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PROSPECTUS
November 1, 1995
FASCIANO FUND, INC.
A No-Load Fund
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[LOGO]
190 SOUTH LASALLE STREET
SUITE 2800
CHICAGO, ILLINOIS 60603
(312) 444-6050
(800) 848-6050
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INVESTMENT OBJECTIVE: LONG-TERM CAPITAL GROWTH
NO SALES OR 12b-1 CHARGES
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MINIMUM INVESTMENT:
REGULAR ACCOUNTS: INITIAL INVESTMENT - $1,000
SUBSEQUENT INVESTMENTS - $100
AUTOMATIC INVESTMENT PLAN: NO INITIAL INVESTMENT REQUIRED
EACH AUTOMATIC INVESTMENT - $50
PLANS AVAILABLE:
INDIVIDUAL RETIREMENT ACCOUNT (IRA)
AUTOMATIC INVESTMENT PLAN
SYSTEMATIC WITHDRAWAL PLAN
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This prospectus sets forth concisely information you should know before
investing. Please read it carefully and retain it for future reference. A
Statement of Additional Information dated the date of this prospectus and
containing more information about the Fund has been filed with the Securities
and Exchange Commission and (together with any supplements thereto) is
incorporated herein by reference. The Statement of Additional Information is
available without charge at the address and telephone number set forth above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder of the
Fund will bear.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases........................... None
Sales Load Imposed on Reinvested Dividends................ None
Deferred Sales Load....................................... None
Redemption Fees........................................... None
Annual Fund Operating Expenses
(stated as a percentage of average net assets)
Management Fees........................................... 1.0%
12b-1 Fees................................................ None
Other Expenses (a)........................................ 0.7%
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Total Fund Operating Expenses........................... 1.7%
(a) The Fund's "Other Expenses", including the transfer
agency and custody fees, are stated as a percentage
of average net assets for purposes of this table,
but are generally paid by the Fund on some other
basis and may include a minimum fee. A shareholder
requesting payment of redemption proceeds by wire
must pay the cost of the wire (currently $7.50).
That charge and any similar service fee may be
changed without prior notice to shareholders.
Example
You would pay the following expenses on a $1,000 investment in the Fund,
assuming (1) a 5% annual rate of return (as required by the Securities and
Exchange Commission for purposes of this example), (2) the same operating
expense percentage that the Fund experienced in the past fiscal year, (3)
reinvestment of all dividends and capital gain distributions and (4) redemption
at the end of each period:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
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$17 $53 $92 $200
The table and example are intended to help you understand the costs and
expenses that an investor in the Fund bears, directly or indirectly. THIS
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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Although information such as that shown above is useful in reviewing the
Fund's expenses and in providing a basis for comparison with other mutual funds,
it should not be used for comparison with other investments using different
assumptions or time periods.
FINANCIAL HIGHLIGHTS
The table below reflects the results of the Fund's operations for a share
outstanding throughout the periods shown below and has been audited by Arthur
Andersen LLP, the Fund's independent public accountants. This table should be
read in conjunction with the Fund's financial statements and notes thereto,
which are incorporated by reference into the statement of additional information
and which may be obtained from the Fund upon request without charge.
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YEAR ENDED JUNE 30,
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1995 1994 1993 1992 1991 1990 1989(A)
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<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year................. $ 17.34 $ 17.74 $ 16.30 $ 15.67 $ 14.20 $ 12.72 $ 11.22
Income from investment operations
Net investment income (loss)....................... (0.24) (0.05) (0.05) 0.03 0.11 0.11 0.25
Net realized and unrealized gain on securities..... 4.21 0.65 1.95 0.99 1.87 1.57 1.94
--------- -------- -------- -------- ------- ------- ---------
Total from investment operations................. 3.97 0.60 1.90 1.02 1.98 1.68 2.19
Less distributions:
Dividends from net investment income............... 0.00 0.00 0.00 (0.02) (0.12) (0.12) (0.12)
Distributions from realized gains on securities.... (1.14) (1.00) (0.46) (0.36) (0.38) (0.03) (0.56)
Provision for income tax on realized gains......... 0.00 0.00 0.00 (0.01) (0.01) (0.05) (0.01)
--------- -------- -------- -------- ------- ------- ---------
Total distributions and taxes.................... (1.14) (1.00) (0.46) (0.39) (0.51) (0.20) (0.69)
--------- -------- -------- -------- ------- ------- ---------
Net asset value at end of year....................... $ 20.17 $ 17.34 $ 17.74 $ 16.30 $ 15.67 $ 14.20 $ 12.72
========= ======== ======== ======== ======= ======= =========
Total return......................................... 24.1% 3.3% 11.8% 6.5% 14.8% 12.9% 30.4%*
Ratios/Supplemental Data:
Net assets at end of period (in thousands)......... $ 20,868 $ 16,582 $ 15,458 $ 10,564 $ 7,445 $ 5,196 $ 3,574
Expenses, excluding provision for taxes,
to average net assets (b)......................... 1.7% 1.7% 1.7% 1.7% 1.9% 2.0% 0.6%*
Net investment income (loss) before
taxes to average net assets (c)................... (0.6)% (0.3)% (0.3)% 0.2% 0.7% 0.9% 3.3%*
Portfolio turnover rate............................ 37.9% 99.0% 43.2% 29.0% 7.7% 57.2% 25.1%
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* Annualized.
(a) From November 10, 1988, the date on which shares were first offered for
sale to the public.
(b) If the Fund had paid all of its expenses, excluding provision for Federal
income tax, and there had been no reimbursement by the investment adviser,
this ratio would have been 2.7% for the period ended June 30, 1989 and 2.1%
for the year ended June 30, 1990.
(c) If the Fund had paid all of its expenses, excluding provision for Federal
income tax, and there had been no reimbursement by the investment adviser,
this ratio would have been 1.2% for the period ended June 30, 1989 and 0.8%
for the year ended June 30, 1990.
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INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Fund is long-term capital growth.
Current income is considered in selecting securities, but its importance is
secondary to capital growth. There can be no assurance that the Fund will
achieve its investment objective.
The Fund invests in common stocks based on their potential for capital
appreciation, as determined by the Fund's investment adviser, Fasciano Company,
Inc. (the "Adviser"). The Adviser selects common stocks based on qualitative and
quantitative parameters, including market capitalization, business
opportunities, financial condition, and insider ownership. Ultimately,
investments selected for the Fund are those that are determined by the Adviser
to offer the greatest value or growth potential relative to price.
In the opinion of the Adviser, smaller companies (having market
capitalizations of less than one billion dollars) are more likely to sustain
higher long-term rates of growth, and therefore present better opportunities for
long-term capital growth than larger companies. Furthermore, smaller companies
are not as widely followed by institutional investors and are more likely to be
undervalued. However, the Fund may invest in larger companies that present
attractive opportunities for long-term capital growth.
The Fund invests in companies on a long-term basis and emphasizes long-term
investment performance. The Adviser has an investment time horizon of three to
five years. Prospective investors should invest in the Fund with a time horizon
of three years or longer to be consistent with the Adviser. From time to time,
however, the Fund may invest on a short-term basis or may sell within a few
months securities purchased on a long-term basis.
The Fund is ordinarily substantially fully invested and does not attempt to
invest based on a market timing strategy. The Fund expects that the major
portion of its portfolio will at all times be invested in common stocks and
securities having common stock characteristics, including securities convertible
into common stocks, and rights and warrants to purchase common stocks. The Fund
may invest in corporate or government obligations or hold cash or cash
equivalents if a temporary defensive position is considered advisable.
INVESTMENT RISKS
All investments, including those in mutual funds, have risks and the Fund is
not intended to present a balanced investment program. The Fund is designed for
LONG-TERM investors who can accept the fluctuations in portfolio value and other
risks associated with seeking long-term capital growth through investments in
securities. The securities in which the Fund invests are subject to individual
market fluctuations.
The securities of small companies, as a class, have shown market behavior
which has had periods of favorable results and other periods of less favorable
results relative to larger companies as a class. Stocks of small companies tend
to be more volatile and less liquid than stocks of large companies. Small
companies, as compared to larger companies, may have a shorter history of
operations, may not have as great an ability to raise additional capital, may
have a less diversified product line making them susceptible to market pressure,
and may have a smaller public market for their shares.
