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File Nos. 33-21677
811-5547
As filed with the Securities and Exchange Commission on July 29, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 21 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT /X/
COMPANY ACT OF 1940
Amendment No. 24 /X/
BARR ROSENBERG SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, OH 43219
(Address of principal executive offices)
925-254-6464
(Registrant's telephone number, including area code)
Barr M. Rosenberg with a copy to:
Rosenberg Institutional J.B. Kittredge, Jr.
Equity Management Ropes & Gray
Four Orinda Way One International Place
Building E Boston, Massachusetts 02110-2624
Orinda, CA 94563
(Name and address of agent for service)
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It is proposed that this filing will become effective:
X Immediately upon filing pursuant to paragraph (b)
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On _________________ pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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On _______ pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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On _______ pursuant to paragraph (a)(2), of Rule 485
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If appropriate, check the following box:
--- This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
NOTE: This Amendment relates solely to shares of beneficial interest in the
Barr Rosenberg Market Neutral Fund and the Barr Rosenberg Double Alpha Market
Fund. Information contained in the Registration Statement relating to the
other series of the Registrant is neither amended nor superseded hereby.
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BARR ROSENBERG SERIES TRUST
CROSS REFERENCE SHEET FOR
THE BARR ROSENBERG MARKET NEUTRAL FUND AND
THE BARR ROSENBERG DOUBLE ALPHA MARKET FUND ONLY
N-1A Item No. Location
- ------------ --------
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Fund Expenses
Item 3. Condensed Financial Financial Highlights; Other
Information Information
Item 4. General Description of Description of the Trust
Registrant and Ownership of Shares;
Investment Objectives and
Policies; Cover Page;
and General Description
of Risks and Fund Investments
Item 5. Management of the Fund Management of the Trust;
Back Cover
Item 5A. Management's Discussion Not Applicable
of Fund Performance
Item 6. Capital Stock and Other Description of the Trust
Securities and Ownership of Shares;
Distributions; Multiple
Classes; Shareholder Inquiries;
Taxes; Back Cover and General
Description of Risks and Fund
Investments
Item 7. Purchase of Securities Being Purchase of Shares; Exchange of
Offered Fund Shares; Management of the
Trust; Multiple Classes;
Determination of Net Asset
Value; and Back Cover
Item 8. Redemption or Repurchase Redemption of Shares; Exchange
of Fund Shares; and
Determination of Net Asset
Value
Item 9. Legal Proceedings None
PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and Description of the Trust
History and Ownership of Shares
Item 13. Investment Objectives Investment Objectives and
and Policies Policies; Miscellaneous
Investment Practices; and
Investment Restrictions
Item 14. Management of the Fund Management of the Trust
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Item 15. Control Persons and Principal Description of the Trust
Holders of Securities and Ownership of Shares
Item 16. Investment Advisory and Other Investment Advisory and
Services Other Services; Management of
the Trust and Description of
the Trust and Ownership of
Shares
Item 17. Brokerage Allocation and Other Portfolio Transactions
Practices
Item 18. Capital Stock and Other Description of the Trust
Securities and Ownership of Shares
Item 19. Purchase, Redemption Determination of Net Asset
and Pricing of Securities Value; See in Part A, Purchase
Being Offered of Shares; Exchange of Fund
Shares; Redemption of Shares;
Determination of Net Asset Value
Item 20. Tax Status Income Dividends,
Distributions and Tax
Status
Item 21. Underwriters Investment Advisory and
Other Services
Item 22. Calculation of Performance Data Total Return Calculations
Item 23. Financial Statements Financial Statements
Part C
Information to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
<PAGE>
BARR ROSENBERG SERIES TRUST
BARR ROSENBERG MARKET NEUTRAL FUND
BARR ROSENBERG DOUBLE ALPHA MARKET FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-555-5737 (INSTITUTIONAL SHARES)
1-800-447-3332 (INVESTOR SHARES)
JULY 29, 1998
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 adviser 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 the return 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 Shares or
Investor Shares depends on the amount invested in a particular Fund. Investor
Shares bear a Shareholder Service Fee and Distribution Fee. See "Multiple
Classes."
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 July 29, 1998 (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 1-800-555-5737 (for Institutional Share
customers) and 1-800-447-3332 (for Investor 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, material incorporated by
reference and other information regarding registrants that file electronically
with the Commission.
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.
<PAGE>
TABLE OF CONTENTS
PAGE
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FUND EXPENSES......................................................... 3
FINANCIAL HIGHLIGHTS.................................................. 5
INVESTMENT OBJECTIVES AND POLICIES.................................... 6
GENERAL DESCRIPTION OF RISKS AND FUND INVESTMENTS..................... 8
PERFORMANCE INFORMATION............................................... 12
MANAGEMENT OF THE TRUST............................................... 14
MULTIPLE CLASSES...................................................... 21
PURCHASE OF SHARES.................................................... 22
IRA ACCOUNTS.......................................................... 24
REDEMPTION OF SHARES.................................................. 24
EXCHANGE OF FUND SHARES............................................... 26
DETERMINATION OF NET ASSET VALUE...................................... 27
DISTRIBUTIONS......................................................... 28
TAXES................................................................. 28
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES...................... 29
OTHER INFORMATION..................................................... 30
SHAREHOLDER INQUIRIES................................................. 30
2
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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)*(A) BURSEMENT)*(A)
---------- ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES
Market Neutral Fund............................. 1.70% None None 0.30%** 2.00%
Double Alpha Market Fund........................ 0.00% None None 2.35% 2.35%
INVESTOR SHARES
Market Neutral Fund............................. 1.70% 0.25% 0.25% 0.30%** 2.50%
Double Alpha Market Fund........................ 0.00% 0.25% 0.25% 2.35% 2.85%
</TABLE>
The Manager has undertaken to waive its management fee and bear certain
expenses until further notice in order to limit the total annual operating
expenses (exclusive of nonrecurring account fees, extraordinary expenses and
dividends and interest paid on securities sold short) of each class to the
percentage of a Fund's average daily net assets 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 2.20% for Institutional Shares and 2.70% 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."
