As Filed With the Securities and Exchange Commission on April 28, 2000
Securities Act File No. 33-12213
Investment Company Act File No. 811-5037
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post Effective Amendment No.95 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 97 [X]
(Check appropriate box or boxes)
PROFESSIONALLY MANAGED PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
915 Broadway
New York, NY 10010
(Address of Principal Executive Offices, including Zip Code)
(212) 633-9700
Registrant's Telephone Number, including Area Code:
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
----------
It is proposed that this filing will become effective (check appropriate box)
[X] Immediately upon filing pursuant to paragraph (b)
[ ] On ________________ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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MATRIX GROWTH FUND
MATRIX EMERGING GROWTH FUND,
EACH A SERIES OF PROFESSIONALLY MANAGED PORTFOLIOS
The Matrix Growth Fund seeks to provide investors with long-term growth of
capital, while conserving capital. The Fund will invest in the securities of
companies of any size.
The Matrix Emerging Growth Fund seeks to provide investors with long-term
capital appreciation. The Fund will invest primarily in the securities of
smaller companies.
These securities have not been approved or disapproved by the Securities
and Exchange Commission nor has the Commission passed upon the accuracy or
adequacy of this Prospectus. Any representation to the contrary is a criminal
offense.
The date of this Prospectus is April 28, 2000
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TABLE OF CONTENTS
An Overview of the Funds..................................................... 3
Performance.................................................................. 5
Fees and Expenses............................................................ 7
Investment Objectives and Principal Investment Strategies.................... 8
Principal Risks of Investing in the Funds.................................... 9
Investment Advisor........................................................... 10
Shareholder Information...................................................... 11
Pricing of Fund Shares....................................................... 15
Dividends and Distributions.................................................. 15
Tax Consequences............................................................. 16
Rule 12b-1 Fees.............................................................. 16
Financial Highlights......................................................... 17
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AN OVERVIEW OF THE FUNDS
THE FUNDS' INVESTMENT GOALS
MATRIX GROWTH FUND
The Growth Fund's primary investment goal is to seek long-term growth of
capital. The Growth Fund also seeks to preserve capital.
MATRIX EMERGING GROWTH FUND
This Emerging Growth Fund seeks long-term capital appreciation.
THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES
MATRIX GROWTH FUND
The Growth Fund will seek to achieve its investment goal by primarily investing
at least 65% of its assets in the common stocks of U.S. companies of any size.
In selecting investments the Advisor will invest in companies which it believes
have good prospects for rising earnings and stable or rising share prices.
MATRIX EMERGING GROWTH FUND
The Emerging Growth Fund will seek to achieve its investment goal by primarily
investing at least 65% of its assets in the common stocks U.S. companies. The
Fund will emphasize investments in smaller companies considered to be in the
emerging or developing growth phase. In selecting investments, the Advisor will
invest in companies which it believes have prospects for above-average growth
over an extended period of time.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
There is the risk that you could lose money on your investment in a Fund. This
could happen if any of the following events happen:
* The stock market goes down
* Interest rates go up
* Growth stocks fall out of favor with the stock market
* Stocks in a Fund's portfolio may not increase their earnings at the rate
anticipated because the Advisor's initial evaluation of the stock was
mistaken
* Developments occur which could have a negative effect on the value of
stocks of smaller companies in which the Emerging Growth Fund invest.
Investing in smaller companies involves greater risks than investing in
larger, more established companies.
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WHO MAY WANT TO INVEST IN THE FUNDS
The Funds 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 in exchange for a higher
potential of long-term growth
The Funds may not be appropriate for investors who:
* Need regular income
* Are pursuing a short-term investment goal
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PERFORMANCE
The following performance information indicates some of the risks of
investing in the Funds. The bar charts show how the Funds' total returns have
varied from year to year. The tables show the Funds' average returns over time
compared with broad-based market indices. This past performance will not
necessarily continue in the future.
MATRIX GROWTH FUND
CALENDAR YEAR TOTAL RETURNS (%)
[The following is the bar chart]
1990 - (4.51)
1991 - 34.18
1992 - 5.00
1993 - 9.25
1994 - (4.82)
1995 - 23.52
1996 - 17.93
1997 - 34.57
1998 - 20.44
1999 - 16.04%
[End of bar chart]
During the period shown in the bar chart, the Growth Fund's highest quarterly
return was 21.16% for the quarter ended June 30, 1997 and the lowest quarterly
return was -16.37% for the quarter ended September 30, 1990.
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1999
1 Year 5 Years 10 Years
------ ------- --------
Growth Fund 16.04% 22.32% 14.37%
S&P 500 Index* 21.04 28.56 18.21
- ----------
* The S&P 500 Index is an unmanaged index generally representative of the
market for the stocks of large-sized U.S. companies.
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MATRIX EMERGING GROWTH FUND
CALENDAR YEAR TOTAL RETURNS (%)
[The following is the bar chart]
1996 - 10.47
1997 - 16.58
1998 - (2.72)
1999 - 29.58%
[End of bar chart]
During the period shown in the bar chart, the Emerging Growth Fund's highest
quarterly return was 39.59% for the quarter ended December 31,1999 and the
lowest quarterly return was -23.45% for the quarter ended September 30, 1998.
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1999
Since Inception
1 Year (April 4, 1995)
------ ---------------
Emerging Growth Fund 29.58% 17.01%
Russell 2000 Index* 21.26 16.49
S&P 500 Index** 21.04 27.51
- ----------
* The Russell 2000 Index is composed of the 2,000 smallest stocks in the
Russell 3000 Index, and is widely regarded in the industry as the premier
measure of small cap stocks. The Russell 3000 Index is an index composed of
the 3,000 largest U.S. companies.
** The S&P 500 Index is an unmanaged index generally representative of the
market for the stocks of large sized U.S. companies.
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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 Funds.
SHAREHOLDER FEES
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases None
Maximum deferred sales charge (load) None
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from Fund assets)
Growth Fund Emerging Growth Fund
----------- --------------------
Management Fees 0.90% 0.90%
Distribution and Service
(12b-1) Fees 0.25% 0.25%
Other Expenses 0.83% 1.71%
---- ----
Total Annual Fund Operating Expenses 1.98% 2.86%
---- ----
Fee Reduction and/or Expense Reimbursement (0.23%)
(0.86%)
Net Expenses* 1.75% 2.00%
==== ====
- ----------
* The Advisor has contractually agreed to reduce its fees and/or pay expenses
of each Fund's total annual operating expenses (excluding interest and
taxes) to the net expense amounts shown. This contract has a one-year term,
renewable at the end of each fiscal year.
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EXAMPLE
This example is intended to help you compare the costs of investing in the Funds
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time periods
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 Five Years Ten Years
-------- ----------- ---------- ---------
Growth Fund $178 $599 $1,046 $2,288
Emerging Growth Fund $203 $805 $1,433 $3,124
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
MATRIX GROWTH FUND
The Matrix Growth Fund seeks long-term growth of capital as its primary
investment goal. The Fund also seeks to preserve capital. The Fund will invest
at least 65% of its assets in the common stocks of U.S. companies. The Fund may
also choose to invest in foreign securities, including American Depositary
Receipts ("ADRs").
Using a growth style, the Advisor selects the securities of companies that
it believes will have rising earnings and stable or rising share prices.
Earnings growth is evaluated relative to the earnings history of a company.
Price trends are also viewed relative to the long-term price behavior of a
company's shares.
The Advisor considers several factors in determining whether to sell a
stock in the Fund's portfolio. The Advisor may sell a stock when it fails to
meet earnings expectations, has become overvalued or, in the Advisor's opinion,
there has been a deterioration in the underlying fundamentals for future growth.
MATRIX EMERGING GROWTH FUND
The Matrix Emerging Growth Fund seeks long-term capital appreciation as its
investment goal. The Fund will invest at least 65% of its assets in the common
stocks of smaller emerging or developing U.S. companies with long-term growth
potential. The Fund may also invest in foreign securities, including American
Depositary Receipts.
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The Advisor uses the growth style in selecting stocks for the Fund's
portfolio. While economic forecasting and industry sector analysis play a part
in the research effort, the Advisor's stock selection process begins with an
individual company. This is often referred to as a bottom-up approach to
investing. From a group of companies that meet the Advisor's standards, the
Advisor selects the securities of those companies that it believes are capable
of increasing earnings over an extended period of time at an above average rate
and are in a sound financial position. The emphasis will be on companies that
operate in various fields of science or technology. The Advisor will also
consider companies in other areas that have developed innovative products or
services that in the Advisor's opinion have significant earnings growth
potential. Areas of particular interest will include, but not be limited to,
electronics, computers and services, communications equipment and services and
health care.
The Advisor considers several factors in determining whether to sell a
stock in the Fund's portfolio. The Advisor may sell a stock when it fails to
meet earnings expectations, it ceases to be an attractive investment in relation
to its peer group, or, in the Advisor's opinion, there has been a deterioration
in the underlying fundamentals for future growth.
Under normal market conditions, each Fund will stay fully invested in
stocks. However, a 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 a Fund not
achieving its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
The principal risks of investing in the Funds that may adversely affect a
Fund's net asset value or total return are discussed above in "Principal Risks
of Investing in the Funds." These risks are discussed in more detail below.
MANAGEMENT RISK. Management risk means that your investment in a Fund
varies with the success and failure of the Advisor's investment strategies and
the Advisor's research, analysis and security selection decisions. If the
Advisor's investment strategies do not produce the expected results, you could
lose money.
MARKET RISK. The principal risk of investing in a Fund is that the market
value of securities held by a Fund will 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 COMPANIES RISK. The Emerging Growth Fund may invest in smaller
companies. Investing in securities of smaller companies may involve greater risk
than investing in larger companies because they can be subject to more abrupt or
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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 share prices can be
extremely volatile.
SECTOR RISK. The Emerging Growth Fund may invest in companies that are in
the technology, communication or health care sectors. Companies in these sectors
are particularly vulnerable to rapidly changing technology, and relatively high
risks of obsolescence caused by rapid and significant scientific and
technological advances. In addition, companies that operate in this sector are
subject to extreme competition and may rapidly lose, or be unable to obtain
market share. The value of the Emerging Growth Fund's shares may be volatile and
fluctuate more than shares of a fund investing in a broader range of industries.
INVESTMENT ADVISOR
Sena Weller Rohs Williams, Inc. is the investment advisor to the Funds. The
Advisor's address is 300 Main Street, Cincinnati, OH 45020. The Advisor, whose
predecessor was established in 1901, provides investment management services to
mutual funds, individual and institutional investors with assets of
approximately $1.5 billion. The Advisor provides advice on buying and selling
securities. The investment advisor also furnishes the Funds with office space
and certain administrative services and provides most of the personnel needed by
the Funds. For its services, each Fund pays the Advisor a monthly management fee
based upon its average daily net assets. For the fiscal year ended December 31,
1999, the investment advisor received advisory fees of 0.66% of average daily
net assets, net of waiver, for the Growth Fund and 0.04% of average daily net
assets, net of waiver, for the Emerging Growth Fund.
PORTFOLIO MANAGERS
Peter H. Williams and Robert S. Castellini are responsible for the
day-to-day management of the Growth Fund's portfolio. Mr. Williams, Senior Vice
President of the Advisor has managed the Fund's portfolio since 1988. Mr.
Castellini joined the Advisor in 1996 and began managing the Fund's portfolio in
1998. From June 1994 to June 1996, he was employed by the investment brokerage
firm of Hilliard, Lyons.
Fred W. Weller and Michael E. Coombe are responsible for the day-to-day
management of the Emerging Growth Fund's portfolio. Mr. Weller, Senior Vice
President of the Advisor, has been associated with the Advisor since 1981. He
has managed the Advisor's emerging growth limited partnerships since 1981. Mr.
Coombe, Vice President of the Advisor, joined the Advisor in 1994. Prior to
that, he was associated with the investment management firm of Gradison &
Company.
