eligible to make and makes a special election,
such contracts that are "Section 1256 contracts" will be "marked-to-market" for
federal income tax purposes at the end of each taxable year, i.e., each contract
will be treated as sold for its fair market value on the last day of the taxable
year. In general, unless the special election referred to in the previous
sentence is made, gain or loss from transactions in such contracts will be 60%
long-term and 40% short-term capital gain or loss. Section 1092 of the Code,
which applies to certain "straddles", may affect the taxation of the Fund's
transactions in options, futures and foreign currency contracts. Under Section
1092 of the Code, the Fund may be required to postpone recognition for tax
purposes of losses incurred in certain closing transactions.
Pzena SAI B-9
<PAGE>
A redemption of Fund shares may result in recognition of a taxable gain
or loss. Any loss realized upon a redemption of shares within six months from
the date of their purchase will be treated as a long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gains during
such six-month period. Any loss realized upon a redemption of Fund shares may be
disallowed under certain wash sale rules to the extent shares of the Fund are
purchased (through reinvestment of distributions or otherwise) within 30 days
before or after the redemption.
Under the Code, the Fund will be required to report to the Internal
Revenue Service ("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 Fund reserves
the right to refuse to open an account for any person failing to provide a
certified taxpayer identification number.
The Fund will not be subject to tax in the Commonwealth of
Massachusetts as long as it qualifies as a regulated investment company for
federal income tax purposes. Distributions and the transactions referred to in
the preceding paragraphs may be subject to state and local income taxes, and the
tax treatment thereof may differ from the federal income tax treatment.
Moreover, the above discussion is not intended to be a complete discussion of
all applicable federal tax consequences of an investment in the Fund.
Shareholders are advised to consult with their own tax advisers concerning the
application of federal, state and local taxes to an investment in the Fund.
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income.
This discussion and the related discussion in the prospectus have been
prepared by Fund management, and counsel to the Fund has expressed no opinion in
respect thereof.
Pzena SAI B-10
<PAGE>
TRUSTEES AND EXECUTIVE OFFICERS
The Trustees of the Trust, who were elected for an indefinite term by
the initial shareholders of the Trust, are responsible for the overall
management of the Trust, including general supervision and review of the
investment activities of the Fund. The Trustees, in turn, elect the officers of
the Trust, who are responsible for administering the day-to-day operations of
the Trust and its separate series. The current Trustees and officers, their
affiliations, dates of birth and principal occupations for the past five years
are set forth below.
Steven J. Paggioli,* 04/03/50 President and Trustee
479 West 22nd Street, New York, NY 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, 09/12/43 Trustee
14 Five Roses East, Ancram, NY 12517. President, Talon Industries (venture
capital and business consulting); formerly Chief Operating Officer, Integrated
Asset Management (investment advisor and manager) and formerly President, Value
Line, Inc., (investment advisory and financial publishing firm).
Wallace L. Cook, 09/10/39 Trustee
One Peabody Lane, Darien, CT 06820. Retired. Formerly Senior Vice President,
Rockefeller Trust Co. Financial Counselor, Rockefeller & Co.
Carl A. Froebel, 05/23/38 Trustee
2 Crown Cove Lane, Savannah, GA 31411. Private Investor. Formerly Managing
Director, Premier Solutions, Ltd. (asset management computer and software
products). Formerly President and Founder, National Investor Data Services, Inc.
(investment related computer software).
Rowley W.P. Redington, 06/01/44 Trustee
1191 Valley Road, Clifton, NJ 07103. President, Intertech (consumer electronics
and computer service and marketing); formerly Vice President, PRS of New Jersey,
Inc. (management consulting), and Chief Executive Officer, Rowley Associates
(consultants).
Pzena SAI B-11
<PAGE>
Eric M. Banhazl*, 08/05/57 Treasurer
2020 E. Financial Way, Glendora, CA 91741. Senior Vice President, The Wadsworth
Group, Senior Vice President of ICAC and Vice President of FFD since 1990.
Robin Berger*, 11/17/56 Secretary
479 West 22nd St., New York, NY 10011. Vice President, The Wadsworth Group since
June, 1993.
Robert H. Wadsworth*, 01/25/40 Vice President
4455 E. Camelback Road, Suite 261E, Phoenix, AZ 85018. President of The
Wadsworth Group since 1982, President of 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 Fund and all other portfolios of the Trust. This total amount
is allocated among the portfolios. Disinterested trustees receive an annual
retainer of $7,500 and a fee of $2,500 for each regularly scheduled meeting.
