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BARR ROSENBERG SERIES TRUST
BARR ROSENBERG MARKET NEUTRAL FUND
BARR ROSENBERG DOUBLE ALPHA MARKET FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-447-3332 (INVESTOR SHARES)
1-800-527-6026 (INSTITUTIONAL SHARES)
DECEMBER 9, 1997
Barr Rosenberg Series Trust (the "Trust") is an open-end management
investment company offering five diversified portfolios with different
investment objectives and strategies including the Barr Rosenberg Market Neutral
Fund and Barr Rosenberg Double Alpha Market Fund. The other portfolios of the
Trust, which are offered under a separate prospectus, are the U.S. Small
Capitalization Series, Japan Series and International Small Capitalization
Series. The Barr Rosenberg Market Neutral Fund and Barr Rosenberg Double Alpha
Market Fund are referred to herein individually as a "Series" or a "Fund" and
collectively as the "Series" or the "Funds". Each Fund's investment manager is
Rosenberg Institutional Equity Management (the "Manager").
The BARR ROSENBERG MARKET NEUTRAL FUND seeks long-term capital appreciation
while maintaining minimal exposure to general equity market risk by taking long
positions in stocks principally traded in the markets of the United States that
the Manager has identified as undervalued and short positions in such stocks
that the Manager has identified as overvalued. For a description of the risks of
an investment in the Fund, see "Investment Objectives and Policies -- Barr
Rosenberg Market Neutral Fund" and "General Description of Risks and Fund
Investments". The Fund seeks a total return greater than the return on 3-month
U.S. Treasury Bills. For a description of the differences between an investment
in the Fund and in 3-month U.S. Treasury Bills, see "Investment Objectives and
Policies -- Barr Rosenberg Market Neutral Fund."
The BARR ROSENBERG DOUBLE ALPHA MARKET FUND seeks a total return greater
than that of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500
Index") by investing in shares of the Barr Rosenberg Market Neutral Fund while
simultaneously utilizing S&P 500 Index Futures, options on S&P 500 Index Futures
and equity swap contracts to gain exposure to the equity market as measured by
the S&P 500 Index. See "Investment Objectives and Policies--Barr Rosenberg
Double Alpha Market Fund" and "General Description of Risks and Fund
Investments."
The Funds offer two classes of shares: Institutional Shares and Investor
Shares. Whether an investor is eligible to purchase Institutional or Investor
Shares generally depends on the amount invested in a particular Fund. Investor
Shares bear a Shareholder Service Fee and Distribution Fee whereas Institutional
Shares do not.
This Prospectus concisely describes the information that investors ought to
know before investing. Please read this Prospectus carefully and keep it for
future reference.
A Statement of Additional Information dated December 9, 1997 (the
"Statement") is available free of charge by writing to Barr Rosenberg Funds
Distributor, Inc., the Funds' distributor (the "Distributor"), at 3435 Stelzer
Road, Columbus, Ohio 43219 or by telephoning 1-800-447-3332 (for Investor Share
customers) and 1-800-527-6026 (for Institutional Share customers). The
Statement, which contains more detailed information about the Funds, has been
filed with the Securities and Exchange Commission (the "Commission") and is
incorporated by reference into this Prospectus. The Commission maintains a World
Wide Web site at http://www.sec.gov that contains the Statement and other
information regarding the Trust.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
PAGE
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FUND EXPENSES......................................................... 3
INVESTMENT OBJECTIVES AND POLICIES.................................... 4
GENERAL DESCRIPTION OF RISKS AND FUND INVESTMENTS..................... 6
PERFORMANCE INFORMATION............................................... 10
MANAGEMENT OF THE TRUST............................................... 11
MULTIPLE CLASSES...................................................... 17
PURCHASE OF SHARES.................................................... 18
IRA ACCOUNTS.......................................................... 20
REDEMPTION OF SHARES.................................................. 20
EXCHANGE OF FUND SHARES............................................... 22
DETERMINATION OF NET ASSET VALUE...................................... 23
DISTRIBUTIONS......................................................... 23
TAXES................................................................. 24
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES...................... 24
OTHER INFORMATION..................................................... 25
SHAREHOLDER INQUIRIES................................................. 26
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FUND EXPENSES
The estimated annual expenses of each of the Funds are set forth in the
following tables, the forms of which are prescribed by federal securities laws
and regulations.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
OTHER EXPENSES
MANAGEMENT SHAREHOLDER EXPENSES (AFTER WAIVER
FEE (AFTER SERVICE DISTRIBUTION (AFTER REIM- AND/OR REIM-
WAIVER) FEE FEE BURSEMENT)* BURSEMENT)*
---------- ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES
Market Neutral Fund............................. 1.57% None None 0.43%** 2.00%
Double Alpha Market Fund........................ 0.00% None None 2.35% 2.35%
INVESTOR SHARES
Market Neutral Fund............................. 1.57% 0.25% 0.25% 0.43%** 2.50%
Double Alpha Market Fund........................ 0.00% 0.25% 0.25% 2.35% 2.85%
</TABLE>
The Manager has undertaken to reduce its management fee and bear certain
expenses until further notice in order to limit the total annual operating
expenses (which do not include nonrecurring account fees and extraordinary
expenses) of each class to the percentage of a Fund's total annual operating
expenses attributable to that class listed under Total Fund Operating Expenses
above. Absent such undertaking by the Manager to waive its fee and bear such
expenses, the Barr Rosenberg Market Neutral Fund's management fees would be
1.90% and estimated Total Fund Operating Expenses would be 2.33% for
Institutional Shares and 2.83% for Investor Shares, and the Barr Rosenberg
Double Alpha Market Fund's management fees would be 0.10%, estimated Other
Expenses (including indirect expenses) would be 2.88% and estimated Total Fund
Operating Expenses (including indirect expenses) would be 2.98% for
Institutional Shares and 3.48% for Investor Shares. See "Management of the
Trust."
- ------------------------
*Includes, in the case of the Barr Rosenberg Double Alpha Market Fund, indirect
expenses borne through ownership of Institutional Shares of the Barr Rosenberg
Market Neutral Fund.
**Estimated Other Expenses without reimbursement of expenses by the Manager.
EXAMPLE:
<TABLE>
<CAPTION>
YOU WOULD PAY THE
FOLLOWING EXPENSES ON A
$1,000 INVESTMENT
ASSUMING A 5% ANNUAL
RETURN (WITH OR WITHOUT
A REDEMPTION AT THE END
OF EACH TIME PERIOD):
-----------------------
1 3
YEAR YEARS
----- -----
<S> <C> <C>
INSTITUTIONAL SHARES
Market Neutral Fund............................. $20 $63
Double Alpha Market Fund........................ $24 $73
INVESTOR SHARES
Market Neutral Fund............................. $25 $78
Double Alpha Market Fund........................ $29 $88
</TABLE>
THE PURPOSE OF THIS TABLE IS TO ASSIST YOU IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES OF THE FUNDS THAT ARE BORNE DIRECTLY OR INDIRECTLY BY HOLDERS
OF SHARES OF THE FUNDS. THE EXPENSES USED IN THE EXAMPLE AND THE FIVE PERCENT
ANNUAL RETURN (WHICH IS MANDATED BY THE SECURITIES AND EXCHANGE COMMISSION) ARE
NOT REPRESENTATIONS OF PAST OR FUTURE EXPENSES OR PERFORMANCE; ACTUAL EXPENSES
AND/OR PERFORMANCE MAY BE MORE OR LESS THAN THOSE SHOWN.
3
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INVESTMENT OBJECTIVES AND POLICIES
BARR ROSENBERG MARKET NEUTRAL FUND
The investment objective of the Barr Rosenberg Market Neutral Fund is to
seek long-term capital appreciation while maintaining minimal exposure to
general equity market risk. The Fund seeks a total return greater than the
return on 3-month U.S. Treasury Bills. The Fund attempts to achieve its
objective by taking long positions in stocks principally traded in the markets
of the United States that the Manager has identified as undervalued and short
positions in such stocks that the Manager has identified as overvalued. See
"General Description of Risks and Fund Investments -- Risks of Short Sales"
below. By taking long and short positions in different stocks with similar
characteristics, the Fund attempts to cancel out the effect of general stock
market movements on the Fund's performance. The Manager will determine the size
of each long or short position by analyzing the tradeoff between the
attractiveness of each position and its impact on the risk of the overall
portfolio. The Fund seeks to construct a diversified portfolio that has minimal
net exposure to the U.S. equity market generally and near neutral exposure to
specific industries, specific capitalization ranges (e.g., large cap, mid cap
and small cap) and certain other risk factors.
Although the Fund's investment strategy seeks to minimize the risk
associated with investing in the equity market, an investment in the Fund will
be subject to the risk of poor stock selection by the Manager. In other words,
the Manager may not be successful in executing its strategy of taking long
positions in stocks that outperform the market and short positions in stocks
that underperform the market. Further, since the Manager will manage both a long
and a short portfolio, an investment in the Fund will involve the risk that the
Manager may make more poor investment decisions than a manager of a typical
stock mutual fund with only a long portfolio may make. An investment in 3-month
U.S. Treasury Bills is different from an investment in the Fund because Treasury
Bills are backed by the full faith and credit of the U.S. Government, Treasury
Bills have a fixed rate of return and investors in Treasury Bills do not bear
the risk of losing their investment.
To meet margin requirements, redemptions or pending investments, the Fund
may also temporarily hold a portion of its assets in full faith and credit
obligations of the United States government (e.g., U.S. Treasury Bills) and in
short-term notes, commercial paper or other money market instruments of high
quality (i.e., rated at least "A-2" or "AA" by Standard & Poor's ("S&P") or
Prime 2 or "Aa" by Moody's Investors Service, Inc. ("Moody's")) issued by
companies having an outstanding debt issue rated at least "AA" by S&P or at
least "Aa" by Moody's, or determined by the Manager to be of comparable quality
to any of the foregoing.
The Fund's long and short positions may involve (without limit) equity
securities of foreign issuers that are principally traded in the markets of the
United States. See "General Description of Risks and Fund Investments -- Special
Considerations of Foreign Investments." The Fund will not invest in equity
securities that are principally traded outside of the United States.
BARR ROSENBERG DOUBLE ALPHA MARKET FUND
The investment objective of the Barr Rosenberg Double Alpha Market Fund is
to seek a total return greater than that of the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500 Index"). The Fund seeks to achieve its objective
by investing in shares of the Barr Rosenberg Market Neutral Fund while
simultaneously utilizing S&P 500 Index Futures, options on S&P 500 Index Futures
and equity swap contracts
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to gain exposure to the equity market as measured by the S&P 500 Index. See
"Investment Objectives and Policies -- Barr Rosenberg Market Neutral Fund" and
"General Description of Risks and Fund Investments -- Risks of S&P 500 Index
Futures and Related Options" and "-- Equity Swap Contracts" below. The Fund has
applied to the Securities and Exchange Commission for an exemptive order
allowing it to invest without limit in the Barr Rosenberg Market Neutral Fund.
Once the Fund has indirectly constructed a diversified long and short portfolio
through the purchase of shares of the Barr Rosenberg Market Neutral Fund, the
Manager will purchase S&P 500 Index Futures, options on S&P 500 Index Futures
and equity swap contracts in an amount approximately equal to the net asset
value of the Fund in order to gain full net exposure to the U.S. equity market
as measured by the S&P 500 Index. In addition to purchasing shares of the Barr
Rosenberg Market Neutral Fund, the Fund may also take long positions in stocks
principally traded in the markets of the United States that the Manager has
identified as undervalued and short positions in such stocks that the Manager
has identified as overvalued. See "General Description of Risks and Fund
Investments -- Risks of Short Sales."
The S&P 500 Index is an unmanaged index composed of 500 common stocks, most
of which are listed on the New York Stock Exchange. The S&P 500 Index assigns
relative values to the stocks included in the index, weighted according to each
stock's total market value relative to the total market value of the other
stocks included in such index.
To meet margin requirements, redemptions or pending investments, the Fund
may also temporarily hold a portion of its assets in full faith and credit
obligations of the United States government (e.g., U.S. Treasury Bills) and in
short-term notes, commercial paper or other money market instruments of high
quality (i.e., rated at least "A-2" or "AA" by S&P or Prime 2 or "Aa" by
Moody's) issued by companies having an outstanding debt issue rated at least
"AA" by S&P or at least "Aa" by Moody's, or determined by the Manager to be of
comparable quality to any of the foregoing.
The Fund's long and short positions may involve (without limit) equity
securities of foreign issuers that are principally traded in the markets of the
United States. See "General Description of Risks and Fund Investments -- Special
Considerations of Foreign Investments." The Fund will not invest in equity
securities that are principally traded outside of the United States.
In a typical stock mutual fund the portfolio manager attempts to earn an
excess return (return above market return) or "alpha" by identifying and
purchasing UNDERVALUED stocks. However, there is another "alpha" possibility --
identifying and selling short OVERVALUED stocks. The term "double alpha" refers
to the fact that there are thus two potential sources of alpha: one from
correctly identifying undervalued stocks and one from correctly identifying
overvalued stocks. The market neutral strategy employed by both the Barr
Rosenberg Market Neutral Fund and indirectly by the Barr Rosenberg Double Alpha
Market Fund (through investment in shares of the Barr Rosenberg Market Neutral
Fund) seeks to capture both alphas. The Barr Rosenberg Double Alpha Market Fund
also seeks gain (and incurs additional risk) by investing in S&P 500 Index
instruments.
INVESTMENT CONSIDERATIONS
An investor desiring capital appreciation with minimal exposure to the
equity market may wish to consider the Barr Rosenberg Market Neutral Fund. An
investor desiring enhanced equity market returns
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exceeding the return on the S&P 500 Index may wish to consider the Barr
Rosenberg Double Alpha Market Fund.
GENERAL DESCRIPTION OF RISKS AND FUND INVESTMENTS
INVESTMENT RISKS. The value of Fund shares may increase or decrease
depending on market, economic, political, regulatory and other conditions
affecting each Fund's portfolio. Investment in shares of the Funds is more
volatile and risky than some other forms of investment. In addition, if the
Manager takes long positions in stocks that underperform the market and short
positions in stocks that outperform the market, then the losses of the Barr
Rosenberg Market Neutral Fund and Barr Rosenberg Double Alpha Market Fund may
exceed those of other stock mutual funds.
RISKS OF SHORT SALES (BOTH FUNDS). When the Manager anticipates that a
security is overvalued, it may sell the security short and borrow the same
security from a broker or other institution to complete the sale. A Fund will
incur a loss as a result of a short sale if the price of the borrowed security
increases between the date of the short sale and the date on which the Fund
replaces such security. A Fund will realize a gain if the security declines in
price between those dates. There can be no assurance that a Fund will be able to
close out a short position at any particular time or at an acceptable price.