FUND EXPENSES
Each Fund is responsible for its own operating expenses. The Advisor has
contractually agreed to reduce its fees and/or pay expenses of each Fund to
ensure that each Fund's aggregate annual operating expenses (excluding interest
and tax expenses) will not exceed the limits set forth in the Fees and Expenses
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Table. That agreement has a one-year term, renewable at the end of each fiscal
year. Any reduction in advisory fees or payment of expenses made by the Advisor
which are the Funds' obligation are subject to reimbursement by a Funds,
provided a Fund is able to effect such reimbursement and remain in compliance
with any applicable expense limitations.
SHAREHOLDER INFORMATION
HOW TO BUY SHARES
You may open a Fund account with $1,000 and add to your account at any time
with $100 or more. You may open a retirement plan account with $500 and add to
your account with $100 or more. You also may open a Fund account with $1,000 and
make subsequent monthly investments with $100 or more through the Automatic
Investment Check Plan. The minimum investment requirements may be waived from
time to time by the Funds.
You may purchase shares of the Funds 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 Funds reserve the
right to reject any purchase in whole or in part.
BY CHECK
If you are making an initial investment in a Fund, simply complete the
Application Form included with this Prospectus and mail it with a check (made
payable to "Matrix Growth Fund" or "Matrix Emerging Growth Fund") to:
Matrix Growth Fund OR
Matrix Emerging Growth Fund
c/o ICA Fund Services Corp.
4455 East Camelback Road
Suite 161E
Phoenix, AZ 85018
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-
576-8229) 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 "Matrix Growth Fund"
or "Matrix Emerging Growth Fund" in the envelope provided with your statement to
the address noted above. Your account number should be written on the check.
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BY WIRE
If you are making an initial investment in a Fund, before you wire funds
you should call the Transfer Agent at (800) 576-8229 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 Fund 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 #0420-001-3
Attn: Matrix Growth Fund OR Matrix Emerging Growth Fund
DDA #483897989 DDA #483897997
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 a Fund through certain brokers (and their
agents) that have made arrangements with a 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 Funds' Transfer Agent, and you
will pay or receive the next price calculated by a 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 Funds 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 Funds' prospectus.
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AUTOMATIC INVESTMENT CHECK PLAN
For your convenience, the Funds offer an Automatic Investment Check 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 $100. If you wish to enroll in this Plan,
please contact the Fund for an 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.
RETIREMENT PLANS
The Funds offer an Individual Retirement Account ("IRA") plan. You may
obtain information about opening an IRA account by calling (800) 576-8229. 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 Growth Fund and the Emerging
Growth Fund on any day the Funds and the New York Stock Exchange ("NYSE") are
open for business.
You may exchange your shares by simply sending a written request to the
Funds' 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.
If your account has telephone privileges, you may also exchange Fund shares
by calling the Transfer Agent at (800) 576-8229 between the hours of 9:00 a.m.
and 4:00 p.m. (Eastern time). 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 Funds 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 Funds 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. Redemption requests
for amounts of $5,000 or more require a signature guarantee. Call the Transfer
Agent for details. You should send your redemption request to:
Matrix Growth Fund OR
Matrix Emerging Growth Fund
c/o ICA Fund Services Corp.
4455 East Camelback Road
Suite 261E
Phoenix, AZ 85018
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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) 576-8229 before the close of trading on the NYSE. This is
normally 4:00 p.m. Eastern time. 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. 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 redeem shares by telephone.
When you establish telephone privileges, you are authorizing a Fund and its
Transfer Agent to act upon the telephone instructions of the person or persons
you have designated in your Application. Such persons may request that the
shares in your account be either exchanged or redeemed. Redemption proceeds will
be transferred to the bank account you have designated on your Account
Application.
Before executing an instruction received by telephone, the Funds 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 Funds and the
Transfer Agent follow these procedures, they will not be liable for any loss,
expense, or cost arising out of any telephone redemption or exchange request
that is reasonably believed to be genuine. This includes any fraudulent or
unauthorized request.
You may request telephone redemption privileges after your account is
opened by calling the Transfer Agent at (800) 576-8229 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, a Fund may delay payment of your redemption
proceeds for up to 15 days from purchase or until your check has cleared,
whichever occurs first.
Each Fund may redeem the shares in your account if the value of your
account is less than $1,000 as a result of redemptions you have made. This does
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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
$1,000 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 $1,000 before the Fund takes any action.
Each 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 a Fund would do so except in unusual circumstances. If either Fund
pays your redemption proceeds by a distribution of securities, you could incur
brokerage or other charges in converting the securities to cash.
SYSTEMATIC WITHDRAWAL PROGRAM
As another convenience, you may redeem your Fund shares through the
Automatic Withdrawal Program. If you elect this method 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 Funds. You may also elect to terminate your
participation in this Program at any time by writing to the Transfer Agent at:
ICA Fund Services Corp.
4455 East Camelback Road, Suite 261E
Phoenix, AZ 85018
PRICING OF FUND SHARES
The price of a Fund's shares is based on a Fund's net asset value ("NAV").
This is done by dividing the Fund's assets, minus its liabilities, by the number
of shares outstanding. A Fund's assets are the market value of securities held
in its portfolio, plus any cash and other assets. A Fund's liabilities are fees
and expenses owed by the Fund. The number of Fund shares outstanding is the
amount of shares that 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 NAV next calculated after your order is received by the Transfer
Agent in proper form. Orders are in proper form only after funds are converted
to U.S. funds.
The NAV of each 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
Each Fund will make distributions of dividends and capital gains, if any,
annually. Because of its investment strategies, each Fund expects that its
distributions will primarily consist of capital gains.
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All distributions will be invested in Fund shares unless you choose one of
the following options: (1) receive dividends in cash while reinvesting capital
gain distributions in additional Fund shares; or (2) receive all distributions
in cash. If you wish to change your distribution option, write to the Transfer
Agent in advance of the payment date for the distribution.
TAX CONSEQUENCES
Each 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.
RULE 12b-1 FEES
Each Fund has adopted a distribution plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Rule 12b-1 allows each Fund to pay distribution
fees for the sale and distribution of its shares and for services provided to
its shareholders. The annual distribution and service fee is 0.25% of each
fund's average daily net assets which is payable to the Advisor, as Distribution
Coordinator. Because these fees are paid out of the Fund's assets on an on-going
basis, over time these fees will increase the cost of your investment in Fund
shares and may cost you more than paying other types of sales charges.
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FINANCIAL HIGHLIGHTS
These tables show the Funds' financial performance for up to the past five
years. Certain information reflects financial results for a single Fund share.
"Total return" shows how much your investment in a Fund would have increased or
decreased during each period, assuming you had reinvested all dividends and
distributions. This information has been audited by Tait, Weller & Baker,
Independent Certified Public Accountants. Their reports and the Funds' financial
statements are included in the Annual Reports, which are available upon request.
The information for periods prior to December 31, 1996 was audited by other
independent accountants.
MATRIX GROWTH FUND
For a capital share outstanding throughout each period
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $20.14 $18.64 $15.09 $14.96 $13.45
------ ------ ------ ------ ------
Income from investment operations:
Net investment gain (loss) income (0.08) (0.07) (0.06) (0.01) 0.10
Net realized and unrealized gain on
investments 2.97 3.72 5.24 2.69 3.06
------ ------ ------ ------ ------
Total from investment operations 2.89 3.65 5.18 2.68 3.16
------ ------ ------ ------ ------
Less distributions:
From net investment income -- -- -- -- (0.10)
From net realized gains $(6.26) $(2.15) (1.63) (2.55) (1.55)
------ ------ ------ ------ ------
Total distributions $(6.26) $(2.15) (1.63) (2.55) (1.65)
Net asset value, end of period $16.77 $20.14 $18.64 $15.09 $14.96
====== ====== ====== ====== ======
Total return 16.04% 20.44% 34.57% 17.93% 23.52%
Ratios/supplemental data:
Net assets, end of year (millions) $ 13.3 $ 13.5 $ 12.6 $ 12.1 $ 12.3
Ratio of expenses to average net assets:
Before expense reimbursement 1.98% 2.00% 1.98% 1.99% 1.76%
After expense reimbursement 1.75% 1.75% 1.75% 1.75% 1.75%
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement (0.72)% (0.63)% (0.57)% (0.33)% 0.47%
After expense reimbursement (0.49)% (0.38)% (0.34)% (0.08)% 0.48%
Portfolio turnover rate 49% 1% -- -- 27%
</TABLE>
17
<PAGE>
MATRIX EMERGING GROWTH FUND
For a capital share outstanding throughout each period
<TABLE>
<CAPTION>
Year Ended December 31 April 4, 1995 *
------------------------------------- Through
1999 1998 1997 1996 December 31, 1995
---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.62 $16.33 $14.24 $12.98 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment loss (0.31) (0.26) (0.21) (0.18) (0.03)
Net realized and unrealized gain
(loss) on investments 4.93 (0.21) 2.56 1.54 3.01
------ ------ ------ ------ ------
Total from investment operations 4.62 (0.47) 2.35 1.36 2.98
------ ------ ------ ------ ------
Less distributions:
From net realized gains -- (0.24) (0.26) (0.10) --
Net asset value, end of period $20.24 $15.62 $16.33 $14.24 $12.98
====== ====== ====== ====== ======
Total return 29.58% (2.72)% 16.58% 10.47% 29.80%
Ratios/supplemental data:
Net assets, end of period (millions) $ 7.3 $ 6.8 $ 7.0 $ 5.7 $ 4.3
Ratio of expenses to average net assets:
Before expense reimbursement 2.86% 2.70% 2.71% 3.13% 3.43%+
After expense reimbursement 2.00% 2.00% 2.00% 2.00% 2.00%+
Ratio of net investment loss to
average net assets:
Before expense reimbursement (2.69)% (2.29)% (2.19)% (2.53)% (1.87)%+
After expense reimbursement (1.83)% (1.59)% (1.48)% (1.40)% (0.43)%+
Portfolio turnover rate 25% 25% 41% 30% 10%
</TABLE>
- ----------
* Commencement of operations.
+ Annualized.
18
<PAGE>
MATRIX GROWTH FUND
MATRIX EMERGING GROWTH FUND,
EACH A SERIES OF PROFESSIONALLY MANAGED PORTFOLIOS (THE "TRUST")
For investors who want more information about the Funds, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
the Funds' annual reports, you will find a discussion of market conditions and
investment strategies that significantly affected each Fund's performance during
its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds and is incorporated by reference into this
Prospectus.
You can get free copies of reports and the SAI, request other information and
discuss your questions about the Funds by contacting the Funds at:
ICA Fund Services Corp.
4455 East Camelback Road
Suite 261E
Phoenix, AZ 85018
(800) 576-8229
You can review and copy information including the Funds' Annual and Semi-Annual
Reports, SAI and other information 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
1-202-942-8090. Reports and other information about the Funds are also
available:
* Free of charge from the Commission's EDGAR database on the Commission's
Internet website at http://www.sec.gov., or
* For a fee, by writing to the Public Reference Room of the Commission,
Washington, DC 10549-0102, or
* For a fee, by electronic request at the following e-mail address:
[email protected].
(The Trust's SEC Investment Company Act
file number is 811-05037)
19
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
APRIL 28, 2000
MATRIX GROWTH FUND
MATRIX EMERGING GROWTH FUND
EACH A SERIES OF
PROFESSIONALLY MANAGED PORTFOLIOS
300 MAIN ST., CINCINNATI, OH 45202-4123
(513) 621-2875
(800) 576-8229
This Statement of Additional Information ("SAI") is not a prospectus and it
should be read in conjunction with the Prospectus dated April 28, 2000, as may
be revised, of the Matrix Growth Fund ("Growth Fund") and the Matrix Emerging
Growth Fund ("Emerging Growth Fund"), each a series of Professionally Managed
Portfolios (the "Trust"). The Growth Fund and the Emerging Growth Fund are
referred to herein collectively as the "Funds." Sena Weller Rohs Williams, Inc.
(the "Advisor") is the investment advisor to the Funds. A copy of the Funds'
Prospectus is available by calling the numbers listed above or (212) 633-9700.