These trustees also receive a fee of $1000 for any special meeting attended. The
Chairman of the Board of Trustees receives an additional annual retainer of
$4,500. Disinterested trustees are also reimbursed for expenses in connection
with each Board meeting attended. No other compensation or retirement benefits
were received by any Trustee or officer from the Fund or any other portfolios of
the Trust.
Name of Trustee Total Annual Compensation
Dorothy A. Berry $22,000
Wallace L. Cook $17,500
Carl A. Froebel $17,500
Rowley W.P. Redington $17,500
During the fiscal year ended April 30, 1998, trustees' fees and
expenses in the amount of $4,174 were allocated to the 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 the Fund.
Investment Advisor
The Board of Trustees of the Trust establishes the Fund's policies and
supervises and reviews the management of the Fund. Pzena Investment Management
LLC acts as Advisor to the Fund. The Advisor was founded in 1995 and is
controlled by Mr. Richard Pzena, who is principally responsible for the Fund's
portfolio. Mr. Pzena was formerly Director of Research for U.S. equities at an
Pzena SAI B-12
<PAGE>
investment advisory firm with several billion in investment advisory and
investment company assets under management.
Under the Investment Advisory Agreement with the Fund, the Advisor
provides the Fund with advice on buying and selling securities, manages the
investments of the Fund, furnishes the Fund with office space and certain
administrative services, and provides most of the personnel needed by the Fund.
As compensation, the Fund pays the Advisor a monthly management fee (accrued
daily) based upon the average daily net assets of the Fund at the rate of 1.25%
annually.
The Advisor has undertaken to limit the Fund's operating expenses to an
annual level of 1.75% of the Fund's average net assets. For the fiscal period
ended April 30, 1997, the Advisor waived its fees of $21,340 and reimbursed the
Fund for other operating expenses in the amount of $48,237. For the fiscal year
ended April 30, 1998, the Fund incurred advisory fees of $83,738, of which
amount the Advisor reimbursed $63,814 to the Fund pursuant to the expense
limitation.
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 FUND'S ADMINISTRATOR
The Fund has 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 the
Fund; prepare all required filings necessary to maintain the Fund's
qualification and/or registration to sell shares in all states where the Fund
currently does, or intends to do business; coordinate the preparation, printing
and mailing of all materials (e.g., Annual Reports) required to be sent to
shareholders; coordinate the preparation and payment of Fund related expenses;
monitor and oversee the activities of the Fund's servicing agents (i.e.,
transfer agent, custodian, fund accountants, etc.); review and adjust as
necessary the Fund's daily expense accruals; and perform such additional
services as may be agreed upon by the Fund and the Administrator. For its
services, ICAC receives a fee at the following annual rate:
Pzena SAI B-13
<PAGE>
Average Net Assets of the Fund Fee or Fee Rate
Under $15 million $30,000
$15 to $50 million 0.20% of average net assets
$50 to $100 million 0.15% of average net assets
$100 to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
ICAC received fees of $26,499 and $30,000 from the Fund for the fiscal period
ended April 30, 1997 and for the fiscal year ended April 30, 1998, respectively.
THE FUND'S DISTRIBUTOR
First Fund Distributors, Inc. (the "Distributor"), a corporation owned
by Messrs. Banhazl, Paggioli and Wadsworth, acts as the Fund's principal
underwriter in a continuous public offering of the Fund's shares. The
Distribution Agreement between the Fund and the Distributor continues in effect
for periods not exceeding one year if approved at least annually by (i) the
Board of Trustees or the vote of a majority of the outstanding shares of the
Fund (as defined in the 1940 Act) and (ii) a majority of the Trustees who are
not interested persons of any such party, in each case cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement may be terminated without penalty by the parties thereto upon sixty
days' written notice, and is automatically terminated in the event of its
assignment as defined in the 1940 Act.
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Advisor determines
which securities are to be purchased and sold by the Fund and which
broker-dealers are eligible to execute the Fund's portfolio transactions.
Purchases and sales of securities in the over-the-counter market will generally
be executed directly with a "market-maker" unless, in the opinion of the
Advisor, a better price and execution can otherwise be obtained by using a
broker for the transaction.
Purchases of portfolio securities for the Fund also may be made
directly from issuers or from underwriters. Where possible, purchase and sale
transactions will be effected through dealers (including banks) which specialize
in the types of securities which the Fund will be holding, unless better
executions are available elsewhere. Dealers and underwriters usually act as
principal for their own accounts. 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 dealer or underwriter are comparable, the order
may be allocated to a dealer or underwriter that has provided research or other
services as discussed below.