Although a Fund's gain is limited to the amount at which it sold a security
short, its potential loss is limited only by the maximum attainable price of the
security less the price at which the security was sold. Until a Fund replaces a
borrowed security, it will maintain daily a segregated account with its
Custodian containing cash, U.S. Government securities, or other liquid
securities such that the amount deposited in the account plus any amount
deposited with a broker or other custodian as collateral will at least equal the
current market value of the security sold short. Depending on arrangements made
with such broker or custodian, a Fund may not receive any payments (including
interest) on collateral deposited with such broker or custodian. The Funds will
not make a short sale if, after giving effect to such sale, the market value of
all securities sold exceeds 100% of the value of a Fund's net assets.
RISKS OF S&P 500 INDEX FUTURES AND RELATED OPTIONS (BARR ROSENBERG DOUBLE
ALPHA MARKET FUND ONLY). An S&P 500 Index Future contract (an "Index Future") is
a contract to buy or sell an integral number of units of the S&P 500 Index at a
specified future date at a price agreed upon when the contract is made. A unit
is the value at a given time of the S&P 500 Index. Entering into a contract to
buy units is commonly referred to as buying or purchasing a contract or holding
a long position in the S&P 500 Index. An option on an Index Future gives the
purchaser the right, in return for the premium paid, to assume a long or a short
position in an Index Future. The Barr Rosenberg Double Alpha Market Fund will
realize a loss if the value of the S&P 500 Index declines between the time the
Fund purchases an Index Future or an option transaction in which the Fund has
assumed a long position and may realize a gain if the value of the S&P 500 Index
rises between such dates.
The Barr Rosenberg Double Alpha Market Fund may close out a futures contract
purchase by entering into a futures contract sale. This will operate to
terminate the Fund's position in the futures contract. Positions in Index
Futures may be closed out by the Fund only on the futures exchanges on which the
Index Futures are then traded. There can be no assurance that a liquid market
will exist for any particular contract at any particular time. The liquidity of
the market in futures contracts could be adversely affected by "daily price
fluctuation limits" established by the relevant futures exchange which limit the
amount of fluctuation in
6
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the price of an Index Future during a single trading day. Once the daily limit
has been reached in the contract, no trades may be entered into at a price
beyond the limit. In such event, it may not be possible for the Fund to close
its futures contract purchase, and, in the event of adverse price movements, the
Fund would continue to be required to make daily cash payments of variation
margin (payments to and from a broker made on a daily basis as the price of the
Index Future fluctuates). The futures market may also attract more speculators
than does the securities market, because deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Increased participation by speculators in the futures market may also cause
price distortions.
Further, when the Barr Rosenberg Double Alpha Market Fund purchases an Index
Future, it is required to maintain, at all times while an Index Future is held
by the Fund, cash, U.S. Government securities or other high grade liquid
securities in a segregated account with its Custodian, in an amount which,
together with the initial margin deposit on the futures contract, is equal to
the current value of the futures contract.
EQUITY SWAP CONTRACTS (BARR ROSENBERG DOUBLE ALPHA MARKET FUND ONLY). In an
equity swap contract, the counterparty generally agrees to pay the Barr
Rosenberg Double Alpha Market Fund the amount, if any, by which the notional
amount of the equity swap contract would have increased in value had it been
invested in the basket of stocks comprising the S&P 500 Index, plus the
dividends that would have been received on those stocks. The Fund agrees to pay
to the counterparty a floating rate of interest (typically the London Inter Bank
Offered Rate) on the notional amount of the equity swap contract plus the
amount, if any, by which that notional amount would have decreased in value had
it been invested in such stocks. Therefore, the return to the Fund on any equity
swap contract should be the gain or loss on the notional amount plus dividends
on the stocks comprising the S&P 500 Index (as if the Fund had invested the
notional amount in stocks comprising the S&P 500 Index) less the interest paid
by the Fund on the notional amount. Therefore, the Fund will generally realize a
loss if the value of the S&P 500 Index declines and will generally realize a
gain if the value of the S&P 500 Index rises. The Fund will enter into equity
swap contracts only on a net basis, i.e., where the two parties' obligations are
netted out, with the Fund paying or receiving, as the case may be, only the net
amount of any payments. If there is a default by the counterparty to an equity
swap contract, the Fund will be limited to contractual remedies pursuant to the
agreements related to the transaction.
There is no assurance that the equity swap contract counterparties will be
able to meet their obligations or that, in the event of default, the Barr
Rosenberg Double Alpha Market Fund will succeed in pursing contractual remedies.
The Fund thus assumes the risk that it may be delayed in or prevented from
obtaining payments owed to it pursuant to these contracts. The Fund will closely
monitor the credit of equity swap contract counterparties in order to minimize
this risk. The Fund will not use equity swap contracts for leverage.
The Barr Rosenberg Double Alpha Market Fund will not enter into any equity
swap contract unless, at the time of entering into such transaction, the
unsecured senior debt of the counterparty is rated at least A by Moody's or S&P.
In addition, the staff of the Securities and Exchange Commission considers
equity swap contracts to be illiquid securities. Consequently, while the staff
maintains this position, the Fund will not invest in equity swap contracts if,
as a result of the investment, the total value of such investments together with
that of all other illiquid securities which the Fund owns would exceed 15% of
the Fund's net assets.
7
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The net amount of the excess, if any, of the Fund's obligations over its
entitlement with respect to each equity swap contract will be accrued on a daily
basis, and an amount of cash, U.S. Government Securities or other liquid
securities having an aggregate market value at least equal to the accrued excess
will be maintained in a segregated account by the Fund's Custodian. The Fund
does not believe that the Fund's obligations under equity swap contracts are
senior securities, so long as such a segregated account is maintained, and
accordingly, the Fund will not treat them as being subject to its borrowing
restrictions.
SPECIAL CONSIDERATIONS OF FOREIGN INVESTMENTS (BOTH FUNDS). Investing in
securities of foreign issuers involves certain risks not typically found in
investing in securities of U.S. issuers. These include risks of adverse change
in foreign economic, political, regulatory and other conditions, and changes in
currency exchange rates, exchange control regulations (including currency
blockage), expropriation of assets or nationalization, imposition of withholding
taxes on dividend or interest payments, and possible difficulty in obtaining and
enforcing judgments against foreign entities. Furthermore, issuers of foreign
securities are subject to different, and often less comprehensive, accounting,
reporting and disclosure requirements than domestic issuers. In certain
countries, legal remedies available to investors may be more limited than those
available with respect to investments in the United States or other countries.
The laws of some foreign countries may limit a Fund's ability to invest in
securities of certain issuers located in those countries. The securities of some
foreign issuers are less liquid and at times more volatile than securities of
comparable U.S. issuers. There are also special tax considerations which apply
to securities of foreign issuers.
The risks of investing in securities of foreign issuers may be intensified
in the case of investments in countries with limited or developing capital
markets. Prices of securities of companies in developing markets can be
significantly more volatile than prices of securities of companies in the more
developed nations of the world, reflecting the greater uncertainties of
investing in less developed markets and economies. In particular, countries with
developing markets may have relatively unstable governments, present the risk of
nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets, and may have less protection of property
rights than more developed countries. The economies of countries with developing
markets may be predominantly based on only a few industries or dependent on
revenues from particular commodities or on international aid or development
assistance, may be highly vulnerable to changes in local or global trade
conditions, and may suffer from extreme and volatile debt burdens or inflation
rates.
REPURCHASE AGREEMENTS (BOTH FUNDS). Each Fund may enter into repurchase
agreements, by which a Fund purchases a security and obtains a simultaneous
commitment from the seller (a bank or, to the extent permitted by the Investment
Company Act of 1940, as amended (the "1940 Act"), a recognized securities
dealer) to repurchase the security at an agreed-upon price and date (usually
seven days or less from the date of original purchase). The resale price is in
excess of the purchase price and reflects an agreed-upon market rate unrelated
to the coupon rate on the purchased security. Such transactions afford the Funds
the opportunity to earn a return on temporarily available cash. Although the
underlying security may be a bill, certificate of indebtedness, note or bond
issued by an agency, authority or instrumentality of the U.S. Government, the
obligation of the seller is not guaranteed by the U.S. Government and there is a
risk that the seller may fail to repurchase the underlying security. In such
event, a Fund would attempt to exercise rights with respect to the underlying
security, including possible disposition in the market. However, a Fund may be
subject to various delays and risks of loss, including (a) possible declines in
the value of the underlying
8
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security during the period while a Fund seeks to enforce its rights thereto and
(b) inability to enforce rights and the expenses involved in attempted
enforcement.
LOANS OF PORTFOLIO SECURITIES (BOTH FUNDS). Each Fund may lend some or all
of its portfolio securities to broker-dealers. Securities loans are made to
broker-dealers pursuant to agreements requiring that loans be continuously
secured by collateral in cash or U.S. Government securities at least equal at
all times to the market value of the securities lent. The borrower pays to the
lending Fund an amount equal to any dividends or interest received on the
securities lent. When the collateral is cash, the Funds may invest the cash
collateral in interest-bearing, short-term securities. When the collateral is
U.S. Government securities, the Fund usually receives a fee from the borrower.
Although voting rights or rights to consent with respect to the loaned
securities pass to the borrower, a Fund retains the right to call the loans at
any time on reasonable notice, and it will do so in order that the securities
may be voted by the Fund if the holders of such securities are asked to vote
upon or consent to matters materially affecting the investment. A Fund may also
call such loans in order to sell the securities involved. The risks in lending
portfolio securities, as with other extensions of credit, include possible delay
in recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. However, such loans will be made only to
broker-dealers that are believed by the Manager to be of relatively high credit
standing.
ILLIQUID SECURITIES (BOTH FUNDS). Each Fund may purchase "illiquid
securities", defined as securities which cannot be sold or disposed of in the
ordinary course of business within seven days at approximately the price at
which a Fund has valued such securities, so long as no more than 15% of a Fund's
net assets would be invested in such illiquid securities after giving effect to
a purchase. Investment in illiquid securities involves the risk that, because of
the lack of consistent market demand for such securities, a Fund may be forced
to sell them at a discount from the last offer price.
PORTFOLIO TURNOVER. Portfolio turnover is not a limiting factor with
respect to investment decisions of the Manager. The rate of a Fund's portfolio
turnover may vary significantly from time to time depending on the volatility of
economic and market conditions. Although the rate of portfolio turnover is
difficult to predict, it is not anticipated that under normal circumstances the
annual portfolio turnover rate of each of the long and short portfolios of the
Barr Rosenberg Market Neutral Fund will exceed 150%, and it is not anticipated
that under normal circumstances the annual portfolio turnover rate of the Barr
Rosenberg Double Alpha Market Fund will exceed 50%. It is, however, impossible
to predict portfolio turnover in future years. High portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs, which
will be borne directly by a Fund, and could involve realization of capital gains
that would be taxable when distributed to shareholders of such Fund. To the
extent portfolio turnover results in the realization of net short-term capital
gains, such gains ordinarily are taxed to shareholders at ordinary income tax
rates. See "Taxes."
INVESTMENT OBJECTIVES AND POLICIES. Except as explicitly described
otherwise, the investment objective and policies of each of the Funds may be
changed without shareholder approval.
9
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PERFORMANCE INFORMATION
Rosenberg Institutional Equity Management also serves as the manager of
other accounts that have investment objectives, policies and strategies that are
substantially similar to those of the Barr Rosenberg Market Neutral Fund
(collectively, the "Market Neutral Accounts"). The information below should not
be considered a prediction of the future performance of the Barr Rosenberg
Market Neutral Fund. The performance of such Fund may be higher or lower than
the performance of the Market Neutral Accounts. The performance information
shown below is based on a composite of all of the Manager's accounts with
substantially similar investment objectives, policies and strategies and has
been adjusted to give effect to the estimated annualized expenses (without
giving effect to any expense waivers or reimbursements) of Institutional Shares
of the Barr Rosenberg Market Neutral Fund during its first year of operations.
The Market Neutral Accounts were not registered under the 1940 Act and therefore
were not subject to certain investment restrictions imposed by the 1940 Act. If
the Market Neutral Accounts had been registered under the 1940 Act, their
performance might have been adversely affected. In addition, the Market Neutral
Accounts were not subject to Subchapter M of the Internal Revenue Code. The
following table shows the average annual total return for the one-year,
three-year, five-year and since-inception periods ending November 30, 1997 for
the Market Neutral Accounts. The following table also shows the average annual
total return on 3-month U.S. Treasury bills for the same periods.
<TABLE>
<CAPTION>
ONE-YEAR PERIOD THREE-YEAR PERIOD FIVE-YEAR PERIOD PERIOD FROM
ENDING ENDING ENDING FEBRUARY 28, 1989
NOVEMBER 30, 1997 NOVEMBER 30, 1997 NOVEMBER 30, 1997 TO NOVEMBER 30, 1997
----------------- ----------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Market Neutral Accounts............. 17.42% 17.66% 13.85% 8.04%
3-month U.S. Treasury Bills......... 5.19% 5.33% 4.57% 5.34%
</TABLE>
An investment in 3-month U.S. Treasury Bills is different from an investment
in the Barr Rosenberg Market Neutral Fund because Treasury Bills are backed by
the full faith and credit of the U.S. Government, Treasury Bills have a fixed
rate of return and investors in Treasury Bills do not bear the risk of losing
their investment. Giving effect to the expense limitation of 2.00% on the
expenses of the Institutional Shares of the Barr Rosenberg Market Neutral Fund
as set forth in the "Fund Expenses" section, the average annual total return for
the one-year, three-year, five-year and since-inception periods ending November
30, 1997 for the Market Neutral Accounts would have been 17.80%, 18.05%, 13.96%
and 8.26%, respectively. There have been two enhancements to the Manager's
market neutral strategy since its inception in 1989. First, the Manager
incorporated its Earnings Change Model and Investor Sentiment Model into its
market neutral strategy in October 1992 and April 1993, respectively. See
"Management of the Trust -- The Manager's General Investment Philosophy and
Strategy." The second change to the Manager's market neutral strategy occurred
in July 1995, when the Manager focused its strategy on medium and smaller
capitalization companies. Prior to such date, the Manager had applied its market
neutral strategy to companies across the capitalization spectrum (i.e., large,
medium and small capitalization companies). Throughout both periods, however,
the Manager has maintained long and short positions of approximately the same
dollar amount within a given capitalization sector. The Funds may invest in
stocks of companies of any capitalization to meet risk/return objectives and
liquidity needs. Despite the two enhancements to the Manager's market neutral
strategy since 1989, the Barr Rosenberg Market Neutral Fund will have
substantially similar investment objectives, policies and strategies as the
Market Neutral Accounts.