TABLE OF CONTENTS
The Trust.................................................................. B-2
Investment Objectives and Policies......................................... B-2
Investment Restrictions.................................................... B-7
Distributions and Tax Information.......................................... B-9
Trustees and Executive Officers............................................ B-12
Code of Ethics............................................................. B-14
The Funds' Investment Advisor.............................................. B-14
The Funds' Administrator................................................... B-15
The Funds' Distributor..................................................... B-15
Execution of Portfolio Transactions........................................ B-16
Additional Purchase and Redemption Information............................. B-18
Determination of Share Price............................................... B-21
Performance Information.................................................... B-22
General Information........................................................ B-23
Financial Statements....................................................... B-25
Appendix................................................................... B-26
<PAGE>
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 Funds.
The Trust is registered with the SEC as a management investment company.
Such a registration does not involve supervision of the management or policies
of the Funds. The Prospectus of the Funds and this 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 OBJECTIVES AND POLICIES
The Matrix Growth Fund is a mutual fund with the investment objective of
long-term growth of capital with a secondary objective of conserving principal.
The Matrix Emerging Growth Fund is a mutual fund with the investment objective
of seeking long-term capital appreciation. Each Fund is diversified, which under
applicable federal law means that as to 75% of its total assets (1) no more than
5% may be invested in the securities of a single issuer, and (2) it may hold no
more than 10% of the outstanding voting securities of a single issuer. The
following discussion supplements the discussion of the Funds' investment
objectives and policies as set forth in the Prospectus. There can be no
assurance the objective of either Fund will be attained.
REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements. Under such agreements, the
seller of the security agrees to repurchase it at a mutually agreed upon time
and price. The repurchase price may be higher than the purchase price, the
difference being income to the Funds, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Funds together with the
repurchase price on repurchase. In either case, the income to the Funds is
unrelated to the interest rate on the U.S. Government security itself. Such
repurchase agreements will be made only with banks with assets of $500 million
or more that are insured by the Federal Deposit Insurance Corporation or with
Government securities dealers recognized by the Federal Reserve Board and
registered as broker-dealers with the Securities and Exchange Commission ("SEC")
or exempt from such registration. The Funds will generally enter into repurchase
agreements of short durations, from overnight to one week, although the
underlying securities generally have longer maturities. Each Fund may not enter
into a repurchase agreement with more than seven days to maturity if, as a
result, more than 15% of the value of 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 Funds to the seller of the
U.S. Government security subject to the repurchase agreement. It is not clear
whether a court would consider the U.S. Government security acquired by the
B-2
<PAGE>
Funds subject to a repurchase agreement as being owned by the Funds or as being
collateral for a loan by the Funds to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the U.S. Government security before its repurchase under a repurchase
agreement, the Funds may encounter delays and incur costs before being able to
sell the security. Delays may involve loss of interest or a decline in price of
the U.S. Government security. If a court characterizes the transaction as a loan
and the Funds have not perfected a security interest in the U.S. Government
security, the Funds may be required to return the security to the seller's
estate and be treated as an unsecured creditor of the seller. As an unsecured
creditor, the Funds would be at the risk of losing some or all of the principal
and income involved in the transaction. As with any unsecured debt instrument
purchased for the Funds, the 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, a Fund
will always receive as collateral for any repurchase agreement to which it is a
party securities acceptable to it, the market value of which is equal to at
least 100% of the amount invested by the Funds plus accrued interest, and the
Funds will make payment against such securities only upon physical delivery or
evidence of book entry transfer to the account of its Custodian. If the market
value of the U.S. Government security subject to the repurchase agreement
becomes less than the repurchase price (including interest), the Funds will
direct the seller of the U.S. Government security to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement will equal or exceed the repurchase price. It is possible that the
Funds will be unsuccessful in seeking to impose on the seller a contractual
obligation to deliver additional securities.
WHEN-ISSUED SECURITIES
The Funds may from time to time purchase securities on a "when-issued"
basis. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
for 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 Funds to the issuer and no interest accrues to the Funds.
To the extent that assets of the Funds are held in cash pending the settlement
of a purchase of securities, the Funds would earn no income; however, it is the
Funds' intention to be fully invested to the extent practicable and subject to
the policies stated above. While when-issued securities may be sold prior to the
settlement date, the Funds intend to purchase them with the purpose of actually
acquiring them unless a sale appears desirable for investment reasons. At the
time the Funds make the commitment to purchase a security on a when-issued
basis, they will record the transaction and reflect the value of the security in
determining their net asset value. The market value of the when-issued
securities may be more or less than the purchase price. The Funds do not believe
that their net asset value or income will be adversely affected by their
purchase of securities on a when-issued basis. The Funds will establish a
segregated account with their Custodian in which they will maintain liquid
assets equal in value to commitments for when-issued securities. Such segregated
assets either will mature or, if necessary, be sold on or before the settlement
date.
B-3
<PAGE>
ILLIQUID SECURITIES
Neither Fund may 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 each 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 a 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. A 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.
FOREIGN SECURITIES
The Funds may invest in foreign securities that are not publicly traded in
the United States. The Funds may invest without limitation in securities of
foreign issuers which are listed and traded on a domestic national securities
exchange.
DEPOSITARY RECEIPTS. Securities of foreign issuers may be held by the Funds
in the form of American Depositary Receipts and European Depositary Receipts
("ADRs" and "EDRs"). These are certificates evidencing ownership of shares of a
foreign-based issuer held in trust by a bank or similar financial institution.
B-4
<PAGE>
Designed for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national market and currencies.
Foreign investments can involve significant risks in addition to the risks
inherent in U.S. investments, including the following:.
POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the US economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, diversification and balance of payments
position. The internal politics of some foreign countries may not be as stable
as those of the United States. Governments in some foreign countries also
continue to participate to a significant degree, through ownership interest or
regulation, in their respective economies. Action by these governments could
include restrictions on foreign investment, nationalization, expropriation of
goods or imposition of taxes, and could have a significant effect on market
prices of securities and payment of interest. The economies of many foreign
countries are heavily dependent upon international trade and are affected by the
trade policies and economic conditions of their trading partners. If these
trading partners enacted protectionist trade legislation, it could have a
significant adverse effect upon the securities markets of such countries.
CURRENCY FLUCTUATIONS. Each Fund may invest in securities denominated in
foreign currencies. A change in the value of any such currency against the U.S.
dollar will result in a corresponding change in the U.S. dollar value of the
Fund's assets denominated in that currency. Such changes will also affect the
Fund's income. The value of the Fund's assets may also be affected significantly
by currency restrictions and exchange control regulations enacted from time to
time.
EURO CONVERSION. Several European countries adopted a single uniform
currency known as the "euro," effective January 1, 1999. The euro conversion,
that will take place over a several year period, could have potential adverse
effects on a Fund's ability to value its portfolio holdings in foreign
securities, and could increase the costs associated with the Fund's operations.
The Funds and the Advisor are working with providers of services to the Funds in
the areas of clearance and settlement of trade to avoid any material impact on
the Funds due to the euro conversion; there can be no assurance, however, that
the steps taken will be sufficient to avoid any adverse impact on the Funds.
MARKET CHARACTERISTICS. The Advisor expects that many foreign securities in
which a Fund invests will be purchased in over-the-counter markets or on
exchanges located in the countries in which the principal offices of the issuers
of the various securities are located, if that is the best available market.
Foreign exchanges and markets may be more volatile than those in the United
States. While growing, they usually have substantially less volume than U.S.
markets, and the Funds' foreign securities may be less liquid and more volatile
than U.S. securities. Also, settlement practices for transactions in foreign
markets may differ from those in United States markets, and may include delays
beyond periods customary in the United States. Foreign security trading
practices, including those involving securities settlement where Fund assets may
B-5
<PAGE>
be released prior to receipt of payment or securities, may expose the Funds to
increased risk in the event of a failed trade or the insolvency of a foreign
broker-dealer.
LEGAL AND REGULATORY MATTERS. Certain foreign countries may have less
supervision of securities markets, brokers and issuers of securities, and less
financial information available to issuers, than is available in the United
States.
TAXES. The interest and dividends payable on some of the Funds' foreign
portfolio securities may be subject to foreign withholding taxes, thus reducing
the net amount of income available for distribution to Fund shareholders.
COSTS. To the extent that a Fund invests in foreign securities, its expense
ratio is likely to be higher than those of investment companies investing only
in domestic securities, since the cost of maintaining the custody of foreign
securities is higher.
SHORT-TERM INVESTMENTS
Each Fund may invest in any of the following securities and instruments:
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS. Each 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 a 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, a
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. Each 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.
B-6
<PAGE>
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.
OPTIONS TRANSACTIONS
The Growth Fund may at times purchase index put options, principally to
protect against declines in the value of the common stocks held in the Fund's
portfolio or to attempt to retain unrealized gains in the value of the
securities held.
When the Fund purchases a put, it pays a premium in return for the right to
sell the underlying security at the exercise price at any time during the option
period. If any put is not exercised or sold, it will become worthless on its
expiration date. The Fund's option positions may be closed out only on an
exchange which provides a secondary market for options of the same series, but
there can be no assurance that a liquid secondary market will exist at a given
time for any particular option.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation has the authority to
permit other, generally comparable securities to be delivered to satisfy option
exercise obligations. If the Options Clearing Corporation exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and
rate movements may take place in the underlying markets that cannot be reflected
in the options markets. The purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by the
Funds and (unless otherwise noted) are fundamental and cannot be changed without
the affirmative vote of a majority of the Funds' outstanding voting securities
as defined in the 1940 Act. Neither Fund may:
1. Make loans to others, except (a) through the purchase of debt securities
in accordance with its investment objectives and policies, (b) through the
lending of its portfolio securities as described above and in its Prospectus, or
(c) to the extent the entry into a repurchase agreement is deemed to be a loan.
B-7
<PAGE>
2. (a) Borrow money, except temporarily for extraordinary or emergency
purposes from a bank and then not in excess of 10% of its total assets (at the
lower of cost or fair market value); any such borrowing will be made only if
immediately thereafter there is an asset coverage of at least 300% of all
borrowings and no additional investments may be made while any borrowings are in
excess of 5% of total assets.
(b) Mortgage, pledge or hypothecate any of its assets except in connection
with any such borrowings.
3. Purchase securities on margin, participate on a joint or joint and
several basis in any securities trading account, or underwrite securities. (Does
not preclude the Funds from obtaining such short-term credit as may be necessary
for the clearance of purchases and sales of its portfolio securities.)
4. Purchase or sell real estate, commodities or commodity contracts (As a
matter of operating policy, the Board of Trustees may in the future authorize
the Funds to engage in certain activities regarding futures contracts for bona
fide hedging purposes; any such authorization will be accompanied by appropriate
notification to shareholders).
5. Invest more than 25% of the market value of its assets in the securities
of companies engaged in any one industry. (Does not apply to investment in the
securities of the U.S. Government, its agencies or instrumentalities.)
6. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Funds from (a) making any
permitted borrowings, mortgages or pledges, or (b) entering into repurchase
transactions.
7. Invest in any issuer for purposes of exercising control or management.
8. Buy or sell interests in oil, gas, mineral exploration or development
programs or leases, or real estate, provided that this restriction does not
preclude the investment in marketable securities of issuers engaged in real
estate related activities.
9. With respect to 75% of its total assets, invest more than 5% of its
total assets in securities of a single issuer or hold more than 10% of the
voting securities of such issuer, except that this restriction does not apply to
investment in the securities of the U.S. Government, its agencies or
instrumentalities.
The Funds observe the following policies, which are not deemed fundamental
and which may be changed without shareholder vote. Neither Fund may:
10. Invest in securities of other investment companies which would result
in the Funds owning more than 3% of the outstanding voting securities of any one
such investment company, the Funds owning securities of another investment
B-8
<PAGE>
company having an aggregate value in excess of 5% of the value of the Funds'
total assets, or the Funds owning securities of investment companies in the
aggregate which would exceed 10% of the value of the Funds' total assets.