The Fund's investment objective may be changed by the board of directors
without shareholder approval. The Fund will notify shareholders at least 30 days
prior to a change in the Fund's investment objective. If there is a change in
the Fund's investment objective, you should consider whether the Fund remains an
appropriate investment in light of your then current financial position and
needs. There can be no assurance that the Fund will achieve its objective.
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INVESTMENT RESTRICTIONS
The Fund will not:
1. Invest more than 5% of its assets (valued at the time of investment) in
securities of any one issuer, except in U.S. government obligations;
2. Acquire securities of any one issuer which at the time of investment (a)
represent more than 10% of the voting securities of the issuer or (b) have a
value greater than 10% of the value of the outstanding securities of the issuer;
3. Invest more than 10% of its net assets (valued at the time of investment)
in securities for which there is no ready market (including restricted
securities and repurchase agreements maturing in more than seven days); or
4. Borrow, except in amounts up to 10% of its total assets, provided (i)
that the total of reverse repurchase agreements and such borrowings will not
exceed 5% of the Fund's total assets and (ii) the Fund will not purchase
securities when its borrowings exceed 5% of total assets.
These restrictions cannot be changed without the approval of a "majority of
the outstanding" shares of the Fund as defined in the Investment Company Act of
1940. All of the Fund's investment restrictions are listed in the Statement of
Additional Information.
PERFORMANCE INFORMATION
From time to time, in advertisements or sales literature, the Fund may
present information about its performance, including "total return" and "average
annual total return" on a hypothetical investment in Fund shares.
Total return for a period is the percentage change in value during the
period of an investment in Fund shares, including the value of shares acquired
through reinvestment of all dividends and capital gain distributions. Average
annual total return is the average annual compounded rate of change in value
represented by the total return for the period. The effect of income taxes will
not be taken into account. Performance information supplied by the Fund may not
provide a basis of comparison with other investments using different
reinvestment assumptions or time periods.
The Fund may also compare its performance to various stock indices (groups
of unmanaged common stocks), such as the New York Stock Exchange Composite
Index, S & P 500, the NASDAQ Composite Index and Dow Jones Industrial Average,
or to the Consumer Price Index or groups of comparable mutual funds, including
ranking determined by Lipper Analytical Services, Inc., an independent service
that monitors the performance of over 1,000 mutual funds, Morningstar, Inc., or
another service.
Performance of the Fund will vary from time to time, and past results are
not necessarily indicative of future results. Information about the Fund's
performance is contained in the Fund's annual report which may be obtained free
of charge by calling 1--800-848-6050.
PURCHASING SHARES
You may purchase shares of the Fund at net asset value by check, by wire or
through the Fund's Automatic Investment Plan. There are no sales commissions or
underwriting discounts. The minimum initial investment is $1,000 (except for an
Automatic Investment Plan) and minimum subsequent investments are $100
(excluding reinvestments of dividends and capital gain distributions), or $50
under the Automatic Investment Plan described below. The purchase price of Fund
shares is the net asset value per share next determined after your Share
Purchase Application (for a new account)
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and funds are received in proper order and accepted by the Fund. See "Net Asset
Value."
Purchasing shares by check. To purchase shares by check, complete and sign
the Share Purchase Application at the back of this prospectus and mail it, with
a check in U.S. dollars drawn on a U.S. bank for the total purchase price, to
the Fund's transfer agent, Firstar Trust Company, P. O. Box 701, Milwaukee,
Wisconsin 53201-0701.
Purchasing shares by wire. You may also pay for Fund shares by wire
transfer of the purchase price. Before wiring funds, call Firstar Trust Company
("Firstar") at (800) 338-1579 to ensure prompt and accurate handling of your
investment. Then instruct your bank to wire the purchase price to "Firstar
Bank-Milwaukee N.A., ABA number 075000022, Credit Firstar Trust Company, Account
112-952-137, Further Credit: Fasciano Fund, Inc., Attention: Mutual Fund
Department (shareholder name; account number)". Your bank may charge you a fee
for sending the wire. The Fund is not responsible for the consequences of
delays, including delays in the banking or Federal Reserve wire system.
Automatic Investment Plan. The Automatic Investment Plan allows you to
purchase shares by an electronic transfer of funds at regular monthly intervals
from your bank checking account, money market account, NOW account or savings
account.
There is no minimum initial investment if you enroll in the Automatic
Investment Plan when you open your account. Your account will be debited and
shares will be purchased at regular monthly intervals of your choosing. You may
join the Automatic Investment Plan by completing that portion of the Share
Purchase Application or filling out a separate Automatic Investment Plan
Application which you may obtain from the Fund or the transfer agent. You may
cancel your participation in the Plan or change the amount of purchase or the
day each month on which shares are purchased at any time by calling (800) 338-
1579 or by writing to the Fund, c/o FIRSTAR TRUST COMPANY, P. O. BOX 701,
MILWAUKEE, WISCONSIN 53201-0701. The change or cancellation will be effective
five business days following receipt. For details on how to change your Plan
options or terminate the Plan by telephone, see "Account Registration."
Each investment through the Automatic Investment Plan must be at least $50
and not more than $50,000. For you to participate in the Plan, your bank or
other financial institution must be an Automated Clearing House member. It will
take about 15 days for Firstar to process your Automatic Investment Plan
enrollment. The Fund may modify or terminate the Automatic Investment Plan at
any time or charge a service fee, although no such fee is currently
contemplated.
General. Each investment in shares of the Fund, including dividends and
capital gain distributions reinvested in Fund shares, is acknowledged by a
statement showing the number of shares purchased, the net asset value at which
the shares are purchased, and the new balance of Fund shares owned. Generally
the Fund does not issue stock certificates for the shares, although stock
certificates in full share amounts will be furnished upon your written request.
Fractional shares, if any, will be carried on the books of the Fund without the
issuance of certificates.
The Fund reserves the right not to accept purchase orders under
circumstances or in amounts considered disadvantageous to existing shareholders,
or which do not include properly certified social security or taxpayer
identification numbers. In addition to any loss sustained by the Fund, Firstar
will charge a fee (currently $15) against any person whose check is returned for
insufficient funds.
Purchases and redemptions through dealers. You may purchase or redeem
shares of the Fund through an investment dealer, bank or other institution. Any
such purchase or redemption generally will not be effective until the order or
request is received by the Fund's transfer agent. However, the Fund may enter
into an arrangement with such an institution allowing the institution to process
purchase orders or redemption requests for its customers with the Fund on an
expedited basis, including requesting share redemptions by telephone. Although
these arrangements might permit you to effect a purchase or redemption of Fund
shares through the institution more quickly than would otherwise be possible,
the institution
5
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may impose charges for its services. Any such charges could constitute a
substantial portion of a smaller account, and may not be in your best interest.
You may purchase or redeem shares of the Fund directly from or with the Fund
without imposition of any charges other than those described in this prospectus.
REDEEMING SHARES
The Fund will redeem all or any part of your shares upon your written
request delivered to the Fund's transfer agent, Firstar Trust Company, P. O. Box
701, Milwaukee, Wisconsin 53201-0701.
Your redemption request must:
(1) specify the number of shares or dollar amount to be redeemed, if less
than all shares are to be redeemed;
(2) be signed by all owners exactly as their names appear on the account;
(3) if the shares to be redeemed have a value of more than $20,000, or if the
redemption proceeds are to be sent to an address different from the address
in the Fund's records, include a signature guarantee (the guarantor must be
a bank, member firm of a national securities exchange, savings and loan
association, credit union, or other entity authorized by state law to
guarantee signatures; a notary public is not an acceptable guarantor); and
(4) be accompanied by properly endorsed stock certificates representing the
shares to be redeemed, if they are represented by certificates.
In the case of shares held by a corporation, the redemption request must be
signed in the name of the corporation by an officer whose title must be stated,
and a certified bylaw provision or resolution of the board of directors
authorizing the officer to so act must be furnished. In the case of a trust or
a partnership, the signature must include the name of the registered shareholder
and the title of the person signing on its behalf. Redemption requirements for
shares held under a Fasciano Fund IRA are described in separate disclosure
information for the plan. Under certain circumstances, before the shares can be
redeemed, additional documents may be required in order to verify the authority
of the person seeking to redeem.
