As filed with the Securities and Exchange Commission on November 1, 2000
Securities Act registration no. 33-23997
Investment Company Act file no. 811-5602
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 13 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 15 [X]
FASCIANO FUND, INC.
(Registrant)
190 S. LaSalle Street, Suite 2800
Chicago, Illinois 60603
Telephone number: 312/444-6050
Michael F. Fasciano Alan P. Goldberg
Fasciano Company, Inc. Bell, Boyd & Lloyd LLC
Suite 2800 Suite 3200
190 S. LaSalle Street 70 West Madison Street
Chicago, Illinois 60603 Chicago, Illinois 60602
(Agents for service)
Amending Parts A, B and C and filing exhibits
It is proposed that this filing will become effective:
--X-- immediately upon filing pursuant to paragraph (b) of rule 485
----- on --------------- pursuant to paragraph (b) of rule 485
----- 60 days after filing pursuant to paragraph (a)(1) of rule 485(a)
----- on ---------------, pursuant to paragraph (a)(1) of rule 485(a)
----- 75 days after filing pursuant to paragraph (a)(2) of rule 485
----- on --------------- pursuant to paragraph (a)(2) of rule 485
<PAGE>
PROSPECTUS
FASCIANO FUND, INC.
(FASCIANO FUND, INC. LOGO)
Chicago, Illinois
November 1, 2000
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PROSPECTUS
FASCIANO FUND, INC.
A No-Load Fund November 1, 2000
(FASCIANO FUND, INC. LOGO)
190 South LaSalle Street
Suite 2800
Chicago, Illinois 60603
(312) 444-6050
(800) 848-6050
Web Site: www.fascianofunds.com
E-mail: [email protected]
INVESTMENT OBJECTIVE: LONG-TERM CAPITAL GROWTH
NO SALES OR 12B-1 CHARGES
MINIMUM INVESTMENT PLANS AVAILABLE
------------------ ---------------
REGULAR AND ROTH IRA ACCOUNTS: O INDIVIDUAL RETIREMENT ACCOUNT (IRA)
Initial investment: $1,000
Subsequent investments: $100 O ROTH IRA
AUTOMATIC INVESTMENT PLAN: O EDUCATION IRA:
No initial investment required Initial Investment: $500
Each automatic investment: $50
O SEP-IRA
SYSTEMATIC WITHDRAWAL PLAN O SIMPLE IRA
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
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INVESTMENTS, RISKS AND PERFORMANCE 1
MORE INFORMATION ON THE FUND'S INVESTMENT OBJECTIVES AND STRATEGIES 3
INVESTMENT RISKS 3
PURCHASING SHARES 4
REDEEMING SHARES 6
ACCOUNT REGISTRATION 8
IRA PLANS 8
MANAGEMENT OF THE FUND 9
DIVIDENDS AND DISTRIBUTIONS 10
TAXATION 10
FINANCIAL HIGHLIGHTS 12
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INVESTMENTS, RISKS AND PERFORMANCE
WHAT IS THE FUND'S INVESTMENT OBJECTIVE AND WHAT ARE ITS PRINCIPAL STRATEGIES?
OBJECTIVE. The primary investment objective of the Fund is long-term capital
growth.
PRINCIPAL STRATEGIES. The Fund invests primarily in the common stocks of
smaller companies with market capitalizations of less than $2.0 billion. The
Fund's investment adviser, Fasciano Company, Inc. (the "Adviser"), looks for
companies with:
o strong business franchises that are likely to sustain long-term rates of
earnings growth for a three to five year time horizon, and
o stock prices that the market has undervalued relative to the value of
similar companies and that offer excellent potential to appreciate over a
three to five year time horizon.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
Your investment in the Fund is subject to market risk and you can lose money
by investing in the Fund if:
o The stock market goes down, or
o The common stocks the Adviser selects for the Fund do not perform as the
Adviser expected.
In addition, the smaller companies that the Fund tends to invest in are often
more volatile and less liquid than the stocks of larger companies and
o may have a shorter history of operations than larger companies;
o may not have as great an ability to raise additional capital;
o may have a less diversified product line, making them more susceptible to
market pressure; and
o may have a smaller public market for their shares.
IS THE FUND AN APPROPRIATE INVESTMENT FOR ME?
The Fund invests in companies on a long-term basis and emphasizes long-term
investment performance. Prospective investors should invest in the Fund with a
time horizon of three years or longer to be consistent with the Adviser. The
Fund may not be suitable for you if you have a short-term investment horizon or
are unwilling to accept fluctuations in share price, including significant
declines over a given period.
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HOW HAS THE FUND PERFORMED?
The following bar chart and table illustrate certain risks of investing in the
Fund. As you can see, the bar chart shows the changes in the Fund's returns year
by year. The table compares the Fund's average annual total returns for the
periods listed to a market index. This information is intended to help you
assess the variability of the Fund's returns over the periods listed (and
consequently, the risks of investing in the Fund). Of course, the Fund's past
performance doesn't necessarily indicate how it will perform in the future.
TOTAL RETURN (PER CALENDAR YEAR)
(BAR CHART APPEARS HERE)
1989 22.45%
1990 -1.18%
1991 35.08%
1992 7.67%
1993 8.08%
1994 3.68%
1995 31.12%
1996 26.54%
1997 21.51%
1998 7.19%
1999 6.16%
*<F13> The Fund's total return as of September 30, 2000 was -4.03%.
The Fund's best and worst quarters during the last 10 years were:
Best quarter: 23.36%, during the first quarter of 1991.
Worst quarter: -15.99%, during the third quarter of 1990.
The following table shows the Average Annual Total Return on an investment in
the Fund compared to changes in the Russell 2000 Index for the 1-, 5- and 10-
year periods ended December 31, 1999:
FASCIANO FUND RUSSELL 2000 INDEX*<F14>
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1 year 6.16% 21.26%
5 years 18.06% 16.69%
10 years 13.96% 13.40%
*<F14> The Russell 2000 Index is an unmanaged, market value weighted index
comprised of small-sized companies.
WHAT ARE THE COSTS OF INVESTING IN THE FUND?
This table describes the fees and expenses that you would pay if you buy and
hold shares of the Fund.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum sales charge None
Redemption fee*<F15> None
Exchange fee None
*<F15> Firstar will charge a $12 fee each time a shareholder requests to
receive proceeds from a redemption via wire.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management fees 1.0%
Distribution (12b-1) fees None
Other expenses 0.2%
Total Annual Operating Expenses 1.2%
EXAMPLE. This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 for the time periods indicated, redeem all of your shares at
the end of those periods, earn a 5% return each year, and that operating
expenses remain constant. Your costs may be higher or lower than those shown,
but based on these assumptions, your expenses would be:
After 1 year $122
After 3 years $381
After 5 years $660
After 10 years $1,455
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MORE INFORMATION ON THE FUND'S
INVESTMENT OBJECTIVES AND STRATEGIES
OBJECTIVE:
The primary investment objective of the Fund is long-term capital growth.
HOW THE ADVISER CHOOSES INVESTMENTS:
The Fund primarily invests in common stocks and securities having common stock
characteristics, including securities convertible into common stocks, and rights
and warrants to purchase common stocks. Common stocks represent an equity
(ownership) interest in a company.
In choosing companies that the Adviser believes are likely to achieve the
Fund's investment objective, the Adviser considers the company's ability to
sustain long-term rates of earnings growth, as well as overall business
qualities. These qualities include the company's profitability and cash flow,
financial condition, insider ownership, and stock valuation. In selecting
companies that the Adviser believes may have greater potential to appreciate in
price, the Adviser will invest the Fund in smaller companies that are under-
followed by major Wall Street brokerage houses and large asset management firms.
However, the Fund may hold the stocks of small companies that grow into medium-
size companies.
The Adviser also may consider a company's potential for current income prior
to selecting it for the Fund.
Although the Fund primarily invests in companies on a long-term basis, from
time to time, the Fund may invest on a short-term basis or may sell within a few
months securities that it originally had intended to be a long-term investment
if the security no longer meets the quality or valuation requirements of the
Fund.
The Adviser generally does not attempt to invest the Fund based on a market
timing strategy. Rather, the Adviser will invest in a company when the Adviser
believes the company meets the Fund's requirements for long-term earnings growth
prospects and price appreciation potential.
The Fund generally seeks to be fully invested in common stocks. However, at
times, the Adviser may invest a large portion of the Fund's assets in cash if
the Adviser is unable to locate and invest in a sufficient number of companies
that meet the Fund's quality and valuation requirements.
If the Adviser considers a temporary defensive position advisable in response
to adverse market, economic, political, or other conditions, the Adviser may
invest the Fund exclusively in investment grade corporate or government debt
obligations, or hold cash or cash equivalents. A consequence of the Fund taking
such a temporary defensive position is that it may not be able to achieve its
investment objective.
INVESTMENT RISKS
Market Risk. All investments, including those in mutual funds, have risks and
an investment in the Fund is not a balanced investment program. The Fund
invests mostly in common stocks, which represent an equity (ownership) interest
in a corporation. However, stock prices may decline over short or extended
periods. Stock markets tend to move in cycles, with periods of rising stock
prices and periods of falling stock prices.
Risks of Small Companies. 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 and
o may have a shorter history of operations than large companies;
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o may not have as great an ability to raise additional capital;
o may have a less diversified product line, making them more susceptible to
market pressure; and
o may have a smaller public market for their shares.
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.
Purchasing shares by check. To purchase shares by check, call the number on
the front of this prospectus to request a Share Purchase Application. Complete
and sign the Share Purchase Application 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 MUTUAL FUND SERVICES, LLC, 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 Mutual Fund Services,
LLC ("Firstar") at (800) 848-6050 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 042000013, Credit Firstar Trust Department,
Account 112-952-137, Further Credit: Fasciano Fund, Inc., Attention: Mutual
Fund Services (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.