10
<PAGE>
MANAGEMENT OF THE TRUST
Each Fund is advised and managed by Rosenberg Institutional Equity
Management (the "Manager") which provides investment advisory services to a
substantial number of institutional investors. The Manager is also the
investment manager of the other funds of the Trust.
KEY PERSONNEL OF THE MANAGER
The biography of each of the General Partners of the Manager, each of whom
is also a Trustee of the Trust, is set forth below.
BARR ROSENBERG. Dr. Rosenberg is Managing General Partner and Chief
Investment Officer of the Manager. As such, he has ultimate responsibility for
the Manager's securities valuation and portfolio optimization systems used to
manage the Funds and for the implementation of the decisions developed therein.
His area of special concentration is the design of the Manager's proprietary
securities valuation model.
Dr. Rosenberg earned a B.A. degree from the University of California,
Berkeley, in 1963. He earned an M.Sc. from the London School of Economics in
1965, and a Ph.D. from Harvard University, Cambridge, Massachusetts, in 1968.
From 1968 until 1983, Dr. Rosenberg was a Professor of Finance, Econometrics,
and Economics at the School of Business Administration at the University of
California, Berkeley. Concurrently, from 1968 until 1974, Dr. Rosenberg worked
as a consultant in applied decision theory in finance, banking and medicine. In
1975, he founded Barr Rosenberg Associates, a financial consulting firm (now
known as BARRA) where he was a managing partner, and later chief scientist. Dr.
Rosenberg, the founder of the Berkeley Program in Finance, is acknowledged as an
expert in the modeling of complex processes with substantial elements of risk.
MARLIS S. FRITZ. Ms. Fritz is a General Partner of the Manager. She has
primary responsibility for the Manager's new business development and secondary
responsibility for client service.
Ms. Fritz earned a B.S. degree from the University of Michigan, Ann Arbor,
in 1971. After working in life insurance management and sales for seven years,
she entered the investment management business in 1978 as Marketing Associate
with Forstmann-Leff Associates, New York. From 1983 until 1985, she was Vice
President, Marketing at Criterion Investment Management Company, Houston, Texas.
KENNETH REID. Dr. Reid is a General Partner and Director of Research of the
Manager. His work is focused on the design and estimation of the Manager's
valuation models and he has primary responsibility for analyzing the empirical
evidence that validates and supports the day-to-day recommendations of the
Manager's securities valuation models. Patterns of short-term price behavior
discussed by Dr. Reid as part of his Ph.D. dissertation have been refined and
incorporated into the Manager's proprietary valuation and trading systems.
Dr. Reid earned both a B.A. degree (1973) and an M.D.S. (1975) from Georgia
State University, Atlanta. In 1982, he earned a Ph.D. from the University of
California, Berkeley, where he was awarded the American Bankers Association
Fellowship. From 1981 until June 1986, Dr. Reid worked as a consultant at BARRA
in Berkeley, California. His responsibilities included estimating
multiple-factor risk models, designing and evaluating active management
strategies, and serving as an internal consultant on econometric matters in
finance.
There are 42 professional staff members of the Manager and the Manager's
affiliate, Barr Rosenberg Investment Management, Inc., located in Orinda,
California. Included among the Manager's professional staff are seven
individuals with Ph.D.s and eighteen individuals with other graduate degrees.
Five members of the staff have been awarded C.F.A. certificates.
11
<PAGE>
THE OUTSIDE TRUSTEES
William F. Sharpe and Nils H. Hakansson are Trustees of the Trust who are
not "interested persons" (as defined in the 1940 Act) of the Trust or the
Manager.
Dr. Sharpe is the STANCO 25 Professor of Finance at Stanford University's
Graduate School of Business. He is best known as one of the developers of the
Capital Asset Pricing Model, including the beta and alpha concepts used in risk
analysis and performance measurement. He developed the widely-used binomial
method for the valuation of options and other contingent claims. He also
developed the computer algorithm used in many asset allocation procedures. Dr.
Sharpe has published articles in a number of professional journals. He has also
written six books, including PORTFOLIO THEORY AND CAPITAL MARKETS, (McGraw-Hill,
1970), ASSET ALLOCATION TOOLS, (Scientific Press, 1987), FUNDAMENTALS OF
INVESTMENTS (with Gordon J. Alexander and Jeffery Bailey, Prentice-Hall, 1993)
and INVESTMENTS (with Gordon J. Alexander and Jeffery Bailey, Prentice-Hall,
1995). Dr. Sharpe is a past President of the American Finance Association. He
has also served as consultant to a number of corporations and investment
organizations. He is also a member of the Board of Trustees of Smith Breeden
Trust, an investment company, and a director at CATS Software and Stanford
Management Company. He received the Nobel Prize in Economic Sciences in 1990.
Professor Hakansson is the Sylvan C. Coleman Professor of Finance and
Accounting at the Haas School of Business, University of California, Berkeley.
He is a former member of the faculty at UCLA as well as at Yale University. At
Berkeley, he served as Director of the Berkeley Program in Finance (1988-1991)
and as Director of the Professional Accounting Program (1985-1988). Professor
Hakansson is a Certified Public Accountant and spent three years with Arthur
Young & Company prior to receiving his Ph.D. from UCLA in 1966. He has twice
been a Visiting Scholar at Bell Laboratories in New Jersey and was, in 1975, the
Hoover Fellow at the University of New South Wales in Sydney and, in 1982, the
Chevron Fellow at Simon Fraser University in British Columbia. In 1984,
Professor Hakansson was a Special Visiting Professor at the Stockholm School of
Economics, where he was also awarded an honorary doctorate in economics. He is a
past president of the Western Finance Association (1983-1984). Professor
Hakansson has published numerous articles in academic journals and in
professional volumes. Many of his papers address various aspects of asset
allocation procedures as well as topics in securities innovation, information
economics and financial reporting. He has served on the editorial boards of
several professional journals and been a consultant to the RAND Corporation and
a number of investment organizations. Professor Hakansson is a member of the
board of two foundations and a past board member of SuperShare Service
Corporation and of Theatrix Interactive, Inc. He is also a Fellow of the
Accounting Researchers International Association and a member of the Financial
Economists Roundtable.
THE MANAGER'S GENERAL INVESTMENT PHILOSOPHY AND STRATEGY
The Manager attempts to add value relative to a benchmark through a
quantitative stock selection process, and seeks to diversify investment risk
across the holdings in each Fund. In seeking to outperform each Fund's
benchmark, the Manager also attempts to control risk in a Fund's portfolio
relative to the benchmark.
INVESTMENT PHILOSOPHY. The Manager's investment strategy is based on the
belief that stock prices imperfectly reflect the present value of the expected
future earnings of companies, their "fundamental value." The Manager believes
that market prices will converge towards fundamental value over time, and that
therefore, if the Manager can accurately determine fundamental value, and can
apply a disciplined investment process to select those stocks that are currently
undervalued (in the case of purchases) or overvalued (in the case of short
sales), the Manager will outperform a Fund's benchmark over time.
The premise of the Manager's investment philosophy is that there is a link
between the price of a stock and the underlying financial and operational
characteristics of the company. In other words, the price reflects the market's
assessment of how well the company is positioned to generate future earnings
and/or future cash
12
<PAGE>
flow. The Manager identifies and purchases those stocks which are undervalued
(i.e., they are currently cheaper than similar stocks with the same
characteristics) and engages in short sales with respect to those stocks that
are overvalued (i.e., they are currently more expensive than similar stocks with
the same characteristics). The Manager believes that the market will recognize
the "better value" and that the mispricing will be corrected as the stocks in
the Fund's portfolios are purchased or sold by other investors.
Determination of the relative valuation of a stock is based upon a
comparison of similar companies. In any group of similar companies, it is the
Manager's view that there are always some that are overvalued, some that are
undervalued, and some that are fairly-valued relative to the average valuation
for the group. These moderate valuation errors are believed to be present in
every sector of the market and can be identified through rigorous quantitative
analysis of fundamental data.
In determining whether or not a stock is attractive, the Manager considers
the company's current estimated fundamental value as determined by the Manager's
proprietary Appraisal Model, the Manager's model for expected earnings, and
analysis of investor sentiment toward the stock. The Manager identifies and
causes a Fund to purchase an undervalued stock and to hold it in the Fund's
portfolio until the market recognizes and corrects for the misvaluation.
Conversely, the Manager identifies and causes a Fund to sell short an overvalued
stock.
DECISION PROCESS. The Manager's decision process is a continuum. Its
research function develops Models which analyze the approximately 12,000
securities in the global universe, both fundamentally and technically, and
determines the risk characteristics of the Fund's benchmark. The portfolio
management function optimizes each portfolio's composition, executes trades, and
monitors performance and trading costs.
The essence of the Manager's approach is rigorous attention to important
aspects of the investment process. Factors crucial to successful stock selection
include: (1) accurate and timely data on a large universe of companies; (2)
subtle quantitative descriptors of value and predictors of changes in value; and
(3) insightful definitions of similar businesses. The Manager takes great care
assimilating, checking and structuring the input data on which its Models rely.
The Manager believes that if the data is correct, the recommendations made by
the system will be sound.
STOCK SELECTION. Fundamental valuation of stocks is key to the Manager's
investment process, and the heart of the valuation process lies in the Manager's
proprietary Appraisal Model. Analysis of companies in the United States and
Canada is conducted in a single unified Model. The Appraisal Model discriminates
where the two markets are substantially different, while simultaneously
comparing companies in the two markets according to their degrees of similarity.
European companies and Asian companies (other than Japanese companies) are
analyzed in a nearly global Model, which includes the United States and Canada
as a further basis for comparative valuation, but which excludes Japan. Japanese
companies are analyzed in an independent national Model. The Model incorporates
the various accounting standards which apply in different markets and makes
adjustments to ensure meaningful comparisons.
An important feature of the Appraisal Model is the classification of
companies into one or more of 166 groups of "similar" businesses. Currently, in
the United States, 160 groups are applicable; in Japan, 122 groups are
applicable; and in Europe, 154 groups are applicable. Each company is broken
down into its individual business segments, and each segment is compared with
similar business operations of other companies doing business in the same
geographical market. In most cases, the comparison is extended to include
companies with similar business operations in different markets. Subject to the
availability of data in different markets, the Manager appraises the company's
assets, operating earnings and sales within each business segment, accepting the
market's valuation of that category of business as fair. The Manager then
integrates the segment appraisals into balance sheet, income statement and sales
valuation models for the total company, and simultaneously adjusts the segment
appraisals to include appraisals for variables which are
13
<PAGE>
declared only for the total company, such as taxes, capital structure, and
pension funding. The result is a single valuation for each of the approximately
12,000 companies followed.
The difference between the Manager's appraisal and the market price is
believed to represent an opportunity for profit. For each stock, the Manager
develops "appraisal alphas" (i.e., the expected rate of extraordinary return) by
adjusting for the rate at which the market has corrected for such misvaluations
in the past.
A second sphere of analysis is captured by the Manager's proprietary
Earnings Change Model, which analyzes more than 20 variables to predict
individual company earnings over a one year horizon. The variables are
fundamental and fall into three categories: measures of past profitability,
measures of company operations and consensus earnings forecasts. The Earnings
Change Model is independent of the Appraisal Model and projects the change in a
company's earnings in cents/current price. The value of the projected earnings
change is converted to an "earnings change alpha" by multiplying the projected
change by the market's historical response to changes of that magnitude.
Finally, the Manager's proprietary Investor Sentiment Model quantifies
investor sentiment about features of stocks which influence price but which are
not captured by the Appraisal Model or the Earnings Change Model. This Model
measures company quality by looking at past price patterns and by predicting the
probability of deficient earnings. The Investor Sentiment Model also captures
market enthusiasm towards individual stocks by looking at broker recommendations
and analyst estimates. Investor sentiment alphas are developed by multiplying
the Model's sentiment scores by the market's historical response to such scores.
Each company's earnings change alpha and investor sentiment alpha are added
to its appraisal alpha to arrive at a total company alpha. Stocks with large
positive total company alphas are candidates for purchase. Stocks with large
negative total company alphas are candidates for short sales. Stocks held in a
portfolio with total company alphas that are only slightly positive, zero or
negative are candidates for sale.
Before trading, the Manager systematically analyzes the short-term price
behavior of individual stocks to determine the timing of trades. The Investor
Sentiment Model quantifies investor enthusiasm for each stock by analyzing its
short-term performance relative to similar stocks, changes in analyst and broker
opinions about the stock, and earnings surprises. The Manager develops a
"trading alpha" for each stock, which is the Manager's prediction of the
short-term return of a particular stock. This return is calculated by the
Manager's proprietary model by analyzing short-term factors such as trading
volume and price movements. The Manager believes its model, used in this way,
can add value by helping determine the optimal timing of portfolio trades.
OPTIMIZATION. The Manager's portfolio optimization system seeks to optimize
the trade-off between risk and reward relative to a Fund's benchmark. It
exploits the information developed by the Manager's stock selection Models to
maximize return relative to the benchmark, while avoiding a portfolio with
exposure to any other extraneous factors that would distinguish the Fund's
portfolio from the relevant benchmark. Within the geographic zone appropriate
for a Fund, the optimizer recommends positions in companies which in the
aggregate constitute the most efficient portfolio. The optimizer simultaneously
considers total company alphas, trading alphas, and risk and quantifies the
expected "net benefit" to the portfolio of each recommended transaction. No
transaction will be executed unless the opportunity offered by a purchase or
sale candidate sufficiently exceeds the potential of an existing holding to
justify the transaction costs. In most markets, portfolios are reoptimized
continuously throughout the day, allowing the Manager to respond immediately to
investment opportunities.
TRADING. The Manager's trading system aggregates the recommended
transactions for a Fund and determines the feasibility of each recommendation in
light of the stock's liquidity, the expected transaction costs, and general
market conditions. It relays target price information to a trader for each stock
considered for purchase or sale. Trades are executed through any one of four
trading strategies: traditional brokerage, networks, accommodation, and package
or "basket" trades.
14
<PAGE>
The network arrangements the Manager has developed with Instinet Matching
System (IMS), Portfolio System for Institutional Trading (POSIT), and the
Arizona Stock Exchange (AZX) facilitate large volume trading with little or no
price disturbance and low commission rates.
Accommodative trading (which we also refer to as the Manager's "match
system") allows institutional buyers and sellers of stock to electronically
present the Manager with their "interest" lists each morning. Any matches
between the inventory which the brokers have presented and the Manager's own
recommended trades are signaled to the Manager's traders. Since the broker is
doing agency business and has a client on the other side of the trade, the
Manager expects that the other side will be accommodative in the price. The
Manager's objective in using this match system is to execute most trades on the
Manager's side of the bid/ask spread so as to minimize market impact.