Systematic Withdrawal Plan. The Systematic Withdrawal Plan allows you to
set up automatic redemptions at regular intervals from your account if you have
a $10,000 minimum account balance. You may join the Systematic Withdrawal Plan
by completing that portion of the Share Purchase Application or filling out a
separate Systematic Withdrawal Plan Application which you may obtain from the
Fund or the transfer agent. You may cancel your participation in the Plan or
change the amount of withdrawal at any time by calling (800) 338-1579 or by
writing to the Fund at, c/o FIRSTAR TRUST COMPANY, P. O. BOX 701, MILWAUKEE,
WISCONSIN 53201-0701. The change or cancellation will be effective five
business days following receipt. The Systematic Withdrawal Plan does not apply
to Fund shares held in Individual Retirement Accounts. For details on how to
change your Plan options or terminate the Plan by telephone, see "Account
Registration."
If you need more information on redemption procedures, including information
on redemption of shares held in IRA and other retirement accounts, please call
the Fund's transfer agent toll-free at (800) 338-1579.
The redemption price per share is the net asset value determined as
described under "Net Asset Value." There is no redemption charge. The
redemption value of the shares may be more or less than your cost depending upon
the value of the Fund's portfolio securities at the time of redemption.
You may not cancel or revoke your redemption order once instructions have
been received and accepted. Payment for shares redeemed is made within seven
days after receipt by Firstar of a request for redemption in proper form.
However, redemption payments for shares that were purchased by check may be
delayed until the Fund can verify that the pay-
6
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ment for the shares has been collected, which may take several days. The Fund
reserves the right to suspend or postpone redemptions during any period when (a)
trading on the New York Stock Exchange is restricted, as determined by the
Securities and Exchange Commission, or that exchange is closed for other than
customary weekend and holiday closings, (b) the Commission has by order
permitted such suspension, or (c) an emergency, as determined by the Commission,
exists making disposal of portfolio securities or valuation of net assets of the
Fund not reasonably practicable.
ACCOUNT REGISTRATION
ADDRESS CHANGES on your account may be made by calling (800) 338-1579. The
Fund will send you a written statement of the account to both your new and old
addresses. Any written redemptions received within 15 days after the address
change must be accompanied by a signature guarantee.
AUTOMATIC INVESTMENT PLAN AND SYSTEMATIC WITHDRAWAL PLAN CHANGES may be made
by telephone. Plan changes that may be made by telephone include increasing or
decreasing investment/withdrawal amounts, changing the frequency of
investment/withdrawal or terminating either Plan.
DIVIDEND AND CAPITAL GAIN DISTRIBUTION CHANGES may also be made by
telephone. A telephone request changing the reinvestment of dividend and capital
gain distributions to the receipt of payment, will be honored only if the
proceeds are to be sent to the address of record on the account. For more
details, see "Dividends and Distributions."
The Fund reserves the right to record all account registration changes made
by telephone.
NET ASSET VALUE
The price per share for a purchase order or redemption request is the net
asset value next determined after receipt of the order or request in proper
form. The net asset value of a share of common stock of the Fund is determined
as of the time of the close of regular session trading on the New York Stock
Exchange on any day on which that exchange is open for trading. The net asset
value of a share of the Fund is the value of the Fund's assets, less its
liabilities, divided by the number of shares outstanding.
Securities traded on a stock exchange are ordinarily valued on the basis of
the last sale price on the date of valuation or, in the absence of any sale on
that day, the closing bid price. Other securities are generally valued at the
current bid price. Any securities for which there are no readily available
market quotations and all assets other than securities will be valued at a fair
value, as determined in good faith by the board of directors.
IRA PLAN
The Fund has a master individual retirement account (IRA) plan which allows
you to invest in the Fund. Income and capital gains earned by an IRA are
sheltered from taxation until withdrawal. There is $1,000 initial minimum
investment. The plan also permits you to "roll over" to a Fasciano Fund IRA a
lump sum distribution from a qualified pension or profit-sharing plan, including
by a direct transfer from the plan trustee, thereby postponing your federal
income tax on the distribution if rolled over within 60 days. Many distributions
from qualified plans are subject to income tax withholding unless transferred
directly from the plan to an IRA or another plan.
If your employer has a Simplified Employee Pension Plan (SEP), you may
establish an IRA with the Fund to which your employer may contribute annually up
to the lesser of 15% of your earned income or $30,000, subject to special rules
designed to avoid discrimination.
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Detailed information about the IRA, including related documents and charges
of Firstar, as custodian, may be obtained from the Fund.
MANAGEMENT OF THE FUND
Directors and Investment Adviser
The board of directors has overall responsibility for the conduct of the
Fund's affairs. Subject to the authority of the board of directors, the
investment adviser, Fasciano Company, Inc. (the "Adviser"), furnishes continuous
investment supervision and management to the Fund under an investment advisory
agreement. The Adviser, which is wholly-owned by Michael F. Fasciano, is a
registered investment adviser organized in November 1986. As of the date of this
prospectus, the Fund is the Adviser's only investment advisory client.
Mr. Fasciano, who is president of the Fund and the Adviser, has been
responsible for management of the Fund's portfolio since the Fund began
operations. Mr. Fasciano is a Chartered Financial Analyst and has been employed
in the securities industry since 1978. Before organizing Fasciano Company, Mr.
Fasciano was a securities analyst and portfolio manager.
FEES AND EXPENSES
The Adviser manages the investment and reinvestment of the Fund's assets. At
its own expense, the Adviser provides office space to the Fund and all necessary
facilities, equipment and personnel for managing the assets of the Fund. For
these services, the Adviser receives a monthly fee at the annual rate of 1% of
the Fund's average daily net assets. The annual rate of fee is higher than that
paid by most mutual funds. The Fund pays all of its operating expenses not
specifically assumed by the Adviser, which amounted to 1.7% of the Fund's
average net assets during the fiscal year ended June 30, 1995, including the
advisory fee. The Fund's investment advisory agreement also includes the
conditions under which the Fund may use "Fasciano" in its name.
PORTFOLIO TRANSACTIONS
The Adviser places the orders for the purchase and sale of the Fund's
portfolio securities. In doing so, the Adviser seeks to obtain the best
combination of net price and execution, which involves a number of judgmental
factors. When the Adviser believes that more than one broker or dealer is
capable of providing the best combination of price and execution in a particular
portfolio transaction, the Adviser often selects a broker or dealer that has
furnished it with research services.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all its net investment income
and any net capital gain realized from sales of the Fund's portfolio securities
at least annually. Dividends and capital gain distributions, if any, are
reinvested in additional shares of the Fund unless you have requested in writing
or on your Share Purchase Application to have them paid to you by check or by
automatic deposit to your bank account. For details on how to change your
distribution option by telephone, see "Account Registration."
TAXATION
The Fund intends to continue to qualify, as it has since it began offering
its shares to the public, as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code"), so as to be relieved of federal
income tax on its net investment income and net capital gains, to the extent
that it distributes such amounts to shareholders.
Dividends from net investment income and net short-term capital gains are
taxable as ordinary income. Distributions of long-term
8
<PAGE>
capital gains are taxable as long-term capital gains regardless of the length of
time you have held your shares in the Fund. Distributions will be taxable to you
whether received in cash or reinvested in shares of the Fund.
If you purchase shares shortly before a record date for a distribution you
will, in effect, receive a return of a portion of your investment, but the
distribution will be taxable to you even if the net asset value of your shares
is reduced below your cost. However, for federal income tax purposes your
original cost would continue as your tax basis. If you redeem shares within six
months, any loss on the sale of those shares would be long-term capital loss to
the extent of any distributions of long-term capital gain that you have received
on those shares.
If you fail to furnish your social security or other taxpayer identification
number or to certify properly that it is correct, the Fund may be required to
withhold federal income tax ("backup withholding") from dividend, capital gain,
and redemption payments to you. Your dividend and capital gain payments may also
be subject to backup withholding if you fail to certify properly that you are
not subject to backup withholding due to the underreporting of certain income.