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(a) Other Expenses and Total Fund Operating Expenses do not include dividend
expenses incurred in connection with short sales (estimated at 0.88% for the
Barr Rosenberg Market Neutral Fund's first fiscal year), which are included
in and reduce the investment return of the Funds.
* 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.
3
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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(B):
-----------------------
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>
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(b) Excluding dividend expenses incurred in connection with short sales.
THE PURPOSE OF THIS TABLE IS TO ASSIST YOU IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES OF THE FUNDS THAT YOU WILL BEAR DIRECTLY OR INDIRECTLY. 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.
4
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FINANCIAL HIGHLIGHTS
The following tables present per share financial information for the period
listed for the Barr Rosenberg Market Neutral Fund. The Financial Highlights have
been audited by PricewaterhouseCoopers LLP, independent accountants, whose
report on the financial statements of the Barr Rosenberg Market Neutral Fund
appears in such Fund's Annual Report for the fiscal year ended March 31, 1998
(the "Annual Report"). These statements should be read in conjunction with the
"Report of Independent Accountants," the other audited financial statements and
related notes which are contained in the Annual Report and are incorporated by
reference into this Prospectus and the Statement of Additional Information.
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTOR
SHARES SHARES
------------- -------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
MARCH 31, MARCH 31,
1998(a) 1998(a)
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<S> <C> <C>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Net asset value, beginning of period.................................................. $ 10.00 $ 10.00
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Income from investment operations:
Net investment income/(loss)(b)..................................................... 0.10** 0.08**
Net realized and unrealized gain/(loss) on investments.............................. (0.13) (0.12)
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Total from investment operations.................................................... (0.03) (0.04)
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Distributions to shareholders from:
Net investment income............................................................... -- --
Net realized gain on investments.................................................... -- --
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Total distributions to shareholders................................................. -- --
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Net asset value, end of period........................................................ $ 9.97 $ 9.96
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Total return(c)....................................................................... (0.30%) (0.40%)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (000)....................................................... $ 168,080 $ 35,223
Net investment income/(loss) before waivers/reimbursements............................ 2.72%* 2.28%*
Net investment income/(loss) net of waivers/reimbursements............................ 3.31%* 2.82%*
Expenses before waivers/reimbursements and dividend expenses.......................... 3.33%* 3.87%*
Expenses (including dividend expense) net of waivers/reimbursements................... 2.75%* 3.34%*
Expenses (excluding dividend expense) net of waivers/reimbursements................... 2.00%* 2.50%*
Portfolio Turnover Rate............................................................... 232.93% 232.93%
Average commission rate............................................................... $ 0.0294 $ 0.0294
</TABLE>
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* Annualized.
** Calculated based on the average shares outstanding during the period.
(a) The Institutional Shares commenced operations on December 16, 1997 and
Investor Shares commenced operations on December 18, 1997.
(b) Net of fees and expenses waived/reimbursed by the Manager for the
Institutional Shares and Investor Shares in the amount of $.02 and $.02,
respectively.
(c) Total return would have been lower had certain fees and expenses not been
waived/reimbursed by the Manager.
5
<PAGE>
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, the Fund attempts
to cancel out the effect of general stock market movements on the Fund's
performance. It is expected that the Fund can achieve a positive return if the
Fund's long portfolio outperforms the Fund's short portfolio. Conversely, it is
expected that the Fund will incur losses if the Fund's long portfolio
underperforms the Fund's short portfolio. 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 characteristics 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 and certain other risk
factors. It is currently expected that the long and short positions of the Fund
will be invested primarily in small capitalization stocks and smaller
mid-capitalization stocks. For purposes of the preceding sentence, the 200
stocks principally traded stocks in the markets of the United States with the
largest market capitalizations are considered large capitalization stocks, the
next 800 largest stocks are considered mid-capitalization stocks and all other
stocks are considered small capitalization stocks. Stocks of companies with
relatively small market capitalizations tend to be less liquid and more volatile
than stocks of companies with relatively large market capitalizations.
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 various risks, including the risk of poor stock selection by the
Manager. There can be no assurance that the Manager will successfully take long
positions in stocks and short positions in other stocks, such that the portfolio
of long positions outperforms the portfolio of short positions. In addition, the
Manager may fail to construct a portfolio that has minimal exposure to general
equity market risk or that has near neutral exposure to specific industries,
specific capitalization ranges and certain other risk factors. Further, because
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. Moreover, an investment in the Fund is different from an investment
in 3-month U.S. Treasury Bills because Treasury Bills are backed by the full
faith and credit of the U.S. Government, Treasury Bills have a fixed rate of
return, investors in Treasury Bills do not bear the risk of losing their
investment and an investment in the Fund is more volatile than an investment in
Treasury Bills.
To meet margin requirements related to short sales, redemption requests or
for investment purposes, 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
6
<PAGE>
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 the return 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 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 received an exemptive order from the Securities
and Exchange Commission allowing it to invest in securities other than those
described in Section 12(d)(1)(G) of the Investment Company Act of 1940, as
amended (the "1940 Act") while investing 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 Fund 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 related to short sales, redemption requests or
for investment purposes, 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.
7
<PAGE>
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 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, it is
possible that the Barr Rosenberg Market Neutral Fund's long positions will
decline in value at the same time that the value of securities sold short
increases, thereby increasing the potential for loss of the Barr Rosenberg
Market Neutral Fund and Barr Rosenberg Double Alpha Market Fund. Moreover, the
market neutral strategy has the effect of accelerating the recognition of gain
for tax purposes and increasing the short-term gain component of gains in the
Funds. Short-term gains are ordinarily taxed to shareholders at ordinary income
tax rates, thereby increasing the amount of taxes payable by shareholders.