Package trades further allow the Manager to trade large lists of orders
simultaneously using state of the art tools such as the Instinet Real-Time
System, Instinet Order Matching System and Lattice Trading System. Those tools
provide order entry, negotiation and execution capabilities, either directly to
other institutions or electronically to the floor of the exchange. The
advantages of using such systems include speed of execution, low commissions,
anonymity and very low market impact.
The Manager continuously monitors trading costs to determine the impact of
commissions and price disturbance on a Fund's portfolio.
INDIVIDUALS RESPONSIBLE FOR THE FUNDS
Each of the following General Partners of the Manager holds a greater than
5% interest in the Manager: Marlis S. Fritz and Kenneth Reid. Rosenberg Alpha
L.P., a California limited partnership, is a limited partner of the Manager and
holds a greater than 5% interest in the Manager. Barr M. Rosenberg, the Managing
General Partner of the Manager, and his wife, June Rosenberg, each holds a
greater than 5% general partnership interest in Rosenberg Alpha L.P.
Management of the portfolio of each Fund is overseen by the Manager's
General Partners who are responsible for the design and maintenance of the
Manager's portfolio system, and by a portfolio manager who is responsible for
research and monitoring each Fund's characteristic performance against the
relevant benchmark and for monitoring cash balances.
Dr. Rosenberg, Dr. Reid and F. William Jump, Jr., the portfolio manager, are
responsible for the day-to-day management of each Fund's portfolio. Dr.
Rosenberg and Dr. Reid both have been employed by the Manager since 1985. Mr.
Jump has had numerous responsibilities including trading, applications
programming, new product development and portfolio engineering since he joined
the Manager in 1990. He received a B.A. from Swarthmore College in 1977 and a
M.B.A. from The Wharton School, University of Pennsylvania in 1983.
MANAGEMENT CONTRACTS
Under a Management Contract with the Trust on behalf of each Fund, the
Manager selects and reviews each Fund's investments and provides executive and
other personnel for the management of the Trust. Pursuant to the Trust's
Agreement and Declaration of Trust, as amended, the Board of Trustees supervises
the affairs of the Trust as conducted by the Manager. In the event that the
Manager ceases to be the manager of a Fund, the right of the Trust to use the
identifying name "Barr Rosenberg" and/or "Rosenberg" may be withdrawn.
Each Fund will pay all other expenses incurred in the operation of such
Fund, including, but not limited to, brokerage commissions and transfer taxes in
connection with the Fund's portfolio transactions, all applicable taxes and
filing fees, distribution fees, shareholder servicing fees, the fees and
expenses for registration or qualification of its shares under the federal or
state securities laws, the compensation of
15
<PAGE>
trustees who are not partners, officers or employees of the Manager, interest
charges, expenses of issue or redemption of shares, charges of custodians,
auditing and legal expenses, expenses of determining net asset value of Fund
shares, expenses of reports to shareholders, expenses of meetings of
shareholders, expenses of printing and mailing prospectuses, proxy statements
and proxies to existing shareholders, insurance premiums and professional
association dues or assessments.
In addition, each Fund has agreed to pay the Manager a quarterly management
fee at the annual percentage rate of such Fund's average daily net assets set
forth below. The Manager has voluntarily undertaken to waive some or all of its
management fee and, if necessary, to bear certain expenses of each Fund until
further notice to the extent required to limit the total annual operating
expenses (which do not include nonrecurring account fees and extraordinary
expenses) of each class of shares to the percentage of each Fund's average daily
net assets attributable to that class listed in the Expense Limitation column
below. The Manager's fee for management of the Barr Rosenberg Market Neutral
Fund is higher than that paid by most other mutual funds although the Manager
believes it is competitive with the fees for similar collective investment
vehicles.
<TABLE>
<CAPTION>
CONTRACTUAL
MANAGEMENT FEE (AS EXPENSE LIMITATION
A % OF AVERAGE DAILY (AS A % OF AVERAGE
NET ASSETS) DAILY NET ASSETS)*
------------------------------- -------------------
<S> <C> <C>
INSTITUTIONAL SHARES
Market Neutral Fund........................................... 1.90% 2.00%
Double Alpha Market Fund...................................... 0.10% 2.35%
INVESTOR SHARES
Market Neutral Fund........................................... 1.90% 2.50%
Double Alpha Market Fund...................................... 0.10% 2.85%
</TABLE>
- ------------------------
* Includes indirect expenses borne by the Barr Rosenberg Double Alpha Market
Fund through ownership of Institutional Shares of the Barr Rosenberg Market
Neutral Fund.
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN
BISYS Fund Services (the "Administrator"), a wholly-owned subsidiary of The
BISYS Group, Inc., serves as the Trust's administrator and generally assists the
Trust in all aspects of its administration and operation. As compensation for
its administrative services, the Administrator receives a monthly fee based upon
an annual percentage rate of 0.15% of the aggregate average daily net assets of
the Trust.
BISYS Fund Services, Inc. (the "Transfer Agent") has entered into an
agreement with the Trust for the provision of transfer agency services and
dividend disbursing services for the Trust. The principal business address of
the Transfer Agent is 3435 Stelzer Road, Columbus, Ohio 43219.
Custodial Trust Company (the "Custodian") serves as custodian of the assets
of the Funds. The principal address of the Custodian is 101 Carnegie Center,
Princeton, New Jersey 08540.
DISTRIBUTOR
Investor Shares of the Funds are sold on a continuous basis by the Trust's
distributor, Barr Rosenberg Funds Distributor, Inc. (the "Distributor"), a
wholly-owned subsidiary of BISYS. The Distributor's principal offices are
located at 125 West 55th Street, 11th Floor, New York, NY 10019. Institutional
Shares are sold directly by the Funds.
Solely for the purpose of compensating the Distributor for services and
expenses primarily intended to result in the sale of Investor Shares of the
Funds, such shares are subject to an annual Distribution Fee of up to 0.50% of
the average daily net assets attributable to such shares in accordance with a
Distribution Plan (the
16
<PAGE>
"Distribution Plan") adopted by the Trust pursuant to Rule 12b-1 under the 1940
Act. Currently, each Fund pays the Distributor an annual Distribution Fee of
0.25% of each Fund's average daily net assets attributable to Investor Shares.
Activities for which the Distributor may be reimbursed include (but are not
limited to) the development and implementation of direct mail promotions and
advertising for each Fund, the preparation, printing and distribution of
prospectuses for the Funds to recipients other than existing shareholders, and
contracting with one or more wholesalers of the Funds' shares. The Distribution
Plan is of the type known as a "compensation" plan. This means that, although
the Trustees of the Trust are expected to take into account the expenses of the
Distributor in their periodic review of the Distribution Plan, the fees are
payable to compensate the Distributor for services rendered even if the amount
paid exceeds the Distributor's expenses.
The Distributor may also provide (or arrange for another intermediary or
agent to provide) personal and/or account maintenance services to Investor
shareholders of the Funds (the Distributor or such entity is referred to as a
"Servicing Agent" in such capacity). A Servicing Agent will be paid some or all
of the Shareholder Servicing Fees charged with respect to Investor Shares of the
Funds pursuant to a Servicing Plan for such shares.
MULTIPLE CLASSES
As indicated previously, the Funds offer two classes of shares to investors,
with eligibility generally depending on the amount invested in a particular
Fund. The two classes of shares are Institutional Shares and Investor Shares.
The following table sets forth basic investment and fee information for each
class.
<TABLE>
<CAPTION>
MINIMUM ANNUAL ANNUAL
FUND SUBSEQUENT METHOD OF SHAREHOLDER DISTRIBUTION
NAME OF CLASS INVESTMENT* INVESTMENTS* INVESTMENT SERVICE FEE FEE
- -------------------------------------- ----------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Institutional......................... $ 1 million $ 10,000 Direct None None
Investor.............................. $ 2,500 $ 500 Direct .25% .25%
</TABLE>
- ------------------------------
* Certain exceptions apply. See "Institutional Shares" and "Investor Shares"
below."
The offering price of Fund shares is based on the net asset value per share
next determined after an order is received. See "Purchase of Shares" and
"Redemption of Shares."
INSTITUTIONAL SHARES
Institutional Shares may be purchased by endowments, foundations and plan
sponsors of 401(a), 401(k), 457 and 403(b) plans and by individuals. In order to
be eligible to purchase Institutional Shares, an institution, plan or individual
must make an initial investment of at least $1 million in the particular Fund.
In its sole discretion, the Manager may waive this minimum investment
requirement and the Manager intends to do so for employees of the Manager, for
the spouse, parents, children, siblings, grandparents or grandchildren of such
employees, for employees of the Administrator and for Trustees of the Trust who
are not interested persons of the Trust or Manager and their spouses.
Institutional Shares are sold without any initial or deferred sales charges and
are not subject to any ongoing distribution expenses or shareholder servicing
fees.
INVESTOR SHARES
Investor Shares may be purchased by intermediary financial institutions and
certain individual retirement accounts and individuals. In order to be eligible
to purchase Investor Shares, an eligible investor must make an initial
investment of at least $2,500 in the particular Fund. In its sole discretion,
the Manager may waive this minimum investment requirement. Investor Shares are
subject to an annual Shareholder Service Fee equal to 0.25% of the average daily
net assets attributable to Investor Shares and an annual Distribution Fee equal
to 0.25% of the average daily net assets attributable to Investor Shares. As
described above, the
17
<PAGE>
Distribution Plan for Investor Shares permits payments of up to 0.50% of the
Funds' average daily net assets attributable to Investor Shares.
GENERAL
The Shareholder Service Fee charged with respect to Investor Shares is
intended to be compensation for personal services rendered and for account
maintenance with respect to such shares. The Distribution Fee charged with
respect to Investor Shares is intended to compensate the Distributor for
services and expenses primarily intended to result in the sale of Investor
Shares. See "Multiple Classes -- Distributor".
As described above, shares of the Funds may be sold to corporations or other
institutions such as trusts, foundations or broker-dealers purchasing for the
accounts of others ("Shareholder Organizations"). Investors purchasing and
redeeming shares of the Funds through a Shareholder Organization may be charged
a transaction-based fee or other fee for the services provided by the
Shareholder Organization. Each such Shareholder Organization is responsible for
transmitting to its customers a schedule of any such fees and information
regarding any additional or different conditions regarding purchases and
redemptions of Fund shares. Customers of Shareholder Organizations should read
this Prospectus in light of the terms governing accounts with their particular
organization.
PURCHASE OF SHARES
The offering price for shares of each Fund is the net asset value per share
next determined after receipt of a purchase order. See "Determination of Net
Asset Value." Investors may be charged an additional fee by their broker or
agent if they effect transactions through such persons.
INITIAL CASH INVESTMENTS BY WIRE
Subject to acceptance by the Trust, shares of the Funds may be purchased by
wiring federal funds. Please call 1-800-447-3332 for complete wiring
instructions. A completed Account Application must be overnighted to the Trust
at Barr Rosenberg Series Trust c/o BISYS Fund Services, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219-8021. Notification must be given to the Trust at
1-800-447-3332 prior to 4:00 p.m., New York Time, of the wire date. Federal
funds purchases will be accepted only on a day on which the Trust, the
Distributor and the custodian bank are all open for business.
INITIAL CASH INVESTMENTS BY MAIL
Subject to acceptance by the Trust, an account may be opened by completing
and signing an Account Application and mailing it to Barr Rosenberg Series
Trust, P.O. Box 182495, Columbus, Ohio 43219-2495.
The Fund(s) to be purchased should be specified on the Account Application.
In all cases, subject to acceptance by the Trust, payment for the purchase of
shares received by mail will be credited to a shareholder's account at the net
asset value per share of a Fund next determined after receipt, even though the
check may not yet have been converted into federal funds.
ADDITIONAL CASH INVESTMENTS
Additional cash investments may be made at any time by mailing a check to
the Trust at the address noted under "Initial Cash Investments by Mail" (payable
to Barr Rosenberg Series Trust) or by wiring monies as noted under "Initial Cash
Investments by Wire". Notification must be given at 1-800-447-3332 prior to 4:00
p.m., New York time, of the wire date. The minimum amounts for additional cash
investments are $10,000 for Institutional Shares and $500 for Investor Shares.
In its sole discretion, the Manager may waive the minimum additional investment
requirements.
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INVESTMENTS IN-KIND (INSTITUTIONAL SHARES)
Institutional Shares may be purchased in exchange for common stocks on
deposit at The Depository Trust Company ("DTC") or by a combination of such
common stocks and cash. Purchase of Institutional Shares of a Fund in exchange
for stocks is subject in each case to the determination by the Manager that the
stocks to be exchanged are acceptable. Securities accepted by the Manager in
exchange for Fund shares will be valued as set forth under "Determination of Net
Asset Value" (generally the last quoted sale price) as of the time of the next
determination of net asset value after such acceptance. All dividends,
subscription or other rights which are reflected in the market price of accepted
securities at the time of valuation become the property of the Fund and must be
delivered to the Fund upon receipt by the investor from the issuer. Generally,
the exchange of common stocks for Institutional Shares will be a taxable event
for federal income tax purposes, which will trigger gain or loss to an investor
subject to federal income taxation, measured by the difference between the value
of the Institutional Shares received and the investor's basis in the securities
tendered.
The Manager will not approve the acceptance of securities in exchange for
Fund shares unless (1) the Manager, in its sole discretion, believes the
securities are appropriate investments for the Fund; (2) the investor represents
and agrees that all securities offered to the Fund are not subject to any
restrictions upon their sale by the Fund under the Securities Act of 1933, or
otherwise; and (3) the securities may be acquired under the Fund's investment
restrictions.
OTHER PURCHASE INFORMATION
An eligible shareholder may also participate in the Barr Rosenberg Automatic
Investment Program, an investment plan that automatically debits money from the
shareholder's bank account and invests it in Investor Shares of one or more of
the Funds through the use of electronic funds transfers. Investors may commence
their participation in this program with a minimum initial investment of $2,500
and may elect to make subsequent investments by transfers of a minimum of $50
into their established Fund account. You may contact the Trust for more
information about the Barr Rosenberg Automatic Investment Program.
For purposes of calculating the purchase price of Fund shares, a purchase
order is received by the Trust on the day that it is in "good order" unless it
is rejected by the Distributor. For a purchase order of Investor Shares to be in
"good order" on a particular day a check or money wire must be received on or
before 4:00 p.m., New York Time of that day. In the case of Institutional
Shares, the investor's securities must be placed on deposit at the Depository
Trust Company prior to 10:00 a.m., New York Time or, in the case of cash
investments, the Trust must have received adequate assurances that federal funds
will be wired to a Fund prior to 4:00 p.m., New York Time, on the following
business day. If the consideration is received by the Trust after the deadline,
the purchase price of Fund shares will be based upon the next determination of
net asset value of Fund shares. No third party or foreign checks will be
accepted.