Pzena SAI B-14
<PAGE>
In placing portfolio transactions, the Advisor will use its reasonable
efforts to choose broker-dealers 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 services needed to
obtain the most favorable price and execution available, consideration may be
given to those broker-dealers which furnish or supply research and statistical
information to the Advisor that it may lawfully and appropriately use in its
investment advisory capacities, as well as provide other services in addition to
execution services. The Advisor considers such information, which is in addition
to and not in lieu of the services required to be performed by it under its
Agreement with the Fund, to be useful in varying degrees, but of indeterminable
value. Portfolio transactions may be placed with broker-dealers who sell shares
of the Fund subject to rules adopted by the National Association of Securities
Dealers, Inc.
While it is the Fund's general policy to seek first to obtain the most
favorable price and execution available in selecting a broker-dealer to execute
portfolio transactions for the Fund, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services to the Fund or to the
Advisor, even if the specific services are not directly useful to the Fund and
may be useful to the Advisor in advising other clients. In negotiating
commissions with a broker or evaluating the spread to be paid to a dealer, the
Fund may therefore pay a higher commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services, provided
that the amount of such commission or spread has been determined in good faith
by the Advisor to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. The standard of reasonableness
is to be measured in light of the Advisor's overall responsibilities to the
Fund.
Investment decisions for the Fund are made independently from those of
other client accounts or mutual funds ("Funds") managed or advised by the
Advisor. Nevertheless, it is possible that at times identical securities will be
acceptable for both the Fund and one or more of such client accounts or Funds.
In such event, the position of the Fund and such client account(s) or Funds 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 or Funds seeks to acquire the same security as the Fund at
the same time, the Fund may not be able to acquire as large a portion of such
security as it desires, or it may have to pay a higher price or obtain a lower
yield for such security. Similarly, the Fund may not be able to obtain as high a
price for, or as large an execution of, an order to sell any particular security
at the same time. If one or more of such client accounts or Funds simultaneously
purchases or sells the same security that the Fund is purchasing or selling,
each day's transactions in such security will be allocated between the Fund and
all such client accounts or Funds in a manner deemed equitable by the Advisor,
taking into account the respective sizes of the accounts and the amount being
purchased or sold. It is recognized that in some cases this system could have a
detrimental effect on the price or value of the security insofar as the Fund is
Pzena SAI B-15
<PAGE>
concerned. In other cases, however, it is believed that the ability of the Fund
to participate in volume transactions may produce better executions for the
Fund.
The Fund does not effect securities transactions through brokers in
accordance with any formula, nor does it effect securities transactions through
brokers solely for selling shares of the Fund, although the Fund may consider
the sale of shares as a factor in allocating brokerage. However, as stated
above, broker-dealers who execute brokerage transactions may effect purchase of
shares of the Fund for their customers. The Fund does not use the Distributor to
execute its portfolio transactions.
For the fiscal period ended April 30, 1997 and for the fiscal year
ending April 30, 1998, the aggregate brokerage commissions paid by the Fund were
$9,895 and $207,843.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Trust reserves the right in its sole discretion (i) to suspend the
continued offering of the Fund's shares, (ii) to reject purchase orders in whole
or in part when in the judgment of the Advisor or the Distributor such rejection
is in the best interest of the Fund, and (iii) to reduce or waive the minimum
for initial and subsequent investments for certain fiduciary accounts or under
circumstances where certain economies can be achieved in sales of the Fund's
shares.
Payments to shareholders for shares of the Fund redeemed directly from
the Fund will be made as promptly as possible but no later than seven days after
receipt by the Fund's Transfer Agent of the written request in proper form, with
the appropriate documentation as stated in the Prospectus, except that the Fund
may suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the New York Stock Exchange is restricted as
determined by the SEC or such Exchange is closed for other than weekends and
holidays; (b) an emergency exists as determined by the SEC making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable; or (c) for such other period as the SEC may permit for the
protection of the Fund's shareholders. At various times, the Fund may be
requested to redeem shares for which it has not yet received confirmation of
good payment; in this circumstance, the Fund may delay the redemption until
payment for the purchase of such shares has been collected and confirmed to the
Fund.
The Fund intends to pay cash (U.S. dollars) for all shares redeemed,
but, under abnormal conditions which make payment in cash unwise, the Fund may
make payment partly in securities with a current market value equal to the
redemption price. Although the Fund does not anticipate that it will make any
part of a redemption payment in securities, if such payment were made, an
investor may incur brokerage costs in converting such securities to cash. The
Fund has elected to be governed by the provisions of Rule 18f-1 under the 1940
Act, which contains a formula for determining the minimum redemption amounts
that must be paid in cash.
Pzena SAI B-16
<PAGE>
The value of shares on redemption or repurchase may be more or less
than the investor's cost, depending upon the market value of the Fund's
portfolio securities at the time of redemption or repurchase.