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 may 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.
During the time a Fund is short a security it is subject to the risk that the
lender will terminate the loan at a time when the Fund is unable to borrow the
same security from another lender, in which event the Fund may be "bought in" at
the price required to purchase the security to close out the short position.
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 the security sold
short is replaced, the Fund is required to repay the lender any dividends or
interest that accrue during the period of the loan. To borrow the security, the
Fund also may be required to pay a premium. The Fund also will incur transaction
costs in effecting short sales. The amount of any gain resulting from a short
sale will be decreased, and the amount of any loss increased, by the amount of
premiums, dividends, interest or expenses the Fund may be required to pay in
8
<PAGE>
connection with a short sale. 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. A Fund's use of short sales may result in the Fund
realizing more short-term capital gains (subject to tax at ordinary income
rates) than it would if it did not engage in short sales.
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 takes a long position in an Index Future 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 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. In addition, the price of Index Futures
may not correlate perfectly with movement in the underlying index due to certain
market 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.
The ability to establish and close out positions in options on future
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
9
<PAGE>
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.
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. The Fund's use of equity swap contracts
may result in the Fund realizing more income subject to tax at ordinary income
tax rates than it would if it did not engage in equity swap contracts.
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.
Pursing contractual remedies will also entail additional expense for the Fund.
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.
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
10
<PAGE>
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 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.
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 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
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<PAGE>
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 or dealer markup 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.
PERFORMANCE INFORMATION
BARR ROSENBERG MARKET NEUTRAL FUND
The cumulative total return of the Barr Rosenberg Market Neutral Fund for
the period from inception (December 16, 1997 in the case of Institutional Shares
and December 18, 1997 in the case of Investor Shares) to March 31, 1998 is as
follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION TO
MARCH 31, 1998
--------------
<S> <C>
Institutional Shares............................................................... -0.30%
Investor Shares.................................................................... -0.40%
</TABLE>
THE NUMBERS REPORTED IN THE TABLE REPRESENT PAST PERFORMANCE AND ARE NOT
PREDICTIVE OF FUTURE PERFORMANCE.
PRIVATE ACCOUNTS
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 "Private Accounts"). The Private Accounts, together with the
Barr Rosenberg Market Neutral Fund, are collectively referred to herein as the
"Market Neutral Accounts." The information below does not represent the
historical performance of the Barr Rosenberg Market Neutral Fund and should not
be considered a prediction of the future performance of such Fund. The
performance of such Fund may be higher or lower than the performance of the
Private 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 as the Barr Rosenberg Market Neutral Fund
and has been adjusted to give
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<PAGE>
effect to the estimated annualized expenses (without giving effect to any
expense waivers or reimbursements) of Institutional Shares and Investors Shares
of the Barr Rosenberg Market Neutral Fund during its first fiscal year. The
composite performance information also includes the performance of the Barr
Rosenberg Market Neutral Fund. The Private Accounts were not registered under
the 1940 Act and therefore were not subject to certain investment restrictions
imposed by the 1940 Act. If the Private Accounts had been registered under the
1940 Act, their performance might have been adversely affected. In addition, the
Private Accounts were not subject to Subchapter M of the Internal Revenue Code.
If the Private Accounts had been subject to Subchapter M, their performance
might have been adversely affected. The following table shows the average annual
total return for the one-year, three-year, five-year and since-inception periods
ending March 31, 1998 for the Market Neutral Accounts adjusted to give effect to
the estimated annual expenses of the Institutional Shares and Investor Shares of
the Barr Rosenberg Market Neutral Fund during its first fiscal year. 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
MARCH 31, 1998 MARCH 31, 1998 MARCH 31, 1998 TO MARCH 31, 1998
------------------ ------------------ ----------------- ----------------------
<S> <C> <C> <C> <C>
Market Neutral Accounts.................... 8.87% 16.53% 11.96% 7.87%
(adjusted for the fees and expenses
of Institutional Shares)
Market Neutral Accounts.................... 8.33% 15.95% 11.40% 7.33%
(adjusted for the fees and expenses of
Investor Shares)
3-month U.S. Treasury Bills................ 5.23% 5.28% 4.75% 5.35%
</TABLE>
An investment in the Barr Rosenberg Market Neutral Fund is different from an
investment in 3-month U.S. Treasury Bills because Treasury Bills are backed by
the full faith and credit of the U.S. Government, Treasury Bills have a fixed
rate of return, investors in Treasury Bills do not bear the risk of losing their
investment and an investment in the Fund is more volatile than an investment in
Treasury Bills. 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 March 31,
1998 for the Market Neutral Accounts would have been 9.09%, 16.76%, 12.19% and
8.09%, respectively. Giving effect to the expense limitation of 2.50% on the
expenses of the Investor Shares of the Barr Rosenberg Market Neutral Fund as set
forth in the "Fund Expenses" section, the average annual total returns for the
one-year, three-year, five-year and since-inception periods ending March 31,
1998 for the Market Neutral Accounts would have been 8.54%, 16.18%, 11.63% and
7.55%, 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
13
<PAGE>
capitalization companies. Since inception of the market neutral strategy,
however, the Manager has maintained long and short positions of approximately
the same dollar amount within a given capitalization sector. The Funds reserve
the freedom to 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 has substantially similar investment objectives, policies and strategies as
the Market Neutral Accounts.
MANAGEMENT OF THE TRUST
Each Fund is advised and managed by Rosenberg Institutional Equity
Management (the "Manager"), which provides investment advisory services to a
number of institutional investors as well as the other portfolios 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 until
his departure in 1986. Dr. Rosenberg, the founder of the Berkeley Program in
Finance, has experience 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
14
<PAGE>
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.