The Trust reserves the right, in its sole discretion, to suspend the
offering of shares of a Fund or to reject purchase orders when, in the judgment
of the Manager, such suspension or rejection would be in the best interests of
the Trust.
Purchases of each Fund's shares may be made in full or in fractional shares
of such Fund calculated to three decimal places. In the interest of economy and
convenience, certificates for shares will not be issued.
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IRA ACCOUNTS
Investor Shares of the Funds may be used as a funding medium for IRAs. The
minimum initial investment for an IRA is $2,000. A special application must be
completed in order to create such an account. Contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. For more
information about IRAs, call the Trust at 1-800-447-3332.
REDEMPTION OF SHARES
Shares of the Funds may be redeemed by mail, or, if authorized by an
investor in an account application, by telephone. The value of shares redeemed
may be more or less than the original cost of those shares, depending on the
market value of the investment securities held by the particular Fund at the
time of the redemption.
BY MAIL
The Trust will redeem its shares at the net asset value next determined
after the request is received in "good order". See "Determination of Net Asset
Value." Requests should be addressed to Barr Rosenberg Series Trust, P.O. Box
182495, Columbus, Ohio 43219-2495.
Requests in "good order" must include the following documentation:
(a) a letter of instruction, if required, specifying the number of
shares or dollar amount to be redeemed, signed by all registered owners of
the shares in the exact names in which they are registered;
(b) any required signature guarantees (see "Signature Guarantees"
below); and
(c) other supporting legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pension and
profit sharing plans and other organizations.
SIGNATURE GUARANTEES
To protect shareholder accounts, the Trust and its transfer agent from
fraud, signature guarantees are required to enable the Trust to verify the
identity of the person who has authorized a redemption from an account.
Signature guarantees are required for (1) redemptions where the proceeds are to
be sent to someone other than the registered shareholder(s) at the registered
address, (2) redemptions of $25,000 or more, and (3) share transfer requests.
Signature guarantees may be obtained from certain eligible financial
institutions, including but not limited to, the following: banks, trust
companies, credit unions, securities brokers and dealers, savings and loan
associations and participants in the Securities and Transfer Association
Medallion Program ("STAMP"), the Stock Exchange Medallion Program ("SEMP") or
the New York Stock Exchange Medallion Signature Program ("MSP"). Shareholders
may contact the Trust at 1-800-447-3332 for further details.
BY TELEPHONE
Provided the Telephone Redemption Option has been authorized by an investor
in an account application, a redemption of shares may be requested by calling
the Transfer Agent at 1-800-447-3332 and requesting
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that the redemption proceeds be mailed to the primary registration address or
wired per the authorized instructions. If the Telephone Redemption Option or the
Telephone Exchange Option (as described below) is authorized, the Transfer Agent
may act on telephone instruction from any person representing himself or herself
to be a shareholder and believed by the Transfer Agent to be genuine. The
Transfer Agent's records of such instructions are binding and the shareholder,
and not the Trust or the Transfer Agent, bears the risk of loss in the event of
unauthorized instructions reasonably believed by the Transfer Agent to be
genuine. The Transfer Agent will employ reasonable procedures to confirm that
instructions communicated are genuine and, if it does not, it may be liable for
any losses due to unauthorized or fraudulent instructions. The procedures
employed in connection with transactions initiated by telephone include tape
recording of telephone instructions and requiring some form of personal
identification prior to acting upon instructions received by telephone.
Telephone Redemption will be suspended for a period of 10 days following a
telephonic address change.
SYSTEMATIC WITHDRAWAL PLAN
An owner of $12,000 or more of shares of a Fund may elect to have periodic
redemptions made from the investor's account to be paid on a monthly, quarterly,
semiannual or annual basis. The maximum payment per year is 12% of the account
value at the time of the election. The shareholder will normally redeem a
sufficient number of shares to make the scheduled redemption payments on a date
selected by the shareholder. Depending on the size of the payment requested and
fluctuation in the net asset value, if any, of the shares redeemed, redemptions
for the purpose of making such payments may reduce or even exhaust the account.
A shareholder may request that these payments be sent to a predesignated bank or
other designated party. Capital gains and dividend distributions paid to the
account will automatically be reinvested at net asset value on the distribution
payment date.
FURTHER REDEMPTION INFORMATION
Purchases of shares of the Trust made by check are not permitted to be
redeemed until payment of the purchase price has been collected, which may take
up to fifteen days after purchase. Shareholders can avoid this delay by
utilizing the wire purchase option.
If the Manager determines, in its sole discretion, that it would not be in
the best interests of the remaining shareholders of a Fund to make a redemption
payment wholly or partly in cash, such Fund may pay the redemption price of
Institutional Shares in whole or in part by a distribution in kind of readily
marketable securities held by such Fund in lieu of cash. Securities used to
redeem Fund shares in kind will be valued in accordance with the Funds'
procedures for valuation described under "Determination of Net Asset Value."
Securities distributed by a Fund in kind will be selected by the Manager in
light of each Fund's objective and will not generally represent a PRO RATA
distribution of each security held in a Fund's portfolio. Investors may incur
brokerage charges on the sale of any such securities so received in payment of
redemptions.
The Trust may suspend the right of redemption and may postpone payment for
more than seven days when the New York Stock Exchange is closed for other than
weekends or holidays, or if permitted by the rules of the Securities and
Exchange Commission, during periods when trading on the Exchange is restricted
or during an emergency which makes it impracticable for the Funds to dispose of
their securities or to fairly
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determine the value of their net assets, or during any other period permitted by
the Securities and Exchange Commission for the protection of investors.
EXCHANGE OF FUND SHARES
The Funds offer two convenient ways to exchange shares in one Fund for
shares of another Fund. Shares of a particular class of a Fund may be exchanged
only for shares of the same class in another Fund. There is no sales charge on
exchanges. Before engaging in an exchange transaction, a shareholder should read
carefully the information in the Prospectus describing the Fund into which the
exchange will occur. A shareholder may not exchange shares of a class of one
Fund for shares of the same class of another Fund that is not qualified for sale
in the state of the shareholder's residence. Although the Trust has no current
intention of terminating or modifying the exchange privilege, it reserves the
right to do so at any time. Except as otherwise permitted by regulations of the
Securities and Exchange Commission, the Trust will give 60 days' advance notice
to shareholders of any termination or material modification of the exchange
privilege.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the respective net asset values next determined following
receipt of the request by the Funds containing the information indicated below.
EXCHANGE BY MAIL
To exchange Fund shares by mail, shareholders should simply send a letter of
instruction to the Trust. The letter of instruction must include: (a) the
investor's account number; (b) the class of shares to be exchanged; (c) the Fund
from and the Fund into which the exchange is to be made; (d) the dollar or share
amount to be exchanged; and (e) the signatures of all registered owners or
authorized parties.
EXCHANGE BY TELEPHONE
To exchange Fund shares by telephone or to ask questions about the exchange
privilege, shareholders may call the Trust at 1-800-447-3332. If you wish to
exchange shares, please be prepared to give the telephone representative the
following information: (a) the account number, social security number and
account registration; (b) the class of shares to be exchanged; (c) the name of
the Fund from which and the Fund into which the exchange is to be made; and (d)
the dollar or share amount to be exchanged. Telephone exchanges are available
only if the shareholder so indicates by checking the "yes" box on the Account
Application. The Trust employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that a Fund does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. A Fund will not be liable for
acting upon instructions communicated by telephone that it reasonably believes
to be genuine. The Trust reserves the right to suspend or terminate the
privilege of exchanging by mail or by telephone at any time. The telephone
exchange privilege will be suspended for a period of 10 days following a
telephonic address change.
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DETERMINATION OF NET ASSET VALUE
The net asset value of each class of shares of the Funds will be determined
once on each day on which the New York Stock Exchange is open as of 4:00 p.m.,
New York time.
The net asset value per share of each class of the Funds is determined by
dividing the particular class's proportionate interest in the total market value
of the Fund's portfolio investments and other assets, less any applicable
liabilities, by the total outstanding shares of that class of such Fund.
Specifically, each Fund's liabilities are allocated among its classes. The total
of such liabilities allocated to a particular class plus that class's
shareholder servicing and/or distribution expenses, if any, and any other
expenses specially allocated to that class are then deducted from the class's
proportionate interest in a Fund's assets. The resulting amount for each class
is divided by the number of shares of that class outstanding to produce the net
asset value per share.
Portfolio securities listed on a securities exchange for which market
quotations are available are valued at the last quoted sale price on each
business day, or, if there is no such reported sale, at the most recent quoted
bid price. Price information on listed securities is generally taken from the
closing price on the exchange where the security is primarily traded. Unlisted
securities for which market quotations are readily available are valued at the
most recent quoted bid price, except that debt obligations with sixty days or
less remaining until maturity may be valued at their amortized cost.
Exchange-traded options on futures are valued at the settlement price as
determined by the appropriate clearing corporation. Futures contracts are valued
by computing the gain or loss by reference to the current settlement price as
determined by the appropriate clearing corporation. Other assets and securities
for which no quotations are readily available are valued at fair value as
determined in good faith by the Trustees of the Trust or by persons acting at
their direction.
DISTRIBUTIONS
Each Fund intends to pay out as dividends substantially all of its net
investment income (which comes from dividends and any interest it receives from
its investments and net short-term capital gains). Each Fund also intends to
distribute substantially all of its net long-term capital gains, if any, after
giving effect to any available capital loss carryover. Each Fund's policy is to
declare and pay distributions of its dividends and interest annually although it
may do so more frequently as determined by the Trustees of the Trust. Each
Fund's policy is to distribute net short-term capital gains and net long-term
gains annually, although it may do so more frequently as determined by the
Trustees of the Trust to the extent permitted by applicable regulations.
All dividends and/or distributions will be paid out in the form of
additional shares of the relevant Fund to which the dividends and/or
distributions relate at net asset value unless the shareholder elects to receive
cash. Shareholders may make this election by marking the appropriate box on the
Account Application or by writing to the Administrator.
If you elect to receive distributions in cash and checks (1) are returned
and marked as "undeliverable" or (2) remain uncashed for six months, your cash
election will be changed automatically and your future dividend and capital
gains distributions will be reinvested in the Fund at the per share net asset
value determined as of the date of payment of the distribution. In addition, any
undeliverable checks or checks that
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remain uncashed for six months will be canceled and will be reinvested in the
Fund at the per share net asset value determined as of the date of cancellation.
TAXES
Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended. So long as
a Fund distributes, as dividends, substantially all of the sum of its taxable
net investment income, its net tax-exempt income (if any), and, the excess, if
any, of net short-term capital gains over net long-term capital losses for such
year and otherwise qualifies for the special rules governing the taxation of
regulated investment companies, the Fund itself will not pay federal income tax
on the amount distributed. Such dividends will be taxable to shareholders
subject to income tax as ordinary income. Distributions designated by the Fund
as deriving from net gains on capital assets held for more than one year but not
more than 18 months and from net gains on capital assets held for more than 18
months will be taxable to shareholders as such, regardless of how long a
shareholder has held the shares. Distributions will be taxed as described above
whether received in cash or in shares through the reinvestment of distributions.
A distribution paid to shareholders by a Fund in January of a year is generally
deemed to have been received by shareholders on December 31 of the preceding
year, if the distribution was declared and payable to shareholders of record on
a date in October, November or December of that preceding year. In addition to
the federal requirements, the State of California (where the Manager is located)
imposes additional requirements for eligibility to avoid entity level taxation.
The Trust (domiciled in Ohio) does not believe the Funds are subject to taxation
in California. Each Fund will provide federal tax information annually,
including information about dividends and distributions paid during the
preceding year.
To the extent such investments are permissible for a Fund, the Fund's
transactions in options, futures contracts, hedging transactions, forward
contracts and straddles will be subject to special tax rules (including
mark-to-market, constructive sale, straddle, wash sale and short sale rules),
the effect of which may be to accelerate income to the Fund, defer losses to the
Fund, cause adjustments in the holding periods of the Fund's securities and
convert short-term capital losses into long-term capital losses. These rules
could therefore affect the amount, timing and character of distributions to
shareholders.
The foregoing is a general summary of the federal income tax consequences of
investing in a Fund to shareholders who are U.S. citizens or U.S. corporations.
Shareholders should consult their own tax advisers about the tax consequences of
an investment in the Funds in light of each shareholder's particular tax
situation. Shareholders should also consult their own tax advisers about
consequences under foreign, state, local or other applicable tax laws.
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES
The Trust is a diversified open-end series management investment company
organized as a Massachusetts business trust under the laws of The Commonwealth
of Massachusetts by an Agreement and Declaration of Trust dated April 1, 1988,
as amended from time to time (the "Declaration of Trust").
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest which are presently divided
into five series. Interests in each of the Funds described in this Prospectus
are represented by shares of such Fund. The Declaration of Trust also permits
the Trustees,
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without shareholder approval, to subdivide any series of shares into various
sub-series of shares with such preferences and other rights as the Trustees may
designate. While the Trustees have no current intention to exercise this power,
it is intended to allow them to provide for an equitable allocation of the
impact of any future regulatory requirements which might affect various classes
of shareholders differently. The Trustees may also, without shareholder
approval, establish one or more additional separate portfolios for investments
in the Trust, terminate a series of the Trust or merge two or more existing
portfolios. Shareholders' investments in such a portfolio would be evidenced by
a separate series of shares.
Each Fund is further divided into two classes of shares designated as
Institutional Shares and Investor Shares. Each class of shares of a Fund
represents interests in the assets of such Fund and has identical dividend,
liquidation and other rights and the same terms and conditions except that
expenses, if any, related to the distribution and shareholder servicing of a
particular class are borne solely by such class and each class may, at the
Trustees' discretion, also pay a different share of other expenses, not
including advisory or custodial fees or other expenses related to the management
of the Trust's assets, if these expenses are actually incurred in a different
amount by that class, or if the class receives services of a different kind or
to a different degree than the other classes. All other expenses are allocated
to each class on the basis of the net asset value of that class in relation to
the net asset value of such Fund.
Each class of shares of a Fund has identical voting rights except that each
class has exclusive voting rights on any matter submitted to shareholders that
relates solely to that class, and has separate voting rights on any matter
submitted to shareholders in which the interests of one class differ from the
interests of any other class. Each class of shares has exclusive voting rights
with respect to matters pertaining to any distribution or servicing plan
applicable to that class. Matters submitted to shareholder vote must be approved
by each Fund separately except (i) when required by the Investment Company Act
of 1940, all shares shall be voted together and (ii) when the Trustees have
determined that the matter does not affect all Funds, then only shareholders of
the Fund or Funds affected shall be entitled to vote on the matter. All classes
of shares of a Fund will vote together, except with respect to any distribution
or servicing plan applicable to a class or when a class vote is required as
specified above or otherwise by the Investment Company Act of 1940. Shares are
freely transferable, are entitled to dividends as declared by the Trustees and,
in liquidation of a Fund portfolio, are entitled to receive the net assets of
that portfolio, but not of the other Funds. The Trust does not generally hold
annual meetings of shareholders and will do so only when required by law.