These certifications are contained in the Share Purchase Application which you
should complete and return to the Fund when you make your initial investment.
OTHER INFORMATION
The Fund was incorporated in Maryland on May 28, 1987, and commenced
operations as a private investment company on August 1, 1987 at $10.00 per
share. On June 30, 1988 the Fund registered as a diversified open-end management
investment company under the Investment Company Act of 1940 and began offering
its shares to the public on November 10, 1988.
Each share of the Fund's capital stock, $.01 par value, is entitled to share
pro rata in any dividends and other distributions on shares declared by the
board of directors, to one vote per share in elections of directors and other
matters presented to shareholders, and to equal rights per share in the event of
liquidation.
As a Maryland corporation registered as an investment company under the
Investment Company Act of 1940, the Fund is not required to hold routine annual
meetings and does not expect to do so. Maryland law permits shareholders to
remove directors under certain circumstances and requires the Fund to assist in
shareholder communications.
Inquiries about purchases and redemptions of Fund shares, or about your
account, should be directed to the Fund's transfer agent. Other inquiries
regarding the Fund should be directed to the Fund. The addresses and telephone
numbers of the Fund and its transfer agent are shown on the back cover.
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FASCIANO FUND, INC. [LOGO]
SHARE PURCHASE APPLICATION
(NOTE: Please read the application and the terms below carefully.
This application is not to be used for IRA accounts.)
Make checks payable to, and mail to:
FASCIANO FUND, INC., c/o Firstar Trust Company, P.O.Box 701, Milwaukee,
Wisconsin 53201-0701
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<TABLE>
<CAPTION>
A. PURCHASE
<S> <C>
Purchase by: [_] check for $____________________ ($1,000
minimum for new account)
[_] Automatic Investment Plan transfer of
$__________ - please complete the
Automatic Investment Plan section below.
[_] wire for $____________________ to Firstar
Bank-Milwaukee N.A., ABA number
075000022, Credit Firstar Trust Company,
Account Number 112-952-137, Further
Credit: Fasciano Fund, Inc., Attention:
Mutual Fund Department (shareholder name,
account number)
===============================================================================
B. REGISTRATION: (check one)
[_] INDIVIDUAL OR
JOINT ACCOUNT: ______________________ ___________________________
(Individual) (Joint Tenant, if any)
[_] CORPORATIONS, TRUSTS
OR OTHERS:_________________________________________________________
(Trustee(s), corporation, partnership or other entity)
_____________________________________________________________________
[_] GIFT TO MINOR:_____________ , Custodian for _______________________
(Custodian) (Minor)
Under the Uniform Gifts to Minors Act of_____________________________
(State)
SOCIAL SECURITY OR TAXPAYER IDENTIFICATION NUMBER:_____________________________
(If this is a Uniform Gift to Minor account, use the minor's social security
number.)
I am a citizen of [_] U.S. [_] Other (specify)________________________________
</TABLE>
===============================================================================
If shares are to be registered jointly, all owners must sign. Any registration
in the names of two or more co-owners will, unless otherwise specified, be as
joint tenants with right of survivorship and not as tenants in common.
C. ADDRESS OF RECORD:_________________________________________________________
Zip Code Telephone ( )
===============================================================================
D. DIVIDEND ELECTION-- All dividends and capital gain distributions on all
shares held by you will be reinvested in additional shares, as set forth in
the prospectus, unless you check this box.
[_] Dividends and capital gain distributions in cash. Attach an unsigned
voided check (for checking accounts) or a savings account deposit
slip for your bank account, and your cash payment will be directly
deposited to this account.
===============================================================================
E. AUTOMATIC INVESTMENT PLAN -- An unsigned voided check (for checking
accounts) or a savings account deposit slip is
required with your application.
Please start my Automatic Investment Plan as described in the prospectus
beginning: Month ____________________ Year ________. I hereby instruct Firstar
Trust Company, Transfer Agent for the Fund, to automatically transfer
$_______________ (minimum $50, maximum $50,000) directly from my checking, NOW,
or savings account named below on the ________ of each month or the first
business day thereafter. I understand that I will be assessed a $15 fee if the
automatic purchase cannot be made due to insufficient funds, stop payment, or
for any other reason.
Name(s) on Bank Account________________________________________________________
Bank Name________________________________Bank Routing Number___________________
Bank Address___________________________________________________________________
Signature of Bank Account Owner________________________________________________
Signature of Joint Owner_______________________________________________________
===============================================================================
F. SYSTEMATIC WITHDRAWAL PLAN -- A balance of at least $10,000 is required
for this option.
I would like to withdraw from ________________________________________________
$______________($100 minimum) as follows:
[__] I would like to have payments made to me on or about the _____ day of
each month, OR
[__] I would like to have payments made to me on or about the _____ day of the
months that I have circled below:
Jan. Feb. Mar. Apr. May June
July Aug. Sept. Oct. Nov. Dec.
[__] I would like to have my payments automatically deposited to my checking
or savings account. I have attached a voided check or deposit slip. (A
check will be mailed to the above Account registration address if this
box is not checked)
===============================================================================
G. SIGNATURE AND CERTIFICATION REQUIRED BY THE INTERNAL REVENUE SERVICE
I am (We are) of legal age, have received and read a current prospectus of
Fasciano Fund, Inc., and agree to the terms therein. I (We) certify: (1) that
the Social Security or Taxpayer Identification Number provided above is correct;
and (2) that the IRS has never notified me (us) that I am (we are) subject to
backup withholding. I (We) certify that I (We) have full authority and legal
capacity to purchase Fund shares.
____________________________________ ________________________________________
Signed* Signature of Co-Owner, if any
____________________________________
Date
* If shares are to be registered: (1) in joint names, both persons should
sign; (2) by a custodian for a minor, the custodian should sign; (3) by a
trust, the trustee(s) should sign; or (4) by a corporation or other entity, an
officer should sign and indicate title.
================================================================================
<PAGE>
PROSPECTUS
=============================================================================
INVESTMENT ADVISER
Fasciano Company, Inc. FASCIANO FUND, INC.
ADDRESS OF FUND & ADVISER
190 South LaSalle Street
Suite 2800
Chicago, Illinois 60603
(312) 444-6050
(800) 848-6050
TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND CUSTODIAN
Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201
(414) 765-4124
(800) 338-1579
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
LEGAL COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois
MEMBER OF
====================== Chicago, Illinois
100% NO-LOAD/TM/
MUTUAL FUND
COUNCIL
====================== November 1, 1995
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1995
FASCIANO FUND, INC.
190 S. LaSalle Street
Suite 2800
Chicago, Illinois 60603
(312) 444-6050
(800) 848-6050
This statement of additional information is not a prospectus, but provides
information about Fasciano Fund, Inc. (the "Fund") that should be read in
conjunction with the Fund's prospectus dated November 1, 1995 and any
supplements to the prospectus and the Fund's financial statements included in
its annual report to shareholders for the fiscal year ended June 30, 1995, a
copy of which accompanies this statement of additional information.
The prospectus and additional copies of the annual report may be obtained
without charge by writing or telephoning the Fund at the address or telephone
number set forth above.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
History of the Fund.................................................... B-2
Investment Policies.................................................... B-2
Investment Restrictions................................................ B-7
Performance Information................................................ B-9
Investment Adviser..................................................... B-10
Directors and Officers................................................. B-12
Certain Shareholders................................................... B-13
Purchasing and Redeeming Shares........................................ B-13
Additional Tax Information............................................. B-14
Portfolio Transactions................................................. B-15
Custodian.............................................................. B-16
Independent Public Accountants......................................... B-16
Financial Statements................................................... B-16
Appendix............................................................... B-17
</TABLE>
<PAGE>
HISTORY OF THE FUND
The Fund began operations as a private investment company, not registered
under the Investment Company Act of 1940 (the "1940 Act"), on August 1, 1987.
The Fund registered under the 1940 Act on June 30, 1988 and began offering its
shares to the public on November 10, 1988.
INVESTMENT POLICIES
The primary investment objective of the Fund is long-term capital growth.
