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. 62 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 63 [X]
(Check appropriate box or boxes)
PROFESSIONALLY MANAGED PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
915 Broadway
New York, NY 10010
Registrant's Telephone Number, including Area Code:
(212) 633-9700
Steven J. Paggioli
Professionally Managed Portfolios
915 Broadway
New York, NY 10010
(Name and Address of Agent for Service)
Copy to:
Julie Allecta, Esq.
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, CA 94104
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It is proposed that this filing will become effective (check appropriate box)
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On April 30, 1999 pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] On pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 11, 1999
LEONETTI GROWTH FUND,
A SERIES OF PROFESSIONALLY MANAGED PORTFOLIOS
Leonetti Growth Fund is a growth stock mutual fund. The Fund seeks to
provide investors with long-term growth of capital.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is __________ , 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
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TABLE OF CONTENTS
An Overview of the Fund .................................................
Fees and Expenses .......................................................
Investment Objective and Principal Investment Strategies ................
Principal Risks of Investing in the Fund ................................
Investment Advisor ......................................................
Shareholder Information .................................................
Pricing of Fund Shares ..................................................
Dividends and Distributions .............................................
Tax Consequences ........................................................
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AN OVERVIEW OF THE FUND
LEONETTI GROWTH FUND'S INVESTMENT GOALS
The Fund seeks long-term growth of capital.
LEONETTI GROWTH FUND'S PRINCIPAL INVESTMENT STRATEGIES
The Fund will primarily invest in equity securities of domestic companies of any
size. In selecting investments, the Advisor will primarily invest in:
* growth stocks that pay exhibit a rising trend in earnings and revenue
* small companies with rapidly rising revenues and earnings
* out-of-favor blue chip stocks
PRINCIPAL RISKS OF INVESTING IN THE LEONETTI GROWTH FUND
As with all mutual funds, there is the risk that you could lose money on your
investment in the Fund. For example, the following risks could affect the value
of your investment:
* The stock market goes down
* Interest rates go up which can result in a decline in the stock market
* Growth stocks fall out of favor with the stock market
* Stocks in the Fund's portfolio may not increase their earnings at the rate
anticipated
* Securities of undervalued companies may remain undervalued during a given
period
* Securities of smaller-capitalization companies involve greater risk than
investing in larger- capitalization companies
WHO MAY WANT TO INVEST IN THE LEONETTI GROWTH FUND
The Fund may be appropriate for investors who:
* Are pursuing a long-term goal such as retirement
* Want to add an investment with growth potential to diversify their
investment portfolio
* Are willing to accept higher short-term risk along with higher potential
for long-term growth
The Fund may not be appropriate for investors who:
* Need regular income or stability of principal
* Are pursuing a short-term goal
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FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price ) ............................... None
Maximum deferred sales charge (load)
(as a percentage of the lower of original purchase
price or redemption proceeds) ...................................... None
ANNUAL FUND OPERATING EXPENSES*
(expenses that are deducted from Fund assets)
Management Fees ........................................................ 1.00%
Other Expenses .........................................................
Total Annual Fund Operating Expenses ...................................
Fee Reduction and/or Expense
Reimbursement .........................................................
Net Expenses ........................................................... 2.00%
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*Other Expenses are estimated for the first fiscal year of the Fund. The Advisor
has contractually agreed to reduce its fees and/or pay expenses of the Fund to
insure that the Fund's Total Annual Fund Operating Expenses will not exceed
2.00%. The Advisor reserves the right to be reimbursed for any reduction in its
fees or expenses paid on behalf of the Fund if the Fund's expenses are less than
the limit agreed to by the Fund. The Trustees may terminate this expense
reimbursement arrangement at any time.
EXAMPLE
This Example is intended to help you compare the costs of investing in shares of
the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time period
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, under the assumptions, your
costs would be:
One Year .......................... $
Three Years ....................... $
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INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment goal is long-term growth of capital.
The Fund will primarily invest in equity securities of domestic companies
of any size. Equity securities include common and preferred stock. Under normal
market conditions, the Fund will invest at least 65% of its total assets in
equity securities that have the potential for long-term growth of capital. In
selecting equity investments for the Fund the Advisor emphasizes the following
three types of investments.
The Advisor also seeks growth stocks that have shown a rising trend in
earnings and revenues over a period of years. Companies with low or declining
debt levels, rising gross profit margins, expanding product lines and
significant stock ownership by management are viewed by the Advisor as
attractive. Many of such companies may be components of the Standard & Poor's
500 Index. The Advisor does not limit its investment selections to companies
within this Index and will invest in any company that the Advisor believes has
similar characteristics.
In evaluating out-of-favor companies, the Advisor's fundamental focus is on
a company's business. The Advisor looks for companies that have experienced
problems due to debt, management, excess expenses or cyclical forces, but are
still leaders in their industries. This group of companies includes, but is not
limited to, the largest corporations. These companies are principally components
of the Dow Jones Industrial, Transportation and Utility averages. It is the
Advisor's opinion that such companies frequently undergo restructuring,
management changes, debt reduction and other corporate events that can have a
positive effect on the prices of such stocks, while still providing a cash flow
through regular dividend payments.
The small companies selected for the Fund's portfolio will have experienced
rapidly rising revenues and earnings. The Advisor looks for companies that have
little or no debt, a following in the investment community, an expanding product
line or products that involve a change or improvement in their industry and
control or significant involvement by company founders in day-to- day
management.
Under normal market conditions, the Fund will stay fully invested in
stocks. However, the Fund may temporarily depart from its principal investment
strategies by making short-term investments in cash equivalents in response to
adverse market, economic or political conditions. This may result in the Fund
not achieving its investment objective.
The Fund anticipate that its portfolio turnover rate will be ____.
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PRINCIPAL RISKS OF INVESTING IN THE FUND
The principal risks of investing in the Fund that may adversely affect the
Fund's net asset value or total return are discussed above in "Principal Risks
of Investing in the Leonetti Growth Fund." These risks are discussed in more
detail below.
MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than it
was worth at an earlier time. Market risk may affect a single issuer, industry,
sector of the economy or the market as a whole.
SMALLER AND NEWER COMPANIES RISK. Investing in securities of smaller and
newer companies may involve greater risk than investing in larger companies
because they can be subject to more abrupt or erratic share price changes than
larger companies. Small companies may have limited product lines, markets or
financial resources and their management may be dependent on a limited number of
key individuals. Securities of these companies may have limited market liquidity
and their prices may be more volatile.
YEAR 2000 RISK. The risk that the Fund could be adversely affected if the
computer systems used by the Advisor 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 Problem." This situation may negatively
affect the companies in which the Fund invests and by extension the value of the
Fund's shares. Although the Fund's service providers are taking steps to address
this issue, there may still be some risk of adverse effects.
INVESTMENT ADVISOR
Leonetti & Associates, Inc. is the investment advisor to the Fund. The
Advisor's address is 1130 Lake Cook Road, Suite 300, Buffalo Grove, IL 60089.
The Advisor, which was established in 1982, provides investment management
services to investment companies, individual and institutional investors, with
assets under management in excess of $_______. The Advisor provides the Fund
with advice on buying and selling securities. The Advisor also furnishes the
Fund with office space and certain administrative services and provides most of
the personnel needed by the Fund. For its services, the Fund pays the Advisor a
monthly management fee based upon the average daily net assets of the Fund at
the rate of 1.00% annually.
Mr. Craig T. Johnson, Portfolio Manager, will be responsible for the
day-to-day management of the Fund. Mr. Johnson joined the Advisor in 1983.
FUND EXPENSES
The Fund is responsible for its own operating expenses. At times, the
Advisor may reduce its fees and/or pay expenses of the Fund in order to reduce
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the Fund's aggregate annual operating expenses. Any reduction in advisory fees
or payment of expenses made by the Advisor are subject to reimbursement by the
Fund if requested by the Advisor in subsequent fiscal years. The Advisor is
permitted to be reimbursed for fee reductions and/or expense payments made in
the prior three fiscal years. (After startup, the Fund is permitted to look for
longer periods of four and five years.) Any such reimbursement will be reviewed
by the Trustees. The Fund must pay its current ordinary operating expenses
before the Advisor is entitled to any reimbursement of fees and/or expenses.
SHAREHOLDER INFORMATION
HOW TO BUY SHARES
You may open a Fund account with $100 and add to your account at any time
with $25 or more. After you have opened a Fund account, you also may make
automatic subsequent monthly investments with $25 or more through the Automatic
Investment Plan. The minimum investment requirements may be waived from time to
time by the Fund.
You may purchase shares of the Fund by check or wire. All purchases by
check must be in U.S. dollars. Third party checks and cash will not be accepted.
A charge may be imposed if your check does not clear. The Fund is not required
to issue share certificates. The Fund reserves the right to reject any purchase
in whole or in part.
BY CHECK
If you are making an initial investment in the Fund, simply complete the
Application Form included with this Prospectus and mail it with a check (made
payable to "Leonetti Growth Fund") to:
Leonetti Growth Fund
P.O. Box 640856
Cincinnati, OH 45264-0856
If you wish to send your Application Form and check via an overnight
delivery service (such as FedEx), you should call the Transfer Agent at (800-
282-2340) for instructions:
If you are making a subsequent purchase, a stub is attached to the account
statement you will receive after each transaction. Detach the stub from the
statement and mail it together with a check made payable to "Leonetti Growth
Fund" to the Fund in the envelope provided with your statement or to the address
noted above. Your account number should be written on the check.
BY WIRE
If you are making an initial investment in the Fund, before you wire funds
you should call the Transfer Agent at (800) 282-2340 between 9:00 a.m. and 4:00
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p.m., Eastern time, on a day when the New York Stock Exchange ("NYSE") is open
for trading to advise them that you are making an investment by wire. The
Transfer Agent will ask for your name and the dollar amount you are investing.
You will then receive your account number and an order confirmation number. You
should then complete the Account Application included with this Prospectus.