Purchasing shares by telephone. To purchase shares by telephone, call Firstar
at (800) 848-6050. You may not make an initial purchase by telephone, but you
may make subsequent investments to an existing account. The minimum telephone
purchase amount is $100. Only bank accounts held at domestic financial
institutions that are Automated Clearing House (ACH) members can be used for
telephone transactions. Firstar must receive your telephone purchase order
before the close of regular session trading on the New York Stock Exchange
("NYSE") (generally 3:00 p.m., Central time) to receive the net asset value
calculated for that day. In an effort to reduce the risk of unauthorized or
fraudulent transactions by telephone, the Fund and Firstar employ procedures
reasonably designed to confirm that all instructions by telephone (including
redemptions, as discussed below) are genuine. The procedures used include
requiring an investor to provide the account number, recording all such
telephone instructions and confirming all telephone transactions in writing to
the shareholder at the address on Firstar's records. The Fund may implement
other procedures from time to time. If reasonable procedures are not used, the
Fund and/or Firstar may be liable for any loss due to unauthorized or fraudulent
transactions. In all other cases, the shareholder is liable for any loss for
unauthorized transactions.
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 account or money market 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. To join
the Automatic Investment Plan, complete that portion of the Share Purchase
Application or fill out a separate Automatic Investment Plan Application which
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you may obtain from the Fund or the transfer agent. To 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, simply call (800) 848-6050 or write
to the Fund, c/o FIRSTAR MUTUAL FUND SERVICES, LLC, 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. For each investment in shares of the Fund, including dividends and
capital gain distributions reinvested in Fund shares, you will receive 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 the Fund sustains, Firstar will charge a fee
(currently $25) for any check that is returned for insufficient funds.
The Fund does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposit in the mail or with such
services of purchase applications (or redemptions) does not constitute receipt
by Firstar or the Fund. Do not mail letters by overnight courier to the post
office box address. Address any CORRESPONDENCE SENT BY OVERNIGHT COURIER to
Firstar Mutual Fund Services, LLC, Third Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
Purchases and redemptions through dealers. You may purchase or redeem shares
of the Fund through some broker-dealers, banks or other institutions that have
made Fund shares available to their customers ("financial services companies").
Some financial services companies may charge fees to their customers, including
fees on purchases or redemptions of Fund shares. Those charges, if imposed,
could constitute a substantial portion of a smaller account and may not be in
your best interest. In addition, a financial services company may impose an
accounting or shareholder services charge to an account that holds Fund shares
(which generally will be a percentage of the annual average value of the
account).
The Fund may also enter into an arrangement with some financial services
companies authorizing the company to process purchase orders or redemption
requests on behalf of the Fund on an expedited basis, including requesting share
redemptions by telephone (an "authorized agent"). If an authorized agent
receives a purchase order or redemption request, the Fund will be deemed to have
received such order or request for purposes of determining the net asset value
of Fund shares to be purchased or redeemed.
Determining the Share Price. Firstar Mutual Fund Services, LLC, the Fund's
transfer agent, will price share purchase and redemption orders at the Fund's
net asset value next computed after either Firstar or an authorized agent of the
Fund receives an order 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
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trading on the NYSE (normally 3:00 p.m., Central time) 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 the board of directors will determine in good faith. The effect of
fair value pricing will be that the Fund's net asset value will not be based on
the last quoted price on the security, but on a price which the board of
directors or their delegate believes reflects the current and true price of the
security.
For purchase orders placed through an authorized agent, a shareholder will pay
the Fund's net asset value per share next computed after the authorized agent
receives such purchase order, plus any applicable transaction charge the agent
imposes. For redemption orders placed through an authorized agent, a
shareholder will receive redemption proceeds which reflect the net asset value
per share next computed after the authorized agent receives the redemption
order, less any redemption fees the agent imposes.
REDEEMING SHARES
Redeeming shares in writing. The Fund will redeem all or any part of your
shares upon your written request delivered to the Fund's transfer agent, Firstar
Mutual Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-0701, or to
an authorized agent of the Fund, as described above.
Your redemption request must:
(1) specify the number of shares or the dollar amount to be redeemed, unless
all shares are to be redeemed;
(2) be signed by all owners exactly as their names appear on the account;
(3) include a signature guarantee 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; 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; 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, an officer whose title must be
stated must sign the redemption request in the name of the corporation, 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.
Do not mail letters by overnight courier to the post office box address.
CORRESPONDENCE SENT BY OVERNIGHT COURIER should be addressed to Firstar Mutual
Fund Services, LLC, Third Floor, 615 East Michigan Street, Milwaukee, Wisconsin
53202.
Redeeming shares by telephone. To request a redemption by telephone, call
Firstar at (800) 848-6050. Your shares will be redeemed at the net asset value
next calculated after receipt of your redemption request. You may have the
proceeds wired to your bank account or mailed to your address of record. Only
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one owner of a joint account is required to place a telephone redemption
request. To reduce the risk of fraudulent telephone instructions, the proceeds
of telephone redemptions may be sent only to your address of record or to a bank
or brokerage account you designate, in writing, on the purchase application or
in a letter with the signature(s) guaranteed. You may not redeem shares held in
an IRA account by telephone. During periods of volatile economic and market
conditions, you may have difficulty making a redemption request by telephone, in
which case you should request your redemption in writing. Telephone redemptions
will not be allowed within 15 days of notification of a shareholder address
change unless a signature guaranteed letter has been received by Firstar. If
you redeem shares by telephone and request a wire payment, your redemption
proceeds will normally be paid in federal funds on the next business day,
provided that Firstar receives your redemption order before 3 p.m. Central time.
Firstar will charge a $12 wire fee for each such payment.
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. To join the Systematic Withdrawal Plan,
complete that portion of the Share Purchase Application, or fill out a separate
Systematic Withdrawal Plan Application which you may obtain from the Fund or the
transfer agent. To cancel your participation in the Plan or change the amount
of withdrawal at any time, call (800) 848-6050 or write to the Fund at, c/o
FIRSTAR MUTUAL FUND SERVICES, LLC, 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 redemption of
shares held in IRA and other retirement accounts, please call Firstar, the
Fund's transfer agent, toll-free at (800) 848-6050.
General Redemption Policies. The redemption price per share is the net asset
value determined as described under "Net Asset Value." Neither the Fund nor
Firstar impose a redemption charge. However, certain financial services
companies through which you redeem your Fund shares may charge you a transaction
fee for their services. See "Purchasing Shares." 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.
The Fund 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 these amounts will normally be
paid in cash, but may be paid wholly or partly by a distribution in kind of
securities. Although the Fund has the right to redeem shares in an account
whose value has fallen below the stated minimum for any reason on 60 days'
written notice to the shareholder, the Fund's current policy is not to exercise
its right to redeem small accounts.
You may not cancel or revoke your redemption order once your instructions have
been received. Payment for shares redeemed is made within seven days after
Firstar or an authorized agent of the Fund receives 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 payment for the shares
has been collected, which may take up to 15 days. The Fund may suspend or
postpone redemptions at times when the NYSE is closed, when trading on the NYSE
is restricted or under emergency circumstances as determined by the SEC or for
such other periods as the SEC may permit.
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If the Fund sends you a check (as payment of redemption proceeds, systematic
withdrawal payment or a dividend or capital gain distribution you elected to
receive in cash) and the check is returned "undeliverable" or remains uncashed
for six months, the check will be canceled and the proceeds will be reinvested
in the Fund at the net asset value per share on the date of cancellation. In
addition, after that six-month period, your systematic withdrawal payments will
be canceled and future withdrawals will occur only when requested, or your cash
election will automatically be changed and future dividends and distributions
will be reinvested in your account.
ACCOUNT REGISTRATION
To make ADDRESS CHANGES on your account, call (800) 848-6050. The Fund will
send you a written statement of the account to both your new and old addresses.
A signature guarantee must accompany any written redemptions received within 15
days after the address change.
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.
IRA PLANS
The Fund has master individual retirement account (IRA) plans which allow you
to invest in the Fund using a regular IRA, Roth IRA, Education IRA, SEP-IRA or
SIMPLE-IRA. Income and capital gains earned by an IRA are generally sheltered
from taxation until withdrawal. The initial minimum investment in a Fasciano
Fund IRA is $1,000 (except for an Education IRA, which has an initial minimum
investment of $500). You may also "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.
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Regular IRAs allow anyone of legal age and under 70-1/2 with earned income to
contribute up to $2,000 per tax year. If your spouse has less than $2,000 in
earned income, he or she may still contribute up to $2,000 to an IRA, as long as
you and your spouse's combined earned income is at least $4,000. This $2,000
maximum individual contribution does not include amounts that you may decide to
rollover from another IRA, individual retirement annuity or from a pension or
profit sharing plan in which you participate. However, making the $2,000 maximum
contribution reduces the amount you will be able to contribute to a Roth IRA, as
described below, and will also reduce the amount you are able to contribute to
other IRAs in which you participate. Contributions to a regular IRA may be tax-
deductible depending on whether you participate in another retirement savings
arrangement, and have earned income which does not exceed certain maximum limits
as determined by law. In addition, the investment earnings on your IRA
contributions are generally not taxable to you until you receive a withdrawal.
Roth IRAs allow single taxpayers with adjusted gross income up to $95,000 per
year, and married couples who file joint income tax returns with combined
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adjusted gross income up to $150,000 per year, to contribute up to $2,000, or
$4,000, respectively, per year. If a single individual or married couple exceed
the applicable adjusted gross income limitation, the maximum amounts they are
able to contribute to a Roth IRA will be reduced in accordance with certain
rules imposed by law. The maximum amount a single individual or married couple
is able to contribute to a Roth IRA will be further reduced by contributions
made to other IRAs in which they participate. Contributions to Roth IRAs are
not tax-deductible, but withdrawals are tax-free if you hold the Roth IRA at
least five years from the date of your initial contribution, and you are at
least 59-1/2, become disabled or use the distribution proceeds (up to $10,000)
to purchase your first home. Roth IRA distributions also will not be subject to
tax if those amounts are distributed to your beneficiary on account of your
death, as long as the five year holding period requirement is met.