Marlis S. Fritz and Kenneth Reid each holds a greater than 5% interest in
the Manager. 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.
There are 43 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 nineteen individuals with other graduate degrees.
Six members of the staff have been awarded C.F.A. certificates.
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 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, Australia and, in
1982, the Chevron Fellow at Simon Fraser University in British Columbia, Canada.
In 1984, Professor Hakansson was a Special Visiting Professor
15
<PAGE>
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 articles in a number
of 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.
INDIVIDUALS RESPONSIBLE FOR THE FUNDS
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 an M.B.A. from The Wharton School,
University of Pennsylvania in 1983.
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 flow. The Manager identifies and purchases those stocks that
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.
16
<PAGE>
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 that analyze the more than 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 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 assimilates, checks
and structures 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 Appraisal Model
incorporates the various accounting standards that 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 declared only for the
total company, such as taxes, capital structure, and pension funding. The result
is a single valuation for each of the 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
17
<PAGE>
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.
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 attempts to
construct a Fund portfolio that will outperform the relevant benchmark, while
maintaining portfolio risk characteristics similar to those of the Fund's
benchmark. The optimizer simultaneously considers both the results of the
Manager's stock selection models and risk in determining the benefit to a
portfolio of a particular 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.
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.
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.
18
<PAGE>
Accommodative trading (also referred to herein 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 that the brokers have presented and the Manager's own
recommended trades are signaled to the Manager's traders. Because 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 disturbances on a Fund's portfolio.
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 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 proxy statements and proxies to existing shareholders, expenses of
printing and mailing prospectuses and insurance premiums.
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 (exclusive of nonrecurring account fees, extraordinary expenses and
dividends and interest paid on securities sold short) of each class of shares to
the percentage of a 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
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<PAGE>
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 EXPENSE LIMITATION
MANAGEMENT FEE (AS (AS A % OF AVERAGE
A % OF AVERAGE DAILY DAILY NET
NET ASSETS) ASSETS)*(A)
-------------------------------- -------------------
<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.
(a) Excluding dividend expenses incurred in connection with short sales.
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") serves as the Trust's
transfer agent and provides 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 business 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 The BISYS Group, Inc. The Distributor's principal
office is located at 90 Park Avenue, New York, New York 10016. Institutional
Shares are sold directly by the Trust.
Solely for the purpose of compensating the Distributor for services and
expenses primarily intended to result in the sale of Investor Shares, 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 "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,
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<PAGE>
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 holders of
Investor Shares 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.
YEAR 2000 ISSUES
Many services provided to the Funds depend on the smooth functioning of
computer systems. Many systems in use today cannot distinguish between the year
1900 and the year 2000. Should any of the service systems fail to process
information properly, that could have an adverse impact on the Funds' operations
and services provided to shareholders. The Manager, Distributor, Servicing
Agent, Transfer Agent, Custodian, Administrator and certain other service
providers to the Funds have reported that each is working toward mitigating the
risks associated with the so-called "year 2000 problem." However, there can be
no assurance that the problem will be corrected in all respects and that the
Funds' operations and services provided to shareholders will not be adversely
affected.
MULTIPLE CLASSES
As indicated previously, the Funds offer two classes of shares to investors,
with eligibility 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 SHAREHOLDER DISTRIBUTION
NAME OF CLASS INVESTMENT* INVESTMENTS* SERVICE FEE FEE
- ---------------------------------------------------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Institutional Shares................................ $ 1 million $ 10,000 None None
Investor Shares..................................... $ 2,500 $ 500 .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 institutions such as endowments and
foundations, plan sponsors of 401(a), 401(k), 457 and 403(b) plans and
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
21
<PAGE>
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 institutions, certain individual
retirement accounts and individuals. In order to be eligible to purchase
Investor Shares, an 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 Distribution Plan permits payments of up to 0.50% of the Funds'
average daily net assets attributable to Investor Shares. See "Management of the
Trust -- Distributor."
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 "Management of the Trust -- Distributor."
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
(collectively, "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 first contact the Trust at 1-800-447-3332 for
complete wiring instructions. 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 are all open for business. A
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<PAGE>
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.
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.
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 (i) the Manager, in its sole discretion, believes the
securities are appropriate investments for the Fund; (ii) 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 (iii) the securities may be acquired under the Fund's
investment restrictions.
23
<PAGE>
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 cash purchase order of Fund 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 a purchase in-kind
of Institutional Shares, the investor's securities must be placed on deposit at
DTC prior to 10:00 a.m., New York time. 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 or a Fund.
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.
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:
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<PAGE>
(a) a letter of instruction 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 the Transfer Agent from
fraud, signature guarantees may be 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 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 instructions 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 Trust 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
25
<PAGE>
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 Funds 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 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.
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.
26
<PAGE>
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.
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 for long securities and at the most recent quoted ask price for
securities sold short. 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 for long securities and at the most recent
quoted ask price for securities sold short, except that debt obligations with
sixty days or less remaining until maturity may be valued at their amortized
27
<PAGE>
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 (i) are returned
and marked as "undeliverable" or (ii) 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 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 of long-term capital
gains (generally taxed at 20%) will be taxable to shareholders as such,
regardless of how long a shareholder has held the shares. Some 1998
distributions of long-term capital gains recognized in 1997 may be taxed at 28%.
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. Each Fund will provide
federal tax information annually, including information about dividends and
distributions paid during the preceding year.
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<PAGE>
To the extent such investments are permissible for a Fund, the Fund's short
sales and transactions in options, futures contracts, hedging transactions,
forward contracts, equity swap 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. A Fund's use of such transactions
may result in the Fund realizing more short-term capital gains and ordinary
income subject to tax at ordinary income tax rates than it would if it did not
engage in such transactions.