11. Invest, in the aggregate, more than 15% of its net assets in securities
with legal or contractual restrictions on resale, securities which are not
readily marketable and repurchase agreements with more than seven days to
maturity.
If a percentage restriction is adhered to at the time of investment, a
subsequent increase or decrease in a percentage resulting from a change in the
values of assets will not constitute a violation of that restriction, except
with respect to borrowing and illiquid securities, or as otherwise 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, as described in the
Prospectus after the conclusion of the Funds' fiscal year (December 31). Also,
the Funds expect to distribute any undistributed net investment income on or
about December 31 of each year. Any net capital gains realized through the
period ended October 31 of each year will also be distributed by December 31 of
each year.
Each distribution by the Funds is accompanied by a brief explanation of the
form and character of the distribution. In January of each year the Funds will
issue to each shareholder a statement of the federal income tax status of all
distributions.
TAX INFORMATION
Each series of the Trust is treated as a separate entity for federal income
tax purposes. Each Fund intends to continue to qualify and elect to be treated
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986 (the "Code"), provided it complies with all applicable requirements
regarding the source of its income, diversification of its assets and timing of
distributions. Each 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, each 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.
B-9
<PAGE>
Each 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 Funds.
Distributions of net investment income and net short-term capital gains are
taxable to shareholders as ordinary income. In the case of corporate
shareholders, a portion of the distributions may qualify for the intercorporate
dividends-received deduction to the extent the Funds designate the amount
distributed as a qualifying dividend. This designed amount cannot, however,
exceed the aggregate amount of qualifying dividends received by the Funds for
their taxable year. In view of the Funds' investment policy, it is expected that
dividends from domestic corporations will be part of the Funds' gross income and
that, accordingly, part of the distributions by the Funds may be eligible for
the dividends-received deduction for corporate shareholders. However, the
portion of a Fund's gross income attributable to qualifying dividends is largely
dependent on that Fund's investment activities for a particular year and
therefore cannot be predicted with any certainty. The deduction may be reduced
or eliminated if the Fund shares held by a corporate investor are treated as
debt-financed or are held for less than 46 days.
Any long-term capital gain distributions are taxable to shareholders as
long-term capital gains regardless of the length of time shares have been held.
Capital gains distributions are not eligible for the dividends-received
deduction referred to in the previous paragraph. Distributions of any ordinary
income and net realized capital gains will be taxable as described above,
whether received in shares or in cash. Shareholders who choose to receive
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share so received equal to the net asset
value of a share on the reinvestment date. Distributions are generally taxable
when received. However, distributions declared in October, November or December
to shareholders of record on a date in such a month and paid the following
January are taxable as if received on December 31. Distributions are includable
in alternative minimum taxable income in computing a shareholder's liability for
the alternative minimum tax.
A redemption or exchange of Fund shares may result in recognition of a
taxable gain or loss. Any loss realized upon a redemption or exchange of shares
within six months from the date of their purchase will be treated as a long-term
capital loss to the extent of any amounts treated as distributions of long-term
capital gains during such six-month period. In determining gain or loss from an
exchange of Fund shares for shares of another mutual fund, the sales charge
incurred in purchasing the shares that are surrendered will be excluded from
their tax basis to the extent that a sales charge that would otherwise be
imposed in the purchase of the shares received in the exchange is reduced. Any
portion of a sales charge excluded from the basis of the shares surrendered will
be added to the basis of the shares received. Any loss realized upon a
redemption or exchange may be disallowed under certain wash sale rules to the
extent shares of the same Funds are purchased (through reinvestment of
distributions or otherwise) within 30 days before or after the redemption or
exchange.
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Under the Code, the Funds 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 Internal Revenue Code, distributions
of any taxable income and capital gains and proceeds from the redemption of Fund
shares may be subject to withholding of federal income tax at the rate of 31
percent in the case of non-exempt shareholders who fail to furnish the Funds
with their taxpayer identification numbers and with required certifications
regarding their status under the federal income tax law. If the withholding
provisions are applicable, any such distributions and proceeds, whether taken in
cash or reinvested in additional shares, will be reduced by the amounts required
to be withheld. Corporate and other exempt shareholders should provide the Funds
with their taxpayer identification numbers or certify their exempt status in
order to avoid possible erroneous application of backup withholding. The Funds
reserve the right to refuse to open an account for any person failing to provide
a certified taxpayer identification number.
The Funds will not be subject to corporate income tax in the Commonwealth
of Massachusetts as long as they qualify as regulated investment companies for
federal income tax purposes. Distributions and the transactions referred to in
the preceding paragraphs may be subject to state and local income taxes, and the
tax treatment thereof may differ from the federal income tax treatment.
The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Funds, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income.
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 Funds and certain shareholders therein, and, as
such, is subject to change. In particular, the consequences of an investment in
shares of the Funds 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.
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<PAGE>
TRUSTEES AND EXECUTIVE OFFICERS
The Trustees of the Trust, who were elected for an indefinite term by the
initial shareholders of the Trust, are responsible for the overall management of
the Trust, including general supervision and review of the investment activities
of the Funds. The Trustees, in turn, elect the officers of the Trust, who are
responsible for administering the day-to-day operations of the Trust and its
separate series. The current Trustees and officers, their affiliations, dates of
birth and principal occupations for the past five years are set forth below.
Steven J. Paggioli,* 04/03/50 President and Trustee
915 Broadway, New York, New York 10010. Executive Vice President, The Wadsworth
Group (consultants) since 1986; Executive Vice President of Investment Company
Administration, L.L.C. ("ICA") (mutual fund administrator and the Trust's
administrator),and Vice President of First Fund Distributors, Inc. ("FFD") (a
registered broker-dealer and the Funds' Distributor) since 1990.
Dorothy A. Berry, 08/12/43 Chairman and Trustee
14 Five Roses East, Ancram, NY 12502. President, Talon Industries (venture
capital and business consulting); formerly Chief Operating Officer, Integrated
Asset Management (investment advisor and manager) and formerly President, Value
Line, Inc., (investment advisory and financial publishing firm).
Wallace L. Cook 09/10/39 Trustee
One Peabody Lane, Darien, CT 06820. Retired. Formerly Senior Vice President,
Rockefeller Trust Co. Financial Counselor, Rockefeller & Co.
Carl A. Froebel 05/23/38 Trustee
2 Crown Cove Lane, Savannah, GA 31411. Private Investor. Formerly Managing
Director, Premier Solutions, Ltd. Formerly President and Founder, National
Investor Data Services, Inc. (investment related computer software).
Rowley W.P. Redington 06/01/44 Trustee
1191 Valley Road, Clifton, New Jersey 07103. President; Intertech (consumer
electronics and computer service and marketing); formerly Vice President, PRS of
New Jersey, Inc. (management consulting), and Chief Executive Officer, Rowley
Associates (consultants).
B-12
<PAGE>
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
since June, 1993.
Robert H. Wadsworth* 01/25/40 Vice President
4455 E. Camelback Road, Suite 261E, Phoenix, Arizona 85018. President of The
Wadsworth Group since 1982, President of ICA and FFD since 1990.
* Indicates an "interested person" of the Trust as defined in the 1940 Act.
Set forth below is the rate of compensation received by the following
Trustees from all 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
During the fiscal year ended December 31, 1999, trustees fees and expenses
of $5,343 were allocated to the Growth Fund and $4,224 to the Emerging Growth
Fund. As of the date of this SAI, the Trustees and officers of the Trust as a
group owned less than 1% of each of the Fund's outstanding shares.
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<PAGE>
THE FUNDS' INVESTMENT ADVISOR
As stated in the Prospectus, investment advisory services are provided to
the Funds by Sena Weller Rohs Williams, Inc. (the "Advisor") pursuant to an
Investment Advisory Agreement (the "Agreement"). As compensation, each 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 0.9% of the first $50 million
of the Fund's average daily net assets, 0.7% of the Fund's average daily net
assets in excess of $50 million and up to $100 million and 0.6% of the Fund's
average daily net assets in excess of $100 million.
The Agreement continues in effect for successive annual periods so long as
such continuation is approved at least annually by the vote of (1) the Board of
Trustees of the Trust (or a majority of the outstanding shares of the Funds to
which the Agreement applies), and (2) a majority of the Trustees who are not
interested persons of any party to the Agreement, in each case cast in person at
a meeting called for the purpose of voting on such approval. The Agreement may
be terminated at any time, without penalty, by either party to the Agreement
upon sixty days' written notice and is automatically terminated in the event of
its "assignment," as defined in the 1940 Act.
During the fiscal years ended December 31, 1999, 1998 and 1997, the Growth
Fund paid advisory fees of $115,056, $118,473 and $104,356, respectively. For
the same periods, the Advisor reimbursed operating expenses in the amount of
$30,134, $33,090 and $26,619, respectively, in accordance with its undertaking
to limit the Fund's expenses to 1.75% annually.
During the fiscal years ended December 31, 1999, 1998 and 1997, the
Emerging Growth Fund paid advisory fees of $54,784, $64,626 and $57,805,
respectively. For the same periods, the Advisor reimbursed operating expenses in
the amount of $52,252, $50,214 and $40,592, respectively, in accordance with its
undertaking to limit the Fund's expenses to 2.00% annually.
THE FUNDS' ADMINISTRATOR
The Funds have an Administration Agreement with Investment Company
Administration, LLC (the "Administrator"), a corporation partly owned and
controlled by Messrs. 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 Funds; prepare all
required filings necessary to maintain the Funds' qualification and/or
registration to sell shares in all states where the Funds currently do, or
intends to do business; coordinate the preparation, printing and mailing of all
materials (e.g., Annual Reports) required to be sent to shareholders; coordinate
the preparation and payment of Fund-related expenses; monitor and oversee the
activities of the Funds' servicing agents (i.e., transfer agent, custodian, fund
accountants, etc.); review and adjust as necessary the Funds' daily expense
accruals; and perform such additional services as may be agreed upon by the
Funds and the Administrator. For its services, the Administrator receives a
monthly fee at the following annual rate:
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<PAGE>
Average net assets Fee or Fee rate
- ------------------ ---------------
under $15million $30,000
$15 million to $50 million 0.20% of average net assets
$50 million to $100 million 0.15% of average net assets
$100 million to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
For each of the fiscal years ended December 31, 1999, 1998 and 1997, the
Administrator received fees of $30,000 from each Fund.
THE FUNDS' DISTRIBUTOR
Reynolds, DeWitt Securities Company, (the "Distributor"), an affiliate of
the Advisor, acts as the Funds' principal underwriter in a continuous public
offering of the Funds' shares. The Distribution Agreement between the Funds and
the Distributor continues in effect from year to year if approved at least
annually by (i) the Board of Trustees or the vote of a majority of the
outstanding shares of the Funds (as defined in the 1940 Act) and (ii) a majority
of the Trustees who are not interested persons of any such party, in each case
cast in person at a meeting called for the purpose of voting on such approval.
The Distribution Agreement may be terminated without penalty by the parties
thereto , upon sixty days' written notice, and is automatically terminated in
the event of its assignment as defined in the 1940 Act.
The Funds have adopted a Distribution Plan in accordance with Rule 12b-1
under the 1940 Act. The Plan provides that the Funds will pay a fee to the
Advisor, as Distribution COORDINATOR, at an annual rate of up to 0.25% of the
average daily net assets of each Fund. The fee is paid to the Advisor, as
Distribution Coordinator, as reimbursement for or in anticipation of, expenses
incurred for distribution related activities. Expenses permitted to be paid by
each Fund under its Plan include: preparation, printing and mailing or
prospectuses, shareholder reports such as semi-annual and annual reports,
performance reports and newsletters; sales literature and other promotional
material to prospective investors; direct mail solicitation; advertising; public
relations; compensation of sales personnel, advisors or other third parties for
their assistance with respect to the distribution of the Funds' shares; payments
to financial intermediaries for shareholder support; administrative and
accounting services with respect to the shareholders of the Fund; and such other
expenses as may be approved from time to time by the Board of Trustees.