Education IRAs may be established on behalf of a beneficiary under age 18 to
save for his or her education. Distributions from an Education IRA are tax-free
as long as the proceeds are used to pay for "qualified higher education
expenses." Single taxpayers with annual income up to $95,000, and married
couples with combined annual income up to $150,000, are allowed to contribute up
to $500 per year per beneficiary. The $500 annual maximum contribution is also
subject to reduction if the contributor's income exceeds those amounts.
Small business owners or those with self-employment income may establish a
Simplified Employee Pension Plan (SEP-IRA), which generally allows tax-
deductible contributions of up to 15% of the first $170,000 of compensation per
year for themselves and any eligible employees, subject to special rules
designed to avoid discrimination in favor of certain highly paid individuals.
An employer (including a self-employed person) may establish Savings Incentive
Match Plan IRAs (SIMPLE IRAs), which enable all employees of the employer to
elect to have up to $6,000 per year deducted from their paychecks on a before-
tax basis and deposited directly into an account maintained for the individual
employee. The employer is also generally required to match 100% of the amount
the employee elects to contribute on a before-tax basis, as long as such
matching contribution does not exceed 3% of the employee's compensation.
More information about regular and Roth IRAs, Education IRAs, SEP-IRAs and
SIMPLE IRAs, including related documents and charges of Firstar, as custodian,
may be obtained from the Fund.
The Fund may also be used as an investment in other kinds of retirement plans,
including Keogh or corporate profit-sharing and money purchase plans, 403(b)(7)
custodial tax-deferred annuity plans and 401(k) plans, as long as the use of the
Fund is a permissible investment under the terms of the plan. The Fund does not
offer prototypes of these plans. Your employer must sponsor one of these types
of plans in order for the Fund to be used as an investment vehicle thereunder.
MANAGEMENT OF THE FUND
Fasciano Company, Inc. (the "Adviser") is the investment adviser to the Fund.
Subject to overall supervision of the Fund's board of directors, the Adviser
furnishes continuous investment supervision and management to the Fund under an
investment advisory agreement. The Adviser is a registered investment adviser
wholly-owned by Michael F. Fasciano, and is located at: 190 South LaSalle
Street, Suite 2800, Chicago, IL 60603. As of the date of this prospectus, the
Fund is the Adviser's only investment advisory client. The Adviser has
furnished investment advisory services to the Fund since 1986. 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.
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
-9-
<PAGE>
operations. Mr. Fasciano is a Chartered Financial Analyst and has been employed
in the securities industry since 1978. Before organizing the Adviser in 1986,
Mr. Fasciano was a securities analyst and portfolio manager.
On October 13, 2000, the Adviser entered into an Asset Purchase Agreement (the
"Agreement") with Neuberger Berman Inc. ("Neuberger"). Under the Agreement,
Neuberger has agreed to purchase certain assets of the Adviser (the
"Transaction"). On October 31, 2000, the Fund's board of directors approved a
Plan of Reorganization (the "Plan"), in which the Fund will transfer all of its
assets and liabilities to a newly-created series of the Neuberger Berman Equity
Fund that will be called the Neuberger Berman Fasciano Fund (the "New Fund"),
for shares of equal value of the New Fund in a tax free exchange. Neuberger
Berman Management Inc., a subsidiary of Neuberger, will be the investment
manager to the New Fund and Neuberger Berman, LLC ("NB, LLC"), another Neuberger
subsidiary, will be the sub-adviser. Michael Fasciano will become a Managing
Director of NB, LLC, and will be responsible for the day-to-day management of
the New Fund. It is also anticipated that the New Fund will have the same
investment objectives as the Fund.
The sale of the Adviser cannot be consummated unless shareholders of the Fund
approve the Plan and each party satisfies certain other conditions.
Shareholders will receive a prospectus/proxy statement that describes the sale
of the Adviser and the Plan in more detail, and that will seek approval of the
Plan by the shareholders of the Fund.
Subject to the receipt of the necessary shareholder approval and the
satisfaction of other conditions contained in the Agreement, it is anticipated
that the closing of the Transaction and the Plan will occur during the first
quarter of 2001.
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, in order to avoid payment 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 to you as ordinary income, whether received in cash or reinvested in
additional shares of the Fund. Distributions of net long-term capital gains are
taxable to you as long-term capital gains (currently at a maximum rate of 20%)
regardless of the length of time you have held your shares in the Fund.
Classification as long-term capital gain depends on how long the Fund has held
the security sold. Long-term gains are those held from securities held more
than one year. As a result of tax legislation passed in 1997, the maximum long-
term capital gains rate will decrease from 20% to 18% for capital assets that
have been held for more than five years and whose holding periods begin after
December 31, 2000.
Distributions declared in October, November, or December and paid in January
are taxable as if they were paid on December 31. Every January, the Fund will
-10-
<PAGE>
send you and the IRS a Form 1099-DIV showing the amount of each taxable
distribution you received during the year.
If you purchase shares shortly before the 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 realize a loss on the
sale of Fund shares held for six months or less, your short-term loss is
recharacterized as long-term to the extent of any long-term capital gain
distributions you have received with respect to those shares.
Redemptions are subject to capital gains tax. A capital gain or loss is the
difference between the cost of your shares and the price you receive when you
sell them.
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 31% 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 complete and return to the Fund when you make your initial investment.
-11-
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five fiscal years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with the Fund's financial statements, are included in the June 30,
2000 annual report. The annual report may be obtained from the Fund upon
request without charge.
<TABLE>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 31.78 $ 34.91 $ 27.53 $ 24.33 $ 20.17
Income from investment operations
Net investment income (loss) 0.34 0.40 0.16 (0.03) (0.05)
Net realized and unrealized gain (loss)
on investments 0.82 (2.25) 8.71 3.82 5.55
-------- -------- -------- -------- --------
Total from investment operations 1.16 (1.85) 8.87 3.79 5.50
Less distributions:
Dividends from net investment income (0.39) (0.03) 0.00 0.00 0.00
Distributions from net capital gains 0.00 (1.25) (1.49) (0.59) (1.34)
-------- -------- -------- -------- --------
Total distributions (0.39) (1.28) (1.49) (0.59) (1.34)
Net asset value at end of year $ 32.55 $ 31.78 $ 34.91 $ 27.53 $ 24.33
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return 3.7% (5.2)% 33.2% 15.8% 28.3%
Ratios/Supplemental Data:
Net assets at end of year
(in thousands) $266,902 $418,184 $94,957 $42,121 $28,981
Ratio of expenses to average net assets 1.2% 1.2% 1.3% 1.4% 1.5%
Ratio of net investment income (loss)
to average net assets 0.8% 1.8% 0.2% (0.4)% (0.3)%
Portfolio turnover rate 29.4% 19.8% 49.8% 41.0% 45.6%
</TABLE>
-12-
<PAGE>
You can obtain more information about the Fund's investments in its semiannual
and annual reports to shareholders. Those reports discuss the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
You may wish to read the Statement of Additional Information ("SAI") for more
information about the Fund. The SAI is incorporated into this prospectus, which
means that it is considered to be part of this prospectus.
To obtain free copies of the Fund's semiannual and annual reports and the SAI,
request other information, or discuss your questions about the Fund, write or
call:
Fasciano Company, Inc.
190 South LaSalle Street
Suite 2800
Chicago, Illinois 60603
(312) 444-6050
(800) 848-6050
www.fascianofunds.com
[email protected]
Text-only versions of all Fund documents can be viewed online or downloaded
from the SEC at http://www.sec.gov. You can also visit the SEC's Public
------------------
Reference Room in Washington, DC, call 202-942-8090, send your request and the
appropriate fee to the SEC's Public Reference Section, 450 5th Street, N.W.,
Washington, DC 20549-0102, or send your request electronically to
[email protected] after paying the appropriate fee to obtain copies.
Printed on Recycled Paper
Fasciano Fund, Inc. 811-5602
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
November 1, 2000
FASCIANO FUND, INC.
190 S. LaSalle Street
Suite 2800
Chicago, Illinois 60603
(312) 444-6050
(800) 848-6050
www.fascianofunds.com
[email protected]
This statement of additional information ("SAI") 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, 2000 (and any
supplements thereto).
To obtain the prospectus and additional copies of the annual report without
charge, write or telephone the Fund at the addresses or telephone numbers set
forth above.
TABLE OF CONTENTS
Page
----
History of the Fund 2
Shareholder Voting Rights 2
Investment Strategies and Risks 2
Investment Policies and Restrictions 7
Performance Information 9
Investment Adviser 11
Directors and Officers 12
Certain Shareholders 14
Code of Ethics 14
Purchasing and Redeeming Shares 14
Additional Tax Information 15
Portfolio Transactions 16
Administrator, Custodian and Transfer Agent 18
Independent Public Accountants 19
Financial Statements 20
Appendix 34
-B-1-
<PAGE>
HISTORY OF THE FUND
The Fund was incorporated in Maryland on May 28, 1987, and commenced
operations as a private investment company, not registered under the Investment
Company Act of 1940 (the "1940 Act"), 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 1940 Act and began offering its shares to the
public on November 10, 1988.
SHAREHOLDER VOTING RIGHTS
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 the board of
directors declares, 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. There are no preemptive rights or conversion rights relating to
the Fund's shares.
INVESTMENT STRATEGIES AND RISKS
The primary investment objective of the Fund is long-term capital growth.
The Fund invests in common stocks and securities having common stock
characteristics, including securities convertible into common stocks, and rights
and warrants to purchase common stocks based on their potential for capital
appreciation. The Fund's investment adviser, Fasciano Company, Inc. (the
"Adviser") looks for companies with:
O strong business franchises that are likely to sustain long-term rates
of earnings growth for a three to five year time horizon, and
O stock prices that the market has undervalued relative to the value of
similar companies and that offer excellent potential to appreciate in
price over a three to five year time horizon.