Include the date and the order confirmation number on the Account Application
and mail the completed Account Application to the address at the top of the
Account Application. Your bank should transmit immediately available funds by
wire in your name to:
Firstar Bank, N.A. Cinti/Trust
ABA Routing #0420-00001-3
Leonetti Growth Fund
DDA #______________
Account name (shareholder name)
Shareholder account number
If you are making a subsequent purchase, your bank should wire funds as
indicated above. Before each wire purchase, you should be sure to notify the
Transfer Agent. It is essential that your bank include complete information
about your account in all wire instructions. If you have questions about how to
invest by wire, you may call the Transfer Agent. Your bank may charge you a fee
for sending a wire to the Fund.
You may buy and sell shares of the Fund through certain brokers (and their
agents) that have made arrangements with the Fund to sell its shares. When you
place your order with such a broker or its authorized agent, your order is
treated as if you had placed it directly with the Fund's Transfer Agent, and you
will pay or receive the next price calculated by the Fund. The broker (or agent)
holds your shares in an omnibus account in the broker's (or agent's) name, and
the broker (or agent) maintains your individual ownership records. The Advisor
may pay the broker (or its agent) for maintaining these records as well as
providing other shareholder services. The broker (or its agent) may charge you a
fee for handling your order. The broker (or agent) is responsible for processing
your order correctly and promptly, keeping you advised regarding the status of
your individual account, confirming your transactions and ensuring that you
receive copies of the Fund's prospectus.
AUTOMATIC INVESTMENT PLAN
For your convenience, the Fund offers an Automatic Investment Plan. Under
this Plan, after your initial investment, you authorize the Fund to withdraw
from your personal checking account each month an amount that you wish to
invest, which must be at least $25. If you wish to enroll in this Plan, complete
the appropriate section in the Account Application. The Fund may terminate or
modify this privilege at any time. You may terminate your participation in the
Plan at any time by notifying the Transfer Agent in writing.
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RETIREMENT PLANS
The Fund offers an Individual Retirement Account ("IRA") plan. You may
obtain information about opening an IRA account by calling (800) 282-2340. If
you wish to open a Keogh, Section 403(b) or other retirement plan, please
contact your securities dealer.
HOW TO EXCHANGE SHARES
You may exchange your shares between the Fund and the Leonetti Balanced
Fund on any day the Funds and the New York Stock Exchange ("NYSE") are open for
business. Before making an exchange into the Leonetti Balanced Fund, obtain and
read a copy of its prospectus.
BY MAIL. You may exchange your shares by simply sending a written request
to the Fund's Transfer Agent. You should give your account number and the number
of shares or dollar amount to be exchanged. The letter should be signed by all
of the shareholders whose names appear in the account registration.
BY TELEPHONE. If your account has telephone privileges, you may also
exchange Fund shares by calling the Transfer Agent at (800) 282-2340 between the
hours of 9:00 a.m. and 4:00 p.m.., Eastern time, on any day the NYSE is open for
trading. If you are exchanging shares by telephone, you will be subject to
certain identification procedures which are listed below under "How to Sell
Shares." The Fund may modify, restrict or terminate the exchange privilege at
any time.
HOW TO SELL SHARES
You may sell (redeem) your Fund shares on any day the Fund and the NYSE are
open for business either directly to the Fund or through your investment
representative.
You may redeem your shares by simply sending a written request to the
Transfer Agent. You should give your account number and state whether you want
all or some of your shares redeemed. The letter should be signed by all of the
shareholders whose names appear in the account registration. Certain redemptions
require a signature guarantee. Call the Transfer Agent for details. You should
send your redemption request to:
Leonetti Growth Fund
P.O. Box 5536
Hauppauge, NY 11788-0132
BY TELEPHONE. If you complete the Redemption by Telephone portion of the
Account Application, you may redeem all or some of your shares by calling the
Transfer Agent at (800) 282- 2340 between the hours of 9:00 a.m. and 4:00 p.m.,
Eastern time, on any day the NYSE is open for trading. Redemption proceeds will
be mailed on the next business day to the address that appears on the Transfer
Agent's records. If you request, redemption proceeds will be wired on the next
business day to the bank account you designated on the Account Application. The
minimum amount that may be wired is $1,000. Wire charges, if any, will be
deducted from your redemption proceeds.
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Telephone redemptions cannot be made if you notify the Transfer Agent of a
change of address within 30 days before the redemption request. If you have a
retirement account, you may not redeem shares by telephone.
When you establish telephone privileges, you are authorizing the Fund and
its Transfer Agent to act upon the telephone instructions of the person or
persons you have designated in your Account Application. Redemption proceeds
will be transferred to the bank account you have designated on your Account
Application.
Before executing an instruction received by telephone, the Fund and the
Transfer Agent will use procedures to confirm that the telephone instructions
are genuine. These procedures will include recording the telephone call and
asking the caller for a form of personal identification. If the Fund and the
Transfer Agent follow these procedures, they will not be liable for any loss,
expense, or cost arising out of any telephone redemption request that is
reasonably believed to be genuine. This includes any fraudulent or unauthorized
request. The Fund may change, modify or terminate these privileges at any time
upon at least 60 days' notice to shareholders.
You may request telephone redemption privileges after your account is
opened by calling the Transfer Agent at (800) 282-2340 for instructions.
You may have difficulties in making a telephone redemption during periods
of abnormal market activity. If this occur, you may make your redemption request
in writing.
Payment of your redemption proceeds will be made promptly, but not later
than seven days after the receipt of your written request in proper form. If you
made your initial investment by wire, payment of your redemption proceeds for
those shares will not be made until one business day after your completed
Account Application is received by the Fund. If you did not purchase your shares
with a certified check or wire, the Fund may delay payment of your redemption
proceeds for up to 15 days from date of purchase or until your check has
cleared, whichever occurs first.
The Fund may redeem the shares in your account if the value of your account
is less than $100 as a result of redemptions you have made. This does not apply
to retirement plan or Uniform Gifts or Transfers to Minors Act accounts. You
will be notified that the value of your account is less than $100 before the
Fund makes an involuntary redemption. You will then have 30 days in which to
make an additional investment to bring the value of your account to at least
$100 before the Fund takes any action.
The Fund has the right to pay redemption proceeds to you in whole or in
part by a distribution of securities from the Fund's portfolio. It is not
expected that the Fund would do so except in unusual circumstances.
SYSTEMATIC WITHDRAWAL PROGRAM. As another convenience, you may redeem your
Fund shares through the Systematic Withdrawal Program. If you elect this method
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of redemption, the Fund will send you a check in a minimum amount of $100. You
may choose to receive a check each month or calendar quarter. Your Fund account
must have a value of at least $10,000 in order to participate in this Program.
This Program may be terminated at any time by the Fund. You may also elect to
terminate your participation in this Program at any time by writing to the
Transfer Agent.
A withdrawal under the Program involves a redemption of shares and may
result in a gain or loss for federal income tax purposes. In addition, if the
amount withdrawn exceeds the dividends credited to your account, the account
ultimately may be depleted.
PRICING OF FUND SHARES
The price of the Fund's shares is based on the Fund's net asset value. This
is done by dividing the Fund's assets, minus its liabilities, by the number of
shares outstanding. The Fund's assets are the market value of securities held in
its portfolio, plus any cash and other assets. The Fund's liabilities are fees
and expenses owed by the Fund. The number of Fund shares outstanding is the
amount of shares which have been issued to shareholders. The price you will pay
to buy Fund shares or the amount you will receive when you sell your Fund shares
is based on the net asset value next calculated after your order is received by
the Transfer Agent with complete information and meeting all the requirements
discussed in this Prospectus.
The net asset value of the Fund's shares is determined as of the close of
regular trading on the NYSE. This is normally 4:00 p.m., Eastern time. Fund
shares will not be priced on days that the NYSE is closed for trading (including
certain U.S. holidays).
DIVIDENDS AND DISTRIBUTIONS
The Fund will make distributions of dividends and capital gains, if any,
annually, usually on or about December 31 of each year.
All distributions will be reinvested in Fund shares unless you request in
writing to the Transfer Agent that you wish to receive your distributions in
cash. This written request must be received by the Transfer Agent in advance of
the payment date for the distribution.
TAX CONSEQUENCES
The Fund intends to make distributions of dividends and capital gains.
Dividends are taxable to you as ordinary income. The rate you pay on capital
gain distributions will depend on how long the Fund held the securities that
generated the gains, not on how long you owned your Fund shares. You will be
taxed in the same manner whether you receive your dividends and capital gain
distributions in cash or reinvest them in additional Fund shares.
If you exchange or sell your Fund shares, it is considered a taxable event
for you. Depending on the purchase price and the sale price of the shares you
exchange or sell, you may have a gain or a loss on the transaction. You are
responsible for any tax liabilities generated by your transaction.
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LEONETTI GROWTH FUND,
A SERIES OF PROFESSIONALLY MANAGED PORTFOLIOS (THE "TRUST")
For investors who want more information about the Fund, the following document
is available free upon request:
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
Prospectus.
You can get free copies of the SAI, request other information and discuss your
questions about the Fund by contacting the Fund at:
American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
Telephone: 1-800-282-2340
You can review and copy information including the Fund's SAI at the Public
Reference Room of the Securities and Exchange Commission in Washington, D.C. You
can obtain information on the operation of the Public Reference Room by calling
1-800-SEC-0330. You can get text-only copies:
* For a fee, by writing to the Public Reference Room of the Commission,
Washington, DC 20549-6009, or
* For a fee, by calling 1-800-SEC-0330, or
* Free of charge from the Commission's Internet website at
http://www.sec.gov.
(The Trust's SEC Investment Company Act
file number is 811-5037)
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STATEMENT OF ADDITIONAL INFORMATION SUBJECT TO COMPLETION,
DATED MAY 11, 1999
STATEMENT OF ADDITIONAL INFORMATION
_________________, 1999
LEONETTI EQUITY FUND
A SERIES OF
PROFESSIONALLY MANAGED PORTFOLIOS
1130 LAKE COOK ROAD, SUITE 300
BUFFALO GROVE, IL 60089
(847) 520-0999
This Statement of Additional Information ("SAI") is not a prospectus and it
should be read in conjunction with the prospectus of the Leonetti Equity Fund
(the "Fund"). Leonetti & Associates, Inc. (the "Advisor) is the investment
advisor to the Fund. Copies of the Fund's Prospectus dated _____________, 1999
are available by calling the number above or (212) 633-9700.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY STATE
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TABLE OF CONTENTS
The Trust ............................................................... B-
Investment Objective and Policies.......................................... B-
Investment Restrictions.................................................... B-
Distributions and Tax Information.......................................... B-
Trustees and Executive Officers............................................ B-
The Fund's Investment Advisor.............................................. B-
The Fund's Administrator................................................... B-
The Fund's Distributor..................................................... B-
Execution of Portfolio Transactions........................................ B-
Portfolio Turnover ....................................................... B-
Additional Purchase And Redemption Information............................. B-
Determination of Share Price............................................... B-
Performance Information.................................................... B-
General Information........................................................ B-
Financial Statements....................................................... B-
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THE TRUST
Professionally Managed Portfolios (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust. The Trust may
consist of various series which represent separate investment portfolios. This
SAI relates only to the Fund.