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 (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, 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. Although 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
29
<PAGE>
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 1940 Act, all shares
shall be voted together and (ii) when the Trustees have determined that the
matter does not affect all series, then only shareholders of the series 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 1940 Act. 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
portfolios. 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.
As of June 30, 1998, Gary E. Whipple may be deemed to control the Investor
Shares of the Barr Rosenberg Double Alpha Market Fund because he beneficially
owned more than 25% of such shares of such Fund.
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 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.
30
<PAGE>
SHAREHOLDER SERVICES
1-800-555-5737 (INSTITUTIONAL SHARE CUSTOMERS)
1-800-447-3332 (INVESTOR 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, OH 43219
MANAGER
Rosenberg Institutional Equity Management
Four Orinda Way, Building E
Orinda, CA 94563
ADMINISTRATOR, TRANSFER AND DIVIDEND PAYING AGENT
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
DISTRIBUTOR
Barr Rosenberg Funds Distributor, Inc.
90 Park Avenue
New York, NY 10016
CUSTODIAN OF ASSETS
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
555 California Street
San Francisco, CA 94104
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
B a r r
R o s e n b e r g
S e r i e s
T r u s t
- - Barr Rosenberg Market Neutral Fund
- - Barr Rosenberg Double Alpha Market Fund
Prospectus
July 29, 1998
<PAGE>
BARR ROSENBERG SERIES TRUST
BARR ROSENBERG MARKET NEUTRAL FUND
BARR ROSENBERG DOUBLE ALPHA MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
JULY 29, 1998
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 July 29, 1998 (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.
-1-
<PAGE>
TABLE OF CONTENTS
Page
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . 3
MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INCOME DIVIDENDS, DISTRIBUTIONS AND TAX STATUS . . . . . . . . . . . . . . . . 6
MANAGEMENT OF THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . . 9
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
TOTAL RETURN CALCULATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .13
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES . . . . . . . . . . . . . . .14
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . .18
PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . .18
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
</TABLE>
-2-
<PAGE>
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 may 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. 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.
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 of the S&P
500 Index 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 specified amount of cash or securities. This is known by participants
in the market as "initial margin." The types 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
-3-
<PAGE>
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.
Position in Index Futures may be closed out only if there is a secondary
market for such futures. There can be no assurance that a liquid secondary
market will exist for any particular contract or at any particular time. In
such event, it may not be possible to close a futures position and, in the event
of adverse price movements, the Barr Rosenberg Double Alpha Market Fund would
continue to be required to make daily cash payments of variation margin.
Generally, a futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract purchase is
effected by entering into a futures contract sale for the same aggregate amount
of the specified financial instrument with the same delivery date. If the
offsetting sale price exceeds the purchase price, the Barr Rosenberg Double
Alpha Market Fund realizes a gain, and if the purchase price exceeds the
offsetting price, the Fund realizes a loss.
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.
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. The portfolio turnover rate for the Barr Rosenberg Market
Neutral Fund for the period ended March 31, 1998 was 232.93%. 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,
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<PAGE>
such gains are ordinarily taxed to shareholders at ordinary income tax rates.
See "Income Dividends, Distributions and Tax Status" and "Portfolio
Transactions."
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 or for payments of variation margin
(in the case of the Barr Rosenberg Double Alpha Market Fund only). 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) 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.
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<PAGE>
(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 Restriction 9 above, the Funds
have no current intention of 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 a 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.
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 headings "Distributions" and "Taxes."
The Funds intend to qualify each year as a regulated investment company under
the Internal Revenue Code of 1986, as amended. 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
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<PAGE>
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.
Distributions of long-term gains (generally taxed at a 20% rate) will be taxable
to shareholders as such, regardless of how long a shareholder has held the
shares in the Fund. Some 1998 distributions of long-term capital gains
recognized in 1997 may be subject to tax at 28%. 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.
Dividends and distributions on a Fund's shares are generally subject
to federal income tax as described herein to the extent they do not exceed
the Fund's realized income and gains, even though such dividends and
distributions may economically represent a return of a particular
shareholder's investment. Such distributions are likely to occur in respect
of shares purchased at a time when a Fund's net asset value reflects gains
that are either unrealized, or realized but not distributed.
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.
The Internal Revenue Service recently revised its regulations affecting the
application to foreign investors of the back-up withholding and withholding tax
rules described above. The new regulations will generally be effective for
payments made after December 31, 1999 (although transition rules will apply).
In some circumstances, the new rules will increase the certification and filing
requirements imposed on foreign investors in order to qualify for exemption from
the 31% back-up withholding tax and for reduced withholding tax rates under
income tax treaties. Foreign investors in the Fund should consult their tax
advisors with respect to the potential application of these new regulations.
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, convert
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<PAGE>
long-term capital gains into short-term capital gains 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 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.
MANAGEMENT OF THE TRUST
<TABLE>
<CAPTION>
The Trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
<S><C>
Kenneth Reid* (48) General Partner and Director of
President, Trustee Research, Rosenberg Institutional
Equity Management, June 1986 to
present.
Marlis S. Fritz* (48) General Partner and Director of
Vice President, Trustee Marketing, Rosenberg Institutional
Equity Management, April 1985 to
present.
Nils H. Hakansson (61) Sylvan C. Coleman Professor of Finance
Trustee and Accounting, Haas School of
Business, University of California,
Berkeley, June 1969 to present.
Director, Supershare Services
Corporation (investment management),
Los Angeles, California, November 1989
to 1995.
Barr M. Rosenberg* (55) Managing General Partner and Chief
Trustee Investment Officer, Rosenberg
Institutional Equity Management,
January 1985 to present.
William F. Sharpe (64) STANCO 25 Professor of Finance,
Trustee Stanford University. Chairman,
Financial Engines Incorporated, Los
Altos, California (electronic
investment advice), March 1996 to
present.