The Adviser invests the Fund primarily in smaller companies (generally
having market capitalizations of less than $2.0 billion) that the Adviser
believes have strong business franchises and are likely to sustain higher long-
term rates of earnings growth. The Adviser also will invest in smaller
companies that are under-followed by major Wall Street brokerage houses and
large asset management firms and thereby may have greater potential to
appreciate in price. However, the Fund may hold the stocks of small companies
that grow into medium-size companies, and 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. From time to time, however, the Fund may invest on a
short-term basis or may sell within a few months securities that it had
originally intended to be a long-term investment if the security no longer meets
the quality or valuation requirements of the Fund.
-B-2-
<PAGE>
DEBT SECURITIES
The Fund may invest in debt securities, including debt securities that the
recognized rating agencies do not rate or rate below investment grade (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 the Fund acquires or the portion of the Fund's assets
that the Fund may invest 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. Although the Fund does not presently intend to
invest in debt securities, it may invest in convertible bonds that present a
good value because they are convertible into equity securities and have an
attractive yield.
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, the Fund's
achievement 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.
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. Adverse publicity and investor perceptions may affect the
market value of these securities and their liquidity.
A description of the ratings S&P and Moody's uses is included as an
appendix to this statement of additional information.
-B-3-
<PAGE>
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 a United States person guarantees. ADRs are receipts an
American bank or trust company typically issues evidencing ownership of the
underlying securities.
To the extent positions in portfolio securities are denominated in foreign
currencies, the strength or weakness of the U.S. dollar against these currencies
affects the Fund's investment performance. 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.
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
-B-4-
<PAGE>
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 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 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
-B-5-
<PAGE>
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.
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.
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 its holdings of restricted securities 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.
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 the Federal Reserve Bank of New York designates) 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 the custodian to continuously maintain
-B-6-
<PAGE>
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.
The Adviser generally does not attempt to invest the Fund based on a market
timing strategy. Rather, the Adviser will invest in a company when the Adviser
believes the company meets the Fund's requirements for long-term earnings growth
prospects and price appreciation potential.
The Fund generally seeks to be fully invested in common stocks. However,
at times, the Adviser may invest a large portion of the Fund's assets in cash if
the Adviser is unable to locate and invest in a sufficient number of companies
that meet the Fund's quality and valuation requirements.
INVESTMENT POLICIES AND RESTRICTIONS
The primary investment objective of the Fund is long-term capital growth.
Current income is considered in selecting securities for the portfolio, but its
importance is secondary to capital growth. The board of directors may change
the Fund's investment objective without shareholder approval.
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.
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).
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).
-B-7-
<PAGE>
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).1<F16>
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 agreements2<F17> 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 the Fund's investment restrictions permits.
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.
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.
14. The Fund will not issue any senior security except to the extent
permitted under the Investment Company Act of 1940.
1<F16> The Fund does not currently intend to sell securities short even under
the conditions described in investment restriction 5.
2<F17> The Fund does not currently intend to enter into reverse repurchase
agreements.
-B-8-
<PAGE>
In addition to the fundamental restrictions listed above, 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 the
Fund purchases.
DEFENSIVE INVESTMENTS
If the Adviser considers a temporary defensive position advisable in
response to adverse market, economic, political, or other conditions, the
Adviser may invest the Fund exclusively in investment grade corporate or
government debt obligations, or hold cash or cash equivalents. A consequence of
the Fund taking such a temporary defensive position is that it may not be able
to achieve its investment objective.
PERFORMANCE INFORMATION
From time to time, the Fund may quote total return figures in
advertisements and sales literature when giving information about its
performance. "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 the total
return for the period represents.
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 and Average Annual Total Return for various periods
ended June 30, 2000 is shown below:
Average Annual
Total Return Total Return
------------ ------------
1 year 3.65% 3.65%
5 years 94.41% 14.20%
10 years 240.69% 13.03%
Life of Fund3<F18> 422.42% 13.64%
1<F18> From August 1, 1987. The performance data shown includes the
performance of the Fund for the period before November 10, 1988, the
date the Fund's registration statement became effective with the
Securities and Exchange Commission. The Fund began operations as a
private investment company on August 1, 1987. Prior to November 10,
1988, the Fund was not registered under the 1940 Act and therefore was
not subject to certain requirements and restrictions that are imposed by
the 1940 Act and the Internal Revenue Code. If the Fund had been
registered during that period, the Fund's return might have been lower.
-B-9-
<PAGE>
The Fund imposes no sales charges and pays no distribution expenses.
Income taxes shareholders must pay 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 also may 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 (OTC) Index, the
Russell 2000 Index and the Dow Jones Industrial Average, or to the Consumer
Price Index or groups of comparable mutual funds, including rankings of Lipper
Analytical Services, Inc., an independent service that monitors the performance
of 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.
Statistical Information. The Fund may use the statistical measures beta,
R-squared and standard deviation to quantify aspects of risk or volatility.
Beta is a measure of the Fund's sensitivity to market movements. It measures
the relationship between the Fund's excess return over the risk-free rate (90-
day Treasury bill) and the excess return of the benchmark index. The beta is
calculated regressing the excess return for the Fund against the excess return
for the benchmark index. By definition, the beta of the benchmark index is
1.00. Accordingly, a portfolio with a beta greater than 1.00 displays more
volatility than the market, and a portfolio with a beta less than 1.00 displays
less volatility than the market.
R-squared reflects the percentage of the Fund's movements that movements in
the benchmark index explain. An R-squared of 100 indicates that movements in
the index explain all movements of the Fund. Conversely, a low R-squared means
that movements in the benchmark index explain very few of the Fund's movements.
An R-squared of 45, for example, reveals that movements in its benchmark index
explain only 45% of the Fund's movements. R-squared can also be used to
ascertain the significance of a particular beta. Generally, a higher R-squared
-B-10-
<PAGE>
will indicate a more reliable beta figure. If the R-squared is lower, then the
beta is less relevant to the Fund's performance.
Standard deviation is a statistical measure of dispersion about an average,
which, for the Fund, depicts how widely the returns varied over a certain period
of time. The standard deviation of historical performance may be used to try to
predict the range of future returns that are most likely for a given investment.
When a Fund has a high standard deviation, the predicted range of performance is
wide, implying greater volatility. Approximately 68% of the time, the total
return of any given fund will vary from its average total return by no more than
plus or minus the deviation figure. Ninety-five percent of the time a fund's
total return will vary within a range of plus or minus two times the deviation
from the average returns.
Statistics may also be used to discuss the Fund's relative performance.
One such measure is alpha. Alpha is a measure of the difference between the
Fund's actual return and its expected performance, given its level of risk (as
measured by beta). A positive alpha figure indicates that the Fund performed
better than its beta would predict. In contrast, a negative alpha indicates the
Fund has not performed as well as its beta would predict. The alpha may be seen
as a measurement of the value a fund manager adds or subtracts.
As of June 30, 2000 the Fund's beta was 0.72, its R-squared was 0.63, and
its standard deviation for the three, five and ten year periods were 16.38%,
16.06%, and 14.17%, respectively.
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 the Adviser specifically assumes,
including but not limited to printing and postage charges; securities
registration, custodian and transfer agency fees; accounting services fees and
audit and legal fees.
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.
The investment advisory fees of the Fund for the fiscal years ended June
30, 2000, 1999 and 1998 were $3,597,288, $2,307,620 and $604,499, respectively.
During those fiscal years, the Fund operated within all applicable expense
limitations without the Adviser reimbursing the Fund.
-B-11-
<PAGE>
The Adviser is a registered investment adviser organized in November 1986.
Michael F. Fasciano is the sole shareholder of the Adviser.
DIRECTORS AND OFFICERS
The Board of Directors has overall responsibility for the conduct of the
Fund's affairs. As a Maryland corporation registered as an investment company
under the 1940 Act, the Fund is not required to hold routine annual meetings and
does not expect to do so. The Fund will call a meeting of shareholders for the
purpose of voting upon the question of removal of a director or directors when
record holders of at least 10% of the Fund's outstanding common shares request
in writing, and in connection with such meeting will comply with the provisions
of section 16(c) of the 1940 Act concerning assistance with a record shareholder
communication asking other record shareholders to join in that request.
The directors and officers of the Fund and their principal business
activities during the past five years are:
<TABLE>
Positions Held Principal Occupations
Name, Address and Age with Fund and other Affiliations
--------------------- --------- ----------------------
<S> <C> <C>
Michael F. Fasciano*<F19> Director, President Director, President and Treasurer of Fasciano Company,
Suite 2800 and Treasurer Inc. since November 1986. Mr. Fasciano is a Chartered
190 South LaSalle St. Financial Analyst.
Chicago, Illinois 60603
Age 45
Susan N. Fasciano*<F19> Secretary Private investor.
Suite 2800
190 South LaSalle Street
Chicago, Illinois 60603
Age 42
.
David R. Long Director Vice President - Investments of Arthur J. Gallagher & Co.,
The Gallagher Center Inc., a New York Stock Exchange listed international insurance
Two Pierce Place and risk management services firm, since May 1989.
Itasca, Illinois 60143-3141
Age 48
-B-12-
<PAGE>
Mark B. Mandich Director Executive Vice President - Finance and Administration, and
PPM America, Inc. Director, PPM America, Inc., an investment management firm,
225 West Wacker since May 1993.
Suite 1200
Chicago, Illinois 60606
Age 40
Joseph C. Neuberger Assistant Secretary Senior Vice President, Firstar Mutual Fund Services, LLC,
Firstar Mutual Fund Services, LLC since 1994; Manager, Arthur Andersen LLP, prior thereto.