Current income will be considered in selecting securities for the portfolio, but
its importance will be secondary to capital growth. The Fund's investment
objective may be changed by the board of directors without shareholder approval.
DEBT SECURITIES
The Fund may invest in debt securities, including debt securities that are
not rated or are rated below investment grade by the recognized rating agencies
(i.e., BBB or higher by Standard & Poor's Corporation ("S&P") or Baa or higher
by Moody's Investor Services, Inc. ("Moody's")). There are no restrictions as
to the ratings of debt securities acquired by the Fund or the portion of the
Fund's assets that may be invested in debt securities in a particular ratings
category, except that the Fund will not invest more than 5% of its assets in
securities rated below investment grade ("junk bonds"). The Fund has no present
intention of investing in junk bonds.
Securities rated BBB or Baa are considered to be medium grade and to have
speculative characteristics. Lower-rated debt securities are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. Investment in medium- or lower-quality debt securities involves
greater investment risk, including the possibility of issuer default or
bankruptcy. An economic downturn could severely disrupt the market for such
securities and adversely affect the value of such securities. In addition,
lower-quality bonds are less sensitive to interest rate changes than higher-
quality instruments and generally are more sensitive to adverse economic changes
or individual corporate developments. During a period of adverse economic
changes, including a period of rising interest rates, issuers of such bonds may
experience difficulty in servicing their principal and interest payment
obligations.
To the extent the Fund invests in lower-rated debt securities, achievement
by the Fund of its investment objective will be more dependent on the Adviser's
credit analysis than would be the case if the Fund were investing in higher-
quality debt securities. Since the ratings of rating services (which evaluate
the safety of principal and interest payments, not market risks) are used only
as preliminary indicators of investment quality, the Adviser employs its own
credit research and analysis. These analyses may take into consideration such
quantitative factors as an issuer's present and potential liquidity,
profitability, internal capability to generate funds, debt/equity ratio and debt
servicing capabilities, and such qualitative factors as an assessment of
management, industry characteristics, accounting methodology, and foreign
business exposure.
B-2
<PAGE>
Medium- and lower-quality debt securities tend to be less marketable than
higher-quality debt securities because the market for them is less broad. The
market for unrated debt securities is even narrower. During periods of thin
trading in these markets, the spread between bid and asked prices is likely to
increase significantly, and the Fund may have greater difficulty selling its
portfolio securities. The market value of these securities and their liquidity
may be affected by adverse publicity and investor perceptions. At June 30, 1994
the Fund held no debt securities other than short-term demand notes.
A description of the ratings used by S&P and Moody's is included as an
appendix to this statement of additional information.
FOREIGN SECURITIES
The Fund may invest in foreign securities, which may entail a greater
degree of risk (including risks relating to exchange rate fluctuations, exchange
controls, tax provisions, political instability, expropriation of assets, other
governmental restrictions and regulations and less available financial
information) than does investment in securities of domestic issuers.
The Fund will not invest more than 5% of its assets in foreign securities
and will not invest in securities traded only or primarily in emerging markets.
For this purpose, foreign securities do not include American Depository Receipts
(ADRs) or securities guaranteed by a United States person. ADRs are receipts
typically issued by an American bank or trust company evidencing ownership of
the underlying securities. As of June 30, 1994, the Fund held no foreign
securities.
To the extent positions in portfolio securities are denominated in foreign
currencies, the Fund's investment performance is affected by the strength or
weakness of the U.S. dollar against these currencies. For example, if the
dollar falls in value relative to the Japanese yen, the dollar value of a
Japanese stock held in the portfolio will rise even though the price of the
stock remains unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the Japanese stock will fall. (See discussion of
transaction hedging under "Currency Exchange Transactions.")
Investors should understand and consider carefully the risks involved in
foreign investing. Investing in foreign securities, which are generally
denominated in foreign currencies, and utilization of forward foreign currency
exchange contracts involve both risks and opportunities not typically associated
with investing in U.S. securities. These considerations include: fluctuations
in exchange rates of foreign currencies; possible imposition of exchange control
regulation or currency restrictions that would prevent cash from being brought
back to the United States; less public information with respect to issuers of
securities; less governmental supervision of stock exchanges, securities
brokers, and issuers of securities; lack of uniform accounting, auditing, and
financial reporting standards; lack of uniform settlement periods and trading
practices; less liquidity and frequently greater price volatility in foreign
markets than in the United States; possible imposition of foreign taxes;
possible investment in securities of companies in developing as well as
developed countries; and sometimes less advantageous legal, operational, and
financial protections applicable to foreign sub-custodial arrangements.
B-3
<PAGE>
Although the Fund intends to invest in companies and governments of
countries having stable political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the adoption
of foreign government restrictions, or other adverse political, social, or
diplomatic developments that could affect investment in these nations.
Currency Exchange Transactions. Currency exchange transactions may be
conducted either on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market or through forward
currency exchange contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at a specified
future date (or within a specified time period) and price set at the time of the
contract. Forward contracts are usually entered into with banks and broker-
dealers, are not exchange traded, and are usually for less than one year, but
may be renewed.
Forward currency transactions may involve currencies of the different
countries in which the Fund may invest and serve as hedges against possible
variations in the exchange rate between these currencies. The currency
transactions of the Fund are limited to transaction hedging involving specific
transactions. Transaction hedging is the purchase or sale of forward contracts
with respect to specific receivables or payables of a Fund accruing in
connection with the purchase and sale of its portfolio securities or the receipt
of dividends or interest thereon. The Fund's intention not to invest more than
5% of its assets in foreign securities effectively limits the extent of its
transactions in foreign currencies.
If the Fund enters into a forward contract, the Fund's custodian will
segregate liquid assets of the Fund having a value equal to the Fund's
commitment under such forward contract. At the maturity of the forward
contract, the Fund may either sell the portfolio security related to the
contract and deliver the currency, or it may retain the security and either
acquire the currency on the spot market or terminate its contractual obligation
to deliver the currency by purchasing an offsetting contract with the same
currency trader obligating it to purchase on the same maturity date the same
amount of the currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a forward contract. Accordingly, it
may be necessary for the Fund to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the currency.
Conversely, it may be necessary to sell on the spot market some of the currency
received upon the sale of the portfolio security if its market value exceeds the
amount of currency the Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between the Fund's
entering into a forward contract for the sale of a currency and the date it
enters into an
B-4
<PAGE>
offsetting contract for the purchase of the currency, the Fund will realize a
gain to the extent the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward prices increase,
the Fund will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell. A
default on the contract would deprive the Fund of unrealized profits or force
the Fund to cover its commitments for purchase or sale of currency, if any, at
the current market price.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the value of a portfolio security traded in that currency or
prevent a loss if the value of the security declines. Hedging transactions also
preclude the opportunity for gain if the value of the hedged currency should
rise. Moreover, it may not be possible for the Fund to hedge against a
devaluation that is so generally anticipated that the Fund is not able to
contract to sell the currency at a price above the devaluation level it
anticipates. The cost to the Fund of engaging in currency exchange transactions
varies with such factors as the currency involved, the length of the contract
period, and prevailing market conditions. Since currency exchange transactions
are usually conducted on a principal basis, no fees or commissions are involved.
SHORT SALES
The Fund may make short sales of securities if at all times when a short
position is open the Fund owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short. This technique is called selling short "against the
box." Although permitted by its investment restrictions, the Fund does not
currently intend to sell securities short.
In a short sale against the box, the Fund does not deliver from its
portfolio the securities sold and does not receive immediately the proceeds from
the short sale. Instead, the Fund borrows the securities sold short from a
broker-dealer through which the short sale is executed, and the broker-dealer
delivers such securities, on behalf of the Fund, to the purchaser of such
securities. Such broker-dealer is entitled to retain the proceeds from the
short sale until the Fund delivers to such broker-dealer the securities sold
short. In addition, the Fund is required to pay to the broker-dealer the amount
of any dividends paid on shares sold short. Finally, to secure its obligation
to deliver to such broker-dealer the securities sold short, the Fund must
deposit and continuously maintain in a separate account with the Fund's
custodian an equivalent amount of the securities sold short or securities
convertible into or exchangeable for such securities without the payment of
additional consideration. The Fund is said to have a short position in the
securities sold until it delivers to the broker-dealer the securities sold, at
which time the Fund receives the proceeds of the sale. Because the Fund
ordinarily will want to continue to hold securities in its portfolio that are
sold short, the Fund will normally close out a short position by purchasing on
the open market and delivering to the broker-dealer an equal amount of the
securities sold short, rather than by delivering portfolio securities.