The Plan allows excess distribution expenses to be carried forward by the
Advisor, as Distribution Coordinator, and resubmitted for payment by a Fund in a
subsequent fiscal year provided that (i) distribution expenses cannot be carried
forward for more than three years following initial submission; (ii) the Board
of Trustees has made a determination at the time of initial submission that the
distribution expenses are appropriate to be carried forward; and (iii) the Board
of Trustees makes a further determination, at the time any distribution expenses
which have been carried forward are resubmitted for payment, to the effect that
B-15
<PAGE>
payment at the time is appropriate, consistent with the objectives of the Plan
and in the current best interests of shareholders.
During the fiscal year ended December 31, 1999, the Growth Fund paid
distribution fees of $31,960 of which $18,321 was used to compensate sales
personnel, $13,460 was used to compensate broker-dealers and $179 paid for
printing and postage.
During the fiscal year ended December 31, 1999, the Emerging Growth Fund
paid distribution fees of $15,218, of which $9,163 was used to compensate sales
personnel, $5,890 was used to compensate broker-dealers and $164 paid for
printing and postage.
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Advisor determines which
securities are to be purchased and sold by the Funds and which broker-dealers
will be used to execute the Funds' portfolio transactions. Purchases and sales
of securities in the over-the-counter market will be executed directly with a
"market-maker" unless, in the opinion of the Advisor, a better price and
execution can otherwise be obtained by using a broker for the transaction.
Purchases of portfolio securities for the Funds also may be made directly
from issuers or from underwriters. Where possible, purchase and sale
transactions will be made through dealers (including banks) which specialize in
the types of securities which the Funds will be holding, unless better
executions are available elsewhere. Dealers and underwriters usually act as
principal for their own account. Purchases from underwriters will include a
concession paid by the issuer to the underwriter and purchases from dealers will
include the spread between the bid and the asked price. If the execution and
price offered by more than one broker, dealer or underwriter are comparable, the
order may be allocated to a broker, dealer or underwriter that has provided
research or other services as discussed below.
In placing portfolio transactions, the Advisor will use its best efforts to
choose a broker-dealer capable of providing the services necessary to obtain the
most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm's risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that more
than one broker-dealer can offer the most favorable price and execution
available, consideration may be given to those broker-dealers which furnish or
supply research and statistical information to the Advisor that it may lawfully
and appropriately use in its investment advisory capacities, as well as provide
other services in addition to execution services. The Advisor considers such
information, which is in addition to and not in lieu of the services required to
be performed by it under its Agreement with the Funds, to be useful in varying
degrees, but of indeterminable value. Portfolio transactions may be placed with
broker-dealers who sell shares of the Funds subject to rules adopted by the
National Association of Securities Dealers, Inc.
B-16
<PAGE>
While it is the Funds' general policy to seek first to obtain the most
favorable price and execution available, in selecting a broker-dealer to execute
portfolio transactions for the Funds, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services to the Funds or to the
Advisor, even if the specific services are not directly useful to the Funds 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
Funds may therefore pay a higher commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services, provided
that the amount of such commission or spread has been determined in good faith
by the Advisor to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. The standard of reasonableness
is to be measured in light of the Advisor's overall responsibilities to the
Funds.
Investment decisions for the Funds are made independently from those of
other client accounts or mutual Funds managed or advised by the Advisor.
Nevertheless, it is possible that at times identical securities will be
acceptable for both the Funds and one or more of such client accounts. In such
event, the position of the Funds and such client account(s) in the same issuer
may vary and the length of time that each may choose to hold its investment in
the same issuer may likewise vary. However, to the extent any of these client
accounts seeks to acquire the same security as the Funds at the same time, the
Funds may not be able to acquire as large a portion of such security as it
desires, or it may have to pay a higher price or obtain a lower yield for such
security. Similarly, the Funds may not be able to obtain as high a price for, or
as large an execution of, an order to sell any particular security at the same
time. If one or more of such client accounts simultaneously purchases or sells
the same security that the Funds are purchasing or selling, each day's
transactions in such security will be allocated between the Funds and all such
client accounts in a manner deemed equitable by the 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 Funds are concerned. In other
cases, however, it is believed that the ability of the Funds to participate in
volume transactions may produce better executions for the Funds.
The Funds do not place securities transactions through brokers solely for
selling shares of the Funds, although the Funds may consider the sale of shares
as a factor in allocating brokerage. However, as stated above, broker-dealers
who execute brokerage transactions may effect purchases of shares of the Funds
for their customers.
For the fiscal year ended December 31, 1997, the Growth Fund paid $7,012 in
brokerage commissions, of which $240 was paid to firms for research, statistical
or other services provided to the Advisor. The fiscal year ended December 31,
1997, the Emerging Growth Fund paid $4,420 in brokerage commissions, of which
$2,231 was paid to firms for research, statistical or other services provided to
the Advisor.
For the fiscal year ended December 31, 1998, the Growth Fund and Emerging
Growth Fund paid $1,940 and $2,687, respectively, in brokerage commissions.
B-17
<PAGE>
For the fiscal year ended December 31, 1999, the Growth Fund paid $11,315
in brokerage commissions, of which $2,110 was paid to firms for research,
statistical or other services provided to the Advisor. The fiscal year ended
December 31, 1999, the Emerging Growth Fund paid $2,174 in brokerage
commissions, none of which was paid to firms for research, statistical or other
services provided to the Advisor
PORTFOLIO TURNOVER
Although the Funds 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 a 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 "Execution of Portfolio
Transactions." Growth Fund's portfolio turnover rate for the fiscal years ended
December 31, 1999 and 1998 was 49% and 1%, respectively. Emerging Growth Fund's
portfolio turnover rate for the fiscal years ended December 31, 1999 and 1998
was 25% and 25%, respectively. The Growth Fund enjoyed an unusual stability of
holdings in the 1997-1998 period. The individual stocks in each industry group
maintained satisfactory earnings growth and price performance to persist as
attractive holdings and hence portfolio turnover was unusually low. These
conditions began to change in early 1999, primarily as a reflection of the
accelerating earnings growth of technology companies particularly. Turnover in
1999 was hence much higher as the Advisor rebalanced the Fund to increase the
presence of companies with superior earnings growth.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The information provided below supplements the information contained in the
Funds' Prospectus regarding the purchase and redemption of Fund shares.
HOW TO BUY SHARES
You may purchase shares of the Funds from selected securities brokers,
dealers or financial intermediaries. Investors should contact these agents
directly for appropriate instructions, as well as information pertaining to
accounts and any service or transaction fees that may be charged by those
agents. Purchase orders through securities brokers, dealers and other financial
intermediaries are effected at the next-determined net asset value after receipt
of the order by such agent before the Funds' daily cutoff time. Orders received
after that time will be purchased at the next-determined net asset value.
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. Orders are in proper form only after funds are
converted to U.S. funds.
B-18
<PAGE>
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.
If you are considering redeeming, exchanging or transferring shares to
another person shortly after purchase, you should pay for those shares with a
certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Funds may delay payment until the purchase price of those shares
has been collected or. To eliminate the need for safekeeping, the Funds will not
issue certificates for your shares unless you request them.
The Trust reserves the right in its sole discretion (i) to suspend the
continued offering of each Fund's shares, (ii) to reject purchase orders in
whole or in part when in the judgment of the Advisor or the Distributor such
rejection is in the best interest of the Fund, and (iii) to reduce or waive the
minimum for initial and subsequent investments for certain fiduciary accounts,
for employees of the Advisor or under circumstances where certain economies can
be achieved in sales of a Fund's shares.
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.
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 also require a signature guarantee. The
Funds 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.
B-19
<PAGE>
DELIVERY OF REDEMPTION PROCEEDS
Payments to shareholders for shares of the Funds redeemed directly from the
Funds will be made as promptly as possible but no later than seven days after
receipt by the Funds' Transfer Agent of the written request in proper form, with
the appropriate documentation as stated in the Prospectus, except that the Funds
may suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the 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 Funds not reasonably practicable; or (c) for such other period
as the SEC may permit for the protection of the Funds' shareholders. Under
unusual circumstances, a 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 Funds' 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, a
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
for services, including purchasing, exchanging 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, a 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 Funds nor their 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.
B-20
<PAGE>
REDEMPTIONS-IN-KIND
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 (in excess of the lesser of (i) $250,000 or (ii) 1% of a Fund=s assets).
Each Fund has reserved the right to pay the redemption price of its shares in
excess of the amounts specified by the rule, 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.
AUTOMATIC INVESTMENT CHECK PLAN
As discussed in the Prospectus, the Funds provide an Automatic Investment
Check Plan for the convenience of investors who wish to purchase shares of the
Funds on a regular basis. All record keeping and custodial costs of the
Automatic Investment Check Plan are paid by the Funds. The market value of the
Funds' shares is subject to fluctuation, so before undertaking any plan for
systematic investment, the investor should keep in mind that this plan does not
assure a profit nor protect against depreciation in declining markets.
DETERMINATION OF SHARE PRICE
As noted in the Prospectus, the net asset value and offering price of
shares of the Funds will be determined once daily as of the close of public
trading on the NYSE (normally 4:00 p.m. Eastern time) on each day that the NYSE
is open for trading. The Funds do not expect to determine the net asset value of
their 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 a 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 Funds' assets for calculating net asset value, readily
marketable portfolio securities listed on a national securities exchange or on
NASDAQ are valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such exchange or on
NASDAQ on such day, the security is valued at the closing bid price on such day.
Readily marketable securities traded only in the over-the-counter market and not
on NASDAQ are valued at the current or last bid price. If no bid is quoted on
such day, the security is valued by such method as the Board of Trustees of the
Trust shall determine in good faith to reflect the security's fair value. All
other assets of each Fund are valued in such manner as the Board of Trustees in
good faith deems appropriate to reflect their fair value.
The net asset value per share of the Funds is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
which includes accrued but undistributed income; the resulting net assets are
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<PAGE>
divided by the number of shares of the Funds outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
PERFORMANCE INFORMATION
From time to time, the Funds may state their total return in advertisements
and investor communications. Total return may be stated for any relevant period
as specified in the advertisement or communication. Any statements of total
return will be accompanied by information on the Funds' average annual
compounded rate of return for the most recent one, five and ten year periods, or
shorter periods from inception, through the most recent calendar quarter. The
Funds may also advertise aggregate and average total return information over
different periods of time.
The Funds' total return may be compared to relevant indices, including
Standard & Poor's 500 Composite Stock Index and indices published by Lipper
Analytical Services, Inc. From time to time, evaluations of a Fund's performance
by independent sources may also be used in advertisements and in information
furnished to present or prospective investors in the Funds.
Investors should note that the investment results of the Funds will
fluctuate over time, and any presentation of the Funds' total return for any
period should not be considered as a representation of what an investment may
earn or what an investor's total return may be in any future period.
The Funds' average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at
the end of the period
Aggregate total return is calculated in a similar manner, except that the
results are not annualized.
Average annual return for the Funds for the periods ending December 31,
1999 are as follows*:
One Five Ten Life
Fund Year Years Years Of Fund**
- ---- ---- ----- ----- --------
Growth Fund 16.04% 22.32% 14.37% N/A
Emerging Growth Fund 29.58 N/A N/A 17.01%
B-22
<PAGE>
- ----------
* Certain fees and expenses of the Funds have been reimbursed from inception
through December 31, 1999. Accordingly, the Funds= return figures are
higher than that would have been had such fees and expenses not been
reimbursed.
** The Emerging Growth Fund commenced operations on April 4, 1995.
GENERAL INFORMATION
Investors in the Funds will be informed of the Funds' progress through
periodic reports. Financial statements certified by independent public
accountants will be submitted to shareholders at least annually.
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.
Tait, Weller & Baker, 8 Penn Center Plaza, Philadelphia, PA 19103, are the
independent auditors for the Funds.
Paul, Hastings, Janofsky & Walker LLP, 345 California Street, 29th Floor,
San Francisco, California 94104, is legal counsel to the Fund.