DETERMINATION OF SHARE PRICE
As noted in the Prospectus, the net asset value and offering price of
shares of the Fund will be determined once daily as of the close of public
trading on the New York Stock Exchange (currently 4:00 p.m. Eastern time) on
each day that the Exchange is open for trading. It is expected that the Exchange
will be closed on Saturdays and Sundays and on New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The Fund does not expect to
determine the net asset value of its shares on any day when the Exchange is not
open for trading even if there is sufficient trading in its portfolio securities
on such days to materially affect the net asset value per share.
In valuing the 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 the Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
which includes accrued but undistributed income; the resulting net assets are
divided by the number of shares of the Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
PERFORMANCE INFORMATION
From time to time, the Fund may state its total return in
advertisements and investor communications. Total return may be stated for any
relevant period as specified in the advertisement or communication. Any
statements of total return will be accompanied by information on the Fund's
average annual compounded rate of return over the most recent four calendar
quarters and the period from the Fund's inception of operations. The Fund may
also advertise aggregate and average total return information over different
periods of time.
Pzena SAI B-17
<PAGE>
The Fund's total return may be compared to relevant indices, including
Standard & Poor's 500 Composite Stock Index and indices published by Lipper
Analytical Services, Inc. From time to time, evaluations of a Fund's performance
by independent sources may also be used in advertisements and in information
furnished to present or prospective investors in the Funds.
Investors should note that the investment results of the Fund will
fluctuate over time, and any presentation of the Fund's total return for any
period should not be considered as a representation of what an investment may
earn or what an investor's total return may be in any future period.
The Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial purchase order of $1,000 from which the
maximum sales load is deducted
T = average annual total return n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at
the end of the period
Aggregate total return is calculated in a similar manner, except that
the results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.
The Fund's total returns for the year ending April 30, 1998 and since
its inception on June 24, 1996 through April 30, 1998 were 35.10% and 27.43%,
respectively.
GENERAL INFORMATION
Investors in the Fund will be informed of the Fund's progress through
periodic reports. Financial statements certified by independent public
accountants will be submitted to shareholders at least annually.
Star Bank N.A., 425 Walnut Street, Cincinnati, OH 45202 acts as
Custodian of the securities and other assets of the Fund. The Custodian does not
participate in decisions relating to the purchase and sale of securities by the
Fund. American Data Services, Inc., P.O. Box 5536, Hauppauge, NY 11788-0132 is
the Fund's Transfer and Dividend Disbursing Agent.
Tait, Weller & Baker, 8 Penn Center Plaza, Philadelphia, PA 19103 are
the independent auditors for the Fund.
Pzena SAI B-18
<PAGE>
Lane, Altman & Owens, 101 Federal St., Boston, MA 02110 are legal
counsel to the Advisor.
Paul, Hastings, Janofsky & Walker LLP, 345 California Street, 29th
Floor, San Francisco, California 94104, are legal counsel to the Fund.
The following persons are beneficial owners of more than 5% of the
Fund's outstanding voting securities as of August 6, 1998.
Getrud Mainzer, New York, NY 10025; 8.09%
Bonnie Jacobson, St. Petersburg, FL 33733; 5.22%
Olga Hanigan, Rye, NY 10580; 5.09%
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 Fund's assets for any shareholder held
personally liable for obligations of the Fund or Trust. The Agreement and
Declaration of Trust provides that the Trust shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the Fund or Trust and satisfy any judgment thereon. All such rights are limited
to the assets of the Fund. The Agreement and Declaration of Trust further
provides that the Trust may maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its shareholders, trustees, officers, employees and agents to cover
possible tort and other liabilities. Furthermore, the activities of the Trust as
an investment company would not likely give rise to liabilities in excess of the
Trust's total assets. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to the unlikely circumstances in
which both inadequate insurance exists and the Fund itself is unable to meet its
obligations.
The Trust is registered with the SEC as a management investment
company. Such registration does not involve supervision by the SEC of the
management or policies of the Fund. The Prospectus of the Fund 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, or may be accessed via
the world wide web at http://www.sec.gov.
FINANCIAL STATEMENTS
The annual report to shareholders for the Fund for its most recent
fiscal year end 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.
Pzena SAI B-19
<PAGE>
APPENDIX
Description of Bond Ratings*
Moody's Investors Service
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations or protective elements
may be of greater amplitude or there may be other elements present which make
long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements: their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
Pzena SAI B-20
<PAGE>
Standard & Poor's Corporation
AAA: Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay principal and interest.
AA: Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A: Bonds rated A have a strong capacity to pay principal and interest, although
they are more susceptible to the adverse effects of changes in circumstances and
economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
*Ratings are generally given to securities at the time of issuance. While the
rating agencies may from time to time revise such ratings, they undertake no
obligation to do so.