615 East Michigan Street
Milwaukee, WI 53202
Age 38
Douglas G. Hess Assistant Secretary Assistant Vice President, Firstar Mutual Fund Services, LLC,
Firstar Mutual Fund Services, LLC since 1999; Disbursements Supervisor, Firstar Trust Company,
615 East Michigan Street prior thereto.
Milwaukee, WI 53202
Age 33
</TABLE>
*<F19> Michael F. Fasciano and Susan N. Fasciano are "interested persons"
of the Fund as defined in the 1940 Act. Michael Fasciano and
Susan Fasciano are husband and wife.
The only compensation paid to directors and officers of the Fund for their
services as such consists of $2,000 paid to directors who are not interested
persons of the Fund or the Adviser.
The following table sets forth compensation the Fund paid during the fiscal
year ended June 30, 2000 to each of the directors of the Fund. The Fund is not
part of a fund complex and has no retirement, pension or other benefit plans for
directors.
AGGREGATE
COMPENSATION
NAME OF DIRECTOR FROM THE FUND
---------------- -------------
Michael F. Fasciano $ 0
Susan N. Fasciano 0
David R. Long 2,000
Mark B. Mandich 2,000
At September 30, 2000 the directors and officers as a group owned
beneficially 74,767 shares, or 1.0% of the outstanding shares of the Fund.
-B-13-
<PAGE>
CERTAIN SHAREHOLDERS
The only persons known by the Fund to own of record or "beneficially"
(within the meaning of that term as defined in rule 13d-3 under the Securities
Exchange Act of 1934) 5% or more of the outstanding shares of the Fund as of
September 30, 2000 were Charles Schwab & Co., Inc., as a nominee for various
beneficial owners, which held 45.7% of the outstanding shares, and National
Financial Services Corporation, as a nominee for various beneficial owners,
which held 17.9% of the outstanding shares. The address of Charles Schwab &
Co., Inc. is 101 Montgomery Street, San Francisco, California 94104-4122. The
address of National Financial Services Corporation is 200 Liberty Street, New
York, NY 10281-1003.
CODES OF ETHICS
The 1940 Act and rules thereunder require that the Fund and the Adviser
establish standards and procedures for the detection and prevention of certain
conflicts of interest, including activities by which persons having knowledge of
the investments and investment intentions of the Fund might take advantage of
that knowledge for their own benefit. The Fund and the Adviser have adopted a
Code of Ethics to meet those concerns and legal requirements. Although the Code
does not prohibit employees who have knowledge of the investments and investment
intentions of the Fund from engaging in personal securities investing, it does
regulate such personal securities investing by these employees as a part of the
effort by the Fund and the Adviser to detect and prevent conflicts of interest.
PURCHASING AND REDEEMING SHARES
You may purchase or redeem shares of the Fund through some broker-dealers,
banks or other institutions that have made Fund shares available to their
customers ("financial services companies"). Some financial services companies
may charge fees to their customers, including fees on purchases or redemptions
of Fund shares. Those charges, if imposed, could constitute a substantial
portion of a smaller account and may not be in your best interest.
In addition, a financial services company may impose an accounting or
shareholder services charge on an account that holds Fund shares (which
generally will be a percentage of the annual average value of the account).
The Fund may enter into an arrangement with some financial services
companies authorizing the financial services company to process purchase orders
or redemption requests on behalf of the Fund on an expedited basis, including
requesting share redemptions by telephone ("authorized agents"). An authorized
agent's receipt of a purchase order or redemption request will be deemed to be
receipt by the Fund for purposes of determining the net asset value of Fund
shares to be purchased or redeemed. For purchase orders placed through those
authorized agents, a shareholder will pay the Fund's net asset value per share
next computed after the authorized agent receives such purchase order, plus any
applicable transaction charge the agent imposes. For redemption orders placed
through an authorized agent, a shareholder will receive redemption
-B-14-
<PAGE>
proceeds which reflect the net asset value per share next computed after the
authorized agent receives the redemption order, less any redemption fees the
agent imposes.
Net Asset Value. Share purchase and redemption orders will be priced at
the Fund's net asset value next computed after Firstar, as transfer agent for
the Fund, or an authorized agent of the Fund receives such orders. The net
asset value of the shares of the Fund is determined as of the close of regular
session trading on the New York Stock Exchange ("NYSE") (normally 3:00 p.m.
Central time) each day the NYSE is open for unrestricted trading. 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 January, the
third Monday in February, Good Friday, the last Monday in May, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. 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.
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 the most recent bid quotations. Securities for which quotations are not
available and any other assets are valued at a fair value as the board of
directors determines in good faith. Money market instruments having a maturity
of 60 days or less from the valuation date are valued on an amortized cost
basis. Firstar Mutual Fund Services, LLC, the Fund's Fund Accounting agent,
performs calculations of net asset value.
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 value
of the account falls below a stated minimum for any reason. 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.
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 intends to distribute to shareholders annually any capital gains
that have been recognized for federal income tax purposes (including year-end
mark-to-market gains) on Fund
-B-15-
<PAGE>
investments, to the extent such gains exceed recognized capital losses and any
net capital loss carryovers of the Fund. Shareholders will be advised of the
nature of such capital gain distributions. Your distributions will be taxable
to you, under income tax law, whether received in cash or reinvested in
additional shares. For federal income tax purposes, any distribution that is
paid in January but was declared in October, November, or December of the prior
calendar year is deemed paid in the prior calendar year.
You will be subject to income tax at ordinary rates on income dividends and
distributions of net short-term capital gain. Distributions of net long-term
capital gains are taxable to you as long-term capital gains (currently taxed at
a maximum rate of 20%) regardless of the length of time you have held your
shares. Long-term gains are those from securities held more than one year. As a
result of tax legislation passed in 1997, the maximum long-term capital gains
rate will decrease from 20% to 18% for capital assets that have been held for
more than five years and whose holding periods begin after December 31, 2000.
You are urged to consult your tax advisor to assess the impact of the new
legislation on your individual circumstances.
If you realize a loss on the sale of Fund shares held for six months or
less, your short-term loss is recharacterized as long-term to the extent of any
long-term capital gain distributions you have received with respect to those
shares.
The Fund may be required to withhold federal income tax ("backup
withholding") from certain payments to you, generally distributions and
redemption proceeds. Backup withholding may be required if:
O You fail to furnish your properly certified social security or other
tax identification number;
O You fail to certify that your tax identification number is correct or
that you are not subject to backup withholding due to the
underreporting of certain income; or
O The IRS informs the Fund that your tax identification number is
incorrect.
These certifications are contained in the application that you complete
when you open your Fund account. The Fund must promptly pay the IRS all amounts
withheld. Therefore, it is not usually possible for the Fund to reimburse you
for amounts withheld. You may, however, claim the amount withheld as a credit
on your federal income tax return.
This section is not intended to be a full discussion of present or proposed
federal income tax laws and the effect of such laws on the Fund or an investor.
Investors are urged to consult their own tax advisers for a complete review of
the tax ramifications of an investment in the Fund.
PORTFOLIO TRANSACTIONS
The Adviser has discretion to select brokers and dealers to execute
portfolio transactions the Adviser initiates and to select the markets in which
such transactions are to be executed. The
-B-16-
<PAGE>
primary responsibility of the Adviser 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 net 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 the Adviser receives attributable to a particular transaction will
benefit one or more other accounts for which the Adviser exercises investment
discretion.
In valuing research services, the Adviser makes a judgment of the
usefulness of research and other information a broker provides 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 the Fund's
investment decisions. 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 obtaining such information may reduce the expenses of the Adviser in
providing management services to the Fund is not determinable. In addition, the
board of directors understands 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 the Adviser obtains in performing
services for others.
For the fiscal years ended June 30, 2000, 1999 and 1998, the Fund paid
brokerage commissions, not including the gross underwriting spread on securities
purchased in
-B-17-
<PAGE>
underwritten public offerings, aggregating $263,820, $292,464 and $66,326,
respectively. The increase in the commissions paid by the Fund for the
fiscal year ended June 30, 2000 compared to the fiscal year ended June 30, 1998
resulted from an increase in the Fund's assets (from $94,957,000 at June 30,
1998 to $266,902,000 at June 30, 2000).
Although investment decisions for the Fund would be made independently from
those for other investment advisory clients of the Adviser, if any, it might
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.
ADMINISTRATOR, CUSTODIAN AND TRANSFER AGEN
Administrator. Firstar Mutual Fund Services, LLC ("Firstar"), 615 East
-------------
Michigan Street, Milwaukee, Wisconsin 53202 serves as the Fund's Administrator.
Firstar is not an affiliate of the Adviser or its affiliates. Under the Fund
Administration Servicing Agreement entered into between the Fund and Firstar
relating to the Fund (the "Administration Agreement"), Firstar has contracted to
provide the following services: (1) compile data for and prepare, with respect
to the Fund, timely Notices to the SEC required pursuant to Rule 24f-2 under the
1940 Act and Semi-Annual Reports to the SEC and current Shareholders; (2)
coordinate execution and filing by the Fund of all federal and state tax returns
and required tax filings other than those required to be made by the Fund's
custodian and transfer agent; (3) prepare compliance filings and Blue Sky
registrations pursuant to state securities laws with the advice of the Fund's
counsel; (4) assist to the extent requested by the Fund with the Fund's
preparation of Annual and Semi-Annual reports to Fund shareholders and
Registration Statements for the Fund; (5) monitor the Fund's expense accruals
and cause all appropriate expenses to be paid on proper authorization from the
Fund; (6) monitor the Fund's status as a regulated investment company under
Subchapter M of the Code; (7) maintain the Fund's fidelity bond as required by
the 1940 Act; and (8) monitor compliance with the policies and limitations of
the Fund as set forth in the Prospectus, SAI, By-laws and Articles of
Incorporation.
The Administration Agreement will remain in effect until either party
terminates. The board of directors of the Fund may terminate the Administration
Agreement at any time, without the payment of any penalty, upon the giving of
ninety (90) days' written notice to Firstar, and Firstar may terminate the
Administration Agreement upon the giving of ninety (90) days' written notice to
the Fund.