As of March 31, 2000, the following shareholders owned of record and
beneficially 5% or more the outstanding shares of the Growth Fund:
Firstar IFW CIW 81 Trust - 7.37%
FBO R. Westheimer
Cincinnati, OH 45264
Firstar IFW CIW 81 Trust - 7.02%
FBO C. Westheimer
Cincinnati, OH 45264
Firstar - 6.17%
Peter H. Williams IRA
Cincinnati, OH 45264
As of March 31, 2000, the following shareholders owned of record and
beneficially 5% or more of the outstanding shares of the Emerging Growth Fund:
B-23
<PAGE>
Capinco - 27.00%
Milwaukee, WI 53201
Firstcinco - 20.23%
Cincinnati, OH 45264
The Provident Bank - 6.79%
Attn: Securities Processing
Cincinnati, OH 45269
Fifth Third Bank TTE FBO - 5.81%
Christ CH Harry Coombe
Cincinnati, OH 45263
Provident Bank Trustee - 5.68%
FBO: Sena Weller Rohs Williams
Cincinnati, OH 45269
The Provident Bank - 5.32%
Attn: Securities Processing
Cincinnati, OH 45269
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 Funds have no preemptive, conversion, or subscription
rights. Shareholders have equal and exclusive rights as to dividends and
distributions as declared by the Funds and to the net assets of the Funds upon
liquidation or dissolution. Each 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
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.
B-24
<PAGE>
The Agreement and Declaration of Trust also provides for indemnification and
reimbursement of expenses out of the Funds' assets for any shareholder held
personally liable for obligations of the Funds or Trust. The Agreement and
Declaration of Trust provides that the Trust shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the Funds or Trust and satisfy any judgment thereon. All such rights are limited
to the assets of the Funds. The Agreement and Declaration of Trust further
provides that the Trust may maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its shareholders, trustees, officers, employees and agents to cover
possible tort and other liabilities. Furthermore, the activities of the Trust as
an investment company would not likely give rise to liabilities in excess of the
Trust's total assets. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances in which both
inadequate insurance exists and the Funds themselves are unable to meet their
obligations.
The Boards of the Trust, the Advisor and the Distributor have adopted Codes of
ethics under Rule 17j-1 of the 1940 Act. These Codes permit, subject to certain
conditions, personnel of the Advisor and Distributor to invest in securities
that may be purchased or held by the Funds.
FINANCIAL STATEMENTS
The annual report to shareholders for the Funds for the fiscal period ended
December 31, 1999 is a separate document supplied with this SAI and the
financial statements, accompanying notes and report of independent accountants
appearing therein are incorporated by reference in this SAI.
B-25
<PAGE>
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
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-26
<PAGE>
PROFESSIONALLY MANAGED PORTFOLIOS
PART C
ITEM 23. EXHIBITS.
(1) Agreement and Declaration of Trust (1)
(2) By-Laws (1)
(3) Specimen stock certificate (6)
(4) Form of Investment Advisory Agreement (2)
(5) Form of Distribution Agreement (2)
(6) Not applicable
(7) Form of Custodian Agreement with Star Bank, NA (5)
(8) (1) Form of Administration Agreement with Investment Company
Administration, LLC (3)
(2)(a) Fund Accounting Service Agreement with American Data
Services (5)
(2)(b) Transfer Agency and Service Agreement with American Data
Services (5)
(3) Transfer Agency and Fund Accounting Agreement with Countrywide
Fund Services (4)
(4) Transfer Agency Agreement with Provident Financial Processing
Corporation (7)
(9) Opinion of counsel
(10) Consent of Auditors
(11) Not applicable
(12) No undertaking in effect
(13) Rule 12b-1 Plan (2)
(14) Not applicable
(15) Not applicable
(16) Code of Ethics
(i) Professionally Managed Portfolio - filed herewith
(ii) First Fund Distributors, Inc. - filed herewith
- ----------
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. 24 to the
Registration Statement on Form N-1A, filed on January 16, 1996.
3 Incorporated by reference from Post-Effective Amendment No. 35 to the
Registration Statement on Form N-1A, filed on April 24, 1997.
4 Incorporated by reference from Post-Effective Amendment No. 43 to the
Registration Statement on Form N-1A, filed on February 5, 1998.
5 Incorporated by reference from Post-Effective Amendment No. 48 to the
Registration Statement on Form N-1A, filed on June 15, 1998.
<PAGE>
6 Incorporated by reference from Post-Effective Amendment No. 52 to the
Registration Statement on Form N-1A, filed on October 29, 1998.
7 To be filed by amendment.
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:
<PAGE>
Herbert R. Smith & Co, Inc. File No. 801-7098
Hodges Capital Management, Inc. File No. 801-35811
Perkins Capital Management, Inc. File No. 801-22888
Osterweis Capital Management File No. 801-18395
Pro-Conscience Funds, Inc. File No. 801-43868
Trent Capital Management, Inc. File No. 801-34570
Academy Capital Management File No. 801-27836
Sena, Weller, Rohs, Williams File No. 801-5326
Leonetti & Associates, Inc. File No. 801-36381
Lighthouse Capital Management File No. 801-32168
Yeager, Wood & Marshall, Inc. File No. 801-4995
Harris Bretall Sullivan & Smith File No. 801-7369
Pzena Investment Management LLC File No. 801-50838
Titan Investment Advisers, LLC File No. 801-51306
Pacific Gemini Partners LLC File No. 801-50007
James C. Edwards & Co., Inc. File No. 801-13986
Duncan-Hurst Capital Management, Inc. File No. 801-36309
Progressive Investment Management Corporation File No. 801-32066
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
<PAGE>
First Dallas Securities, Inc., 2311 Cedar Springs Rd., Ste. 100, Dallas, TX
75201, an affiliate of Hodges Capital Management, acts as Distributor of the
Hodges Fund. The President and Chief Financial Officer of First Dallas
Securities, Inc. is Don W. Hodges. First Dallas does not act as principal
underwriter for any other investment companies. Reynolds, DeWitt Securities Co.,
an affiliate of Sena Weller Rohs Williams, 300 Main St., Cincinnati, OH 45202,
acts as Distributor for the Matrix Growth Fund and Matrix Emerging Growth Fund.
(b) The officers of First Fund Distributors, Inc. are:
Robert H. Wadsworth President & Treasurer
Eric Banhazl Vice President
Steven J. Paggioli Secretary
Each officer's business address is 4455 E. Camelback Rd., Ste. 261-E,
Phoenix, AZ 85018. Mr. Paggioli serves as President and a Trustee of the
Registrant. Mr. Wadsworth serves as Vice President of the Registrant. Mr. 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 represents that this amendment meets the
requirements for effectiveness pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this amendment to this Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
New York in the State of New York on April 27, 2000.
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 dates indicated.
/s/ Steven J. Paggioli Trustee April 27, 2000
- -----------------------
Steven J. Paggioli
/s/ Robert M. Slotky Principal April 27, 2000
- ----------------------- Financial
Robert M. Slotky Officer
Dorothy A. Berry Trustee April 27, 2000
- -----------------------
*Dorothy A. Berry
Wallace L. Cook Trustee April 27, 2000
- -----------------------
*Wallace L. Cook
Carl A. Froebel Trustee April 27, 2000
- -----------------------
*Carl A. Froebel
Rowley W. P. Redington Trustee April 27, 2000
- -----------------------
*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
Number Description
- ------ -----------
99.B.10 Consent of Auditors
99.B.16.I Code of Ethics - Professionally Managed Portfolio
99.B.16.II Code of Ethics - First Fund Distributors, Inc.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Post-Effective Amendment to the
Registration Statement on Form N-1A of Professionally Managed Portfolios and to
the use of our report dated January 28, 2000 on the financial statements and
financial highlights of the Matrix Growth Fund and Matrix Emerging Growth Fund,
each a series of Professionally Managed Portfolios. Such financial statements
and financial highlights appear in the 1999 Annual Report to Shareholders which
is incorporated by reference into the Statement of Additional Information.
/s/ TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 24, 2000
PROFESSIONALLY MANAGED PORTFOLIOS
UNDERTAKING REGARDING CODE OF ETHICS
1. BACKGROUND
Rule 17j-1 (the "Rule") under the Investment Company Act of 1940 (the
"Investment Company Act") requires Professionally Managed Portfolios (the
"Trust"), as a registered investment company, to adopt a written Code of
Ethics. The Rule also requires investment advisers to and principal
underwriters for (each a "Fund Organization") the Trust to adopt a written
Code of Ethics and to report to the Board of Trustees of the Trust (the
"Board") any material compliance violations. The Board may only approve a
Code of Ethics after it has made a determination that the Code of Ethics
contains provisions designed to prevent "access persons" (as the term is
explained below) from engaging in fraud. In addition, certain key
"investment personnel" (as the term is explained below) of a Fund
Organization are subject to further pre-clearance procedures with respect
to their investment in securities offered through an initial public
offering (an "IPO") or private placements (a "Limited Offerings").
2. KEY DEFINITIONS
The term "Access Person" is generally defined by the Rule to include: (i)
any director, officer, general partner or key investment personnel of the
Trust or an investment adviser to the Trust; and (ii) any director,
officer, or general partner of a principal underwriter who has knowledge of
the investment activities of a series of the Trust (a "Fund").
The term "Investment Personnel" is generally defined by the Rule to include
(i) any employee of the Trust or an investment adviser to the Trust who
regularly participates in making recommendations regarding the purchase or
sale of securities of a Fund; and (ii) any natural person who controls a
Fund or an investment adviser to the Fund who obtains information
concerning recommendations made to a Fund regarding the purchase or sale of
securities by a Fund. Investment Personnel are also Access Persons.
3. PROCEDURES IN PLACE
In order to meet the requirements of the Rule, a Code of Ethics should
provide a procedure for detecting and preventing material trading abuses
and, for each Fund, should require Access Persons to report personal
securities transactions on an initial, quarterly and annual basis. At least
two compliance officers should be designated within each Fund Organization
to receive and review these reports.
A Fund Organization may adopt its own Code of Ethics, subject to the review
and approval of the Board. Any subsequent material change to the Fund
Organization's Code of Ethics must be approved by the Board.
In the alternative, a Fund Organization may adopt the standard Code of
Ethics for the Trust which is attached to this Undertaking. An investment
adviser to a Fund should take care that its Form ADV properly reflects the
terms of its Code of Ethics.
1
<PAGE>
In the event a Fund Organization adopts its own Code of Ethics, the Board
will review that code to ensure that, at a minimum, the following
components are included:
* the appointment of a compliance officer and alternate to review
personal securities transactions of Access Persons;
* the maintenance by the compliance officer of a current list of all
Access Persons and Investment Personnel;
* an initial holdings report within ten days of the start of employment
of an Access Person;
* a requirement that all Access Person are to report quarterly
transactions within ten days of the end of each quarter;
* a requirement that all Access Persons report certain securities
holdings on an annual basis;
* a review procedure by the compliance officer of all Access Person
reports.
* a method by which Access Persons are disciplined and/or sanctioned for
failure to adhere to the Code of Ethics including the failure by an
Access Person to submit reports on a timely basis; and
* a procedure in place whereby Investment Personnel receive
pre-clearance for an investment in an IPO or a Limited Offering.
A Fund Organization may combine its Code of Ethics with other trading
policies and procedures. However, in the event the Code of Ethics conflicts
with the Fund Organization's trading policies and procedures, the terms of
the Code of Ethics shall prevail.
The Trust will file all Codes of Ethics with its registration statement.
1. ANNUAL ISSUES AND CERTIFICATION REPORT
A Fund Organization is required to periodically report to the Board on
issues raised under its Code of Ethics. Specifically, on an annual basis
(see paragraph 6 below), each Fund Organization must provide the Board (i)
a written report that describes issues that arose during the previous year
under the Code of Ethics including material code or procedure violations
and sanctions imposed in response to those material violations and (ii) a
certification that it has adopted procedures reasonably necessary to
prevent its Access Persons from violating its Code of Ethics.