Pzena SAI B-21
<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, 1998: Incorporated by reference from the annual reports to
shareholders for the fiscal year ended March 31, 1998) (Avondale Total
Return Fund, Harris Bretall Sullivan & Smith Growth Equity
Fund, Hodges Fund, Osterweis Fund, Perkins Opportunity Fund and
Pro-Conscience Women's Equity Mutual Fund Series).
Financial Statements for the fiscal year ended April 30, 1998:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended April 30, 1998 (Titan Financial Services Fund
and Pzena Focused Value Fund series).
Financial Statements for the fiscal year ended August 31, 1997:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended August 31, 1997 (Academy Value, Lighthouse
Contrarian and Trent Equity Fund Series).
Financial Statements for the fiscal year ended December 31, 1997;
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended December 31, 1997 (Matrix Growth Fund Series,
Matrix Emerging Growth Fund Series)
(b) Exhibits:
(1) Agreement and Declaration of Trust (2)
(2) By-Laws (2)
(3) Voting Trust Agreement--Not applicable
(4) Specimen stock certificate (3)
(5) Form of Investment Advisory Agreement (1)
(6) Form of Distribution Agreement (1)
(7) Benefit Plan--Not applicable
(8) Form of Custodian Agreement with Star Bank, NA (7)
(9) (1) Form of Administration Agreement with Investment
Company Administration Corporation (5)
(2)(a) Fund Accounting Service Agreement with
American Data Services (7)
(2)(b) Transfer Agency and Service Agreement with
American Data Services (7)
(3) Transfer Agency and Fund Accounting Agreement with
Countrywide Fund Services (6)
(4) Transfer Agency Agreement with Provident Financial
Processing Corporation (8)
(10) Opinion and consent of counsel
(11) Consent of Independent Auditors
(12) All financial statements omitted from Item 23
--Not applicable
(13) Letter of understanding relating to initial capital (3)
(14) Model Retirement Plan Documents--Not applicable
(15) Form of Plan pursuant to Rule 12b-1 (1)
(16) Schedule for Computation of Performance
Quotations (4)
(17) Financial Data Schedule
1 Incorporated by reference from Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A, filed on January 16, 1996.
2 Incorporated by reference from Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A, filed on December 29, 1995.
3 Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on April 13, 1987.
4 Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A filed on June 17, 1992.
5 Incorporated by reference from Post-Effective Amendment No. 35 to the
Registration Statement on Form N-1A, filed on April 24, 1997.
6 Incorporated by reference from Post-Effective Amendment No. 43 to the
Registration Statement on Form N-1A, filed on February 5, 1998.
7 Incorporated by reference from Post-Effective Amendment No. 48 to the
Registration Statement on Form N-1A, filed on June 15, 1998.
8 To be filed by amendment.
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 July 1, 1998
Shares of Beneficial Interest, no par value:
Academy Value Fund 239
Avondale Total Return Fund 181
Boston Balanced Fund 281
Harris, Bretall, Sullivan & Smith
Growth Equity Fund 140
Hodges Fund 1097
Leonetti Balanced Fund 399
Lighthouse Contrarian Fund 393
Matrix Emerging Growth Fund 88
Matrix Growth Fund 477
Osterweis Fund 133
Perkins Discovery Fund 59
Perkins Opportunity Fund 5,868
PGP Korea Growth Fund 26
Pro-Conscience Women's Equity Mutual Fd. 624
Pzena Focused Value Fund 245
Titan Financial Services Fund 1134
Trent Equity Fund 155
U.S.Global Leaders Growth Fund 523
Item 27. Indemnification
The information on insurance and indemnification is incorporated by
reference to Pre-Effective Amendment No. 1 and Post-Effective Amendment No. 1 to
the Registrant's Registration Statement.
In addition, insurance coverage for the officers and trustees of the
Registrant also is provided under a Directors and Officers/Errors and Omissions
Liability insurance policy issued by ICI Mutual Insurance Company with a
$1,000,000 limit of liability.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
With respect to Investment Advisors, the response to this item is
incorporated by reference to their Form ADVs as amended:
Herbert R. Smith & Co, Inc. File No. 801-7098
Hodges Capital Management, Inc. File No. 801-35811
Perkins Capital Management, Inc. File No. 801-22888
Osterweis Capital Management File No. 801-18395
Pro-Conscience Funds, Inc. File No. 801-43868
Trent Capital Management, Inc. File No. 801-34570
Academy Capital Management File No. 801-27836
Sena, Weller, Rohs, Williams File No. 801-5326
Leonetti & Associates, Inc. File No. 801-36381
Lighthouse Capital Management File No. 801-32168
Yeager, Wood & Marshall, Inc. File No. 801-4995
Harris Bretall Sullivan & Smith File No. 801-7369
Pzena Investment Management LLC File No. 801-50838
Titan Investment Advisers, LLC File No. 801-51306
Pacific Gemini Partners LLC File No. 801-50007
With respect to United States Trust Company of Boston, the response to this
item is incorporated by reference to the responses to Item 5 of Part A and Item
16 of Part B ("Management")of Post-Effective Amendment No. 20 to the
Registration Statement.