The Trust is registered with the SEC as a management investment company.
Such a registration does not involve supervision of the management or policies
of the Fund. The Prospectus of the Fund and this SAI 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.
INVESTMENT OBJECTIVE AND POLICIES
The Leonetti Equity Fund is a mutual fund with the investment objective of
seeking long-term growth of capital. The Fund is diversified, which under
applicable federal law means that as to 75% of its total assets, no more than 5%
may be invested in the securities of a single issuer and that it may hold no
more than 10% of the voting securities of a single issuer. 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.
PREFERRED STOCK. A preferred stock is a blend of the characteristics of a
bond and common stock. It can offer the higher yield of a bond and has priority
over common stock in equity ownership, but does not have the seniority of a bond
and, unlike common stock, its participation in the issuer's growth may be
limited. Preferred stock has preference over common stock in the receipt of
dividends and in any residual assets after payment to creditors should the
issuer by dissolved. Although the dividend is set at a fixed annual rate, in
some circumstances it can be changed or omitted by the issuer.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. 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
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if, as a result, more than 15% of the value of its net assets would be invested
in illiquid securities including such repurchase agreements.
For purposes of the Investment Company Act of 1940 (the "1940 Act"), a
repurchase agreement is deemed to be a loan from the Fund to the seller of the
U.S. Government security subject to the repurchase agreement. It is not clear
whether a court would consider the U.S. Government security acquired by the Fund
subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the U.S. Government security before its repurchase under a repurchase
agreement, the Fund may encounter delays and incur costs before being able to
sell the security. Delays may involve loss of interest or a decline in price of
the U.S. Government security. If a court characterizes the transaction as a loan
and the Fund has not perfected a security interest in the U.S. Government
security, the Fund may be required to return the security to the seller's estate
and be treated as an unsecured creditor of the seller. As an unsecured creditor,
the Fund would be at the risk of losing some or all of the principal and income
involved in the transaction. As with any unsecured debt instrument purchased for
the Fund, the Advisor seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the other party, in this case
the seller of the U.S. Government security.
Apart from the risk of bankruptcy or insolvency proceedings, there is also
the risk that the seller may fail to repurchase the security. However, the Fund
will always receive as collateral for any repurchase agreement to which it is a
party securities acceptable to it, the market value of which is equal to at
least 100% of the amount invested by the Fund plus accrued interest, and the
Fund will make payment against such securities only upon physical delivery or
evidence of book entry transfer to the account of its Custodian. If the market
value of the U.S. Government security subject to the repurchase agreement
becomes less than the repurchase price (including interest), the Fund will
direct the seller of the U.S. Government security to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement will equal or exceed the repurchase price. It is possible that the
Fund will be unsuccessful in seeking to impose on the seller a contractual
obligation to deliver additional securities.
WHEN-ISSUED SECURITIES. The Fund may from time to time purchase securities
on a "when- issued" basis. The price of such securities, which may be expressed
in yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for them 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, the Fund intends to
purchase them 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
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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's
Custodian will segregate liquid assets equal in value to commitments for
when-issued securities. Such segregated assets either will mature or, if
necessary, be sold on or before the settlement date.
ILLIQUID SECURITIES. The Fund may not invest more than 15% of the value of
its net assets in securities that at the time of purchase have legal or
contractual restrictions on resale or are otherwise illiquid. The Advisor will
monitor the amount of illiquid securities in the Fund's portfolio, under the
supervision of the Trust's Board of Trustees, to ensure compliance with the
Fund's investment restrictions.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 (the "Securities Act"), securities
which are otherwise not readily marketable and repurchase agreements having a
maturity of longer than seven days. Securities which have not been registered
under the Securities Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Fund might be unable
to sell restricted or other illiquid securities promptly or at reasonable prices
and might thereby experience difficulty satisfying redemption requests within
seven days. The Fund might also have to register such restricted securities in
order to sell them, resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not reflect the actual liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the SEC under the Securities Act,
the Trust's Board of Trustees may determine that such securities are not
illiquid securities despite their legal or contractual restrictions on resale.
In all other cases, however, securities subject to restrictions on resale will
be deemed illiquid.
INVESTMENT COMPANIES. The Fund may under certain circumstances invest a
portion of its assets in other investment companies, including money market
funds. An investment in a mutual fund will involve payment by the Fund of its
pro rata share of advisory and administrative fees charged by such fund.
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SHORT-TERM INVESTMENTS
The Fund may invest in any of the following securities and instruments:
U. S. GOVERNMENT SECURITIES. U.S. Government securities in which the Fund
may invest include direct obligations issued by the U.S. Treasury, such as
Treasury bills, certificates of indebtedness, notes and bonds. U.S. Government
agencies and instrumentalities that issue or guarantee securities include, but
are not limited to, the Federal Housing Administration, Federal National
Mortgage Association, Federal Home Loan Banks, Government National Mortgage
Association, International Bank for Reconstruction and Development and Student
Loan Marketing Association.
All Treasury securities are backed by the full faith and credit of the
United States. Obligations of U.S. Government agencies and instrumentalities may
or may not be supported by the full faith and credit of the United States. Some,
such as the Federal Home Loan Banks, are backed by the right of the agency or
instrumentality to borrow from the Treasury. Others, such as securities issued
by the Federal National Mortgage Association, are supported only by the credit
of the instrumentality and not by the Treasury. If the securities are not backed
by the full faith and credit of the United States, the owner of the securities
must look principally to the agency issuing the obligation for repayment and may
not be able to assert a claim against United States in the event that the agency
or instrumentality does not meet its commitment.
Among the U.S. Government securities that may be purchased by the Fund are
"mortgage-backed securities" of the Government National Mortgage Association
("Ginnie Mae"), the Federal Home Loan Mortgage Association ("Freddie Mac") and
the Federal National Mortgage Association ("Fannie Mae"). These mortgage-backed
securities include "pass-through" securities and "participation certificates,"
both of which represent pools of mortgages that are assembled, with interests
sold in the pool. Payments of principal (including prepayments) and interest by
individual mortgagors are "passed through" to the holders of interests in the
pool; thus each payment to holders may contain varying amounts of principal and
interest. Prepayments of the mortgages underlying these securities may result in
the Fund's inability to reinvest the principal at comparable yields.
Mortgage-backed securities also include "collateralized mortgage obligations,"
which are similar to conventional bonds in that they have fixed maturities and
interest rates and are secured by groups of individual mortgages. Timely payment
of principal and interest on Ginnie Mae pass-throughs is guaranteed by the full
faith and credit of the United States. Freddie Mac and Fannie Mae are both
instrumentalities of the U.S. Government, but their obligations are not backed
by the full faith and credit of the United States.
Collateralized mortgage obligations ("CMO's") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal on a CMO are paid,
in most cases, semi-annually. CMO's may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC, or FNMA. CMO's are structured
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into multiple classes, with each class bearing a different stated maturity.
Monthly payments of principal, including prepayments, are first returned to
investors holding the shortest maturity class. Investors holding the longer
maturity classes receive principal only after the first class has been retired.
Other mortgage-related securities include those that directly or indirectly
represent a participation in or are secured by and payable from mortgage loans
on real property, such as CMO residuals or stripped mortgage-backed securities,
and may be structured in classes with rights to receive varying proportions of
principal and interest.
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS. The Fund
may hold certificates of deposit, bankers' acceptances and time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Fund will be
dollar- denominated obligations of domestic banks, savings and loan associations
or financial institutions which, at the time of purchase, have capital, surplus
and undivided profits in excess of $100 million (including assets of both
domestic and foreign branches), based on latest published reports, or less than
$100 million if the principal amount of such bank obligations are fully insured
by the U.S. Government.
In addition to buying certificates of deposit and bankers' acceptances, the
Fund also may make interest-bearing time or other interest-bearing deposits in
commercial or savings banks. Time deposits are non-negotiable deposits
maintained at a banking institution for a specified period of time at a
specified interest rate.
COMMERCIAL PAPER AND SHORT-TERM NOTES. The Fund may invest a portion of its
assets in commercial paper and short-term notes. Commercial paper consists of
unsecured promissory notes issued by corporations. Commercial paper and
short-term notes will normally have maturities of less than nine months and
fixed rates of return, although such instruments may have maturities of up to
one year.
Commercial paper and short-term notes will consist of issues rated at the
time of purchase "A-2" or higher by Standard & Poor's Ratings Group, "Prime-1"
or "Prime-2" by Moody's Investors Service, Inc., or similarly rated by another
nationally recognized statistical rating organization or, if unrated, will be
determined by the Advisor to be of comparable quality. These rating symbols are
described in the Appendix.
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:
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1. Make loans to others, except (a) through the purchase of debt securities
in accordance with its investment objectives and policies and (b) to the extent
the entry into a repurchase agreement is deemed to be a loan.
2. (a) Borrow money, except as stated in the Prospectus and this SAI. Any
such borrowing will be made only if immediately thereafter there is an asset
coverage of at least 300% of all borrowing.
(b) Mortgage, pledge or hypothecate any of its assets except in connection
with any such borrowing.
3. Purchase securities on margin, participate on a joint or joint and
several basis in any securities trading account, or underwrite securities. (Does
not preclude the Fund from obtaining such short-term credit as may be necessary
for the clearance of purchases and sales of its portfolio securities.)
4. Purchase or sell real estate, commodities or commodity contracts
(however the Fund reserves the right in the future to engage in futures
contracts and options on futures contracts upon authorization by the Board of
Trustees and notification to shareholders).