B-5
<PAGE>
Short sales may protect the Fund against the risk of losses in the value of
its portfolio securities because any unrealized losses with respect to such
portfolio securities should be wholly or partially offset by a corresponding
gain in the short position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding loss in the
short position. The extent to which such gains or losses are offset will depend
upon the amount of securities sold short relative to the amount the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the conversion premium. The Fund will incur transaction
costs in connection with short sales.
In addition to enabling the Fund to hedge against market risk, short sales
may afford a Fund an opportunity to earn additional current income to the extent
the Fund is able to enter into arrangements with broker-dealers through which
the short sales are executed to receive income with respect to the proceeds of
the short sales during the period the Fund's short positions remain open.
UNSEASONED ISSUERS
The Fund has the authority to invest up to 10% of its total assets in the
securities of unseasoned issuers, but has no present intention of investing more
than 5% of its total assets in such securities. An unseasoned issuer is an
issuer that, together with predecessors, has been in operation less than three
years. The Adviser believes that investment in securities of unseasoned issuers
may provide opportunities for long-term capital growth, although the risks of
investing in such securities are greater than with common stocks of more
established companies because unseasoned issuers have only a brief operating
history and may have more limited markets and financial resources. At June 30,
1995, the Fund held no securities of unseasoned issuers.
ILLIQUID SECURITIES
The Fund may invest up to 10% of its net assets, taken at market value, in
securities for which there is no ready market ("illiquid securities"), including
any securities that are not readily marketable either because they are
restricted securities or for other reasons. Restricted securities are
securities that have not been registered under the Securities Act of 1933 and
are thus subject to restrictions on resale. A position in restricted securities
might adversely affect the liquidity and marketability of a portion of the
Fund's portfolio, and the Fund might not be able to dispose of its holdings in
such securities promptly or at reasonable prices. In those instances where the
Fund is required to have restricted securities held by it registered prior to
sale by the Fund and the Fund does not have a contractual commitment from the
issuer or seller to pay the costs of such registration, the gross proceeds from
the sale of securities would be reduced by the registration costs and
underwriting discounts. Any such registration costs are not included in the 10%
limitation on the Fund's investment in restricted securities. The Fund does not
expect to invest in illiquid securities during the next fiscal year.
B-6
<PAGE>
REPURCHASE AGREEMENTS
The Fund may enter into "repurchase agreements" pertaining to U.S.
Government securities with member banks of the Federal Reserve System or primary
dealers (as designated by the Federal Reserve Bank of New York) in such
securities. A repurchase agreement arises when the Fund purchases a security
and simultaneously agrees to resell it to the vendor at an agreed upon future
date. The resale price is greater than the purchase price, reflecting an agreed
upon market rate of return that is effective for the period of time the Fund
holds the security and that is not related to the coupon rate on the purchased
security. Such agreements generally have maturities of no more than seven days
and could be used to permit the Fund to earn interest on assets awaiting long
term investment. The Fund requires continuous maintenance by the custodian for
the Fund's account in the Federal Reserve/Treasury Book Entry System of
collateral in an amount equal to, or in excess of, the market value of the
securities that are the subject of a repurchase agreement. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses, including (i) possible decline in the value of the collateral during the
period while the Fund seeks to enforce its rights thereto, (ii) possible
subnormal levels of income and lack of access to income during this period, and
(iii) expenses of enforcing its rights. The Fund will monitor the
creditworthiness of firms with which it enters into repurchase agreements.
Repurchase agreements maturing in more than seven days are considered illiquid
securities. The Fund does not intend to invest in repurchase agreements during
the next fiscal year.
PORTFOLIO TURNOVER
The Fund normally invests on a long-term basis with an investment time
horizon of three to five years. For the year ended June 30, 1994 the Fund had
an annual turnover rate of 99.0%, compared to a rate of 43.2% for the year ended
June 30, 1993. The higher turnover rate for 1994 resulted from selective
profit-taking by the Fund. For the year ended June 30, 1995 the Fund had an
annual turnover rate of 37.9%, which is consistent with its historical portfolio
turnover rate (excluding fiscal 1994).
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions,
which cannot be changed without the approval of the holders of a majority of its
shares, as defined in the Investment Company Act of 1940:
1. The Fund will not invest more than 5% of its assets (valued at the time
of investment) in securities of any one issuer, except in U.S. government
obligations.
2. The Fund will not acquire securities of any one issuer which at the
time of investment (a) represent more than 10% of the voting securities of the
issuer or (b) have a value greater than 10% of the value of the outstanding
securities of the issuer.
B-7
<PAGE>
3. The Fund will not invest more than 10% of its assets (valued at the
time of investment) in securities of issuers with less than three years'
operation (including predecessors)./1/
4. The Fund will not invest more than 10% of its net assets (valued at the
time of investment) in securities for which there is no ready market (including
restricted securities and repurchase agreements maturing in more than seven
days).
5. The Fund will not participate in a joint trading account, purchase
securities on margin or sell securities short (unless the Fund owns an equal
amount of such securities, or owns securities that are convertible or
exchangeable, without payment of further consideration, into an equal amount of
such securities)./2/
6. The Fund will not act as an underwriter or distributor of securities
other than its own capital stock, except insofar as it may be deemed an
underwriter for purposes of the Securities Act of 1933 on disposition of
securities acquired subject to legal or contractual restrictions on resale.
7. The Fund will not lend money, but this restriction shall not prevent
the Fund from investing in (i) a portion of an issue of publicly distributed
debt securities or (ii) repurchase agreements.
8. The Fund will not purchase or sell real estate or interests in real
estate, although it may invest in marketable securities of issuers that invest
in real estate or interests in real estate.
9. The Fund will not borrow, except that the Fund may borrow from banks as
a temporary measure amounts up to 10% of its total assets (at the lower of cost
or market at the time of the borrowing), provided (i) that the total of reverse
repurchase agreements/3/ and such borrowings will not exceed 10% of the Fund's
total assets and (ii) the Fund will not purchase securities when its borrowings
exceed 5% of total assets.
10. The Fund will not pledge any of its assets, except to secure
indebtedness permitted by the Fund's investment restrictions.
11. The Fund will not invest for the purpose of exercising control or
management of any company.
12. Not more than 25% of the value of the Fund's total assets, taken at
market value at the time of the investment, will be concentrated in companies of
any one industry.
- ----------------
/1/ As long as Fund shares are offered for sale in Missouri, the Fund may not
invest more than 5% of its assets in securities of issuers with less than three
years' operation (including predecessors).
/2/ The Fund does not currently intend to sell securities short even under the
conditions described in investment restriction 5.
/3/ The Fund does not currently intend to enter into reverse repurchase
agreements.
B-8
<PAGE>
13. The Fund will not purchase and sell commodities or commodity
contracts, except that it may enter into forward contracts to hedge securities
transactions made in foreign currencies.
In addition to the fundamental restrictions listed above, the Fund has
adopted the following restrictions that may be changed by the board of directors
without shareholder approval:
(a) The Fund will not invest in interests in oil, gas or other mineral
exploration or development programs, although it may invest in marketable
securities of issuers engaged in oil, gas or mineral exploration.
(b) The Fund will not purchase or hold securities of an issuer if all of
the officers and directors of the Fund and its investment adviser who
individually own beneficially more than 1/2 of 1% of the securities of such
issuer collectively own beneficially more than 5% of such securities.
(c) The Fund will not invest more than 2% of its net assets (valued at the
time of investment) in warrants not listed on the New York or American Stock
Exchanges, valued at the lower of cost or market, nor more than 5% of its net
assets in warrants.