Shareholders holding a majority of the outstanding shares may remove Trustees
from office by votes cast in person or by proxy at a meeting of shareholders or
by written consent.
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust, may, however, be terminated at any time by vote of at least
two-thirds of the outstanding shares of each series of the Trust.
Shareholders could, under certain circumstances, be held personally liable
for the obligations of the Trust. However, the risk of a shareholder incurring
financial loss on account of that liability is considered remote since it may
arise only in very limited circumstances.
OTHER INFORMATION
Each Fund's investment performance may from time to time be included in
advertisements about such Fund. Total return for a Fund is measured by comparing
the value of an investment in such Fund at the
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beginning of the relevant period to the redemption value of the investment in
such Fund at the end of such period (assuming immediate reinvestment of any
dividends or capital gains distributions). All data are based on a Fund's past
investment results and do not predict future performance. Investment
performance, which will vary, is based on many factors, including market
conditions, the composition of a Fund's portfolio and a Fund's operating
expenses. Investment performance also often reflects the risks associated with a
Fund's investment objective and policies. These factors should be considered
when comparing a Fund's investment results with those of other mutual funds and
other investment vehicles. Quotations of investment performance for any period
when an expense limitation was in effect will be greater than if the limitation
had not been in effect.
SHAREHOLDER INQUIRIES
Shareholders may direct inquiries to the Trust at Barr Rosenberg Series
Trust, P.O. Box 182495, Columbus, Ohio 43219-2495.
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SHAREHOLDER SERVICES
1-800-447-3332 (Investor Share Customers)
1-800-527-6026 (Institutional Share Customers)
Additional Information may be found on the
World Wide Web at http://www.riem.com
BARR ROSENBERG SERIES TRUST
3435 Stelzer Road
Columbus, Ohio 43219
MANAGER
Rosenberg Institutional Equity Management
Four Orinda Way, Building E
Orindo, CA 94563
ADMINISTRATOR, TRANSFER AND DIVIDEND PAYING AGENT
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
DISTRIBUTOR
Barr Rosenberg Funds Distributor, Inc.
125 West 55th Street
11th Floor
New York, NY 10019
CUSTODIAN OF ASSETS
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
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BARR ROSENBERG SERIES TRUST
BARR ROSENBERG MARKET NEUTRAL FUND
BARR ROSENBERG DOUBLE ALPHA MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 9, 1997
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information relates to the prospectus of the Barr Rosenberg Market
Neutral Fund and Barr Rosenberg Double Alpha Market Fund of Barr Rosenberg
Series Trust dated December 9, 1997 (the "Prospectus") and should be read in
conjunction therewith. A copy of the Prospectus may be obtained from Barr
Rosenberg Series Trust, 3435 Stelzer Road, Columbus, Ohio 43219.
<PAGE>
TABLE OF CONTENTS
PAGE
----
INVESTMENT OBJECTIVES AND POLICIES.................................... 3
MISCELLANEOUS INVESTMENT PRACTICES.................................... 5
INVESTMENT RESTRICTIONS............................................... 5
INCOME DIVIDENDS, DISTRIBUTIONS AND TAX STATUS........................ 7
MANAGEMENT OF THE TRUST............................................... 9
INVESTMENT ADVISORY AND OTHER SERVICES................................ 11
PORTFOLIO TRANSACTIONS................................................ 13
TOTAL RETURN CALCULATIONS............................................. 14
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES...................... 16
DETERMINATION OF NET ASSET VALUE...................................... 18
PURCHASE AND REDEMPTION OF SHARES..................................... 18
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INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each of the Barr Rosenberg Market
Neutral Fund and Barr Rosenberg Double Alpha Market Fund (each, a "Fund" and
collectively, the "Funds") of Barr Rosenberg Series Trust (the "Trust") are
summarized on the front page of the Prospectus and in the text of the Prospectus
under the headings "Investment Objectives and Policies" and "General Description
of Risks and Fund Investments."
In addition, the following is an additional description of certain
investments of the Fund(s).
SHORT SALES (BOTH FUNDS). The Barr Rosenberg Market Neutral Fund will seek,
and the Barr Rosenberg Double Alpha Market Fund may seek, to realize additional
gains through short sales. Short sales are transactions in which a Fund sells a
security it does not own, in anticipation of a decline in the value of that
security relative to the long positions held by the Fund. To complete such a
transaction, a Fund must borrow the security to make delivery to the buyer. A
Fund then is obligated to replace the security borrowed by purchasing it at the
market price at or prior to the time of replacement. The price at such time may
be more or less than the price at which the security was sold by a Fund. Until
the security is replaced, a Fund is required to repay the lender any dividends
or interest that accrue during the period of the loan. To borrow the security, a
Fund also may be required to pay a premium, which would increase the cost of the
security sold. The net proceeds of the short sale will be retained by the broker
(or by the Fund's custodian in a special custody account), to the extent
necessary to meet margin requirements, until the short position is closed out. A
Fund also will incur transaction costs in effecting short sales.
A Fund will incur a loss as a result of the short sale if the price of the
security increases between the date of the short sale and the date on which the
Fund replaces the borrowed security. A Fund will realize a gain if the security
declines in price between those dates. The amount of any gain will be decreased,
and the amount of any loss increased, by the amount of the premium, dividends,
interest or expenses a Fund may be required to pay in connection with a short
sale. An increase in the value of a security sold short by a Fund over the price
at which it was sold short will result in a loss to the Fund, and there can be
no assurance that the Fund will be able to close out the position at any
particular time or at an acceptable price.
S&P 500 INDEX FUTURES AND RELATED OPTIONS (BARR ROSENBERG DOUBLE ALPHA
MARKET FUND ONLY). An S&P 500 Index Future contract (an "Index Future") is a
contract to buy or sell an integral number of units of the Standard & Poor's 500
Composite Stock Price Index (the "S&P 500 Index") at a specified future date at
a price agreed upon when the contract is made. A unit is the value of the S&P
500 Index from time to time. Entering into a contract to buy units is commonly
referred to as buying or purchasing a contract or holding a long position in the
S&P 500 Index.
Index Futures can be traded through all major commodity brokers. Currently,
contracts are expected to expire on the tenth day of March, June, September and
December. The Barr Rosenberg Double Alpha Market Fund will ordinarily be able to
close open positions on the United States futures exchange on which Index
Futures are then traded at any time up to and including the expiration day.
In contrast to purchases of a common stock, no price is paid or received by
the Barr Rosenberg Double Alpha Market Fund upon the purchase of a futures
contract. Upon entering into a futures contract, the Fund will be required to
deposit with its custodian in a segregated account in the name of the futures
broker a
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specified amount of cash or securities. This is known by participants in the
market as "initial margin". The type of instruments that may be deposited as
initial margin, and the required amount of initial margin, are determined by the
futures exchange(s) on which the Index Futures are traded. The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contract margin does not involve the borrowing of
funds by the customer to finance the transactions. Rather, the initial margin is
in the nature of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Subsequent payments, called
"variation margin", to and from the broker, will be made on a daily basis as the
price of the S&P 500 Index fluctuates, making the position in the futures
contract more or less valuable, a process known as "marking to the market". For
example, when the Fund has purchased an Index Future and the price of the S&P
500 Index has risen, that position will have increased in value and the Fund
will receive from the broker a variation margin payment equal to that increase
in value. Conversely, when the Fund has purchased an Index Future and the price
of the S&P 500 Index has declined, the position would be less valuable and the
Fund would be required to make a variation margin payment to the broker. When
the Fund terminates a position in a futures contract, a final determination of
variation margin is made, additional cash is paid by or to the Fund, and the
Fund realizes a gain or a loss.
The price of Index Futures may not correlate perfectly with movement in the
underlying index due to certain market distortions. First, all participants in
the futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which could distort the normal
relationship between the S&P 500 Index and futures markets. Secondly, the
deposit requirements in the futures market are less onerous than margin
requirements in the securities market, and as a result the futures market may
attract more speculators than does the securities market. Increased
participation by speculators in the futures market may also cause temporary
price distortions.
Options on index futures contracts give the purchaser the right, in return
for the premium paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the holder would assume the underlying futures position
and would receive a variation margin payment of cash or securities approximating
the increase in the value of the holder's option position. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash based on the difference between the
exercise price of the option and the closing level of the index on which the
futures contract is based on the expiration date. Purchasers of options who fail
to exercise their options prior to the exercise date suffer a loss of the
premium paid.
The ability to establish and close out positions in options on futures
contracts will be subject to the development and maintenance of a liquid
secondary market. It is not certain that such a market will develop. Although
the Barr Rosenberg Double Alpha Market Fund generally will purchase only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. In the event no such market exists
for particular options, it might not be possible to effect closing transactions
in such options, with the result that the Fund would have to exercise the
options in order to realize any profit.
4
<PAGE>
MISCELLANEOUS INVESTMENT PRACTICES
PORTFOLIO TURNOVER. A change in securities held by a Fund is known as
"portfolio turnover" and almost always involves the payment by a Fund of
brokerage commissions or dealer markup and other transaction costs on the sale
of securities as well as on the reinvestment of the proceeds in other
securities. Portfolio turnover is not a limiting factor with respect to
investment decisions. As disclosed in the Prospectus, high portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs, which will be borne directly by the Funds, and could involve realization
of capital gains that would be taxable when distributed to shareholders of a
Fund. To the extent that portfolio turnover results in the realization of net
short-term capital gains, such gains are ordinarily taxed to shareholders at
ordinary income tax rates. See "Portfolio Transactions" and "Income Dividends,
Distributions and Tax Status".
NOTICE ON SHAREHOLDER APPROVAL. Unless otherwise indicated in the
Prospectus or this Statement of Additional Information, the investment objective
and policies of each of the Funds may be changed without shareholder approval.
INVESTMENT RESTRICTIONS
Without a vote of the majority of the outstanding voting securities of a
Fund, the Trust will not take any of the following actions with respect to such
Fund:
(1) Borrow money in excess of 10% of the value (taken at the lower of
cost or current value) of the Fund's total assets (not including the amount
borrowed) at the time the borrowing is made, and then only from banks as a
temporary measure to facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely disposition of
portfolio investments or for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are purchased.
Short sales and related borrowings of securities are not subject to this
restriction.
(2) Pledge, hypothecate, mortgage or otherwise encumber its assets in
excess of 10% of the Fund's total assets (taken at cost) and then only to
secure borrowings permitted by Restriction 1 above. (For the purposes of
this restriction, collateral arrangements with respect to options, short
sales, stock index, interest rate, currency or other futures, options on
futures contracts and collateral arrangements with respect to initial and
variation margin are not deemed to be a pledge or other encumbrance of
assets. Collateral arrangements with respect to swaps and other derivatives
are also not deemed to be a pledge or other encumbrance of assets.)
(3) Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of purchases and sales of securities.
(For this purpose, the deposit or payment of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin.)
(4) Make short sales of securities or maintain a short position if,
when added together, more than 100% of the value of a Fund's net assets
would be (i) deposited as collateral for the obligation to replace
securities borrowed to effect short sales, and (ii) allocated to segregated
accounts in connection with short sales. Short sales "against the box" are
not subject to this limitation.
5
<PAGE>
(5) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it
may be deemed to be an underwriter under federal securities laws.
(6) Purchase or sell real estate, although it may purchase securities
of issuers which deal in real estate, including securities of real estate
investment trusts, and may purchase securities which are secured by
interests in real estate.
(7) Concentrate more than 25% of the value of its total assets in any
one industry.
(8) Invest in securities of other investment companies, except to the
extent permitted by the Investment Company Act of 1940, as amended (the
"1940 Act"), or by an exemptive order issued by the Securities and Exchange
Commission.
(9) Purchase or sell commodities or commodity contracts except that
each of the Funds may purchase and sell stock index and other financial
futures contracts and options thereon.
(10) Make loans, except by purchase of debt obligations or by entering
into repurchase agreements or through the lending of the Fund's portfolio
securities.
(11) Issue senior securities. (For the purpose of this restriction none
of the following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction (2) above; any borrowing
permitted by restriction (1) above; short sales permitted by restriction (4)
above; any collateral arrangements with respect to short sales, swaps,
options, future contracts and options on future contracts and with respect
to initial and variation margin; and the purchase or sale of options, future
contracts or options on future contracts.)
Notwithstanding the latitude permitted by Restrictions 1, 2, 3 and 9 above,
the Funds have no current intention of (a) borrowing money or (b) purchasing
interest rate futures.
It is contrary to the present policy of each of the Funds, which may be
changed by the Trustees of the Trust without shareholder approval, to:
(a) Invest in warrants or rights (other than warrants or rights acquired
by the Fund as a part of a unit or attached to securities at the time of
purchase).
(b) Write, purchase or sell options on particular securities (as opposed
to market indices).
(c) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts.
(d) Make investments for the purpose of exercising control of a
company's management.
(e) Invest in (a) securities which at the time of investment are not
readily marketable and (b) repurchase agreements maturing in more than seven
days if, as a result, more than 15% of the Fund's net assets (taken at
current value) would then be invested in such securities.
(f) With respect to the Barr Rosenberg Market Neutral Fund only, invest
in securities of registered open-end investment companies or registered unit
investment trusts in reliance on Sections 12(d)(1)(F) or (G) of the 1940
Act.
6
<PAGE>
Unless otherwise indicated, all percentage limitations on investments set
forth herein and in the Prospectus will apply at the time of the making of an
investment and shall not be considered violated unless an excess or deficiency
occurs or exists immediately after and as a result of such investment.
The phrase "shareholder approval," as used in the Prospectus and herein, and
the phrase "vote of a majority of the outstanding voting securities", as used
herein, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of a Fund or the Trust, as the case may be, or (2) 67% or
more of the shares of a Fund or the Trust, as the case may be, present at a
meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
INCOME DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
The tax status of the Funds and the distributions which they may make are
summarized in the Prospectus under the heading "Taxes." The Funds intend to
qualify each year as a regulated investment company under the Internal Revenue
Code. In order to qualify as a "regulated investment company" and to qualify for
the special tax treatment accorded regulated investment companies and their
shareholders, each Fund must, among other things, (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to certain
securities loans, gains from the sale or other disposition of securities or
foreign currencies or other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business of
investing in such securities or currencies; (b) diversify its holdings so that,
at the close of each quarter of its taxable year, (i) at least 50% of the value
of its total assets consists of cash, cash items, U.S. Government securities,
securities of other regulated investment companies, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of such Fund and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is invested
in the securities of any issuer (other than U.S. Government securities or
securities of other regulated investment companies); and (c) distribute annually
at least 90% of the sum of its taxable net investment income, its net tax-exempt
income (if any), and, the excess, if any, of net short-term capital gains over
net long-term capital losses for such year. To the extent a Fund qualifies for
treatment as a regulated investment company, the Fund will not be subject to
federal income tax on income paid to its shareholders in the form of dividends
or capital gain distributions.