5. 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 borrowing, mortgages or pledges, or (b) entering into options, futures
or repurchase transactions.
7. Invest in any issuer for purposes of exercising control or management.
The Fund observes the following policies, which are not deemed fundamental
and which may be changed without shareholder vote. The Fund may not:
8. Invest in securities of other investment companies except as permitted
under the Investment Company Act of 1940.
9. Invest, in the aggregate, more than 15% of its net assets in securities
with legal or contractual restrictions on resale, securities which are not
readily marketable and repurchase agreements with more than seven days to
maturity.
10. With respect to fundamental investment restriction 2(a) above, the Fund
will not purchase portfolio securities while outstanding borrowings exceed 5% of
its assets.
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If a percentage restriction described in the Fund's Prospectuses or this
SAI 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 Funds expect
to distribute any undistributed net investment income on or about December 31 of
each year. Any net capital gains realized through the period ended October 31 of
each year will also be distributed by December 31 of each year.
Each distribution by a Fund is accompanied by a brief explanation of the
form and character of the distribution. In January of each year each 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 qualify and elect to be treated as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986 (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 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.
The Fund's ordinary income generally 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 designate the amount
distributed as a qualifying dividend. This designated amount cannot, however,
exceed the aggregate amount of qualifying dividends received by the Fund for
their 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
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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 the 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.
A redemption or exchange 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 ordinary 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 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 reserve 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 corporate income tax in the Commonwealth of
Massachusetts as long as its qualifies as regulated investment companies for
federal income tax purposes. Distributions and the transactions referred to in
the preceding paragraphs may be subject to state and local income taxes, and the
tax treatment thereof may differ from the federal income tax treatment.
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.
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In addition, the foregoing discussion of tax law is based on existing
provisions of the Code, existing and proposed regulations thereunder, and
current administrative rulings and court decisions, all of which are subject to
change. Any such charges could affect the validity of this discussion. The
discussion also represents only a general summary of tax law and practice
currently applicable to the Fund and certain shareholders therein, and, as such,
is subject to change. In particular, the consequences of an investment in shares
of the Fund under the laws of any state, local or foreign taxing jurisdictions
are not discussed herein. Each prospective investor should consult his or her
own tax advisor to determine the application of the tax law and practice in his
or her own particular circumstances.
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.
Unless noted otherwise, each person has held the position listed for a minimum
of five years.
Steven J. Paggioli,* 04/03/50 President and Trustee
915 Broadway, New York, New York 10010. Executive Vice President, The Wadsworth
Group (consultants); Executive Vice President of Investment Company
Administration, LLC ("ICA") (mutual fund administrator and the Trust's
administrator),and Vice President of First Fund Distributors, Inc. ("FFD") (a
registered broker-dealer and the Fund' Distributor).
Dorothy A. Berry, 08/12/43 Chairman and Trustee
14 Five Roses East, Ancram, NY 12502. President, Talon Industries (venture
capital and business consulting); formerly Chief Operating Officer, Integrated
Asset Management (investment advisor and manager) and formerly President, Value
Line, Inc., (investment advisory and financial publishing firm).
Wallace L. Cook 09/10/39 Trustee
One Peabody Lane, Darien, CT 06820. Retired. Formerly Senior Vice President,
Rockefeller Trust Co. Financial Counselor, Rockefeller & Co.
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Carl A. Froebel 05/23 /38 Trustee
2 Crown Cove Lane, Savannah, GA 31411. Private Investor. Formerly Managing
Director, Premier Solutions, Ltd. Formerly President and Founder, National
Investor Data Services, Inc. (investment related computer software).
Rowley W.P. Redington 06/01/44 Trustee
1191 Valley Road, Clifton, New Jersey 07103. President; Intertech (consumer
electronics and computer service and marketing); formerly Vice President, PRS of
New Jersey, Inc. (management consulting), and Chief Executive Officer, Rowley
Associates (consultants).
Robert M. Slotky* 6/17/47 Treasurer
2020 E. Financial Way, Suite 100, Glendora, California 91741. Senior Vice
President, ICA since May 1997; former instructor of accounting at California
State University-Northridge (1997); Chief Financial Officer, Wanger Asset
Management L.P. and Treasurer of Acorn Investment Trust (1992- 1996).
Robin Berger* 11/17/56 Secretary
915 Broadway, New York, New York 10010. Vice President, The Wadsworth Group.
Robert H. Wadsworth* 01/25/40 Vice President
4455 E. Camelback Road, Suite 261E, Phoenix, Arizona 85018. President of The
Wadsworth Group, President of ICA and FFD.
*Indicates an "interested person" of the Trust as defined in the 1940 Act.
Set forth below is the rate of compensation received by the following
Trustees from all portfolios of the Trust. This total amount is allocated among
the portfolios. Disinterested Trustees receive an annual retainer of $10,000 and
a fee of $2,500 for each regularly scheduled meeting. These Trustees also
receive a fee of $1,000 for any special meeting attended. The Chairman of the
Board of Trustees receives an additional annual retainer of $5,000.
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 portfolios of the Trust.
Name of Trustee Total Annual Compensation
- --------------- -------------------------
Dorothy A. Berry $25,000
Wallace L. Cook $20,000
Carl A. Froebel $20,000
Rowley W.P. Redington $20,000
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THE FUNDS' INVESTMENT ADVISOR
As stated in the Prospectus, investment advisory services are provided to
the Fund by Leonetti & Associates, Inc., the Advisor, pursuant to an Investment
Advisory Agreement (the "Advisory Agreement"). The Advisor is controlled by Mr.
Michael Leonetti. 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 annual rate of 1.00%.
The Advisory Agreement will continue 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, and (2) a majority of the Trustees who are not interested
persons of any party to the Advisory Agreement, in each case cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement may be terminated at any time, without penalty, by either party to the
Advisory Agreement upon sixty days' written notice and is automatically
terminated in the event of its "assignment," as defined in the 1940 Act.
The use of the name "Leonetti" by the Fund is pursuant to a license granted
by the Advisor, and in the event the Advisory Agreement is terminated, the
Advisor has reserved the right to require the Fund to remove any references to
the name "Leonetti."
THE FUNDS' ADMINISTRATOR
The Fund has an Administration Agreement with Investment Company
Administration, LLC (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 notice filings necessary to maintain the Fund's ability 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, the Administrator receives a monthly fee at the
following annual rate:
AVERAGE NET ASSETS FEE OR FEE RATE
- ------------------ ---------------
Under $15 million $30,000
$15 to $50 million 0.20% of average net assets
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$50 to $100 million 0.15% of average net assets
$100 million to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
THE FUNDS' 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
from year to year if approved at least annually by (i) the Board of Trustees or
the vote of a majority of the outstanding shares of the 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 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.
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
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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
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.
B-15
<PAGE>
PORTFOLIO TURNOVER
Although the Fund generally will not invest for short-term trading
purposes, portfolio securities may be sold without regard to the length of time
they have been held when, in the opinion of the Advisor, investment
considerations warrant such action. Portfolio turnover rate is calculated by
dividing (1) the lesser of purchases or sales of portfolio securities for the
fiscal year by (2) the monthly average of the value of portfolio securities
owned during the fiscal year. A 100% turnover rate would occur if all the
securities in the Fund's portfolio, with the exception of securities whose
maturities at the time of acquisition were one year or less, were sold and
either repurchased or replaced within one year. A high rate of portfolio
turnover (100% or more) generally leads to transaction costs and may result in a
greater number of taxable transactions. See "Portfolio Transactions and
Brokerage."
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The information provided below supplements the information contained in the
Fund's Prospectus regarding the purchase and redemption of Fund shares.
HOW TO BUY SHARES
The public offering price of Fund shares is the net asset value. Each Fund
receives the net asset value. Shares are purchased at the public offering price
next determined after the Transfer Agent receives your order in proper form. In
most cases, in order to receive that day's public offering price, the Transfer
Agent must receive your order in proper form before the close of regular trading
on the New York Stock Exchange ("NYSE"), normally 4:00 p.m., Eastern time. If
you buy shares through your investment representative, the representative must
receive your order before the close of regular trading on the NYSE to receive
that day's public offering price.
The NYSE annually announces the days on which it will not be open for
trading. The most recent announcement indicates that it will not be open on the
following days: New Year's Day, Martin Luther King Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. However, the NYSE may close on days not included in that
announcement.
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 group or periodic plans.
HOW TO SELL SHARES
You can sell your Fund shares any day the NYSE is open for regular trading,
either directly to the Fund or through your investment representative.
B-16
<PAGE>
Selling shares through your investment representative
Your investment representative must receive your request before the close
of regular trading on the NYSE to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Transfer Agent, and may charge you for its services.
Signature Guarantees
If you sell shares having a net asset value of $5,000 a signature guarantee
is required. Certain other transactions, including redemptions, also require a
signature guarantee. The Fund may require additional documentation for the sale
of shares by a corporation, partnership, agent or fiduciary, or a surviving
joint owner. Contact the Transfer Agent for details.
Signature guarantees may be obtained from a bank, broker-dealer, credit
union (if authorized under state law), securities exchange or association,
clearing agency or savings institution. A notary public cannot provide a
signature guarantee.
Delivery of redemption proceeds
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 NYSE is restricted as determined by the SEC or
the NYSE 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. Under
unusual circumstances, the Fund may suspend redemptions, or postpone payment for
more than seven days, but only as authorized by SEC rules.
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.
Telephone redemptions
Shareholders must have selected telephone transactions privileges on the
Account Application when opening a Fund account. Upon receipt of any
instructions or inquiries by telephone from a shareholder or, if held in a joint
account, from either party, or from any person claiming to be the shareholder,
the Fund or its agent is authorized, without notifying the shareholder or joint
account parties, to carry out the instructions or to respond to the inquiries,
consistent with the service options chosen by the shareholder or joint
shareholders in his or their latest Account Application or other written request
B-17
<PAGE>
for services, including purchasing or redeeming shares of the Fund and
depositing and withdrawing monies from the bank account specified in the Bank
Account Registration section of the shareholder's latest Account Application or
as otherwise properly specified to the Fund in writing.