Under the Administration Agreement, Firstar shall exercise reasonable care
and is not liable for any error or judgment or mistake of law or for any loss
the Fund suffers in connection with the performance of the Administration
Agreement, except a loss resulting from willful misfeasance, bad faith or
negligence on the part of Firstar in the performance of its duties under the
Administration Agreement.
The Fund will pay Firstar a monthly fee at the annual rates of 0.06% of the
Fund's average daily net assets up to $200 million, 0.05% of the next $500
million of average daily net
-B-18-
<PAGE>
assets, and 0.03% of average daily net assets in excess of $700 million, subject
to the minimum annual fees described herein. For the fiscal year ending June
30, 2000, the Fund paid $206,814 in Administration Fees.
In addition, the Fund has entered into a Fund Accounting Servicing
Agreement with Firstar pursuant to which Firstar has agreed to maintain the
financial accounts and records of the Fund and provide other accounting services
to the Fund.
Custodian. Firstar acts as custodian of the securities and other assets of
---------
the Fund. As custodian, Firstar Bank-Milwaukee N.A. is responsible for, among
other things, safeguarding and controlling the Fund's cash and securities,
handling the receipt and delivery of securities, and collecting interest and
dividends on the Fund's investments. The custodian's address is P.O. Box 701,
Milwaukee, Wisconsin 53201.
Transfer Agent. Firstar Mutual Fund Services, LLC also serves as transfer
--------------
agent and dividend disbursing agent for the Fund under a Shareholder Servicing
Agent Agreement. As transfer and dividend disbursing agent, Firstar has agreed
to (i) issue and redeem shares of the Fund, (ii) make dividend and other
distributions to shareholders of the Fund, (iii) respond to correspondence from
Fund shareholders and others relating to its duties, (iv) maintain shareholder
accounts, and (v) make periodic reports to the Fund. Firstar's address is P.O.
Box 701, Milwaukee, Wisconsin 53201.
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, and performs other professional accounting, auditing, tax,
and advisory services when the Fund engages it to do so.
-B-19-
<PAGE>
FINANCIAL STATEMENTS
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 2000
COMMON STOCKS -- 97.8%
COMMUNICATIONS & MEDIA -- 22.4%
Market
Shares Company Description Value
------ ------- ----------- -----
250,000 Emmis Communications A diversified media company with 10,343,750
Corporation *<F20> television and radio broadcasting
and publishing operations
300,000 Westwood One, Inc. Provides over 150 news, sports, 10,237,500
music, talk, entertainment
programs, features, live events,
and 24-hour formats to more than
7,500 radio stations
250,000 Penton Media, Inc. Diversified business media company 8,750,000
that publishes magazines and
electronic information products,
produces trade shows and
conferences, and provides marketing
and business development services
200,000 Pulitzer, Inc. Engaged in newspaper publishing 8,437,500
and new media businesses
150,000 Meredith Corporation Diversified media company involved 5,062,500
in magazine and book publishing and
television broadcasting
250,000 Journal Register Publishes small metropolitan, 4,562,500
Company *<F20> suburban daily and suburban and
community non-daily newspapers
serving markets in New York,
Connecticut, Ohio, Pennsylvania,
Missouri and central New England
100,000 McClatchy Newspapers Newspaper and internet publisher 3,312,500
-- Class A with 11 daily and 13 non-daily
newspapers along with local web
sites in each of its daily
newspaper markets. The company also
owns and operates other media-
related businesses
150,000 Hearst-Argyle Owns and/or manages 26 network- 2,925,000
Television, affiliated television stations, and
Inc. *<F20> several radio stations throughout
the U.S.
50,000 Entercom Radio Broadcasting group owning 2,437,500
Communications and/or operating 95 stations in 18
Corporation *<F20> markets
100,000 Lee Enterprises, In the business of newspaper 2,331,250
Inc. publishing and television
broadcasting
-B-20-
<PAGE>
120,000 Ackerly Group, Inc. Media and entertainment company 1,410,000
consisting of four segments:
outdoor media, television
broadcasting, radio broadcasting
and sports and entertainment (owns
the Seattle Supersonics)
59,810,000
CONSUMER PRODUCTS AND SERVICES -- 13.8%
250,000 Tootsie Roll Engaged in the manufacture and 8,750,000
Industries, Inc. sale of candy for over 100 years.
Products include Tootsie Roll,
Charms, Blow Pops, Junior Mints,
Sugar Babies, Charleston Chews,
Sugar Daddys and others
300,000 Snap-on Manufactures and distributes hand 7,987,500
tools, power tools, tool storage
products, diagnostic equipment,
shop equipment, and diagnostic
software and other services
50,000 Plantronics, Provider of headsets to telephone
Inc. *<F20> companies and the business 5,775,000
community worldwide
200,000 Central Parking Operates parking facilities in 4,735,852
Corporation 40 states, the District of
Columbia, and several
international locations
150,000 Blyth Industries, Designs, manufactures, markets 4,425,000
Inc. *<F20> and distributes a line of candles
and home fragrance products, and
markets a range of related candle
accessories and gift bags. Also
produces portable heating fuel
products
400,000 Consolidated Engaged primarily in the 3,600,000
Products, Inc. ownership, operation and
franchising of Steak n Shake
restaurants. The company currently
operates 345 Steak n Shake
restaurants, including 52
franchised, and 11 specialty
restaurants, primarily Colorado
Steakhouses
100,000 ShopKo Stores, Inc. Operates 327 retail stores in 22 1,537,500
states, primarily in the Midwest,
Western Mountain and Pacific
Northwest regions
36,810,852
COMMERCIAL PRODUCTS AND SERVICES -- 12.4%
200,000 OM Group, Inc. Produces and markets metal-based 8,800,000
specialty chemicals and powders
for diverse applications to a
variety of industries
180,000 Zebra Technologies Provides bar code solutions to 7,976,250
Corp. -- manufacturing and service entities
Class A *<F20> worldwide, for use in automatic
identification and data collection
systems
-B-21-
<PAGE>
100,000 Mineral Resource and technology based 4,600,000
Technologies, Inc. organization that develops and
produces performance-enhancing
minerals, mineral-based and
synthetic mineral products for the
paper, steel, polymer and other
manufacturing industries on a
worldwide basis
130,000 Spartech Producer of engineered 3,510,000
Corporation thermoplastic materials, polymeric
compounds and molded and profile
products
100,000 Modine Develops, manufactures, and 2,700,000
Manufacturing Co. markets heat exchangers and
systems for use in various original
equipment manufacturer applications
and for sale to the automotive
aftermarket and to a wide array of
building markets
60,000 Methode Manufactures electronic 2,317,500
Electronics, components that connect, convey
Inc. -- Class A and control electrical energy,
signal and pulse, including
connectors, automotive components,
interconnect devices, printed
circuits, and current carrying
distribution systems
125,000 Communications Engaged in the manufacture and 1,906,250
Systems, Inc. sale of modular connecting and
wiring devices for voice and data
communications
40,000 Andrew A multinational supplier of 1,342,500
Corporation *<F20> communication products and
systems to worldwide commercial,
industrial, governmental and
military customers
33,152,500
HEALTH CARE PRODUCTS & SERVICES -- 10.6%
140,000 Patterson Dental Distributes dental products in 7,140,000
Company *<F20> North America to dentists, dental
laboratories, institutions and
other healthcare providers
185,000 Dentsply Designs, develops, manufactures, 5,700,312
International, Inc. and markets dental consumable and
laboratory products, and dental
equipment
125,000 KV Pharmaceutical Researches, develops, 3,312,500
Company -- manufactures, and markets
Class A*<F20> controlled release and tastemasked
forms of drug products and is a
leading marketer of technology
distinguished generic
pharmaceuticals
150,000 Young Innovations, Designs, manufactures and 2,681,250
Inc. *<F20> markets single-use supplies,
autoclavable instruments and other
products used by dental
professionals
300,000 Hooper Holmes, Inc. Provides medical and paramedical 2,400,000
examinations and related services
to life and health insurance
companies
-B-22-
<PAGE>
200,000 STERIS Provider of infection prevention, 1,775,000
Corporation *<F20> contamination prevention, microbial
reduction, and surgical support
systems, products, services, and
technologies to health care,
scientific, research, food, and
industrial customers worldwide
100,000 Landauer, Inc. Offers a service for measuring 1,556,250
the dosage of x-ray, gamma
radiation and other penetrating
ionizing radiations
25,000 Express Scripts, As an independent pharmacy 1,553,125
Inc. *<F20> benefit manager and managed care
company, Express Scripts provides a
broad range of pharmacy benefit and
medical information management
services, as well as managed vision
care programs
200,000 Sterile Recoveries, Provides hospitals and surgery 1,550,000
Inc. *<F20> centers with a comprehensive
surgical procedure-based delivery
and retrieval service for reusable
gowns, towels, etc. In addition,
provides disposable products
necessary for surgery
50,000 Brookdale Living Provides senior and assisted 725,000
Communities, living services to the elderly
Inc. *<F20> through its facilities located in
urban and suburban areas of major
metropolitan markets
28,393,437
BUSINESS SERVICES -- 9.2%
300,000 G & K Services, Inc. Manufactures uniform garments 7,518,750
-- Class A and is a full service uniform
rental provider
250,000 Concord EFS, Engaged in electronic 6,500,000
Inc. *<F20> transaction authorization,
processing, settlement and
funds transfer services in
selected markets
300,000 Keane, Inc. *<F20> Information technology 6,487,500
consulting firm helping
companies plan, build, and