As described in the Prospectus under the heading "Distributions," each Fund
intends to pay out substantially all of its ordinary income and net short-term
capital gains, and to distribute substantially all of its net capital gains, if
any, after giving effect to any available capital loss carryover. Net capital
gain is the excess of net gains from assets held for more than one year over net
losses from capital assets held for not more than one year. In order to avoid an
excise tax imposed on certain undistributed income, a Fund must distribute prior
to each calendar year end without regard to the Fund's fiscal year end (i) 98%
of the Fund's ordinary income, and (ii) 98% of the Fund's capital gain net
income, if any, realized in the one-year period ending on October 31.
In general, all dividend distributions derived from ordinary income and
short-term capital gain are taxable to investors as ordinary income (eligible in
part for the dividends-received deduction in the case of corporations, subject
to certain conditions). Pursuant to the Taxpayer Relief Act of 1997 (the "1997
Act"), two different tax rates apply to net capital gains. One rate (generally
28%) applies to net gains on capital assets held for more than one year but not
more than 18 months ("mid-term gains") and a second, preferred rate (generally
20%) applies to the balance of such net capital gains ("adjusted net capital
gains").
7
<PAGE>
Distributions of net capital gains will be treated in the hands of shareholders
as mid-term gains to the extent designated by the Fund as deriving from net
gains from assets held for more than one year but not more than 18 months, and
the balance will be treated as adjusted net capital gains. Distributions of
mid-term gains and adjusted net capital gains will be taxable to shareholders as
such, regardless of how long a shareholder has held the shares in the Fund.
Distributions will be taxable as described above whether received in cash or in
shares through the reinvestment of distributions. The dividends-received
deduction for corporations will generally apply to a Fund's dividends from
investment income to the extent derived from dividends received by the Fund from
domestic corporations, provided the Fund and the shareholder each meet the
relevant holding period requirements.
Certain tax exempt organizations or entities may not be subject to federal
income tax on dividends or distributions from a Fund. Each organization or
entity should review its own circumstances and the federal tax treatment of its
income.
Each Fund is generally required to withhold and remit to the U.S. Treasury
31% of the taxable dividends and other distributions, whether distributed in
cash or reinvested in shares of the Fund, paid or credited to any shareholder
account for which an incorrect or no taxpayer identification number has been
provided or where the Fund is notified that the shareholder has underreported
income in the past (or the shareholder fails to certify that he is not subject
to such withholding). However, the general back-up withholding rules set forth
above will not apply to tax exempt entities so long as each such entity
furnishes a Fund with an appropriate certificate.
To the extent such investments are permissible for a particular Fund, the
Fund's transactions in options, futures contracts, hedging transactions, forward
contracts and straddles will be subject to special tax rules (including
mark-to-market, constructive sale, straddle, wash sale and short sale rules),
the effect of which may be to accelerate income to the Fund, defer losses to the
Fund, cause adjustments in the holding periods of the Fund's securities and
convert short-term capital losses into long-term capital losses. These rules
could therefore affect the amount, timing and character of distributions to
shareholders.
Pursuant to the 1997 Act, new "constructive sale" provisions apply to
activities by a Fund which lock in gain on an "appreciated financial position."
Generally, a "position" is defined to include stock, a debt instrument, or
partnership interest, or an interest in any of the foregoing, including through
a short sale, a swap contract, or a future or forward contract. Under the 1997
Act, the entry into a short sale, a swap contract or a future or forward
contract relating to an appreciated direct position in any stock or debt
instrument, or the acquisition of stock or debt instrument at a time when the
Fund occupies an offsetting (short) appreciated position in the stock or debt
instrument, is treated as a "constructive sale" that gives rise to the immediate
recognition of gain (but not loss). The application of these new provisions may
cause a Fund to recognize taxable income from these offsetting transactions in
excess of the cash generated by such activities.
THE TAX DISCUSSION SET FORTH ABOVE IS A SUMMARY INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY. EACH SHAREHOLDER IS ADVISED TO CONSULT ITS OWN TAX
ADVISER WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO IT OF AN INVESTMENT IN
THE FUNDS, INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL, FOREIGN, AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING.
8
<PAGE>
MANAGEMENT OF THE TRUST
The Trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
<TABLE>
<S> <C>
Kenneth Reid* (47) General Partner and Director of Research, Rosenberg Institutional
President, Trustee Equity Management, June, 1986 to present.
Marlis S. Fritz* (47) General Partner and Director of Marketing, Rosenberg Institutional
Vice President, Trustee Equity Management, April, 1985 to present.
Nils H. Hakansson (60) Sylvan C. Coleman Professor of Finance and Accounting, Haas School
Trustee of Business, University of California, Berkeley, June, 1969 to
present. Director, Supershare Services Corporation (investment
management), Los Angeles, California, November, 1989 to present.
Barr M. Rosenberg* (54) Managing General Partner and Chief Investment Officer, Rosenberg
Trustee Institutional Equity Management, January, 1985 to present.
William F. Sharpe (63) Timken Professor of Finance, Stanford University, September, 1970
Trustee to September, 1989. Timken Professor Emeritus of Finance,
Stanford University, October, 1989 to present. Chairman, William
F. Sharpe Associates, Los Altos, California (research and
financial consulting), March, 1986 to present.
Po-Len Hew (31) Accounting Manager, Rosenberg Institutional Equity Management,
Treasurer October, 1989 to present.
Carolyn Demler (53) Administrative Coordinator, Rosenberg Institutional Equity
Clerk Management, December, 1988 to present.
Edward H. Lyman (53) Executive Vice President, Barr Rosenberg Investment Management,
Vice President Inc., and General Counsel to the Rosenberg Group of companies,
1990 to present.
Richard L. Saalfeld President and Chief Executive Officer of mutual fund unit of
(54) Rosenberg Institutional Equity Management from June, 1996 to
Vice President present; Consultant to Rosenberg Institutional Equity Management,
September, 1995 to May, 1996; Chairman and Chief Executive
Officer of CoreLink Resources, Inc. (mutual fund marketing
organization), Concord, California, April, 1993 to August, 1995;
Consultant, December, 1992 to March, 1993.
Harold L. Arbit (50) Vice President and Partner, Rosenberg Alpha L.P., 1984 to present.
Vice President
F. William Jump, Jr. Portfolio engineer, Rosenberg Institutional Equity Management,
(42) August, 1990 to present.
Vice President
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
David Bunstine (32) Employee of BISYS Fund Services.
Assistant Treasurer
Gregory Maddox (30) Director, Client Services, BISYS Fund Services.
Assistant Treasurer
Bruce Treff (31) Employee of BISYS Fund Services.
Assistant Clerk
Ellen Stoutamire (48) Employee of BISYS Fund Services.
Assistant Clerk
Jeanette Peplowski (39) Employee of BISYS Fund Services.
Assistant Clerk
Alaina Metz (31) Employee of BISYS Fund Services.
Assistant Clerk
</TABLE>
- ------------------------
* Trustees who are "interested persons" (as defined in the 1940 Act) of the
Trust or the Manager.
The mailing address of each of the officers and Trustees is c/o Barr
Rosenberg Series Trust, 3435 Stelzer Road, Columbus, OH 43219.
The principal occupations of the officers and Trustees for the last five
years have been with the employers as shown above, although in some cases they
have held different positions with such employers.
The Trust pays the Trustees other than those who are interested persons of
the Trust or Manager an annual fee of $23,000 plus $2,500 for each meeting
attended. The Trust does not pay any pension or retirement benefits for its
Trustees. The Trust does not pay any compensation to officers or Trustees of the
Trust other than those Trustees who are not interested persons of the Trust or
Manager. The following table sets forth information concerning the total
compensation paid to each of the Trustees who are not interested persons of the
Trust or Manager in the fiscal year ended March 31, 1997.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
FROM
AGGREGATE REGISTRANT AND
COMPENSATION PENSION OR RETIREMENT ESTIMATED ANNUAL FUND COMPLEX
NAME OF PERSON FROM BENEFITS ACCRUED AS BENEFITS UPON PAID TO
POSITION REGISTRANT PART OF FUND EXPENSES RETIREMENT DIRECTORS
- ----------------------------------------------- -------------- --------------------- --------------------- --------------
<S> <C> <C> <C> <C>
Nils H. Hakansson.............................. $ 33,000 $ 0 $ 0 $ 33,000
Trustee
William F. Sharpe.............................. $ 33,000 $ 0 $ 0 $ 33,000
Trustee
</TABLE>
Messrs. Rosenberg, Reid, Arbit, Lyman and Saalfeld and Ms. Fritz, Demler and
Hew, each being a general partner, limited partner, officer or employee of the
Manager, will each benefit from the management fees paid by the Trust to the
Manager, but receive no direct compensation from the Trust.
10
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
MANAGEMENT CONTRACT
As disclosed in the Prospectus under the heading "Management of the Trust",
under management contracts (each, a "Management Contract") between the Trust, on
behalf of each Fund, and Rosenberg Institutional Equity Management (the
"Manager"), subject to the control of the Trustees of the Trust and such
policies as the Trustees may determine, the Manager will furnish continuously an
investment program for each Fund and will make investment decisions on behalf of
each Fund and place all orders for the purchase and sale of portfolio
securities. Subject to the control of the Trustees, the Manager furnishes office
space and equipment, provides bookkeeping and certain clerical services and pays
all salaries, fees and expenses of officers and Trustees of the Trust who are
affiliated with the Manager. As indicated under "Portfolio Transactions --
Brokerage and Research Services," the Trust's portfolio transactions may be
placed with broker-dealers which furnish the Manager, at no cost, certain
research, statistical and quotation services of value to the Manager in advising
the Trust or its other clients.
As disclosed in the Prospectus, each of the Funds has agreed to pay the
Manager a quarterly management fee at the annual percentage rate of the relevant
Fund's average daily net assets set forth in the Prospectus. The Manager has
informed the Trust that it will voluntarily waive some or all of its management
fees under the Management Contracts and, if necessary, will bear certain
expenses of each Fund until further notice so that each Fund's total annual
operating expenses (including the management fee but not including nonrecurring
account fees and extraordinary expenses) applicable to each class will not
exceed the percentage of each Fund's average daily net assets attributable to
that class as set forth in the Prospectus. In addition, the Manager's
compensation under each Management Contract is subject to reduction to the
extent that in any year the expenses of a Fund (including investment advisory
fees but excluding taxes, portfolio brokerage commissions and any distribution
expenses paid by a class of shares of a Fund pursuant to a distribution plan or
otherwise) exceed the limits on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction in which shares of the Fund
are qualified for offer and sale.
Each Management Contract provides that the Manager shall not be subject to
any liability to the Trust or to any shareholder of the Trust in connection with
the performance of its services thereunder in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties thereunder.
Each Management Contract will continue in effect for a period of no more
than two years from the date of its execution only so long as its continuance is
approved at least annually by (i) vote, cast in person at a meeting called for
that purpose, of a majority of those Trustees who are not "interested persons"
of the Manager or the Trust, and by (ii) the majority vote of either the full
Board of Trustees or the vote of a majority of the outstanding shares of the
relevant Fund. Each Management Contract automatically terminates on assignment,
and is terminable on not more than 60 days' notice by the Trust to the Manager.
In addition, each Management Contract may be terminated on not more than 60
days' written notice by the Manager to the Trust.
As disclosed in the Prospectus, the general partners of the Manager are Barr
M. Rosenberg, Marlis S. Fritz and Kenneth Reid. Each of these persons may be
deemed a controlling person of the Manager.
11
<PAGE>
As discussed in this Statement of Additional Information under the heading
"Management of the Trust," Barr M. Rosenberg is a Trustee of the Trust as well
as Managing General Partner and Chief Investment Officer of the Manager; Marlis
S. Fritz is a Trustee and Vice President of the Trust as well as a general
partner of the Manager; and Kenneth Reid is a Trustee and President of the Trust
as well as a general partner and Director of Research of the Manager.
ADMINISTRATIVE SERVICES
The Trust has entered into a Fund Administration Agreement with BISYS Fund
Services (the "Administrator") pursuant to which the Administrator provides
certain management and administrative services necessary for the Funds'
operations including: (i) general supervision of the operation of the Funds
including coordination of the services performed by the Funds' investment
advisor, transfer agent, custodian, independent accountants and legal counsel,
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities commissions,
and preparation of proxy statements and shareholder reports for the Funds; (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Funds' officers and Board of
Trustees; and (iii) furnishing office space and certain facilities required for
conducting the business of the Funds. The Trust's principal underwriter is an
affiliate of the Administrator. For these services, the Administrator is
entitled to receive a fee, payable monthly, at the annual rate of 0.15% of the
average daily net assets of the Trust. The Trust has also entered into a Fund
Accounting Agreement with BISYS Fund Services, Inc. (the "Fund Accountant")
pursuant to which the Fund Accountant provides certain accounting services
necessary for the Funds' operations. For these services, the Fund Accountant is
entitled to receive an annual fee of $30,000 for each Fund. The Trust's
principal underwriter is an affiliate of the Fund Accountant.
DISTRIBUTOR AND DISTRIBUTION PLAN
As stated in the text of the Prospectus under the heading "Management of the
Trust--Distributor", Investor Shares of each Fund are sold on a continuous basis
by the Trust's distributor, Barr Rosenberg Funds Distributor, Inc. (the
"Distributor"). Under the Distributor's Contract between the Trust and the
Distributor (the "Distributor's Contract"), the Distributor is not obligated to
sell any specific amount of shares of the Trust and will purchase shares for
resale only against orders for shares.
Pursuant to the Distribution Plan (the "Plan") described in the Prospectus,
in connection with the distribution of Investor Shares of the Trust, the
Distributor receives certain distribution fees from the Trust. Subject to the
percentage limitation on the distribution fee set forth in the Prospectus, the
distribution fee may be paid in respect of services rendered and expenses borne
in the past with respect to Investor Shares as to which no distribution fee was
paid on account of such limitation. The Distributor may pay all or a portion of
the distribution fees it receives from the Trust to participating and
introducing brokers.