The Transfer Agent will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails to
employ reasonable procedures, the Fund and the Transfer Agent may be liable for
any losses due to unauthorized or fraudulent instructions. If these procedures
are followed, an investor agrees, however, that to the extent permitted by
applicable law, neither the Fund nor its agents will be liable for any loss,
liability, cost or expense arising out of any redemption request, including any
fraudulent or unauthorized request. For information, consult the Transfer Agent.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Transfer Agent by telephone. In this event,
you may wish to submit a written redemption request, as described in the
Prospectus, or contact your investment representative. The Telephone Redemption
Privilege may be modified or terminated without notice.
Redemptions-in-kind
The Fund has reserved the right to pay the redemption price of its shares,
either totally or partially, by a distribution in kind of portfolio securities
(instead of cash). The securities so distributed would be valued at the same
amount as that assigned to them in calculating the net asset value for the
shares being sold. If a shareholder receives a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash. The Trust has filed an election under SEC Rule 18f-1 committing to pay
in cash all redemptions by a shareholder of record up to amounts specified by
the rule (approximately $250,000).
Automatic Investment Plan
As discussed in the Prospectus, the Fund provides an Automatic Investment
Plan for the convenience of investors who wish to purchase shares of the Fund on
a regular basis. All record keeping and custodial costs of the Automatic
Investment Plan are paid by the Fund. The market value of the Fund's shares is
subject to fluctuation, so before undertaking any plan for systematic
investment, the investor should keep in mind that this plan does not assure a
profit nor protect against depreciation in declining markets.
DETERMINATION OF SHARE PRICE
As noted in the 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 NYSE (normally 4:00 p.m., Eastern time) on each day that the NYSE
is open for trading. The Fund does not expect to determine the net asset value
B-18
<PAGE>
of its shares on any day when the NYSE 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. However, the net asset value of the Fund's shares
may be determined on days the NYSE is closed or at times other than 4:00 p.m. if
the Board of Trustees decides it is necessary.
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 the 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 for the most recent one, five and ten year periods, or
shorter periods from inception, through the most recent calendar quarter. The
Fund may also advertise aggregate and average total return information over
different periods of time.
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 the Fund's
performance by independent sources may also be used in advertisements and in
information furnished to present or prospective investors in the Fund.
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:
B-19
<PAGE>
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.
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.
Firstar Institutional Custody Services, located at 425 Walnut St.,
Cincinnati, Ohio 45201 acts as Custodian of the securities and other assets of
the Fund. American Data Services, P.O. Box 5536, Hauppauge, NY 11788-0132 acts
as the Fund's transfer and shareholder service agent. The Custodian and Transfer
Agent do not participate in decisions relating to the purchase and sale of
securities by the Fund.
________________________ are the independent auditors for the Fund.
Paul, Hastings, Janofsky & Walker, LLP, 345 California Street, 29th Floor,
San Francisco, California 94104, are legal counsel to the Fund.
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 limited 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.
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 Advisory
Agreement); all series of the Trust vote as a single class on matters affecting
all series jointly or the Trust as a whole (e.g., election or removal of
Trustees). Voting rights are not cumulative, so that the holders of more than
50% of the shares voting in any election of Trustees can, if they so choose,
elect all of the Trustees. While the Trust is not required and does not intend
to hold annual meetings of shareholders, such meetings may be called by the
B-20
<PAGE>
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.
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 circumstances in which both
inadequate insurance exists and the Fund itself is unable to meet its
obligations.
FINANCIAL STATEMENTS
The Fund's annual report to shareholders for its first fiscal year will be
a separate document supplied with this SAI and the financial statements,
accompanying notes and report to independent accountants appearing therein will
be incorporated by reference in future SAIS.
APPENDIX
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have
a superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have
a strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
B-21
<PAGE>
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
B-22
<PAGE>
PROFESSIONALLY MANAGED PORTFOLIOS
PART C
ITEM 23. EXHIBITS.
(1) Agreement and Declaration of Trust (1)
(2) By-Laws (1)
(3) Specimen stock certificate (5)
(4) Form of Investment Advisory Agreement
(5) Form of Distribution Agreement
(6) Not applicable
(7) Form of Custodian Agreement with Star Bank, NA (4)
(8) (1) Form of Administration Agreement with Investment
Company Administration, LLC (3)
(2)(a) Fund Accounting Service Agreement with American Data Services
(4)
(2)(b) Transfer Agency and Service Agreement with American Data
Services (4)
(3) Transfer Agency and Fund Accounting Agreement with Countrywide Fund
Services (3)
(4) Transfer Agency Agreement with Provident Financial Processing
Corporation (6)
(9) Form of Opinion of Counsel
(10) Not applicable
(11) Not applicable
(12) No undertaking in effect
(13) Not applicable
(14) Not applicable
(15) Not applicable
1 Incorporated by reference from Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A, filed on December 29, 1995.
2 Incorporated by reference from Post-Effective Amendment No. 35 to the
Registration Statement on Form N-1A, filed on April 24, 1997.
3 Incorporated by reference from Post-Effective Amendment No. 43 to the
Registration Statement on Form N-1A, filed on February 5, 1998.
4 Incorporated by reference from Post-Effective Amendment No. 48 to the
Registration Statement on Form N-1A, filed on June 15, 1998.
5 Incorporated by reference from Post-Effective Amendment No. 52 to the
Registration Statement on Form N-1A, filed on October 29, 1998.
6 To be filed by amendment.
<PAGE>
ITEM 24. 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 25. 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 26. 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
<PAGE>
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
James C. Edwards & Co., Inc. File No. 801-13986
Duncan-Hurst Capital
Management, Inc. File No. 801-36309
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 27. 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
<PAGE>
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. Robert
M. Slotky serves as Treasurer of the Registrant.
c. Incorporated by reference from the Statement of Additional Information
filed herewith as Part B.
ITEM 28. 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 29. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Parts A
and B.
ITEM 30. UNDERTAKINGS
The registrant undertakes:
(a) To furnish each person to whom a Prospectus is delivered a copy of
Registrant's latest annual report to shareholders, upon request and
without charge.
(b) If requested to do so by the holders of at least 10% of the Trust's
outstanding shares, to call a meeting of shareholders for the purposes
of voting upon the question of removal of a director and assist in
communications with other shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this amendment to this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York in the State of New York on May 10,
1999.
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 May 10, 1999
- ----------------------------
Steven J. Paggioli
/s/ Robert M. Slotky Principal May 10, 1999
- ---------------------------- Financial Officer
Robert M. Slotky
Dorothy A. Berry Trustee May 10, 1999
- ----------------------------
*Dorothy A. Berry
Wallace L. Cook Trustee May 10, 1999
- ----------------------------
*Wallace L. Cook
Carl A. Froebel Trustee May 10, 1999
- ----------------------------
*Carl A. Froebel
Rowley W. P. Redington Trustee May 10, 1999
- ----------------------------
*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
<PAGE>
EXHIBITS
Exhibit No. Description
- ----------- -----------
99.B4 Form of Advisory Agreement
99.B5 Form of Distribution Agreement
99.B9 Form of opinion of counsel
PROFESSIONALLY MANAGED PORTFOLIOS
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the ___ day of _____,
1999, by and between PROFESSIONALLY MANAGED PORTFOLIOS, a Massachusetts business
trust (hereinafter called the "Trust"), on behalf of Leonetti Growth Fund (the
"Fund"), a separate series of the Trust, and Leonetti & Associates, Inc.(a
_________ corporation hereinafter called the "Advisor").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company, registered
as such under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, the Fund is a series of the Trust having separate assets and
liabilities; and
WHEREAS, the Advisor is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and is engaged in the business of
supplying investment advice as an independent contractor; and
WHEREAS, the Trust desires to retain the Advisor to render advice and
services to the Fund pursuant to the terms and provisions of this Agreement, and
the Advisor desires to furnish said advice and services;
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties to this Agreement, intending to be legally
bound hereby, mutually agree as follows:
1. APPOINTMENT OF ADVISOR. The Trust hereby employs the Advisor and the
Advisor hereby accepts such employment, to render investment advice and related
services with respect to the assets of the Fund for the period and on the terms
set forth in this Agreement, subject to the supervision and direction of the
Trust's Board of Trustees.
2. DUTIES OF ADVISOR.
(a) GENERAL DUTIES. The Advisor shall act as investment adviser to the
Fund and shall supervise investments of the Fund on behalf of the Fund in
accordance with the investment objectives, policies and restrictions of the Fund
-1-
<PAGE>
as set forth in the Fund's and Trust's governing documents, including, without
limitation, the Trust's Agreement and Declaration of Trust and By-Laws; the
Fund's prospectus, statement of additional information and undertakings; and
such other limitations, policies and procedures as the Trustees may impose from
time to time in writing to the Advisor. In providing such services, the Advisor
shall at all times adhere to the provisions and restrictions contained in the
federal securities laws, applicable state securities laws, the Internal Revenue
Code, the Uniform Commercial Code and other applicable law.
Without limiting the generality of the foregoing, the Advisor shall:
(i) furnish the Fund with advice and recommendations with respect to the
investment of the Fund's assets and the purchase and sale of portfolio
securities for the Fund, including the taking of such steps as may be necessary
to implement such advice and recommendations (I.E., placing the orders); (ii)
manage and oversee the investments of the Fund, subject to the ultimate
supervision and direction of the Trust's Board of Trustees; (iii) vote proxies
for the Fund, file ownership reports under Section 13 of the Securities Exchange
Act of 1934 for the Fund, and take other actions on behalf of the Fund; (iv)
maintain the books and records required to be maintained by the Fund except to
the extent arrangements have been made for such books and records to be
maintained by the administrator or another agent of the Fund; (v) furnish
reports, statements and other data on securities, economic conditions and other
matters related to the investment of the Fund's assets which the Fund's
administrator or distributor or the officers of the Trust may reasonably
request; and (vi) render to the Trust's Board of Trustees such periodic and
special reports with respect to the Fund's investment activities as the Board
may reasonably request, including at least one in-person appearance annually
before the Board of Trustees.