(d) The Fund will not acquire securities of other investment companies
except (i) by purchase in the open market, where no commission or profit to a
sponsor or dealer results from such purchase other than the customary broker's
commission and (ii) where the acquisition results from a dividend or a merger,
consolidation or other reorganization./4/
(e) The Fund will not invest in or write options, puts, calls, straddles or
spreads.
In addition, the Fund has undertaken, as long as Fund shares are offered
for sale in Texas, not to invest in real estate limited partnerships or in oil,
gas or other mineral leases.
PERFORMANCE INFORMATION
From time to time the Fund may give information about its performance by
quoting total return figures in advertisements and sales literature. "Total
return" for a period is the percentage change in value of an investment in Fund
shares, including the value of shares acquired through reinvestment of all
dividends and capital gains distributions. "Average annual total return" is the
average annual compounded rate of change in value represented by the total
return for the period.
- -----------------------
/4/ In addition to this investment restriction, the 1940 Act provides that the
Fund may neither purchase more than 3% of the voting securities of any one
investment company nor invest more than 10% of the Fund's assets (valued at time
of investment) in all investment company securities purchased by the Fund.
B-9
<PAGE>
Average annual total return is computed as follows:
ERV = P(1+T)n
Where: P = the amount of an assumed initial investment in Fund shares
T = average annual total return
n = number of years from initial investment to the end of the
period
ERV = ending redeemable value of shares held at the end of the
period
The Fund's total return for the fiscal year ended June 30, 1995 and for the
periods June 30, 1990 and November 10, 1988 (the date Fund shares were first
offered for sale to the public) through June 30, 1995 was 24.1%, 75.2% and
135.4%, respectively. Average annual total return for the same periods was
24.1%, 11.9% and 13.8%, respectively.
The Fund imposes no sales charges and pays no distribution expenses.
Income taxes payable by shareholders are not taken into account. The Fund's
performance is a result of conditions in the securities markets, portfolio
management, and operating expenses. Although information such as that described
above may be useful in reviewing the Fund's past performance and in providing
some basis for comparison with other investment alternatives, it is not
necessarily indicative of future performance and should not be used for
comparison with other investments using different reinvestment assumptions or
time periods.
The Fund may also compare its performance to various stock indices (groups
of unmanaged common stocks), including the New York Stock Exchange Composite
Index, Standard & Poor's 500 Stock Index, the NASDAQ Composite Index, and the
Dow Jones Industrial Average, or to the Consumer Price Index or groups of
comparable mutual funds, including rankings determined by Lipper Analytical
Services, Inc., an independent service that monitors the performance of over
1,000 mutual funds, or that of another independent service, including
Morningstar, Inc.
The Fund may cite its rating, recognition, or other mention by Morningstar
or any other entity. Morningstar's rating system is based on risk-adjusted
total return performance and is expressed in a star-rating format. The risk-
adjusted number is computed by subtracting a fund's risk score (which is a
function of the fund's monthly returns less the 3-month T-bill return) from the
fund's load-adjusted total return score. This numerical score is then
translated into rating categories, with the top 10% labeled five star, the next
22.5% labeled four star, the next 35% labeled three star, the next 22.5% labeled
two star, and the bottom 10% one star. A high rating reflects either above-
average returns or below-average risk or both.
INVESTMENT ADVISER
The Fund's investment adviser, Fasciano Company, Inc. (the "Adviser"),
furnishes continuing investment supervision to the Fund and is responsible for
overall management of the Fund's business affairs. It furnishes office space,
equipment, and personnel to the Fund and assumes the expenses of printing and
distributing the Fund's prospectus and reports to prospective investors. The
Fund pays all of its expenses except those specifically assumed by the
B-10
<PAGE>
Adviser, including but not limited to printing and postage charges; securities
registration, custodian and transfer agency fees; accounting services fees (paid
to the Adviser); audit and legal fees; and expenses in connection with its
organization.
For its services, the Adviser receives a monthly fee at an annual rate of
1% of the average daily net asset value of the Fund. The Investment Advisory
Agreement provides that the Adviser will reimburse the Fund to the extent that
its total annual operating expenses exceed 2%, exclusive of (i) taxes, (ii)
interest charges, (iii) litigation and other extraordinary expenses, and (iv)
brokers' commissions and other charges relating to the purchase and sale of the
Fund's portfolio securities. In addition, in order to comply with regulations
applicable to the sale of Fund shares in California, the Adviser has undertaken
to reimburse the Fund to the extent the Fund's annual operating expenses exceed
2-1/2% of the first $30 million of average net assets, 2% of the next $70
million, and 1-1/2% of average net assets in excess of $100 million.
The investment advisory fees of the Fund for the fiscal years ended June
30, 1995, 1994, and 1993 were $183,008, $167,089 and $114,899, respectively.
During the fiscal year ended June 30, 1995, the Fund operated within all
applicable expense limitations without reimbursement by the Adviser.
The Adviser is a registered investment adviser organized in November 1986.
Michael F. Fasciano is the sole shareholder of the Adviser.
B-11
<PAGE>
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal business
activities during the past five years are:
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age with Fund and other Affiliations
- --------------------- -------------- ----------------------
<S> <C> <C>
Michael F. Fasciano Director, President Director, President and
Suite 2800 and Treasurer Treasurer of Fasciano
190 South LaSalle St. Company, Inc. since November
Chicago, Illinois 60603 1986. Mr. Fasciano is a
Age 40 Chartered Financial Analyst.
Susan N. Fasciano Secretary and Private investor.
Suite 2800 Director
190 South LaSalle Street
Chicago, Illinois 60603
Age 37
David R. Long Director Vice President - Investments
The Gallagher Center of Arthur J. Gallagher & Co.,
Two Pierce Place Inc., a New York Stock
Itasca, Illinois Exchange listed international
60143-3141 insurance and risk
Age 43 management services firm,
since May 1989. Mr. Long has
held various executive
positions with that firm
since January 1981.
</TABLE>
Michael F. Fasciano and Susan N. Fasciano are directors who are "interested
persons" of the Fund as defined in the 1940 Act. Michael Fasciano and Susan
Fasciano are husband and wife.
Mr. Fasciano and Ms. Fasciano serve as members of the Executive Committee
of the Board of Directors. The Executive Committee, which meets between regular
meetings of the Board, is authorized to exercise all of the powers of the Board
of Directors. The Executive Committee did not meet during the fiscal year ended
June 30, 1995.
The only compensation paid to directors and officers of the Fund for their
services as such consists of $500 paid to directors who are not interested
persons of the Fund or the Adviser. The Fund has no retirement or pension
plans.
B-12
<PAGE>
The following table sets forth compensation paid by the Fund during the
fiscal year ended June 30, 1995 to each of the directors of the Fund. The Fund
is not part of a fund complex.
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF DIRECTOR FROM THE FUND
---------------- -------------
<S> <C>
Michael F. Fasciano $ 0
Susan N. Fasciano 0
David R. Long 500
</TABLE>
At September 30, 1995 the directors and officers as a group owned
beneficially 24,612 shares, or 2.3%, of the Fund.
CERTAIN SHAREHOLDERS
As of September 30, 1995, the only persons known by the Fund to own
beneficially 5% or more of the outstanding shares of the Fund were:
<TABLE>
<CAPTION>
Outstanding Shares Owned
------------------------
Number Percent
------ -------
<S> <C> <C>
Albert O. Nicholas 238,020 22.7%
6002 North Highway 83
Hartland, Wisconsin 53209
Nancy J. Nicholas 252,349 24.0%
6002 North Highway 83
Hartland, Wisconsin 53209
Firwood 76,085 7.3%
c/o Amcore Trust Co.
P. O. Box 4599
Rockford, Illinois 61110
</TABLE>
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Fund's prospectus under the
headings "Purchasing Shares," "Redeeming Shares" and "Net Asset Value." All of
that information is incorporated herein by reference.
For purposes of computing the net asset value of a share of the Fund,
securities traded on securities exchanges, or in the over-the-counter market in
which transaction prices are reported, are valued at the last sales prices at
the time of valuation or lacking any reported sales on that day, at the most
recent bid quotations. Other securities traded over-the-counter are also valued
at
B-13
<PAGE>
the most recent bid quotations. Securities for which quotations are not
available and any other assets are valued at a fair value as determined in good
faith by the board of directors. Money market instruments having a maturity of
60 days or less from the valuation date are valued on an amortized cost basis.