The Plan may be terminated with respect to Investor Shares of any Fund to
which the Plan relates by vote of a majority of the Trustees of the Trust who
are not interested persons of the Trust (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the operation of the Plan or
the Distributor's Contract (the "Independent Trustees"), or by vote of a
majority of the outstanding voting securities of that class. Any change in the
Plan that would materially increase the cost to the Investors Shares of any Fund
to which the Plan relates requires approval by the Investor shareholders of that
Fund. The
12
<PAGE>
Trustees of the Trust review quarterly a written report of such costs and the
purposes for which such costs have been incurred. Except as described above, the
Plan may be amended by vote of the Trustees of the Trust, including a majority
of the Independent Trustees, cast in person at a meeting called for the purpose.
For so long as the Plan is in effect, selection and nomination of those Trustees
of the Trust who are not interested persons of the Trust shall be committed to
the discretion of such disinterested persons.
The Distributor's Contract may be terminated with respect to any Fund or
Investor shares thereof at any time by not more than 60 days' nor less than 30
days' written notice without payment of any penalty either by the Distributor or
by such Fund or class and will terminate automatically, without the payment of
any penalty, in the event of its assignment.
The Distributor's Contract and the Plan will continue in effect with respect
to each class of shares to which they relate for successive one-year periods,
provided that each such continuance is specifically approved (i) by the vote of
a majority of the Independent Trustees and (ii) by the vote of a majority of the
entire Board of Trustees (or by vote of a majority of the outstanding shares of
a class, in the case of the Distributor's Contract) cast in person at a meeting
called for that purpose.
If the Distributor's Contract or the Plan are terminated (or not renewed)
with respect to one or more classes, they may continue in effect with respect to
any class of any Fund as to which they have not been terminated (or have been
renewed).
The Trustees of the Trust believe that the Plan will provide benefits to the
Trust. The Trustees believe that the Plan will result in greater sales and/or
fewer redemptions of Investor Shares, although it is impossible to know for
certain the level of sales and redemptions of Investor Shares that would occur
in the absence of the Plan or under alternative distribution schemes. The
Trustees believe that the effect on sales and/or redemptions benefit the Trust
by reducing Fund expense ratios and/or by affording greater flexibility to Fund
managers.
CUSTODIAL ARRANGEMENTS. Custodial Trust Company ("CTC"), Princeton, NJ
08540, is the Trust's custodian. As such, CTC holds in safekeeping certificated
securities and cash belonging to the Trust and, in such capacity, is the
registered owner of securities in book-entry form belonging to a Fund. Upon
instruction, CTC receives and delivers cash and securities of a Fund in
connection with Fund transactions and collects all dividends and other
distributions made with respect to Fund portfolio securities.
INDEPENDENT ACCOUNTANTS. The Trust's independent accountants are Price
Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110. Price
Waterhouse LLP conducts an annual audit of the Trust's financial statements,
assists in the preparation of the Trust's federal and state income tax returns
and the Trust's filings with the Securities and Exchange Commission, and
consults with the Trust as to matters of accounting and federal and state income
taxation.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS. The purchase and sale of portfolio securities for the
Funds and for the other investment advisory clients of the Manager are made by
the Manager with a view to achieving each client's investment objective. For
example, a particular security may be purchased or sold on behalf of certain
clients of the Manager even though it could also have been purchased or sold for
other clients at the same time.
13
<PAGE>
Likewise, a particular security may be purchased on behalf of one or more
clients when the Manager is selling the same security on behalf of one or more
other clients. In some instances, therefore, the Manager, acting for one client
may sell indirectly a particular security to another client. It also happens
that two or more clients may simultaneously buy or sell the same security, in
which event purchases or sales are effected prorata on the basis of cash
available or other equitable basis so as to avoid any one account's being
preferred over any other account.
BROKERAGE AND RESEARCH SERVICES. Transactions on stock exchanges and other
agency transactions involve the payment of negotiated brokerage commissions.
Such commissions vary among different brokers. There is generally no stated
commission in the case of securities traded in the over-the-counter markets, but
the price paid for such securities usually includes an undisclosed dealer
commission or mark up. In placing orders for the portfolio transactions of a
Fund, the Manager will seek the best price and execution available, except to
the extent it may be permitted to pay higher brokerage commissions for brokerage
and research services as described below. The determination of what may
constitute best price and execution by a broker-dealer in effecting a securities
transaction involves a number of considerations, including, without limitation,
the overall net economic result to the Fund (involving price paid or received
and any commissions and other costs paid), the efficiency with which the
transaction is effected, the ability to effect the transaction at all where a
large block is involved, availability of the broker to stand ready to execute
possibly difficult transactions in the future and the financial strength and
stability of the broker. Because of such factors, a broker-dealer effecting a
transaction may be paid a commission higher than that charged by another broker-
dealer. Most of the foregoing are judgmental considerations.
Over-the-counter transactions often involve dealers acting for their own
account. It is the Manager's policy to place over-the-counter market orders for
a Fund with primary market makers unless better prices or executions are
available elsewhere.
Although the Manager does not consider the receipt of research services as a
factor in selecting brokers to effect portfolio transactions for a Fund, the
Manager will receive such services from brokers who are expected to handle a
substantial amount of a Fund's portfolio transactions. Research services may
include a wide variety of analyses, reviews and reports on such matters as
economic and political developments, industries, companies, securities and
portfolio strategy. The Manager uses such research in servicing other clients as
well as the Trust.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, as
amended, and subject to such policies as the Trustees of the Trust may
determine, the Manager may pay an unaffiliated broker or dealer that provides
"brokerage and research services" (as defined in the Act) to the Manager an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction.
TOTAL RETURN CALCULATIONS
Each Fund computes its average annual total return separately for its share
classes by determining the average annual compounded rates of return during
specified periods that would equate the initial amount
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invested in a particular share class to the ending redeemable value of such
investment in the class, according to the following formula:
P(1 + T)(n) = ERV
Where:
T = Average annual total return
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of a period at the end of such period
P = A hypothetical initial payment of $1,000
n = Number of years
The calculation of average annual total return assumes that any dividends
and distributions are reinvested immediately, rather than paid to the investor
in cash. The ending redeemable value (variable "ERV" in the formula) is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all nonrecurring charges at the end of the period covered by
the computations.
Unlike bank deposits or other investments that pay a fixed yield or return
for a stated period of time, the return for each Fund will fluctuate from time
to time and does not provide a basis for determining future returns. Average
annual total return is based on many factors, including market conditions, the
composition of a Fund's portfolio and a Fund's operating expenses.
Average annual total return is calculated separately for Investor Shares and
Institutional Shares. Investor Shares and Institutional Shares are subject to
different fees and expenses and may have different performance for the same
period.
PERFORMANCE COMPARISONS
Investors may judge the performance of the Funds by comparing them to the
performance of other mutual fund portfolios with comparable investment
objectives and policies through various mutual fund or market indices such as
those prepared by Dow Jones & Co., Inc. and Standard & Poor's Corporation and to
data prepared by Lipper Analytical Services, Inc., a widely recognized
independent service which monitors the performance of mutual funds. Comparisons
may also be made to indices or data published in MONEY MAGAZINE, FORBES,
BARRON'S, THE WALL STREET JOURNAL, MORNINGSTAR, INC., IBBOTSON ASSOCIATES,
CDA/WIESENBERGER, THE NEW YORK TIMES, BUSINESS WEEK, U.S.A. TODAY, INSTITUTIONAL
INVESTOR and other periodicals. In addition to performance information, general
information about the Funds that appears in a publication such as those
mentioned above may be included in advertisements, sales literature and reports
to shareholders. The Funds may also include in advertisements and reports to
shareholders information discussing the performance of the Manager in comparison
to other investment advisers and to other institutions.
From time to time, the Trust may include the following types of information
in advertisements, supplemental sales literature and reports to shareholders:
(1) discussions of general economic or financial principles (such as the effects
of inflation, the power of compounding and the benefits of dollar cost
averaging); (2) discussions of general economic trends; (3) presentations of
statistical data to supplement such discussions; (4) descriptions of past or
anticipated portfolio holdings for the Funds; (5) descriptions of
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investment strategies for the Funds; (6) descriptions or comparisons of various
investment products, which may or may not include the Funds; (7) comparisons of
investment products (including the Funds) with relevant market or industry
indices or other appropriate benchmarks; (8) discussions of fund rankings or
ratings by recognized rating organizations; and (9) testimonials describing the
experience of persons that have invested in a Fund. The Trust may also include
calculations, such as hypothetical compounding examples, which describe
hypothetical investment results in such communications. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of a Fund.
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES
As more fully described in the Prospectus, the Trust is a diversified
open-end series investment company organized as a Massachusetts business trust.
A copy of the Agreement and Declaration of Trust of the Trust, as amended (the
"Declaration of Trust"), is on file with the Secretary of The Commonwealth of
Massachusetts. The fiscal year of the Trust ends on March 31. The Trust changed
its name to "Barr Rosenberg Series Trust" from "Rosenberg Series Trust" on
August 5, 1996.
Interests in the Trust's portfolios are currently represented by shares of
five series, the Barr Rosenberg Market Neutral Fund, Barr Rosenberg Double Alpha
Market Fund, U.S. Small Capitalization Series, International Small
Capitalization Series and Japan Series, issued pursuant to the Declaration of
Trust. The rights of shareholders and powers of the Trustees of the Trust with
respect to such shares are described in the Prospectus.
As described in the Prospectus, each Fund is further divided into two
classes of shares designated as Institutional Shares and Investor Shares. Each
class of shares of each Fund represents interests in the assets of the Fund and
has identical dividend, liquidation and other rights and the same terms and
conditions except that expenses, if any, related to the distribution and
shareholder servicing of a particular class are borne solely by such class and
each class may, at the discretion of the Trustees of the Trust, also pay a
different share of other expenses, not including advisory or custodial fees or
other expenses related to the management of the Trust's assets, if these
expenses are actually incurred in a different amount by that class, or if the
class receives services of a different kind or to a different degree than the
other classes. All other expenses are allocated to each class on the basis of
the net asset value of that class in relation to the net asset value of the
particular Fund.
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust may, however, be terminated at any time by vote of at least two-thirds
of the outstanding shares of the Trust.
VOTING RIGHTS
Shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held) and will vote (to the extent
provided herein) in the election of Trustees and the termination of the Trust
and on other matters submitted to the vote of shareholders. Shareholders will
vote by individual Fund on all matters except (i) when required by the 1940 Act,
shares shall be voted in the aggregate and not by individual Fund, and (ii) when
the Trustees have determined that the matter affects only the interests of one
or more Funds, then only shareholders of such Funds shall be entitled to vote
thereon. Shareholders of one Fund shall not be entitled to vote on matters
exclusively affecting another Fund, such matters including, without
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limitation, the adoption of or change in any fundamental policies or
restrictions of the other Fund and the approval of the investment advisory
contracts of the other Fund.
Each class of shares of each Fund has identical voting rights except that
each class has exclusive voting rights on any matter submitted to shareholders
that relates solely to that class, and has separate voting rights on any matter
submitted to shareholders in which the interests of one class differ from the
interests of any other class. Each class of shares has exclusive voting rights
with respect to matters pertaining to any distribution or servicing plan
applicable to that class. All classes of shares of a Fund will vote together,
except with respect to any distribution or servicing plan applicable to a class
or when a class vote is required as specified above or otherwise by the 1940
Act.
There will normally be no meetings of shareholders for the purpose of
electing Trustees, except that in accordance with the 1940 Act (i) the Trust
will hold a shareholders' meeting for the election of Trustees at such time as
less than a majority of the Trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy in the Board of Trustees,
less than two-thirds of the Trustees holding office have been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders. In
addition, Trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for the purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by the holders of at least 1% of the outstanding shares
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a Trustee, the Trust has undertaken to provide a list of
shareholders or to disseminate appropriate materials (at the expense of the
requesting shareholders). Except as set forth above, the Trustees shall continue
to hold office and may appoint successor Trustees. Voting rights are not
cumulative.
No amendment may be made to the Declaration of Trust without the affirmative
vote of a majority of the outstanding shares of the Trust except (i) to change
the Trust's name or to cure technical problems in the Declaration of Trust and
(ii) to establish, designate or modify new and existing series, sub-series or
classes of shares of any series of Trust shares or other provisions relating to
Trust shares in response to applicable laws or regulations.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the Trust or
the Trustees. The Declaration of Trust provides for indemnification out of all
the property of the relevant Fund for all loss and expense of any shareholder of
that Fund held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which the
disclaimer is inoperative and the Fund of which he is or was a shareholder would
be unable to meet its obligations.
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The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee 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. The Declaration of Trust also provides for indemnification by the
Trust of the Trustees and the officers of the Trust against liabilities and
expenses reasonably incurred in connection with litigation in which they may be
involved because of their offices with the Trust, except if it is determined in
the manner specified in the Declaration of Trust that such Trustees are liable
to the Trust or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties. In addition, the
Manager has agreed to indemnify each Trustee who is not "an interested person"
of the Trust to the maximum extent permitted by the 1940 Act against any
liabilities arising by reason of such Trustee's status as a Trustee of the
Trust.
The officers and trustees of the Trust, as a group, own less than 1% of any
class of outstanding shares of the Trust.
DETERMINATION OF NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each Fund share is
determined on each day on which the New York Stock Exchange is open for trading.
The Trust expects that the days, other than weekend days, that the New York
Stock Exchange will not be open are Christmas Day, New Year's Day, Martin Luther
King's Day, President's Day, Good Friday and Memorial Day, Independence Day
(observed), Labor Day and Thanksgiving Day.
Portfolio securities listed on a securities exchange for which market
quotations are available are valued at the last quoted sale price on each
business day, or, if there is no such reported sale, at the most recent quoted
bid price. Price information on listed securities is generally taken from the
closing price on the exchange where the security is primarily traded. Unlisted
securities for which market quotations are readily available are valued at the
most recent quoted bid price, except that debt obligations with sixty days or
less remaining until maturity may be valued at their amortized cost.
Exchange-traded options, futures and options on futures are valued at the
settlement price as determined by the appropriate clearing corporation. Other
assets and securities for which no quotations are readily available are valued
at fair value as determined in good faith by the Trustees of the Trust or by
persons acting at their direction.
PURCHASE AND REDEMPTION OF SHARES
The procedures for purchasing shares of each of the Funds and for
determining the offering price of such shares are described in the Prospectus.
The Trust has elected to be governed by Rule 18f-1 under the 1940 Act pursuant
to which the Trust is obligated to redeem shares solely in cash for any
shareholder during any 90-day period up to the lesser of (i) $250,000 or (ii) 1%
of the total net asset value of the Trust at the beginning of such period. The
procedures for redeeming shares of each of the Funds are described in the
Prospectus.
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