(b) Brokerage. The Advisor shall be responsible for decisions to buy
and sell securities for the Fund, for broker-dealer selection, and for
negotiation of brokerage commission rates, provided that the Advisor shall not
direct orders to an affiliated person of the Advisor without general prior
authorization to use such affiliated broker or dealer for the Trust's Board of
Trustees. The Advisor's primary consideration in effecting a securities
transaction will be execution at the most favorable price. In selecting a
broker-dealer to execute each particular transaction, the Advisor may take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Fund on a continuing
basis. The price to a Fund in any transaction may be less
-2-
<PAGE>
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered.
Subject to such policies as the Board of Trustees of the Trust may
determine, the Advisor shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused a Fund to pay a broker or dealer that provides (directly or
indirectly) brokerage or research services to the Advisor an amount of
commission for effecting a portfolio transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Advisor's overall responsibilities with respect to
the Trust. The Advisor is further authorized to allocate the orders placed by it
on behalf of a Fund to such brokers or dealers who also provide research or
statistical material, or other services, to the Trust, the Advisor, or any
affiliate of either. Such allocation shall be in such amounts and proportions as
the Advisor shall determine, and the Advisor shall report on such allocations
regularly to the Trust, indicating the broker-dealers to whom such allocations
have been made and the basis therefor. The Advisor is also authorized to
consider sales of shares as a factor in the selection of brokers or dealers to
execute portfolio transactions, subject to the requirements of best execution,
I.E., that such brokers or dealers are able to execute the order promptly and at
the best obtainable securities price.
On occasions when the Advisor deems the purchase or sale of a security
to be in the best interest of a Fund as well as of other clients, the Advisor,
to the extent permitted by applicable laws and regulations, may aggregate the
securities to be so purchased or sold in order to obtain the most favorable
price or lower brokerage commissions and the most efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Advisor in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
3. REPRESENTATIONS OF THE ADVISOR.
(a) The Advisor shall use its best judgment and efforts in rendering
the advice and services to the Fund as contemplated by this Agreement.
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(b) The Advisor shall maintain all licenses and registrations
necessary to perform its duties hereunder in good order.
(c) The Advisor shall conduct its operations at all times in
conformance with the Investment Advisers Act of 1940, the Investment Company Act
of 1940, and any other applicable state and/or self-regulatory organization
regulations.
(d) The Advisor shall maintain errors and omissions insurance in an
amount at least equal to that disclosed to the Board of Trustees in connection
with their approval of this Agreement.
4. INDEPENDENT CONTRACTOR. The Advisor shall, for all purposes herein, be
deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized to do so, have no authority to act for or represent the
Trust or the Fund in any way, or in any way be deemed an agent for the Trust or
for the Fund. It is expressly understood and agreed that the services to be
rendered by the Advisor to the Fund under the provisions of this Agreement are
not to be deemed exclusive, and the Advisor shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
5. ADVISOR'S PERSONNEL. The Advisor shall, at its own expense, maintain
such staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Advisor shall be
deemed to include persons employed or retained by the Advisor to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Advisor or the Trust's Board of Trustees may desire and reasonably request.
6. EXPENSES.
(a) With respect to the operation of the Fund, the Advisor shall be
responsible for (i) providing the personnel, office space and equipment
reasonably necessary for the operation of the Fund, (ii) the expenses of
printing and distributing extra copies of the Fund's prospectus, statement of
additional information, and sales and advertising materials (but not the legal,
auditing or accounting fees attendant thereto) to prospective investors (but not
to existing shareholders), and (iii) the costs of any special Board of Trustees
meetings or shareholder meetings convened for the primary benefit of the
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<PAGE>
Advisor. If the Advisor has agreed to limit the operating expenses of the Fund,
the Advisor shall also be responsible on a monthly basis for any operating
expenses that exceed the agreed upon expense limit.
(b) The Fund is responsible for and has assumed the obligation for
payment of all of its expenses, other than as stated in Subparagraph 6(a) above,
including but not limited to: fees and expenses incurred in connection with the
issuance, registration and transfer of its shares; brokerage and commission
expenses; all expenses of transfer, receipt, safekeeping, servicing and
accounting for the cash, securities and other property of the Trust for the
benefit of the Fund including all fees and expenses of its custodian,
shareholder services agent and accounting services agent; interest charges on
any borrowings; costs and expenses of pricing and calculating its daily net
asset value and of maintaining its books of account required under the
Investment Company Act; taxes, if any; a pro rata portion of expenditures in
connection with meetings of the Fund's shareholders and the Trust's Board of
Trustees that are properly payable by the Fund; salaries and expenses of
officers and fees and expenses of members of the Trust's Board of Trustees or
members of any advisory board or committee who are not members of, affiliated
with or interested persons of the Advisor; insurance premiums on property or
personnel of the Fund which inure to its benefit, including liability and
fidelity bond insurance; the cost of preparing and printing reports, proxy
statements, prospectuses and statements of additional information of the Fund or
other communications for distribution to existing shareholders; legal, auditing
and accounting fees; trade association dues; fees and expenses (including legal
fees) of registering and maintaining registration of its shares for sale under
federal and applicable state and foreign securities laws; all expenses of
maintaining and servicing shareholder accounts, including all charges for
transfer, shareholder recordkeeping, dividend disbursing, redemption, and other
agents for the benefit of the Fund, if any; and all other charges and costs of
its operation plus any extraordinary and non-recurring expenses, except as
herein otherwise prescribed.
(c) The Advisor may voluntarily absorb certain Fund expenses or waive
the Advisor's own advisory fee.
(d) To the extent the Advisor incurs any costs by assuming expenses
which are an obligation of the Fund as set forth herein, the Fund shall promptly
reimburse the Advisor for such costs and expenses, except to the extent the
Advisor has otherwise agreed to bear such expenses. To the extent the services
for which a Fund is obligated to pay are performed by the Advisor, the Advisor
shall be entitled to recover from such Fund to the extent of the Advisor's
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<PAGE>
actual costs for providing such services. In determining the Advisor's actual
costs, the Advisor may take into account an allocated portion of the salaries
and overhead of personnel performing such services.
7. INVESTMENT ADVISORY AND MANAGEMENT FEE.
(a) The Fund shall pay to the Advisor, and the Advisor agrees to
accept, as full compensation for all investment management and advisory services
furnished or provided to such Fund pursuant to this Agreement, an annual
management fee equal to the amount specified in Appendix A to this Agreement,
computed on the value of the net assets of the Fund as of the close of business
each day.
(b) The management fee shall be accrued daily by the Fund and paid to
the Advisor on the first business day of the succeeding month.
( c) The initial fee under this Agreement shall be payable on the
first business day of the first month following the effective date of this
Agreement and shall be prorated as set forth below. If this Agreement is
terminated prior to the end of any month, the fee to the Advisor shall be
prorated for the portion of any month in which this Agreement is in effect which
is not a complete month according to the proportion which the number of calendar
days in the month during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within ten (10) days after the
date of termination.
(d) The fee payable to the Advisor under this Agreement will be
reduced to the extent of any receivable owed by the Advisor to the Fund and as
required under any expense limitation applicable to the Fund.
(e) The Advisor voluntarily may reduce any portion of the compensation
or reimbursement of expenses due to it pursuant to this Agreement and may agree
to make payments to limit the expenses which are the responsibility of the Fund
under this Agreement. Any such reduction or payment shall be applicable only to
such specific reduction or payment and shall not constitute an agreement to
reduce any future compensation or reimbursement due to the Advisor hereunder or
to continue future payments. Any such reduction will be agreed to prior to
accrual of the related expense or fee and will be estimated daily and reconciled
and paid on a monthly basis.
(f) Any fee withheld or voluntarily reduced and any Fund expense
absorbed by the Advisor voluntarily or pursuant to an agreed upon expense cap
shall be reimbursed by the Fund to the Advisor, if so requested by the Advisor,
in the first, second
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or third (or any combination thereof) fiscal year next succeeding the fiscal
year of the withholding, reduction or absorption if the aggregate amount
actually paid by the Fund toward the operating expenses for such fiscal year
(taking into account the reimbursement) do not exceed the applicable limitation
on Fund expenses. Such reimbursement may be paid prior to a Fund's payment of
current expenses if so requested by the Advisor even if such practice may
require the Advisor to waive, reduce or absorb current Fund expenses.
(g) The Advisor may agree not to require payment of any portion of the
compensation or reimbursement of expenses otherwise due to it pursuant to this
Agreement. Any such agreement shall be applicable only with respect to the
specific items covered thereby and shall not constitute an agreement not to
require payment of any future compensation or reimbursement due to the Advisor
hereunder.
8. NO SHORTING; NO BORROWING. The Advisor agrees that neither it nor any of
its officers or employees shall take any short position in the shares of the
Fund. This prohibition shall not prevent the purchase of such shares by any of
the officers or employees of the Advisor or any trust, pension, profit-sharing
or other benefit plan for such persons or affiliates thereof, at a price not
less than the net asset value thereof at the time of purchase, as allowed
pursuant to rules promulgated under the Investment Company Act. The Advisor
agrees that neither it nor any of its officers or employees shall borrow from
the Fund or pledge or use the Fund's assets in connection with any borrowing not
directly for the Fund's benefit. For this purpose, failure to pay any amount due
and payable to the Fund for a period of more than thirty (30) days shall
constitute a borrowing.
9. CONFLICTS WITH TRUST'S GOVERNING DOCUMENTS AND APPLICABLE LAWS. Nothing
herein contained shall be deemed to require the Trust or the Fund to take any
action contrary to the Trust's Agreement and Declaration of Trust, By-Laws, or
any applicable statute or regulation, or to relieve or deprive the Board of
Trustees of the Trust of its responsibility for and control of the conduct of
the affairs of the Trust and Fund. In this connection, the Advisor acknowledges
that the Trustees retain ultimate plenary authority over the Fund and may take
any and all actions necessary and reasonable to protect the interests of
shareholders.
10. REPORTS AND ACCESS. The Advisor agrees to supply such information to
the Fund's administrator and to permit such compliance inspections by the Fund's
administrator as shall be reasonably necessary to permit the administrator to
satisfy its obligations and respond to the reasonable requests of the Trustees.
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<PAGE>
11. ADVISOR'S LIABILITIES AND INDEMNIFICATION.
(a) The Advisor shall have responsibility for the accuracy and
completeness (and liability for the lack thereof) of the statements in the
Fund's offering materials (including the prospectus, the statement of additional
information, advertising and sales materials), except for information supplied
by the administrator or the Trust or another third party for inclusion therein.