Professionally Managed Portfolios
Undertaking Regarding Code of Ethics
2
<PAGE>
2. INITIAL CERTIFICATION
On behalf of the undersigned Fund Organization, the following duly
authorized representative of the Fund Organization certifies that:
* The Fund Organization has adopted the Trust's Code of Ethics and it
has adopted procedures reasonably necessary to prevent its Access
Persons from violating the Code of Ethics.
* The Fund Organization has adopted its own Code of Ethics, which is
attached to this Certification. Further, the Fund Organization
acknowledges and certifies that it has adopted procedures reasonably
necessary to prevent its Access Persons from violating its Code of
Ethics.
Acknowledged and Certified:
By:
Name:
Title:
Date:
Name of Fund Organization:
(the investment adviser or principal underwriter)
Name of Compliance Officer:
Name of Alternate Officer:
Name of Fund:
(the series of Professionally Managed Portfolios)
Professionally Managed Portfolios
Undertaking Regarding Code of Ethics
3
<PAGE>
ANNUAL RE-CERTIFICATION
(to be certified before each August meeting of the Board of Trustees)
* The Fund Organization has had no material violations of its Code of
Ethics or the procedures adopted to implement its Code of Ethics,
other than those specified on the attached report.
* The Fund Organization acknowledges and certifies that it has
procedures in place reasonably necessary to prevent Access Persons
from violating its Code of Ethics.
* The Fund Organization has materially changed its Code of Ethics, the
revised Code of Ethics was sent to the Board immediately for its
approval and the Board approved the revised Code of Ethics within six
months of the material change.
Acknowledged and Certified:
By:
Name:
Title:
Date:
Name of Fund Organization:
(the investment adviser or principal underwriter)
Name of Compliance Officer:
Name of Alternate Officer:
Name of Fund:
(the series of Professionally Managed Portfolios)
Professionally Managed Portfolios
Undertaking Regarding Code of Ethics
4
<PAGE>
PROFESSIONALLY MANAGED PORTFOLIOS
CODE OF ETHICS
REVISED FEBRUARY 2000
1. BACKGROUND
Rule 17j-1 (the "Rule") under the Investment Company Act of 1940 (the
"Investment Company Act") requires Professionally Managed Portfolios (the
"Trust"), as a registered investment company, to adopt a written Code of
Ethics. The Rule also requires investment advisers to and principal
underwriters for (each a "Fund Organization") of the Trust to adopt a
written Code of Ethics and to report to the Board of Trustees of the Trust
(the "Board") any material compliance violations. The Board may only
approve a Code of Ethics after it has made a determination that the Code of
Ethics contains provisions designed to prevent "access persons" (summarized
below and further defined in Appendix 1) from engaging in fraud. In
addition, certain key "investment personnel" (summarized below and defined
in Appendix 1) of a Fund Organization are subject to further pre-clearance
procedures with respect to their investment in securities offered through
an initial public offering (an "IPO") or private placement (a "Limited
Offering").
2. KEY DEFINITIONS For other definitions, see Appendix 1
The term "Access Person" is generally defined by the Rule to include: (i)
any director, officer, general partner or key investment personnel of the
Trust or an investment adviser to the Trust; and (ii) any director,
officer, or general partner of a principal underwriter who has knowledge of
the investment activities of a series of the Trust. The Fund Compliance
Officer (defined below) will notify an employee if that person fits the
above definition and maintain a list of all Access Persons (see Appendix 2)
The term "Investment Personnel" is generally defined by the Rule to include
(i) any employee of the Trust or an investment adviser to the Trust who
regular participates in making recommendations regarding the purchase or
sale of securities of a series of the Trust (a "Fund"); and (ii) any
natural person who controls the Trust or an investment adviser to the Trust
who obtains information concerning recommendations made to a Fund regarding
the purchase or sale of securities by a Fund. The Fund Compliance Officer
(defined below) will notify an employee if that person fits the above
definition and maintain a list of all Investment Personnel. (see Appendix
2). Investment Personnel are also Access Persons.
3. GENERAL PROHIBITIONS UNDER THE RULE
The Rule prohibits fraudulent activities by affiliated persons of Trust or
Fund Organization. Specifically, it is unlawful for any of these persons
to:
(a) employ any device, scheme or artifice to defraud a Fund;
(b) make any untrue statement of a material fact to a Fund or omit to
state a material fact necessary in order to make the statements made
to a Fund, in light of the circumstances under which they are made,
not misleading;
Professionally Managed Portfolios
Code of Ethics
1
<PAGE>
(c) to engage in any act, practice or course of business that operates or
would operate as a fraud or deceit on a Fund; or
(d) to engage in any manipulative practice with respect to a Fund.
1. COMPLIANCE OFFICERS
In order to meet the requirements of the Rule, the Code of Ethics includes
a procedure for detecting and preventing material trading abuses and
requires all Access Persons to report personal securities transactions on
an initial, quarterly and annual basis (the "Reports"). The officers of the
Trust will appoint a compliance officer for each Fund Organization (a "Fund
Compliance Officer") to receive and review Reports delivered to a Fund
Compliance Officer in accordance with Section 5 below. In turn, the
officers of the Trust will report to the Board any material violations of
the Code of Ethics in accordance with Section 7 below.
2. ACCESS PERSON REPORTS
All Access Persons of Fund Organizations are required to submit the
following reports to the Fund Compliance Officer for THEMSELVES AND ANY
IMMEDIATE FAMILY MEMBER residing at the same address. In lieu of providing
the Reports, an Access Person may submit brokerage statements or
transaction confirmations that contain duplicate information. The Access
Person should arrange to have brokerage statements and transaction
confirmations sent directly to the Fund Compliance Officer (see Appendix 3
for the form of an Authorization Letter):
(a) INITIAL HOLDINGS REPORT. Within ten days of beginning employment, each
Access Person must report the following information:
(1) The title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect
beneficial ownership when the person became an Access Person;
(2) The name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were held
for the direct or indirect benefit of the Access Person; and
(3) The date the report is submitted by the Access Person.
A form of the INITIAL HOLDINGS REPORT is attached as Appendix 4.
(a) QUARTERLY TRANSACTION REPORTS. Within ten days of the end of each
calendar quarter, each Access Person must report the following
information:
(1) With respect to any transaction during the quarter in a Covered
Security in which the Access Person had any direct or indirect
beneficial ownership:
(i) The date of the transaction, the title, the interest rate
and maturity date (if applicable), the number of shares and
the principal amount of each Covered Security involved;
(ii) The nature of the transaction (I.E., purchase, sale);
Professionally Managed Portfolios
Code of Ethics
2
<PAGE>
(iii) The price of the Covered Security at which the transaction
was effected;
(iv) The name of the broker, dealer or bank with or through
which the transaction was effected; and
(v) The date that the report is submitted by the Access Person.
(1) With respect to any account established by the Access Person
in which any securities were held during the quarter for the
direct or indirect benefit of the Access Person:
(i) The name of the broker, dealer or bank with whom the
Access Person established the account;
(ii) The date the account was established; and
(iii) the date that the report is submitted by the Access
Person.
A form of the QUARTERLY TRANSACTION REPORT is attached as Appendix 5.
(a) ANNUAL HOLDINGS REPORTS. Each year, the Access Person must report
the following information:
(1) The title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct or
indirect beneficial ownership;
(2) The name of any broker, dealer or bank with whom the Access
Person maintains an account in which any securities were held
for the direct or indirect benefit of the Access Person; and
(3) The date the report is submitted by the Access Person.
A form of the ANNUAL HOLDINGS REPORT is attached as Appendix 6.
1. EXCEPTIONS TO REPORTING REQUIREMENTS
(a) PRINCIPAL UNDERWRITER. An Access Person of a Fund's principal
underwriter is not required to make any Reports under Section 5
above if the principal underwriter:
(1) is not an affiliated person of the Trust or any investment
adviser to a Fund.
(2) has no officer, director or general partner who serves as an
officer, director or general partner of the Trust or of any
investment adviser to a Fund.
(a) INDEPENDENT TRUSTEE. A trustee of the Trust who is not an
"interested person" of the Trust within the meaning of Section
2(a)(19) of the Investment Company Act (an "Independent Trustee") is
not required to:
(1) file an INITIAL HOLDINGS REPORT or ANNUAL HOLDINGS REPORT; and
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(2) file a QUARTERLY TRANSACTION REPORT, unless the Independent
Trustee knew, or, in the ordinary course of fulfilling his or
her official duties as a trustee, should have known that
during a 15 day period immediately before or after his or her
transaction in a Covered Security, that a Fund purchased or
sold the Covered Security, or a Fund or its investment adviser
considered purchasing or selling the Covered Security.
1. ADMINISTRATION OF THE CODE OF ETHICS - REPORTING VIOLATIONS AND CERTIFYING
COMPLIANCE
(a) Each Fund Organization must use reasonable diligence and institute
policies and procedures reasonably necessary to prevent its Access
Persons from violating this Code of Ethics;
(b) Each Fund Compliance Officer shall circulate the Code of Ethics and
receive an acknowledgement from each Access Person that the Code of
Ethics has been read and understood;
(c) Each Fund Compliance Officer shall compare all Reports with
completed and contemplated portfolio transactions of a Fund to
determine whether a possible violation of the Code of Ethics and/or
other applicable trading policies and procedures may have occurred.
No Access Person shall review his or her own Report(s). The Fund
Compliance Officer shall appoint an alternate to review his or her
own Reports if the Fund Compliance Officer is also an Access Person.
(d) On an annual basis, each Fund Compliance Officer shall prepare a
written report describing any issues arising under the Code of
Ethics or procedures, including information about any material
violations of the Code of Ethics or its underlying procedures and
any sanctions imposed due to such violations and submit the
information to the Compliance Officer for review by the Board; and
(e) On an annual basis, each Fund Organization shall certify to the
Board of Trustees that it has adopted procedures reasonably
necessary to prevent its Access Persons from violating the Code of
Ethics.
1. COMPLIANCE WITH OTHER SECURITIES LAWS
This Code of Ethics is not intended to cover all possible areas of
potential liability under the Investment Company Act or under the federal
securities laws in general. For example, other provisions of Section 17 of
the Investment Company Act prohibit various transactions between a
registered investment company and affiliated persons, including the
knowing sale or purchase of property to or from a registered investment
company on a principal basis, and joint transactions (I.E., combining to
achieve a substantial position in a security or commingling of funds)
between an investment company and an affiliated person. Access Persons
covered by this Code of Ethics are advised to seek advice before engaging
in any transactions involving securities held or under consideration for
purchase or sale by a Fund or if a transaction directly or indirectly
involves themselves and the Trust other than the purchase or redemption of
shares of a Fund or the performance of their normal business duties.
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In addition, the Securities Exchange Act of 1934 may impose fiduciary
obligations and trading restrictions on access persons and others in
certain situations. It is expected that access persons will be sensitive to
these areas of potential conflict, even though this Code of Ethics does not
address specifically these other areas of fiduciary responsibility.
2. PROHIBITED TRADING PRACTICES
(a) No Access Person may purchase or sell directly or indirectly, any
security in which he or she has, or by reason of such transactions
acquires, any direct or indirect beneficial ownership if such
security to his or her actual knowledge at the time of such purchase
or sale:
(i) is being considered for purchase or sale by a Fund;
(ii) is in the process of being purchased or sold by a Fund (except
that an access person may participate in a bunched transaction
with the Fund if the price terms are the same in accordance
with trading policies and procedures adopted by the Fund
Organization).; or
(iii) is or has been held by a Fund within the most recent 15 day
period.
(a) Investment Personnel of a Fund or its investment adviser must obtain
approval from the Fund or the Fund's investment adviser before
directly or indirectly acquiring beneficial ownership in any
securities in an IPO or Limited Offering.
(b) No Access Person may trade ahead of a Fund - a practice known as
"frontrunning."