Calculations of net asset value are performed by Firstar Trust Company, the
Fund's custodian.
The Fund's net asset value will not be determined on any day on which the
New York Stock Exchange is not open for trading. That Exchange is regularly
closed on Saturdays and Sundays and on New Year's Day, the third Monday in
February, Good Friday, the last Monday in May, Independence Day, Labor Day,
Thanksgiving, and Christmas. If one of these holidays falls on a Saturday or
Sunday, the Exchange will be closed on the preceding Friday or the following
Monday, respectively.
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
pursuant to which it is obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Fund during any 90-day
period for any one shareholder. Redemptions in excess of the above amounts will
normally be paid in cash, but may be paid wholly or partly by a distribution in
kind of securities.
Because it can be more expensive for the Fund to maintain small accounts,
the Fund has reserved the right, on 60 days' written notice to the shareholder,
to redeem shares in any account and send the proceeds to the owner, if the
account has a value of less than a stated minimum. It is the Fund's current
policy not to exercise its right to redeem small accounts. No change in that
policy would be implemented without advance notice having been given to
shareholders.
The prospectus discloses that you may purchase (or redeem) shares through
investment dealers, banks, or other institutions. The state of Texas has asked
that the Fund disclose, as a reminder to any such bank or institution, that it
must be registered as a securities dealer in Texas to effect such transactions
on behalf of Texas investors.
ADDITIONAL TAX INFORMATION
The Fund intends to continue to qualify, as it has done since it first
offered its shares to the public, as a regulated investment company under
Subchapter M of the Internal Revenue Code and thus not be subject to federal
income taxes on amounts it distributes to shareholders.
The Fund was a personal holding company under the Code for the fiscal year
ended June 30, 1995 because more than 50% of its outstanding stock was owned by
five or fewer individuals. The Fund will continue to be a personal holding
company under the Code until that concentration of stock ownership no longer
exists. As a personal holding company, the Fund is subject to federal income
tax at the maximum rate on its income not currently distributed to shareholders.
Because the Fund intends to distribute all its net investment income and
realized capital gains, the Fund does not expect its classification as a
personal holding company to result in the imposition of any tax.
B-14
<PAGE>
PORTFOLIO TRANSACTIONS
The Adviser has discretion to select brokers and dealers to execute
portfolio transactions initiated by the Adviser and to select the markets in
which such transactions are to be executed. The primary responsibility regarding
portfolio transactions is to seek the best combination of net price and
execution for the Fund. When executing transactions for the Fund, the Adviser
will consider all factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission. Transactions of the Fund in the over-the-counter market are
executed with primary market makers acting as principal except where it is
believed that better prices and execution may be obtained otherwise.
In selecting brokers or dealers to execute particular transactions and in
evaluating the best net price and execution available, the Adviser is authorized
to consider "brokerage and research services" (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934), statistical quotations,
specifically the quotations necessary to determine the Fund's asset value, and
other information provided to the Fund or the Adviser. The Adviser is also
authorized to cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction. The Adviser must
determine in good faith, however, that such commission was reasonable in
relation to the value of the brokerage and research services provided, viewed in
terms of that particular transaction or in terms of all the accounts over which
the Adviser exercises investment discretion. It is possible that certain of the
services received by the Adviser attributable to a particular transaction will
benefit one or more other accounts for which investment discretion is exercised
by the Adviser.
In valuing research services, the Adviser makes a judgment of the
usefulness of research and other information provided by a broker to the Adviser
in managing the Fund's investment portfolio. In some cases, the information,
e.g., data or recommendations concerning particular securities, relates to the
specific transaction placed with the broker, but for the greater part the
research consists of a wide variety of information concerning companies,
industries, investment strategy, and economic, financial and political
conditions and prospects, useful to the Adviser in advising the Fund.
The Adviser is the principal source of information and advice to the Fund
and is responsible for making and initiating the execution of investment
decisions by the Fund. However, the board of directors of the Fund recognizes
that it is important for the Adviser, in performing its responsibilities to the
Fund, to continue to receive and evaluate the broad spectrum of economic and
financial information that many securities brokers have customarily furnished in
connection with brokerage transactions, and that in compensating brokers for
their services, it is in the interest of the Fund to take into account the value
of the information received for use in advising the Fund. The extent, if any,
to which the obtaining of such information may reduce the expenses of the
Adviser in providing management services to the Fund is not determinable. In
B-15
<PAGE>
addition, it is understood by the board of directors that other clients of the
Adviser might also benefit from the information obtained for the Fund, in the
same manner that the Fund might also benefit from the information obtained by
the Adviser in performing services for others.
For the fiscal years ended June 30, 1995, 1994, and 1993, the Fund paid
brokerage commissions, not including the gross underwriting spread on securities
purchased in underwritten public offerings, aggregating $13,160, $22,496 and
$20,434, respectively.
Although investment decisions for the Fund are made independently from
those for other investment advisory clients of the Adviser, it may develop that
the same investment decision is made for both the Fund and one or more other
advisory clients. If both the Fund and other clients purchase or sell the same
class of securities on the same day, the transactions will be allocated as to
amount and price in a manner considered equitable to each.
CUSTODIAN
Firstar Trust Company, First Wisconsin Center, Box 2054, Milwaukee,
Wisconsin 53201-0701 is the custodian for the Fund. It is responsible for
holding all securities and cash of the Fund, receiving and paying for securities
purchased, delivering against payment securities sold, receiving and collecting
income from investments, making all payments covering expenses of the Fund, and
performing other administrative duties, all as directed by authorized persons of
the Fund. The custodian does not exercise any supervisory function in such
matters as purchase and sale of portfolio securities, payment of dividends, or
payment of expenses of the Fund. The Fund has authorized the custodian to
deposit certain portfolio securities in central depository systems as permitted
under federal law. The Fund may invest in obligations of the custodian and may
purchase or sell securities from or to the custodian. Firstar also provides
portfolio accounting services to the Fund including daily calculation of the
Fund's net asset value.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, 33 West Monroe Street, Chicago, Illinois 60603, audits
and reports on the Fund's annual financial statements, reviews certain
regulatory reports, prepares the Fund's income tax returns, and performs other
professional accounting, auditing, tax, and advisory services when engaged to do
so by the Fund.
FINANCIAL STATEMENTS
The Fund's annual report for its fiscal year ended June 30, 1995, a copy of
which accompanies this statement of additional information, contains financial
statements, notes thereto and a report of independent public accountants, all of
which (but no other part of the annual report) is incorporated herein by
reference.
Additional copies of the annual report may be obtained without charge by
writing or telephoning the Fund at the address or telephone number shown on the
front cover of this statement of additional information.
B-16
<PAGE>
APPENDIX
DESCRIPTION OF BOND RATINGS
A rating of a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Fund's investment adviser believes that the quality of
debt securities in which the Fund invests should be continuously reviewed and
that individual analysts give different weightings to the various factors
involved in credit analysis. A rating is not a recommendation to purchase, sell
or hold a security, because it does not take into account market value or
suitability for a particular investor. When a security has received a rating
from more than one service, each rating should be evaluated independently.
Ratings are based on current information furnished by the issuer or obtained by
the ratings services from other sources which they consider reliable. Ratings
may be changed, suspended or withdrawn as a result of changes in or
unavailability of such information, or for other reasons.
The following is a description of the characteristics of rating used by Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P").
Ratings by Moody's
Aaa--Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt-edge".
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.
Aa--Bonds rated Aa are judged to be high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa bonds.
A--Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
B-17
<PAGE>
Ba--Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B--Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such bonds may be in default or
there may be present elements of danger with respect to principal or interest.
Ca--Bonds rated Ca represent obligations which are speculative in a high degree.
Such bonds are often in default or have other marked shortcomings.
S&P Ratings
AAA--Bonds rated AAA have the highest rating. Capacity to pay principal and
interest is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay principal and interest and
differ from AAA bonds only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this capacity
than for bonds in higher rated categories.
BB--B--CCC--CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation among such bonds and CC the highest
degree of speculation. Although such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
B-18