manage application software
100,000 ACNielsen Global leader in delivering 2,200,000
Corporation *<F20> market research, information
and analysis to clients in the
manufacturing, retailing, service,
media, entertainment and internet
industries. Offers services in over
100 countries
100,000 Interim Services, National provider of a range of 1,775,000
Inc. *<F20> customized staffing solutions to
business, professional and service
organizations, and government
agencies
24,481,250
-B-23-
<PAGE>
FINANCIAL SERVICES -- 7.9%
225,000 Waddell & Reed Underwrites and distributes a 7,382,813
Financial, Inc. portfolio of mutual funds as well
as variable annuities and life
insurance product
250,000 HCC Insurance Principally engaged in 4,718,750
Holdings, Inc. providing aviation, marine,
offshore energy, property, accident
and health, and lenders single
interest insurance and reinsurance
on a worldwide basis
126,250 First Midwest The largest independent banking 2,935,313
Bancorp, Inc. company in the suburban Chicago
market
90,000 American Capital Specialty finance company that 2,148,750
Strategies, Ltd. has been principally engaged in
arranging commercial loans to small
and medium sized business
75,000 ITLA Capital Primarily engages in the 1,087,500
Corporation *<F20> origination of loans secured by
income producing real estate
50,000 Home Federal Unitary savings and loan holding 825,000
Bancorp company for Home Federal Savings
Bank
25,000 Corus Bankshares, Bank holding company for CORUS 660,937
Inc. Bank, which provides financial
services through 11 bank branches
in the Chicago metropolitan area
50,000 Doral Financial Bank holding company that 571,875
Corporation operates in the mortgage banking,
commercial banking and broker-
dealer businesses
27,500 Alliance Bancorp, Registered savings and loan 452,031
Inc. holding company engaged in the
business of providing financial
service products through its
wholly-owned subsidiary, Liberty
Federal Bank
15,000 Cass Commercial Bank holding company for Cass 311,250
Corporation Bank and Trust Company, and
provides information services
through its Cass Information
Systems subsidiary
21,094,219
DISTRIBUTOR -- 5.8%
90,000 CDW Computer Sells MS-DOS/Microsoft Windows 5,625,000
Centers, Inc. and Apple/Macintosh based
microcomputer hardware and
peripherals including: desktop
computers, notebooks and laptops,
printing devices, video monitors,
networking products, software and
accessories
100,000 Fastenal Company Sells and distributes industrial 5,062,500
supplies, grouped into eight
product lines, in North America
-B-24-
<PAGE>
200,000 MSC Industrial A direct marketer of a full
Direct Company, line of industrial products
Inc. *<F20> intended to satisfy its customers'
maintenance, repair and operations 4,187,500
supplies requirements
100,000 Aviall, Distributes and markets products 493,750
Inc. *<F20> new aviation parts of more than
180 manufacturers and distributes
approximately 90,000 items from
customer service centers in North
America, Europe and Asia-Pacific
15,368,750
ENTERTAINMENT & LEISURE -- 5.6%
300,000 Championship Auto Owns, operates, and markets 7,650,000
Racing Teams, North America's leading open-wheel
Inc. *<F20> motorsports series, the FedEx
Championship Series
175,000 International A leading promoter of 7,240,625
Speedway motorsports activities in the
Corporation _ U.S. The company owns and/or
Class A operates 11 major motorsports
facilities
14,890,625
MACHINERY -- INDUSTRIAL -- 5.1%
250,000 The Manitowoc Designs and manufactures 6,687,500
Company, Inc. commercial ice machines and
refrigeration products, and cranes
and related products. Manitowoc
also engages in marine vessel
repair
100,000 IDEX Corporation Manufactures industrial pumps 3,156,250
and related controls for use in
process applications, and
proprietary equipment that may
combine pumps or other devices into
products for industrial, commercial
and safety applications
80,000 Regal-Beloit Manufactures a line of mechanical 1,285,000
Corporation products to control motion and
torque and electrical products such
as motors and generators
60,000 Kaydon Corporation Designer and manufacturer of 1,260,000
custom-engineered products,
supplying a diverse group of
industrial, aerospace, medical and
electronic equipment, and
aftermarket customers
50,000 Robbins & Designs, manufactures and 1,140,625
Myers, Inc. markets fluid handling products
and systems for the process
industry
13,529,375
-B-25-
<PAGE>
TRANSPORTATION -- 5.0%
150,000 EGL, Inc. *<F20> Provider of air freight 4,612,500
forwarding and other
transportation and logistics
services
200,000 Midwest Express Operates single-class, premium 4,300,000
Holdings, service passenger jet airline
Inc. *<F20> that caters to business travelers
and serves selected major business
destinations throughout the U.S.
and Toronto from operations based
in Milwaukee, Omaha, and Kansas
City
70,000 C.H. Robinson Global provider of multimodal 3,465,000
Worldwide, Inc. transportation services and
logistics through a network of 132
offices in N. America, S. America
and Europe
30,000 Atlas Air, Air carrier that operates a 1,076,250
Inc. *<F20> fleet of 747 freighters under
long-term contracts. Atlas operates
scheduled flights on behalf of its
customer airlines to 101 cities in
46 countries
13,453,750
TOTAL COMMON STOCKS (Cost $222,018,890) 260,984,758
TOTAL INVESTMENTS (Cost $222,018,890) -- 97.8% 260,984,758
OTHER ASSETS, LESS LIABILITIES -- 2.2% 5,916,881
TOTAL NET ASSETS -- 100.0% $266,901,639
*<F20> non-income producing
The accompanying notes to financial statements are an integral part of this
schedule.
-B-26-
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
ASSETS
Common stocks, at market value (cost:$222,018,890) $260,984,758
Receivables
Investments sold 10,554,175
Capital shares sold 92,493
Dividends 206,940
Interest 5,603
Prepaid expenses and other assets 25,352
TOTAL ASSETS $271,869,321
LIABILITIES AND NET ASSETS
Capital shares redeemed $ 473,948
Payables and accrued expenses
Payable for securities purchased 3,428,787
Accrued expenses and other 130,268
liabilities
Due to adviser 227,285
Payable to bank 707,394
TOTAL 4,967,682
Net assets
Common stock, $.01 par value; 50,000,000 shares authorized, 235,503,565
8,199,185 shares issued and outstanding, and paid-in capital
Accumulated undistributed net 2,096,968
investment income
Accumulated undistributed net (9,664,762)
realized gain (loss) on investments
Net unrealized appreciation on 38,965,868
investments
Total net assets 266,901,639
Total liabilities and net assets $271,869,321
Net asset value per share $32.55
The accompanying notes to financial statements are an integral part of this
schedule.
-B-27-
<PAGE>
STATEMENT OF OPERATIONS
For the year ended June 30, 2000
INCOME
Interest $ 4,991,529
Dividends 2,220,275
7,211,804
EXPENSES
Management Fee 3,597,288
Transfer and disbursing agent fees 251,200
Administration fee 206,814
Registration fees 129,920
Custodian fees 86,985
Printing and mailing fees 64,880
Accounting fee 64,125
Legal fees 26,630
Audit fees 14,098
Other operating expenses 14,001
Total expenses 4,455,941
Net investment income 2,755,863
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (7,047,190)
Net change in unrealized appreciation on investments 10,119,269
Net gain on investments 3,072,079
Net increase in net assets resulting from operations 5,827,942
The accompanying notes to financial statements are an integral part of this
schedule.
-B-28-
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2000 and June 30, 1999
June 30, 2000 June 30, 1999
OPERATIONS:
Net investment income $ 2,755,863 $ 4,174,483
Net realized gain (loss) on investments (7,047,190) (2,617,572)
Net change in unrealized appreciation on 10,119,269 8,200,699
investments
Net increase in net assets resulting from 5,827,942 9,757,610
operations
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (4,695,205) (208,192)
Distributions from net capital gains -- (8,674,266)
Total distributions (4,695,205) (8,882,458)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (6,386,940 and 198,662,421 397,728,851
12,897,111 shares, respectively)
Increase in shares issued for reinvested 4,558,950 8,683,476
distributions (140,234 and 282,573 shares,
respectively)
Cost of shares redeemed (11,486,097 and (355,636,957) (84,060,191)
2,741,427 shares, respectively)
Net increase (decrease) in net assets derived (152,415,586) 322,352,136
from capital share transactions
Net increase (decrease) in net assets (151,282,849) 323,227,288
NET ASSETS AT BEGINNING OF PERIOD 418,184,488 94,957,200
NET ASSETS AT END OF PERIOD (including $266,901,639 $418,184,488
accumulated undistributed net investment
income of $2,096,968 and $3,739,321,
respectively)
The accompanying notes to financial statements are an integral part of this
schedule.
-B-29-
<PAGE>
FINANCIAL HIGHLIGHTS
Condensed financial information per share of capital stock
outstanding throughout the period is
presented below:
<TABLE>
Year ended June 30,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF YEAR $ 31.78 $ 34.91 $ 27.53 $ 24.33 $ 20.17
Income from investment operations:
Net investment income (loss) 0.34 0.40 0.16 (0.03) (0.05)
Net realized and unrealized gain
(loss) on investments 0.82 (2.25) 8.71 3.82 5.55
Total from investment operations 1.16 (1.85) 8.87 3.79 5.50
Less distribution:
Dividends from net investment income (0.39) (0.03) 0.00 0.00 0.00
Distributions from net capital gains 0.00 (1.25) (1.49) (0.59) (1.34)
Total distributions (0.39) (1.28) (1.49) (0.59) (1.34)
NET ASSET VALUE AT END OF YEAR $32.55 $ 31.78 $ 34.91 $ 27.53 $ 24.33
Total return 3.7% (5.2)% 33.2% 15.8% 28.3%
Ratios/Supplemental Data:
Net assets at end of year (in thousands) $266,902 $418,184 $94,957 $42,121 $28,981
Ratio of expenses to average net assets 1.2% 1.2% 1.3% 1.4% 1.5%
Ratio of net investment income (loss)
to average net assets 0.8% 1.8% 0.2% (0.4)% (0.3)%
Portfolio turnover rate 29.4% 19.8% 49.8% 41.0% 45.6%
</TABLE>
The accompanying notes to financial statements are an
integral part of this schedule.