Item 29. Principal Underwriters.
(a) First Fund Distributors, Inc. (the "Distributor") is the principal
underwriter all series of the Registrant except for the Hodges Fund, the Matrix
Growth Fund and the Matrix Emerging Growth Fund. The Distributor acts as
principal underwriter for the following other investment companies:
Advisors Series Trust
Brandes Investment Trust
Fleming Mutual Fund Group
Fremont Mutual Funds
Guinness Flight Investment Funds
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Purisima Funds
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group
UBS Private Investor Funds
First Dallas Securities, Inc., 2311 Cedar Springs Rd., Ste. 100, Dallas, TX
75201, an affiliate of Hodges Capital Management, acts as Distributor of the
Hodges Fund. The President and Chief Financial Officer of First Dallas
Securities, Inc. is Don W. Hodges. First Dallas does not act as principal
underwriter for any other investment companies. Reynolds, DeWitt Securities Co.,
an affiliate of Sena Weller Rohs Williams, 300 Main St., Cincinnati, OH 45202,
acts as Distributor for the Matrix Growth Fund and Matrix Emerging Growth Fund.
(b) The officers of First Fund Distributors, Inc. are:
Robert H. Wadsworth President & Treasurer
Eric Banhazl Vice President
Steven J. Paggioli Secretary
Each officer's business address is 4455 E. Camelback Rd., Ste. 261-E,
Phoenix, AZ 85018. Mr. Paggioli serves as President and a Trustee of the
Registrant. Mr. Wadsworth serves as Vice President of the Registrant. Mr.
Banhazl serves as Treasurer of the Registrant.
c. Incorporated by reference from the Statement of Additional
Information filed herewith as Part B.
Item 30. Location of Accounts and Records.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession the Registrant's
custodian and transfer agent, except those records relating to portfolio
transactions and the basic organizational and Trust documents of the Registrant
(see Subsections (2) (iii). (4), (5), (6), (7), (9), (10) and (11) of Rule
31a-1(b)), which, with respect to portfolio transactions are kept by each Fund's
Advisor at its address set forth in the prospectus and statement of additional
information and with respect to trust documents by its administrator at 479 West
22nd Street, New York, NY 10011 and 2020 E. Financial Way, Ste. 100, Glendora,
CA 91741.
Item 31. Management Services.
There are no management-related service contracts not discussed in
Parts A and B.
Item 32. Undertakings
The registrant undertakes:
(a) To furnish each person to whom a Prospectus is delivered a
copy of Registrant's latest annual report to shareholders,
upon request and without charge.
(b) If requested to do so by the holders of at least 10% of the
Trust's outstanding shares, to call a meeting of shareholders
for the purposes of voting upon the question of removal of a
director and assist in communications with other shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this amendment to this registration statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this amendment to this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York in the State of
New York on August 17, 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 August 17, 1998
Steven J. Paggioli
/S/ Eric M. Banhazl Principal August 17, 1998
Eric M. Banhazl Financial
Officer
Dorothy A. Berry Trustee August 17, 1998
*Dorothy A. Berry
Wallace L. Cook Trustee August 17, 1998
*Wallace L. Cook
Carl A. Froebel Trustee August 17, 1998
*Carl A. Froebel
Rowley W. P. Redington Trustee August 17, 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
Paul Hastings Janofsky & Walker LLP
345 California Street, Suite 2900
San Francisco, CA 94104
(415) 835-1600
facsimile (415) 217-5333
www.phjw.com
June 25, 1998
Professional Managed Portfolios
479 West 22nd Street
New York, New York 10011
Re: Harris Bretall Sullivan & Smith Funds
Ladies and Gentlemen:
We have acted as counsel to Professionally Managed Portfolios, a
Massachusetts business trust (the "Trust"), in connection with Post-Effective
Amendments to the Trust's Registration Statement on Form N-1A filed with the
United States Securities and Exchange Commission (the "Post-Effective
Amendments") and relating to the issuance by the Trust of an indefinite number
of no par value shares of beneficial interest (the "Shares") of six series of
the Trust: the Harris Bretall Sullivan & Smith Growth Equity Fund; 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").