(b) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties hereunder on the
part of the Advisor, the Advisor shall not be subject to liability to the Trust
or the Fund or to any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security by the
Fund.
(c) Each party to this Agreement shall indemnify and hold harmless the
other party and the shareholders, directors, officers and employees of the other
party (any such person, an "Indemnified Party") against any loss, liability,
claim, damage or expense (including the reasonable cost of investigating and
defending any alleged loss, liability, claim, damage or expenses and reasonable
counsel fees incurred in connection therewith) arising out of the Indemnified
Party's performance or non-performance of any duties under this Agreement
provided, however, that nothing herein shall be deemed to protect any
Indemnified Party against any liability to which such Indemnified Party would
otherwise be subject by reason of willful misfeasance, bad faith or negligence
in the performance of duties hereunder or by reason of reckless disregard of
obligations and duties under this Agreement.
(e) No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or officer of the Advisor, from liability in
violation of Sections 17(h) and (i) of the Investment Company Act.
12. NON-EXCLUSIVITY; TRADING FOR ADVISOR'S OWN ACCOUNT. The Trust's
employment of the Advisor is not an exclusive arrangement. The Trust may from
time to time employ other individuals or entities to furnish it with the
services provided for herein. Likewise, the Advisor may act as investment
adviser for any other person, and shall not in any way be limited or restricted
from buying, selling or trading any securities for its or their own accounts or
the accounts of others for whom it or they may be acting, provided, however,
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<PAGE>
that the Advisor expressly represents that it will undertake no activities which
will adversely affect the performance of its obligations to the Fund under this
Agreement; and provided further that the Advisor will adhere to a code of ethics
governing employee trading and trading for proprietary accounts that conforms to
the requirements of the Investment Company Act and the Investment Advisers Act
of 1940.
13. TERM.
(a) This Agreement shall become effective at the time the Fund
commences operations pursuant to an effective amendment to the Trust's
Registration Statement under the Securities Act of 1933 and shall remain in
effect for a period of two (2) years, unless sooner terminated as hereinafter
provided. This Agreement shall continue in effect thereafter for additional
periods not exceeding one (l) year so long as such continuation is approved for
the Fund at least annually by (i) the Board of Trustees of the Trust or by the
vote of a majority of the outstanding voting securities of the Fund and (ii) the
vote of a majority of the Trustees of the Trust who are not parties to this
Agreement nor interested persons thereof, cast in person at a meeting called for
the purpose of voting on such approval. The terms "majority of the outstanding
voting securities" and "interested persons" shall have the meanings as set forth
in the Investment Company Act.
(b) The Fund may use the name "Leonetti" or any name derived from or
using that name only for so long as this Agreement or any extension, renewal or
amendment hereof remains in effect. Within sixty (60) days from such time as
this Agreement shall no longer be in effect, the Fund shall cease to use such a
name or any other name connected with the Advisor.
14. TERMINATION; NO ASSIGNMENT.
(a) This Agreement may be terminated by the Trust on behalf of a Fund
at any time without payment of any penalty, by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the Fund,
upon sixty (60) days' written notice to the Advisor, and by the Advisor upon
sixty (60) days' written notice to the Fund. In the event of a termination, the
Advisor shall cooperate in the orderly transfer of Fund affairs and, at the
request of the Board of Trustees, transfer any and all books and records of the
Fund maintained by the Advisor on behalf of the Fund.
(b) This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the Investment Company Act.
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<PAGE>
15. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute or rule, or shall be otherwise rendered
invalid, the remainder of this Agreement shall not be affected thereby.
16. NOTICE OF DECLARATION OF TRUST. The Advisor agrees that the Trust's
obligations under this Agreement shall be limited to the Fund and to their
assets, and that the Advisor shall not seek satisfaction of any such obligation
from the shareholders of the Fund nor from any trustee, officer, employee or
agent of the Trust or the Fund.
17. CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
18. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Massachusetts without giving effect to
the conflict of laws principles thereof; provided that nothing herein shall be
construed to preempt, or to be inconsistent with, any federal law, regulation or
rule, including the Investment Company Act and the Investment Advisors Act of
1940 and any rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all on the day and year first
above written.
PROFESSIONALLY MANAGED LEONETTI & ASSOCIATES, INC.
PORTFOLIOS on behalf of
the Leonetti Growth Fund
By: By:
-------------------- -------------------------
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APPENDIX A
Investment Advisory Fee Rate
1.00% of average daily net assets annually
PROFESSIONALLY MANAGED PORTFOLIOS
DISTRIBUTION AGREEMENT
This Agreement, made as of the __ day of ____, 1999 by and between
PROFESSIONALLY MANAGED PORTFOLIOS, a Massachusetts business trust (the "Trust"),
on behalf of Leonetti Growth Fund (the "Fund"), a series of the Trust, and FIRST
FUND DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
l940 (the "1940 Act"), and it is in the interest of the Trust to offer shares of
the Fund for sale continuously; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of l934 (the "1934 Act") and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the shares of beneficial
interest of the Fund (the "Shares"), to commence after the effectiveness of
amendment to the registration statement filed pursuant to the Securities Act of
1933 (the "1933 Act") and the 1940 Act relating to the Fund.
NOW, THEREFORE, the parties agree as follows:
l. APPOINTMENT OF DISTRIBUTOR. The Trust hereby appoints the Distributor as
its exclusive agent to sell and to arrange for the sale of the Shares, on the
terms and for the period set forth in this Agreement, and the Distributor hereby
accepts such appointment and agrees to act hereunder directly and/or through the
Trust's transfer agent in the manner set forth in the Prospectus (as defined
below). It is understood and agreed that the services of the Distributor
hereunder are not exclusive, and the Distributor may act as principal
underwriter for the shares of any other registered investment company.
2. SERVICES AND DUTIES OF THE DISTRIBUTOR
(a) The Distributor agrees to sell the Shares, as agent for the Trust, from
time to time during the term of this Agreement upon the terms described in the
Fund's Prospectus. As used in this Agreement, the term "Prospectus" shall mean
the prospectus and statement of additional information of the Fund included as
part of the Trust's Registration Statement, as such prospectus and statement of
additional information may be amended or supplemented from time to time, and the
term "Registration Statement" shall mean the Registration Statement most
recently filed from time to time by the Trust with the Securities and Exchange
Commission and effective under the 1933 Act and the 1940 Act, as such
Registration Statement is amended by any amendments thereto at the time in
effect. The Distributor shall not be obligated to sell any certain number of
Shares.
<PAGE>
(b) Upon commencement of the Fund's operations, the Distributor will hold
itself available to receive orders, satisfactory to the Distributor, for the
purchase of the Shares and will accept such orders and will transmit such orders
and funds received by it in payment for such Shares as are so accepted to the
Trust's transfer agent or custodian, as appropriate, as promptly as practicable.
Purchase orders shall be deemed effective at the time and in the manner set
forth in the Prospectus. The Distributor shall not make any short sales of
Shares.
(c) The offering price of the Shares shall be the net asset value per share
of the Shares (as defined in the Declaration of Trust), plus the sales charge,
if any, (determined as set forth in the prospectus). The Trust shall furnish the
Distributor, with all possible promptness, an advice of each computation of net
asset value and offering price.
3. DUTIES OF THE TRUST.
(a) MAINTENANCE OF FEDERAL REGISTRATION. The Trust shall, at its expense,
take, from time to time, all necessary action and such steps, including payment
of the related filing fees, as may be necessary to register and maintain
registration of a sufficient number of Shares under the 1933 Act. The Trust
agrees to file from time to time such amendments, reports and other documents as
may be necessary in order that there may be no untrue statement of a material
fact in a registration statement or prospectus, or necessary in order that there
may be no omission to state a material fact in the registration statement or
prospectus which omission would make the statements therein misleading.
(b) MAINTENANCE OF "BLUE SKY" QUALIFICATIONS. The Trust shall, at its
expense, use its best efforts to qualify and maintain the qualification of an
appropriate number of Shares for sale under the securities laws of such states
as the Distributor and the Trust may approve, and, if necessary or appropriate
in connection therewith, to qualify and maintain the qualification of the Trust
as a broker or dealer in such states; provided that the Trust shall not be
required to amend its Declaration of Trust or By-Laws to comply with the laws of
any state, to maintain an office in any state, to change the terms of the
offering of the Shares in any state, to change the terms of the offering of the
Shares in any state from the terms set forth in its Prospectus, to qualify as a
foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering and sale of
the Shares. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Trust in
connection with such qualifications.
(c) COPIES OF REPORTS AND PROSPECTUSES. The Trust shall, at its expense,
keep the Distributor fully informed with regard to its affairs and in connection
therewith shall furnish to the Distributor copies of all information, financial
statements and other papers which the Distributor may reasonably request for use
in connection with the distribution of Shares, including such reasonable number
of copies of its Prospectus and annual and interim reports as the Distributor
may request and shall cooperate fully in the efforts of the Distributor to sell
and arrange for the sale of the Shares and in the performance of the Distributor
under this Agreement.
<PAGE>
4. CONFORMITY WITH APPLICABLE LAW AND RULES. The Distributor agrees that in
selling Shares hereunder it shall conform in all respects with the laws of the
United States and of any state in which Shares may be offered, and with
applicable rules and regulations of the NASD.
5. INDEPENDENT CONTRACTOR. In performing its duties hereunder, the
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, directors, employees, or representatives is or shall be an
employee of the Trust in the performance of the Distributor's duties hereunder.
The Distributor shall be responsible for its own conduct and the employment,
control, and conduct of its agents and employees and for injury to such agents
or employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employee taxes thereunder.