Po-Len Hew (32) Accounting Manager, Rosenberg
Treasurer Institutional Equity Management,
October 1989 to present.
Carolyn Demler (54) Administrative Coordinator, Rosenberg
Clerk Institutional Equity Management,
December 1988 to present.
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<PAGE>
Edward H. Lyman (54) Executive Vice President, Barr
Vice President Rosenberg Investment Management, Inc.,
and General Counsel to the Rosenberg
Group of companies, 1990 to present.
Richard L. Saalfeld (55) President and Chief Executive Officer
Vice President of mutual fund unit of Rosenberg
Institutional Equity Management from
June 1996 to 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 (51) Vice President and Partner, Rosenberg
Vice President Alpha L.P., 1984 to present.
F. William Jump, Jr. (42) Portfolio engineer, Rosenberg
Vice President Institutional Equity Management,
August 1990 to present.
* Trustees who are "interested persons" (as defined in the 1940 Act) of the
Trust or the Manager.
</TABLE>
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 $37,950 plus $4,125 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, 1998:
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement from
Aggregate Benefits Estimated Registrant
Compensation Accrued as Annual and Fund
Name of Person from Part of Fund Benefits Upon Complex Paid
Position Registrant Expenses Retirement to Directors
-------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Nils H. $42,487.50 $ 0 $ 0 $42,487.50
Hakansson
Trustee
William F. $42,487.50 $ 0 $ 0 $42,487.50
Sharpe
Trustee
</TABLE>
Messrs. Rosenberg, Reid, Arbit, Lyman, Saalfeld and Jump 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.
INVESTMENT ADVISORY AND OTHER SERVICES
MANAGEMENT CONTRACTS. 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
-9-
<PAGE>
space and equipment, provides certain bookkeeping and 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.
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 (exclusive
of nonrecurring account fees, extraordinary expenses and dividends and interest
paid on securities sold short) 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.
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.
During the period from December 16, 1997 (inception date) to March 31,
1998, the Barr Rosenberg Market Neutral Fund paid the following amounts as
management fees to the Manager pursuant to its Management Contract:
<TABLE>
<CAPTION>
Period Gross Reduction Net
- ------ ----- --------- ---
<S> <C> <C> <C>
12/16/97 - 3/31/98 $700,708 $193,487 $507,221
</TABLE>
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 adviser, 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
-10-
<PAGE>
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. For the
period from December 16, 1997 (inception date) to March 31, 1998, the
Administrator was entitled to receive from the Barr Rosenberg Market Neutral
Fund $55,610 in administration fees. Of this amount the Administrator waived
$19,476.
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
$50,000 for each Fund. For the period from December 16, 1997 (inception date)
to March 31, 1998 the Barr Rosenberg Market Neutral Fund paid $16,401 in fund
accounting fees. The Trust's principal underwriter is an affiliate of the Fund
Accountant.
DISTRIBUTOR AND DISTRIBUTION PLAN. As stated in 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.
For the period December 16, 1997 (inception date) to March 31, 1998,
the Barr Rosenberg Market Neutral Fund incurred distribution expenses of
$12,626. Of this amount, the Distributor retained $4,440. The Distributor
paid $8,186 to broker-dealers and other selling and/or servicing institutions.
The Plan may be terminated with respect to Investor Shares by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust 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 Investor Shares
requires approval by holders of Investor Shares. The 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 Plan and the Distributor's Contract 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.
-11-
<PAGE>
If the Plan or the Distributor's Contract 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 the
Trust.
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
PricewaterhouseCoopers LLP, 555 California Street, San Francisco, California
94104. Pricewaterhouse Coopers 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.
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 PRO RATA 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.
-12-
<PAGE>
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.
The Barr Rosenberg Market Neutral Fund paid brokerage commissions of
$633,794.69 for the period from December 16, 1997 (inception date) to March 31,
1998.
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 invested in a particular
share class to the ending redeemable value of such investment in such class,
according to the following formula:
n
P(1 + T) = ERV
Where:
T = Average annual total return
ERV = Ending redeemable value of a hypothetical $1,000 investment
made at the beginning of a period at the end of such period
P = A hypothetical initial investment of $1,000
n = Number of years
Each Fund computes its cumulative total return separately for its share
classes by determining the cumulative rates of return during specified periods
that would equate the initial amount invested in a particular share class to the
ending redeemable value of such investment in such class, according to the
following formula:
T = ERV-1,000
---------
1,000
Where:
T = Cumulative rate of return
ERV = Ending redeemable value of a hypothetical $1,000 investment
made at the beginning of a period at the end of such period.
The calculations of average annual total return and cumulative total return
assume that any dividends and distributions are reinvested immediately, rather
than paid to the investor in cash. The ending redeemable value
-13-
<PAGE>
(variable "ERV" in each 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 and cumulative return are based on many factors, including
market conditions, the composition of a Fund's portfolio and a Fund's operating
expenses.
Average annual total return and cumulative return are 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.
The cumulative return of the Barr Rosenberg Market Neutral Fund for the
period from December 16, 1997 (inception date) to March 31, 1998 is as follows:
<TABLE>
<CAPTION>
Inception Date
Inception Date to 3/31/98
-------------- ----------
<S> <C> <C>
Investor Shares 12/18/97 -0.40%
Institutional Shares 12/16/97 -0.30%
</TABLE>
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 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 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
-14-
<PAGE>
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 each series 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 series on all matters except (i) when required by the
1940 Act, shares shall be voted in the aggregate and not by individual series,
and (ii) when the Trustees have determined that the matter affects only the
interests of one or more series, then only shareholders of such series shall be
entitled to vote thereon. Shareholders of one series shall not be entitled to
vote on matters exclusively affecting another series, such matters including,
without limitation, the adoption of or change in any fundamental policies or
restrictions of the other series and the approval of the investment advisory
contracts of the other series.