In connection with this opinion, we have assumed the authenticity of all
records, documents and instruments submitted to us as originals, the
genuineness of all signatures, the legal capacity of all natural persons, and
the conformity to the originals of all records, documents, and instruments
submitted to us as copies. We have based our opinion on the following:
1. the Trust's Agreement and Declaration of Trust dated February 17,
1987 (filed with the Commonwealth of Massachusetts Secretary of State
on February 24, 1987, as amended on May 20, 1988 (filed on September
16, 1988) and April 12, 1991 (filed on May 31, 1991) (as so amended,
the "Declaration of Trust"), as certified to us by an officer of the
Trust as being true and complete and in effect on the date hereof;
2. the By-laws of the Trust certified to us by an officer of the Trust
as being true and complete and in effect on the date hereof;
3. resolutions of the Trustees of the Trust adopted at a meeting on May
14, 1998 authorizing the establishment of the Funds and the issuance of
the Shares;
4. the Post-Effective Amendments; and
5. a certificate of an officer of the Trust as to certain factual
matters relevant to this opinion.
Our opinion below is limited to the federal law of the United States of
America and the business trust law of the Commonwealth of Massachusetts. We
are not licensed to practice law in the Commonwealth of Massachusetts, and we
have based our opinion below solely on our review of Chapter 182 of the
Massachusetts General Laws and the case law interpreting such Chapter as
reported in the Annotated Laws of Massachusetts (Aspen Law & Business, supp.
1998). We have not undertaken a review of other Massachusetts law or of any
administrative or court decisions in connection with rendering this opinion.
We disclaim any opinion as to any law other than that of the United States of
America and the business trust law of the Commonwealth of Massachusetts as
described above, and we disclaim any opinion as to any statute, rule,
regulation, ordinance, order or other promulgation of any regional or local
governmental authority.
We note that, pursuant to certain decisions of the Supreme Judicial Court of
the Commonwealth of Massachusetts, shareholders of a Massachusetts business
trust may, in certain circumstances, be assessed or held personally liable as
partners for the obligations or liabilities of the Trust. However, we also not
that Article VIII, Section 1 of the Declaration of Trust provides that all
persons extending credit to, contracting with or having any claim against the
Trust or the Portfolios (as such term is defined in the Declaration of Trust)
shall look only to the assets of the Trust or the Portfolios for payment
thereof and that the shareholders shall not be personally liable therefor, and
further provides that every note, bond, contract, instrument, certificate or
undertaking made or issued on behalf of the Trust or the Portfolios may
include a notice that such instrument was executed on behalf of the Trust or
the Portfolios and that the obligations of such instruments are not binding
upon any of the shareholders of the Trust or the Portfolios individually, but
are binding only on the assets and property of the Trust.
Based on the foregoing and our examination of such questions of law as we
have deemed necessary and appropriate for the purpose of this opinion, and
assuming that (i) all of the Shares will be issued and sold for cash at the
per-share public offering price on the date of their issuance in accordance
with statements in the Funds' Prospectus included in the Post-Effective
Amendments and in accordance with the Declaration of Trust, (ii) all
consideration for the Shares will be actually received by the Funds, and (iii)
all applicable securities laws will be complied with, it is our opinion that,
when issued and sold by the Funds, the Shares will be legally issued, fully
paid and nonassessable.
This opinion is rendered to you in connection with the Post-Effective
Amendments and is solely for your benefit. This opinion may not be relied upon
by you for any other purpose or relied upon by any other person, firm,
corporation or other entity for any purpose, without our prior written
consent. We disclaim any obligation to advise you of any developments in areas
covered by this opinion that occur after the date of this opinion.
We hereby consent to (i) the reference to our firm as Legal Counsel in the
Prospectus included in the Post-Effective Amendments, and (ii) the filing of
this opinion as an exhibit to a Post-Effective Amendment.
Very truly yours,
\s\ PAUL HASTINGS JANOFSKY & WALKER LLP
Paul Hastings Janofsky & Walker LLP
345 California Street, Suite 2900
San Francisco, CA 94104
(415) 835-1600
facsimile (415) 217-5333
www.phjw.com
June 25, 1998
Professional Managed Portfolios
479 West 22nd Street
New York, New York 10011
Re: RCB Growth and Income Fund
RCB Small Cap Fund
Ladies and Gentlemen:
We have acted as counsel to Professionally Managed Portfolios, a
Massachusetts business trust (the "Trust"), in connection with Post-Effective
Amendments to the Trust's Registration Statement on Form N-1A filed with the
United States Securities and Exchange Commission (the "Post-Effective
Amendments") and relating to the issuance by the Trust of an indefinite number
of no par value shares of beneficial interest (the "Shares") of two series of
the Trust: the RCB Growth and Income Fund and the RCB Small Cap Fund (the
"Funds").