1. SANCTIONS
As to any material violation of this Code of Ethics, each Fund
Organization shall adopt trading policies and procedures that provide for
sanctions of the Access Persons. Such sanctions may include, but are not
limited to: (1) a written reprimand in the Access Person's employment
file; (2) a suspension from employment; and/or (3) termination from
employment.
The Board may also impose sanctions as it deems appropriate, including
sanctions against the Fund Organization or the Fund Compliance Officer for
failure to adequately supervise its Access Persons.
ACKNOWLEDGED AND AGREED:
I have read, and I understand the terms of, this Code of Ethics.
By:
Name:
Title:
Fund Organization:
Date:
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APPENDIX 1
DEFINITIONS
ACCESS (i) any director, officer, general partner or Advisory Person of a
PERSON Fund or of a Fund's investment adviser; and (ii) any director,
officer or general partner of a principal underwriter who, in the
ordinary course of business, makes, participates in or obtains
information regarding, the purchase or sale of Covered Securities by
the Fund for which the principal underwriter acts, or whose
functions or duties in the ordinary course of business relate to the
making of any recommendation to the Fund regarding the purchase or
sale of Covered Securities.
ADVISORY (i) any employee of the Fund or investment adviser (or of any
PERSON company in a control relationship to the Fund or investment adviser)
who, in connection with his or her regular functions or duties,
makes, participates in, or obtains information regarding the
purchase or sale of Covered Securities by a Fund, or whose functions
relate to the making of any recommendations with respect to the
purchases or sales; and (ii) any natural person in a control
relationship to the Fund or investment adviser who obtains
information concerning recommendations made to the Fund with regard
to the purchase or sale of Covered Securities by the Fund.
CONTROL The power to exercise a controlling influence over the management or
policies of a company, unless such power is solely the result of an
official position with such company.
COVERED Includes any Security (see below) but does not include (i) direct
SECURITY obligations of the Government of the United States; (ii) bankers'
acceptances, bank certificates of deposit, commercial paper and high
quality short-term debt instruments, including repurchase
agreements; and (iii) shares issued by open-end investment companies
(i.E., Mutual funds).
FUND An investment company registered under the Investment Company Act.
INVESTMENT (i) any employee of the Fund or investment adviser (or of any
PERSONNEL company in a control relationship to the Fund or investment adviser)
who, in connection with his or her regular functions or duties,
makes or participates in making recommendations regarding the
purchase or sale of security by the Fund; and (ii) any natural
person who controls the fund or investment adviser and who obtains
information concerning recommendations made to the fund regarding
the purchase or sale of securities by the Fund.
LIMITED An offering that is exempt from registration under the Securities
OFFERING Act of 1933 (the "Securities Act") pursuant to Section 4(2) or
Section 4(6) or pursuant to Rule 504, Rule 505, or Rule 506 under
the Securities Act.
PURCHASE Includes, among other things, the writing of an option to purchase
OR SALE OF or sell a Covered Security.
A COVERED
SECURITY
SECURITY Any note, stock, treasury stock, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any
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profit-sharing agreement, collateral trust certificate,
preorganization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas,
or other mineral rights, any put, call, straddle, option, or
privilege on any security (including a certificate of deposit) or on
any group or index of securities (including any interest therein or
based on the value thereof), or any put, call, straddle, option, or
privilege entered into on a national securities exchange relating to
foreign currency, or, in general, any interest or instrument
commonly known as a "security," or any certificate of interest or
participation in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to or purchase, any
of the foregoing.
SECURITY (i) any Covered Security which, within the most recent 15 days: (a)
HELD OR TO is or has been held by the Fund; or (b) is being or has
BE been considered by the Fund or its investment adviser for
ACQUIRED purchase by the Fund; and (ii) any option to purchase or
BY A FUND sell, and any security convertible into or exchangeable for, a
Covered Security described in paragraphs (a) or (b) above.
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APPENDIX 2
LIST OF ACCESS PERSONS AND INVESTMENT PERSONNEL
Acknowledge Is This Person
Ment of Also an
Receipt of Investment
Name Title Code of Ethics Personnel?
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APPENDIX 3
FORM OF AUTHORIZATION LETTER
Date
Name of Broker
Address
Re: Brokerage Statements of [name of employee]
Ladies and Gentlemen:
The above referenced person is an employee of [name of Fund Organization].
Federal securities laws require that we monitor the personal securities
transactions of certain key personnel. By this Authorization Letter, and the
acknowledgement of the employee below, please forward duplicate copies of the
employee's brokerage statements and transaction confirmations to:
[Compliance Officer]
[Fund Organization]
[Address]
Should you have any questions, please contact the undersigned at [number].
Very truly yours,
AUTHORIZATION:
I hereby authorize you to release duplicate brokerage statements and
transaction confirmations to my employer.
Signature:
Name:
SSN:
Account Number:
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APPENDIX 4
INITIAL HOLDINGS REPORT
(complete within ten days of employment)
Date: ___________
NOTE: IN LIEU OF THIS REPORT, YOU MAY SUBMIT DUPLICATE COPIES OF YOUR BROKERAGE
STATEMENTS
1. HOLDINGS
Number of
Name of Covered Security Shares Value of Security
- ------------------------ ------ -----------------
2. BROKERAGE ACCOUNTS
Name of Institution and
Account Holders' Name Account Have You Requested
(i.e., you, spouse, child) Number Duplicate Statements?
- -------------------------- ------ ---------------------
REVIEWED:
(COMPLIANCE OFFICER SIGNATURE)
DATE:
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APPENDIX 5
QUARTERLY TRANSACTION REPORT
(complete within ten days of the quarter)
Date: ___________
NOTE: IN LIEU OF THIS REPORT, YOU MAY SUBMIT DUPLICATE COPIES OF YOUR BROKERAGE
STATEMENTS
1. TRANSACTIONS
<TABLE>
<CAPTION>
Nature of
Name of Covered Number of Transaction Purchase Date of
Security Broker Shares (i.e, buy, sale) Price Transaction
-------- ------ ------ ---------------- ----- -----------
<S> <C>
</TABLE>
2. BROKERAGE ACCOUNTS OPENED DURING QUARTER
Name of Institution and
Account Holders' Name Account Have You Requested
(i.e., you, spouse, child) Number Duplicate Statements?
- -------------------------- ------ ---------------------
REVIEWED:
(COMPLIANCE OFFICER SIGNATURE)
DATE:
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APPENDIX 6
ANNUAL HOLDINGS REPORT
(to be completed within thirty days of each year)
Date: ___________
NOTE: IN LIEU OF THIS REPORT, YOU MAY SUBMIT DUPLICATE COPIES OF YOUR BROKERAGE
STATEMENTS
2. HOLDINGS
Number of
Name of Covered Security Shares Value of Security
- ------------------------ ------ -----------------
2. BROKERAGE ACCOUNTS
Name of Institution and
Account Holders' Name Account Have You Requested
(i.e., you, spouse, child) Number Duplicate Statements?
- -------------------------- ------ ---------------------
REVIEWED:
(COMPLIANCE OFFICER SIGNATURE)
DATE:
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INVESTMENT COMPANY ADMINISTRATION, LLC
FIRST FUND DISTRIBUTORS, INC.
This Code of Ethics (the "Code") has been adopted by Investment Company
Administration, LLC ("ICA")and First Fund Distributors, Inc.("FFD") in
accordance with Rule 17j-1 under the Investment Company Act of 1940 (the "1940
Act").
1. LEGAL REQUIREMENT
Rule 17j-1 makes it unlawful for certain persons, in connection with the
purchase or sale by such person of a security held or to be acquired by a Fund:
(1) To employ any device, scheme, or artifice to defraud the Fund;
(2) To make to the Fund any untrue statement of a material fact or omit to
state to the Fund a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading;
(3) To engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon the Fund; or
(4) To engage in any manipulative practice with respect to the Fund.
II. DEFINITIONS
(a) "Fund" means any investment company registered under the 1940 Act, or
any series or class of shares of such an investment company, which has a
contractual relationship with ICA or FFD.
(b) "Access person" means any employee of ICA or FFD who, in connection
with his or her regular functions or duties, obtains information that a security
is held or to be acquired by a Fund.
(c) A security is "held or to be acquired" if within the most recent 15
days it (i) is or has been held by a Fund, or (ii) is being or has been
considered by the Fund or its investment adviser for purchase by a Fund. A
purchase or sale ijcludes the writ9ing of an option to purchase or sell.
(d) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and communicated.
(e) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 and the rules and regulatiosn
thereunder, except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an access person has or acquires.
<PAGE>
(f) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the 1940 Act.
(g) "Security" shall have the meaning set forth in Section 2(a)(36) of the
1940 Act, except that it shall not include securities issued by the Goverbnment
of the United States, bankers' acceptances, bank certificates of deposit,
comercial paoer and shares of registered open-end investment copanies.
III. EXEMPTED TRANSACTIONS
The prohibitions of Section IV of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the access person
has no direct or indirect influcence or control.
(b) Purchases or sales of securities which are not eligible for purchase or
sale by a Fund.
(c) Purchases or sales which are non-volitional on the part of either the
access person or the Fund.
(d) Purchases which are part of an automatic dividend reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer pro
rata to al lholders of a class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
IV. PROHIBITED PURCHASES AND SALES
(a) No access person shall knowingly purchase or sell, directly or
indirectly, any security held or to be acquired by a Fund until the first
business day after such Fund completes all of its intended trades in such
security.
(b) In order to avoid making a prohibited purchase or sale of a security,
no access person shall purchase or sell any security except as indicated below,
without obtaining advance written clearance of such transaction from a person
designated by ICA and FFD to grant such advance clearance.
(c) Advance clearance is not required for the purchase or sale of 500
shares or less (during a rolling 30 day period) of an equity security which (i)
is listed on the New York Stock Exchange or the NASDAQ National Market System,
or (ii) has a market capitalization of $1 billion or more at the time of
purchase or sale.
<PAGE>
(d) No access person may purchase a security in an initial public offering
without the prior written approval of the person designated by ICA and FFD to
grant such advance clearance.
(e) No access person shall engage in any act, practice, or course of
conduct that would violate the provisions of Rule 17j-1 as set forth in Section
I above.
V. REPORTING
Every access person shall report to the Compliance Officer designated by
ICA and FFD the information described below with respect to transactions in any
security in which such access person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership in the security, provided,
however, that an access person shall not be required to make a report with
respect to transactions effected for any account over which such person does not
have any direct or indirect influence.
(a) INITIAL HOLDINGS REPORT. Within ten days of beginning employment, each
Access Person must report the following information:
(1) The title, number of shares and principal amount of each security
in which the Access Person had any direct or indirect beneficial
ownership when the person became an Access Person;
(2) The name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were held
for the direct or indirect benefit of the Access Person; and
(3) The date the report is submitted by the Access Person. .
(b) QUARTERLY TRANSACTION REPORTS. Within ten days of the end of each
calendar quarter, each Access Person must report the following information:
(1) With respect to any transaction during the quarter in a Security
in which the Access Person had any direct or indirect beneficial
ownership:
(i) The date of the transaction, the title, the interest rate
and maturity date (if applicable), the number of shares and
the principal amount of each security involved;
(ii) The nature of the transaction (I.E., purchase, sale);
(iii) The price of the security at which the transaction was
effected;
(iv) The name of the broker, dealer or bank with or through
which the transaction was effected; and
(v) The date that the report is submitted by the Access Person.
<PAGE>
(c) ANNUAL HOLDINGS REPORTS. Each year, the Access Person must report the
following information:
(1) The title, number of shares and principal amount of each security
in which the Access Person had any direct or indirect beneficial
ownership;
(2) The name of any broker, dealer or bank with whom the Access
Person maintains an account in which any securities were held for
the direct or indirect benefit of the Access Person; and
(3) The date the report is submitted by the Access Person.
VI. SANCTIONS
Upon discovering a violation of this Code, ICA or FFD may impose such sanctions
as it deems appropriate, including, inter alia, a letter of censure, suspension,
or termination of the employment of the violator, and/or a disgorging of any
profits made by the violator.
May 1, 2000