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.
-15-
<PAGE>
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 series for
all loss and expense of any shareholder of that series 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
series of which he is or was a shareholder would be unable to meet its
obligations.
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.
OWNERS OF 5% OR MORE OF A FUND'S SHARES. The following chart sets forth
the names, addresses and percentage ownership of those shareholders owning
beneficially and of record (except as otherwise indicated) 5% or more of the
outstanding shares of the Barr Rosenberg Market Neutral Fund as of June 30,
1998:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OWNERSHIP
OF OWNER OF THE FUND
-------- -----------
<S> <C>
INSTITUTIONAL SHARES:
Charles Schwab & Co Inc. 78.74%*
For the Exclusive Use of Our Customers
Reinvest Account
Attn Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
INVESTOR SHARES:
Charles Schwab & Co Inc. 48.17%*
For the Exclusive Use of Our Customers
Reinvest Account
Attn Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
-16-
<PAGE>
Resources Trust Company 9.08%
P.O. Box 3485
Englewood, CO 80155
</TABLE>
* Record ownership only
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially and of record (except as
otherwise indicated) 5% or more of the outstanding shares of the Barr
Rosenberg Double Alpha Market Fund as of June 30, 1998:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OWNERSHIP
OF OWNER OF THE FUND
-------- -----------
<S> <C>
INSTITUTIONAL SHARES:
Charles Schwab & Co Inc. 82.07%*
For the Exclusive Use of Our Customers
Reinvest Account
Attn Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
INVESTOR SHARES:
Gary E. Whipple 36.41%
5303 East 115th Place
Tulsa, OK 74137
Arthur Wiener 16.53%
102 Coleridge Street
Brooklyn, NY 11235
Daniel C. Lovett 6.71%
4241 South 35th Street B-1
Arlington, VA 22206
Donaldson Lufkin Jenrette Securities Corporation Inc. 12.71%*
P.O. Box 2052
Jersey City, NJ 07303-9998
Fifth Third Bank, Custodian 5.32%
Jimmy T. Hua, Conversion Roth IRA
810 Polhemus Road, Apt. 61
San Mateo, CA 94402
</TABLE>
* Record ownership only
The officers and Trustees of the Trust, as a group, own less than 1% of any
class of outstanding shares of the Trust.
-17-
<PAGE>
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, 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 for long securities and at the most recent quoted ask price for
securities sold short. 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 for long securities and at the
most recent quoted ask price for securities sold short, 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 comparing 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.
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.
FINANCIAL STATEMENTS
The Report of Independent Accountants, financial highlights and financial
statements of the Barr Rosenberg Market Neutral Fund included in its Annual
Report for the period ended March 31, 1998 (the "Annual Report") are
incorporated herein by reference to such Annual Report. Copies of such Annual
Report are available without charge upon request by writing to Barr Rosenberg
Series Trust, 3435 Stelzer Road, Columbus, Ohio 43219 or telephoning
1-800-447-3332.
The financial statements incorporated by reference into this Statement of
Additional Information have been audited by Pricewaterhouse Coopers LLP,
independent accountants, and have been so included and incorporated by reference
in reliance upon the report of said firm, which report is given upon their
authority as experts in auditing and accounting.
-18-
<PAGE>
PART C
OTHER INFORMATION --
THE BARR ROSENBERG MARKET NEUTRAL FUND AND
THE BARR ROSENBERG DOUBLE ALPHA MARKET FUND ONLY
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
See the section entitled "Financial Highlights" in the Prospectus.
See the section entitled "Financial Statements" in the Statement of
Additional Information.
(b) Exhibits:
1. (a) Second Amended and Restated Agreement and Declaration
of Trust of the Registrant -- incorporated by
reference to Post-Effective Amendment No. 19 to the
Registration Statement filed on July 29, 1998;
1. (b) Amendment No. 1 to Second Amended and Restated
Agreement and Declaration of Trust of the Registrant --
incorporated by reference to Post-Effective Amendment
No. 19 to the Registration Statement filed on
July 29, 1998;
2. By-Laws of the Registrant -- incorporated by reference to
Post-Effective Amendment No. 17 to the Registration
Statement filed on December 9, 1997;
3. None;
4. Not applicable;
5. (a) Form of Management Contract between the Registrant on
behalf of its Barr Rosenberg Market Neutral Fund and
Rosenberg Institutional Equity Management --
incorporated by reference to Post-Effective Amendment
No. 16 to the Registration Statement filed on
September 16, 1997;
5. (b) Form of Management Contract between the Registrant on
behalf of its Barr Rosenberg Double Alpha Market Fund
and Rosenberg Institutional Equity Management --
incorporated by reference to Post-Effective Amendment
No. 16 to the Registration Statement filed on
September 16, 1997;
6. Amended and Restated Distributor's Contract between the
Registrant and Barr Rosenberg Funds Distributor, Inc. --
incorporated by reference to Post-Effective Amendment
No. 19 to the Registration Statement filed on
July 29, 1998;
7. None;
8. (a) Custody Agreement between the Registrant and
Custodial Trust Company -- incorporated by reference
to Post-Effective Amendment No. 19 to the Registration
Statement filed on July 29, 1998;
-1-
<PAGE>
(b) Form of Special Custody Account Agreement among the
Registrant, Custodial Trust Company and Bear, Stearns
Securities Corp. -- incorporated by reference to
Post-Effective Amendment No. 17 to the Registration
Statement filed on December 9, 1997;
(c) Schedule of remuneration to Custody Agreement between
the Registrant and Custodial Trust Company --
incorporated by reference to Post-Effective Amendment
No. 18 to the Registration Statement filed on
May 29, 1998;
9. (a) Transfer Agency Agreement between the Registant and
BISYS Fund Services, Inc. -- incorporated by reference
to Post-Effective Amendment No. 15 to the Registration
Statement filed on July 18, 1997;
(b) Form of Notification of Expense Limitation by
Rosenberg Institutional Equity Management to the Barr
Rosenberg Market Neutral Fund and the Barr Rosenberg
Double Alpha Market Fund -- incorporated by reference
to Post-Effective Amendment No. 17 to the Registration
Statement filed on December 9, 1997;
(c) Fund Administration Agreement between the Registrant
and BISYS Fund Services Limited Partnership --
incorporated by reference to Post-Effective Amendment
No. 15 to the Registration Statement filed on