-B-30-
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(1) SIGNIFICANT ACCOUNTING POLICIES:
Fasciano Fund, Inc. (the "Fund"), a Maryland corporation, commenced operations
on August 1, 1987 as a private investment company. On June 30, 1988, the Fund
registered with the Securities and Exchange Commission 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. The primary objective of
the Fund is long-term capital growth. The fiscal year end of the Fund is June
30. The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements in accordance with
accounting principles generally accepted in the United States.
(a) Investment and shareholder transactions are recorded on a trade date basis.
(b) Each security traded on a national securities exchange or traded over the
counter and quoted on the Nasdaq National Market will be valued at the last
sale price on the day of valuation. Securities for which there was no sale
on the day of valuation will be valued at the current bid prices. Each
money market instrument having a maturity of 60 days or less from the date
of purchase is valued on an amortized cost basis, which approximates market
value. Other assets and securities will be valued at a fair value, as
determined in good faith by the Board of Directors.
(c) Dividends are recognized as income on the ex-dividend date. Interest income
and operating expenses are recorded on the accrual basis.
(d) The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
(e) The amount of dividends and distributions from net investment income and
net realized capital gains are determined in accordance with federal income
tax regulations, which may differ from accounting principles generally
accepted in the United States. To the extent that these book and tax
differences are permanent in nature, such amounts are reclassified among
fund shares issued and outstanding, accumulated undistributed net realized
gains on investments and accumulated undistributed net investment income.
Accordingly, at June 30, 2000, reclassifications were recorded to increase
accumulated undistributed net investment income by $282,496, decrease
accumulated net realized gains on investments by $55,741, and decrease fund
shares issued and outstanding by $226,755.
(2) RELATED PARTIES:
Michael F. Fasciano is an officer and director of the Fund and also an
officer, director and sole shareholder of the investment adviser, Fasciano
Company, Inc. Mr. Fasciano held 20,658 shares or 0.2% of the outstanding common
stock of the Fund at June 30, 2000.
-B-31-
<PAGE>
The non-affiliated directors receive a fee of $2,000 annually. The management
fee was paid to Fasciano Company, Inc. for its services as investment adviser.
This fee is paid monthly at the rate of 1/12 of 1% (an annual rate of 1.0%) of
the average daily net asset value of the Fund.
Total annual operating expenses of the Fund shall not exceed 2% of average net
assets, and the adviser has agreed to pay any excess operating expenses or to
reimburse the Fund for any sums expended for such expenses in excess of that
amount. For this purpose, brokers' commissions and other charges relative to the
purchase and sale of portfolio securities, interest charges, taxes and
litigation and other extraordinary expense shall not be regarded as
operating expenses.
(3) INVESTMENTS:
During the year ended June 30, 2000, purchases of securities other than short-
term investments were $106,565,164. Sales of such securities for that period
were $78,078,049.
For Federal income tax purposes, the cost of investments at June 30, 2000 was
$222,397,262. At June 30, 2000, on a tax basis, gross unrealized appreciation
of investments was $59,911,150 and gross unrealized depreciation of investments
was $21,323,654.
(4) INCOME TAXES:
No provision for federal income taxes has been made. The Fund has complied to
date with the provisions of the Internal Revenue Code and intends to distribute
substantially all of its net investment income and net realized capital gains in
order to avoid payment of all future federal income taxes.
(5) DISTRIBUTIONS TO SHAREHOLDERS:
On December 29, 1999, the Fund distributed net investment income of $0.39 per
share.
-B-32-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Fasciano Fund, Inc. We have
audited the accompanying statement of assets and liabilities of FASCIANO FUND,
INC. (a Maryland corporation), including the schedule of portfolio investments,
as of June 30, 2000, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 2000, by correspondence with the custodian and brokers. As
to securities purchased but not received, we requested confirmation from
brokers, and when replies were not received, we carried out alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Fasciano Fund, Inc. as of June 30, 2000, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 31, 2000
-B-33-
<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 ratings Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P")
use.
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." A large
or an exceptionally stable margin protects interest payments 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-34-
<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, large uncertainties or major risk exposures to
adverse conditions outweigh these characteristics.
-B-35-
<PAGE>
PART C OTHER INFORMATION
Item 23. Exhibits
--------
(a) Restated articles of incorporation7<F7>
(b) Bylaws8<F8>
(c) Form of common stock certificate1<F1>
(d) Investment advisory agreement with Fasciano
Company, Inc.9<F9>
(e) None
(f) None
(g) Custody agreement with Firstar Mutual Fund
Services, LLC (formerly Firstar Trust Company,
formerly First Wisconsin Trust Company)10<F10>
(h)(i) Shareholder servicing agreement with Firstar
Mutual Fund Services, LLC (formerly Firstar Trust
Company, formerly First Wisconsin Trust
Company)11<F11>
(h)(ii) Accounting Services Agreement with Firstar Mutual
Fund Services, LLC (formerly Firstar Trust
Company)12<F12>
(i) Opinion and Consent of Bell, Boyd & Lloyd LLC
(j) Consent of independent public accountants
(k) None
(l)(i) Initial 1987 Subscription Agreement for
Individuals2<F2>
<PAGE>
(l)(ii) Initial 1987 Subscription Agreement for
Corporations,3<F3> Trusts and Partnerships
(l)(iii) Initial 1988 Subscription Agreement4<F4>
(l)(iv) Second 1988 Subscription Agreement5<F5>
(l)(v) Third 1988 form of Subscription Agreement6<F6>
(m) None
(n) None
(p) Code of Ethics
1<F1> Incorporated by reference to exhibit 99.B4 filed with pre-effective
amendment No. 2 to registrant's registration statement on form N-1A,
No. 33-23997 (the "Registration Statement") filed on November 8, 1988.
2<F2> Incorporated by reference to exhibit 99.B13A filed with post-effective
amendment no. 6 to the Registration Statement, filed on October 27,
1994.
3<F3> Incorporated by reference to exhibit 99.B13B filed with post-effective
amendment no. 6 to the Registration Statement, filed on October 27,
1994.
4<F4> Incorporated by reference to exhibit 99.B13C filed with post-effective
amendment no. 6 to the Registration Statement, filed on October 27,
1994.
5<F5> Incorporated by reference to exhibit 99.B13D filed with post-effective
amendment no. 6 to the Registration Statement, filed on October 27,
1994.
6<F6> Incorporated by reference to exhibit 99.B13E filed with post-effective
amendment no. 6 to the Registration Statement, filed on October 27,
1994.
7<F7> Incorporated by reference to exhibit 99.B1 filed with post-effective
amendment no. 8 to the Registration Statement, filed on October 31,
1996.
8<F8> Incorporated by reference to exhibit 99.B2 filed with post-effective
amendment no. 8 to the Registration Statement, filed on October 31,
1996.
9<F9> Incorporated by reference to exhibit 99.B5 filed with post-effective
amendment no. 8 to the Registration Statement, filed on October 31,
1996.
10<F10> Incorporated by reference to exhibit 99.B8 filed with post-effective
amendment no. 8 to the Registration Statement, filed on October 31,
1996.
11<F11> Incorporated by reference to exhibit 99.B9A filed with post-effective
amendment no. 8 to the Registration Statement, filed on October 31,
1996.
12<F12> Incorporated by reference to exhibit 99.B9B filed with post-effective
amendment no. 8 to the Registration Statement, filed on October 31,
1996.
-C-2-
<PAGE>
Item 24. Persons Controlled By or Under Common Control with Registrant
-------------------------------------------------------------
The registrant does not consider that there are any persons directly
or indirectly controlling, controlled by, or under common control with, the
registrant within the meaning of this item. The information in the prospectus
under the caption "Management of the Fund" and in the Statement of Additional
Information under the caption "Management" is incorporated by reference.
Item 25. Indemnification
---------------
Section 2-418 of the General Corporation Law of Maryland authorizes
the registrant to indemnify its directors and officers under specified
circumstances. Article Ninth of the Charter of the registrant (exhibit 1 to
this amendment, which is incorporated herein by reference) provides in effect
that the registrant shall provide certain indemnification of its directors and
officers. In accordance with section 17(h) of the Investment Company Act, this
provision of the charter shall not protect any person against any liability to
the registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, 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 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities 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 Act and will
be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
The information in the prospectus under the caption "Management of the
Fund" is incorporated by reference. Except as noted therein, neither Fasciano
Company, Inc., nor any of its directors or officers, has at any time during the
past two years been engaged in any other business, profession, vocation or
employment of a substantial nature either for its or his own account or in the
capacity of director, officer, employee, partner or trustee.
Item 27. Principal Underwriters
----------------------
(a) None
(b) None
(c) None
-C-3-
<PAGE>
Item 28. Location of Accounts and Records
--------------------------------
Michael F. Fasciano
President
Fasciano Fund, Inc.
190 S. LaSalle St., Suite 2800
Chicago, Illinois 60603
Item 29. Management Services
-------------------
None
Item 30. Undertakings
------------
Not applicable
-C-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all of
the requirements for effectiveness of this registration statement under Rule
485(b) under the Securities Act of 1933 and has duly caused this registration
statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Chicago, State of Illinois on November 1, 2000.
FASCIANO FUND, INC.
By /s/ Michael F. Fasciano
--------------------------------
Michael F. Fasciano, President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed below by the following
persons in the capacities and on the date indicated.
Name Title Date
---- ----- ----
/s/ Michael F. Fasciano Director, President and )
----------------------- Treasurer (principal )
Michael F. Fasciano executive, financial and )
accounting officer) )
)
/s/ David R. Long Director ) November 1, 2000
----------------------- )
David R. Long )
)
/s/ Mark B. Mandich Director )
----------------------- )
Mark B. Mandich
<PAGE>
INDEX OF EXHIBITS FILED WITH THIS AMENDMENT
-------------------------------------------
Exhibit
Number Exhibit
------ -------
(i) Opinion and Consent of Bell, Boyd & Lloyd LLC
(j) Consent of independent public accountants
(p) Code of Ethics