In connection with this opinion, we have assumed the authenticity of all
records, documents and instruments submitted to us as originals, the
genuineness of all signatures, the legal capacity of all natural persons, and
the conformity to the originals of all records, documents, and instruments
submitted to us as copies. We have based our opinion on the following:
1. the Trust's Agreement and Declaration of Trust dated February 17,
1987 (filed with the Commonwealth of Massachusetts Secretary of State
on February 24, 1987, as amended on May 20, 1988 (filed on September
16, 1988) and April 12, 1991 (filed on May 31, 1991) (as so amended,
the "Declaration of Trust"), as certified to us by an officer of the
Trust as being true and complete and in effect on the date hereof;
2. the By-laws of the Trust certified to us by an officer of the Trust
as being true and complete and in effect on the date hereof;
3. resolutions of the Trustees of the Trust adopted at a meeting on May
14, 1998 authorizing the establishment of the Funds and the issuance of
the Shares;
4. the Post-Effective Amendments; and
5. a certificate of an officer of the Trust as to certain factual
matters relevant to this opinion.
Our opinion below is limited to the federal law of the United States of
America and the business trust law of the Commonwealth of Massachusetts. We
are not licensed to practice law in the Commonwealth of Massachusetts, and we
have based our opinion below solely on our review of Chapter 182 of the
Massachusetts General Laws and the case law interpreting such Chapter as
reported in the Annotated Laws of Massachusetts (Aspen Law & Business, supp.
1998). We have not undertaken a review of other Massachusetts law or of any
administrative or court decisions in connection with rendering this opinion.
We disclaim any opinion as to any law other than that of the United States of
America and the business trust law of the Commonwealth of Massachusetts as
described above, and we disclaim any opinion as to any statute, rule,
regulation, ordinance, order or other promulgation of any regional or local
governmental authority.
We note that, pursuant to certain decisions of the Supreme Judicial Court of
the Commonwealth of Massachusetts, shareholders of a Massachusetts business
trust may, in certain circumstances, be assessed or held personally liable as
partners for the obligations or liabilities of the Trust. However, we also not
that Article VIII, Section 1 of the Declaration of Trust provides that all
persons extending credit to, contracting with or having any claim against the
Trust or the Portfolios (as such term is defined in the Declaration of Trust)
shall look only to the assets of the Trust or the Portfolios for payment
thereof and that the shareholders shall not be personally liable therefor, and
further provides that every note, bond, contract, instrument, certificate or
undertaking made or issued on behalf of the Trust or the Portfolios may
include a notice that such instrument was executed on behalf of the Trust or
the Portfolios and that the obligations of such instruments are not binding
upon any of the shareholders of the Trust or the Portfolios individually, but
are binding only on the assets and property of the Trust.
Based on the foregoing and our examination of such questions of law as we
have deemed necessary and appropriate for the purpose of this opinion, and
assuming that (i) all of the Shares will be issued and sold for cash or other
valid consideration at the per-share public offering price on the date of
their issuance in accordance with statements in the Funds' Prospectus included
in the Post-Effective Amendments and in accordance with the Declaration of
Trust, (ii) all consideration for the Shares will be actually received by the
Funds, and (iii) all applicable securities laws will be complied with, it is
our opinion that, when issued and sold by the Funds, the Shares will be
legally issued, fully paid and nonassessable.
This opinion is rendered to you in connection with the Post-Effective
Amendments and is solely for your benefit. This opinion may not be relied upon
by you for any other purpose or relied upon by any other person, firm,
corporation or other entity for any purpose, without our prior written
consent. We disclaim any obligation to advise you of any developments in areas
covered by this opinion that occur after the date of this opinion.
We hereby consent to (i) the reference to our firm as Legal Counsel in the
Prospectus included in the Post-Effective Amendments, and (ii) the filing of
this opinion as an exhibit to a Post-Effective Amendment.
Very truly yours,
\s\ PAUL HASTINGS JANOFSKY & WALKER LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Post-Effective Amendment No. 51
to the Registration Statement on Form N-1A of Professionally Managed Portfolios
and to the use of our report dated May 29, 1998 on the financial statements and
financial highlights of the Pzena Focused Value Fund series of Professionally
Managed Portfolios. Such financial statements and financial highlights appear
in the 1998 Annual Report to Shareholders which is incorporated by reference
into the Statement of Additional Information.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
August 25, 1998
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<NAME> PROFESSIONALLY MANAGED PORTFOLIOS
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<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
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<APPREC-INCREASE-CURRENT> 1090800
<NET-CHANGE-FROM-OPS> 1871587
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</TABLE>