6. INDEMNIFICATION.
(a) INDEMNIFICATION OF TRUST. The Distributor agrees to indemnify
and hold harmless the Trust and each of its present or former trustees,
officers, employees, representatives and each person, if any, who controls or
previously controlled the Trust within the meaning of Section l5 of the 1933 Act
against any and all losses, liabilities, damages, claims or expenses (including
the reasonable costs of investigating or defending any alleged loss, liability,
damage, claims or expense and reasonable legal counsel fees incurred in
connection therewith) to which the Trust or any such person may become subject
under the 1933 Act, under any other statute, at common law, or otherwise,
arising out of the acquisition of any Shares by any person which (I) may be
based upon any wrongful act by the Distributor or any of the Distributor's
directors, officers, employees or representatives, or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other information
covering Shares filed or made public by the Trust or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to the Trust by the Distributor. In no case (I) is the
Distributor's indemnity in favor of the Trust, or any person indemnified to be
deemed to protect the Trust or such indemnified person against any liability to
which the Trust or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of his obligations and duties under this
Agreement or (ii) is the Distributor to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against the Trust or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Distributor in writing of the claim within a reasonable
time after the summons or other first written notification giving information of
the nature of the claim shall have been served upon the Trust or upon such
person (or after the Trust or such person shall have received notice to such
service on any designated agent). However, failure to notify the Distributor of
any such claim shall not relieve the Distributor from any liability which the
Distributor may have to the Trust or any person against whom such action is
brought otherwise than on account of the Distributor's indemnity agreement
contained in this Paragraph.
<PAGE>
The Distributor shall be entitled to participate, at its own expense, in
the defense, or, if the Distributor so elects, to assume the defense of any suit
brought to enforce any such claim, but, if the Distributor elects to assume the
defense, such defense shall be conducted by legal counsel chosen by the
Distributor and satisfactory to the Trust, to the persons indemnified defendant
or defendants, in the suit. In the event that the Distributor elects to assume
the defense of any such suit and retain such legal counsel, the Trust, the
persons indemnified defendant or defendants in the suit, shall bear the fees and
expenses of any additional legal counsel retained by them. If the Distributor
does not elect to assume the defense of any such suit, the Distributor will
reimburse the Trust and the persons indemnified defendant or defendants in such
suit for the reasonable fees and expenses of any legal counsel retained by them.
The Distributor agrees to promptly notify the Trust of the commencement of any
litigation of proceedings against it or any of its officers, employees or
representatives in connection with the issue or sale of any Shares.
(b) INDEMNIFICATION OF THE DISTRIBUTOR. The Trust agrees to indemnify and
hold harmless the Distributor and each of its present or former directors,
officers, employees, representatives and each person, if any, who controls or
previously controlled the Distributor within the meaning of Section l5 of the
1933 Act against any and all losses, liabilities, damages, claims or expenses
(including the reasonable costs of investigating or defending any alleged loss,
liability, damage, claim or expense and reasonable legal counsel fees incurred
in connection therewith) to which the Distributor or any such person may become
subject under the 1933 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Shares by any person which (i)
may be based upon any wrongful act by the Trust or any of the Trust's trustees,
officers, employees or representatives, or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other information
covering Shares filed or made public by the Trust or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading unless such statement or omission was made in reliance
upon information furnished to the Trust by the Distributor. In no case (i) is
the Trust's indemnity in favor of the Distributor, or any person indemnified to
be deemed to protect the Distributor or such indemnified person against any
liability to which the Distributor or such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of his duties or by reason of his reckless disregard of his obligations and
duties under this Agreement, or (ii) is the Trust to be liable under its
indemnity agreement contained in this Paragraph with respect to any claim made
against Distributor, or person indemnified unless the Distributor, or such
person, as the case may be, shall have notified the Trust in writing of the
claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or upon such person (or after the Distributor or
such person shall have received notice of such service on any designated agent).
However, failure to notify the Trust of any such claim shall not relieve the
Trust from any liability which the Trust may have to the Distributor or any
person against whom such action is brought otherwise than on account of the
Trust's indemnity agreement contained in this Paragraph.
The Trust shall be entitled to participate, at its own expense, in the
defense, or, if the Trust so elects, to assume the defense of any suit brought
<PAGE>
to enforce any such claim, but if the Trust elects to assume the defense, such
defense shall be conducted by legal counsel chosen by the Trust and satisfactory
to the Distributor, to the persons indemnified defendant or defendants, in the
suit. In the event that the Trust elects to assume the defense of any such suit
and retain such legal counsel, the Distributor, the persons indemnified
defendant or defendants in the suit, shall bear the fees and expenses of any
additional legal counsel retained by them. If the Trust does not elect to assume
the defense of any such suit, the Trust will reimburse the Distributor and the
persons indemnified defendant or defendants in such suit for the reasonable fees
and expenses of any legal counsel retained by them. The Trust agrees to promptly
notify the Distributor of the commencement of any litigation or proceedings
against it or any of its trustees, officers, employees or representatives in
connection with the issue or sale of any Shares.
7. AUTHORIZED REPRESENTATIONS. The Distributor is not authorized by the
Trust to give on behalf of the Trust any information or to make any
representations in connection with the sale of Shares other than the information
and representations contained in a registration statement or prospectus filed
with the Securities and Exchange Commission ("SEC") under the 1933 Act and/or
the 1940 Act, covering Shares, as such registration statement and prospectus may
be amended or supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on behalf of the Trust for
the Distributor's use. This shall not be construed to prevent the Distributor
from preparing and distributing tombstone ads and sales literature or other
material as it may deem appropriate. No person other than the Distributor is
authorized to act as principal underwriter (as such term is defined in the 1940
Act) for the Fund.
8. TERM OF AGREEMENT. The term of this Agreement shall begin on the date
first above written, and unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect for a period of two years from the date first
above written. Thereafter, this Agreement shall continue in effect from year to
year, subject to the termination provisions and all other terms and conditions
thereof, so long as such continuation shall be specifically approved at least
annually by the Board of Trustees or by vote of a majority of the outstanding
voting securities of the Fund and, concurrently with such approval by the Board
of Trustees or prior to such approval by the holders of the outstanding voting
securities of the Fund, as the case may be, by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a majority of the
trustees of the Trust who are not parties to this Agreement or interested
persons of any such party. The Distributor shall furnish to the Trust, promptly
upon its request, such information as may reasonably be necessary to evaluate
the terms of this Agreement or any extension, renewal or amendment hereof.
9. AMENDMENT OR ASSIGNMENT OF AGREEMENT. This Agreement may not be amended
or assigned except as permitted by the 1940 Act, and this Agreement shall
automatically and immediately terminate in the event of its assignment.
10. TERMINATION OF AGREEMENT. This Agreement may be terminated by either
party hereto, without the payment of any penalty, on not more than upon 60 days'
nor less than 30 days' prior notice in writing to the other party; provided,
that in the case of termination by the Trust such action shall have been
authorized by resolution of a majority of the trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, or by vote of
a majority of the outstanding voting securities of the Fund.
<PAGE>
11. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Trust to take any
action contrary to its Declaration of Trust or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the Trust of
responsibility for and control of the conduct of the affairs of the Trust.
12. DEFINITION OF TERMS. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission
validly issued pursuant to the 1940 Act. Specifically, the terms "vote of a
majority of the outstanding voting securities," "interested persons,"
"assignment," and "affiliated person," as used in Paragraphs 8, 9 and 10 hereof,
shall have the meanings assigned to them by Section 2(a) of the 1940 Act. In
addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is relaxed by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
13. COMPLIANCE WITH SECURITIES LAWS. The Trust represents that it is
registered as an open-end management investment company under the 1940 Act, and
agrees that it will comply with all the provisions of the 1940 Act and of the
rules and regulations thereunder. The Trust and the Distributor each agree to
comply with all of the applicable terms and provisions of the 1940 Act, the 1933
Act and, subject to the provisions of Section 4(d), all applicable "Blue Sky"
laws. The Distributor agrees to comply with all of the applicable terms and
provisions of the Securities Exchange Act of 1934.
14. NOTICES. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, to the Distributor and to the Fund on behalf of the Trust at
_______________________________.
15. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of __________.
16. NO SHAREHOLDER LIABILITY. The Distributor understands that the
obligations of this Agreement are not binding upon any shareholder of the Trust
<PAGE>
personally, but bind only the Trust's property; the Distributor represents that
it has notice of the provisions of the Declaration of Trust disclaiming
shareholder liability for acts or obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives and their respective corporate
seals to be hereunto affixed, as of the day and year first above written.
FIRST FUND DISTRIBUTORS, INC.
By:
-----------------------------
Attest:
- ------------------------
PROFESSIONALLY MANAGED PORTFOLIOS
By:
------------------------------
Attest:
- ------------------------
FORM OF OPINION LETTER
Law Offices of Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, California 94104?2635
Telephone (415) 835-1600
Facsimile (415) 217-5333
Internet www.phjw.com
______________, 1999
(415) 835B1600 27217.91123
www.phjw.com
Professionally Managed Portfolios
915 Broadway
New York, NY 10010
Re: LEONETTI EQUITY FUND
Ladies and Gentlemen:
We have acted as counsel to Professionally Managed Portfolios, a Massachusetts
business trust (the "Trust"),in connection with post-Effective Amendment to the
Trust's Registration Statement filed on Form N-1A with the Securities and
Exchange Commission (the "Post-Effective Amendment") and including
Post-Effective Amendment No. 62 relating to the issuance by the Trust of an
indefinite number of no par value shares of beneficial interest (the "Shares")
of Leonetti Equity Fund (the "Fund"), a series of the Trust.
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 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:
(a) 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 May 20, 1988 (filed on September 16,
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<PAGE>
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;
(b) 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;
(c) resolutions of the Trustees of the Trust adopted at a meeting on
_______________ authorizing the establishment of the Fund and the
issuance of its Shares.
(d) the Post-Effective Amendment; and
(e) 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 (Aspect 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 to partners
for the obligations or liabilities of the Trust. However, we also note 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 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.
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<PAGE>
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 Fund's Prospectus included in the
Post-Effective Amendment and in accordance with the Declaration of Trust, (ii)
all consideration for the Shares will be actually received by the Fund, and
(iii) all applicable securities laws will be complied with, then it is our
opinion that, when issued and sold by the Fund, the Shares will be legally
issued, fully paid and nonassessable.
This opinion is rendered to you in connection with the Post-Effective Amendment
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 the (i) reference to our firm as Legal Counsel in the
Prospectus included in the Post-Effective Amendment, and (ii) the filing of this
opinion as an exhibit to the Post-Effective Amendment.
Sincerely yours,
Paul, Hastings, Janofsky & Walker LLP
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