July 18, 1997;
(d) Fund Accounting Agreement between the Registrant and
BISYS Fund Services, Inc. -- incorporated by reference
to Post-Effective Amendment No. 15 to the Registration
Statement filed on July 18, 1997;
10. Opinion of Ropes & Gray -- incorporated by reference to
Post-Effective Amendment No. 17 to the Registration
Statement filed on December 9, 1997;
11. Consent of PricewaterhouseCoopers LLP -- filed herewith;
12. None;
13. Investment letter regarding initial capital -- incorporated
by reference to Post-Effective Amendment No. 19 to the
Registration Statement filed on July 29, 1998;
14. None;
15. Distribution Plan for Investor shares -- incorporated by
reference to Post-Effective Amendment No. 19 to the
Registration Statement filed on July 29, 1998
16. Schedule for Computation of Performance Quotations --
filed herewith;
17. Financial Data Schedule for Registrant's fiscal year
ended March 31, 1998 -- filed herewith;
18. Amended and Restated Multi-Class Plan -- incorporated by
reference to Post-Effective Amendment No. 19 to the
Registration Statement filed on July 29, 1998;
-2-
<PAGE>
19. Power of Attorney -- incorporated by reference to Post-
Effective Amendment No. 19 to the Registration Statement
filed on July 29, 1998
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
Item 26. NUMBER OF HOLDERS OF SECURITIES.
The following table sets forth the number of holders of each class
of securities of the Barr Rosenberg Market Neutral Fund and Barr
Rosenberg Double Alpha Market Fund as of May 27, 1998:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
<S> <C>
Barr Rosenberg Market Neutral Fund
----------------------------------
Institutional Class 129
Investor Class 577
Barr Rosenberg Double Alpha Market Fund
---------------------------------------
Institutional Class 9
Investor Class 14
</TABLE>
-3-
<PAGE>
Item 27. INDEMNIFICATION.
Article VIII of the Registrant's Second Amended and Restated Agreement
and Declaration of Trust reads as follows (referring to the Registrant as the
"Trust"):
ARTICLE VIII
Indemnification
SECTION 1. TRUSTEES, OFFICERS, ETC. The Trust shall indemnify each
of its Trustees and officers (including persons who serve at the Trust's request
as directors, officers or trustees of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise) (hereinafter referred
to as a "Covered Person") against all liabilities and expenses, including but
not limited to amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and counsel fees reasonably incurred by any Covered Person
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person except with respect to any matter as to which such
Covered person shall have been finally adjudicated in any such action, suit or
other proceeding to be liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article, provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust shall be insured against losses arising from any such advance
payments or (c) either a majority of the disinterested Trustees acting on the
matter (provided that a majority of the disinterested Trustees then in office
act on the matter), or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
full trial type inquiry) that there is reason to believe that such Covered
Person will be found entitled to indemnification under this Article.
SECTION 2. COMPROMISE PAYMENT. As to any matter disposed of (whether
by a compromise payment, pursuant to a consent decree or otherwise) without an
adjudication by a court, or by any other body before which the proceeding was
brought, that such Covered Person is liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, indemnification
shall be provided if (a) approved, after notice that it involves such
indemnification, by at least a majority of the disinterested Trustees acting on
the matter (provided that a majority of the disinterested Trustees then in
office act on the matter) upon a determination, based upon a review of readily
available fact (as opposed to a full trial type inquiry) that such Covered
Person is not liable to the Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based upon a review of readily
available facts (as opposed to a full trial type inquiry) to the effect that
such indemnification would not protect such Person against any liability to the
Trust to which he would otherwise be subject by reason of wilful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. Any approval pursuant to this Section shall not prevent
the recovery from any Covered Person of any amount paid to such Covered Person
in accordance with this Section as indemnification if such Covered Person is
subsequently adjudicated by a court of competent
-4-
<PAGE>
jurisdiction to have been liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
SECTION 3. INDEMNIFICATION NOT EXCLUSIVE. The right of
indemnification hereby provided shall not be exclusive of or affect any other
rights to which such Covered Person may be entitled. As used in this Article
VIII, the term "Covered Person" shall include such person's heirs, executors and
administrators and a "disinterested Trustee" is a Trustee who is not an
"interested person" of the Trust as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended, (or who has been exempted from being
an "interested person" by any rule, regulation or order of the Commission) and
against whom none of such actions, suits or other proceedings or another action,
suit or other proceeding on the same or similar grounds is then or has been
pending. Nothing contained in this Article shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees or
officers, and other persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such person; provided, however, that the Trust shall not purchase
or maintain any such liability insurance in contravention of applicable law,
including without limitation the 1940 Act.
SECTION 4. SHAREHOLDERS. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by reason of his or her
being or having been a Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or former Shareholder (or
his or her heirs, executors, administrators or other legal representatives or in
the case of a corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and indemnified against
all loss and expense arising from such liability, but only out of the assets of
the particular series of Shares of which he or she is or was a Shareholder."
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Rosenberg Institutional Equity Management (the "Manager") was
organized as a limited partnership under the laws of the State of California in
1985, and is registered as an investment adviser under the Investment Advisers
Act of 1940. The Manager provides investment advisory services to a substantial
number of institutional investors.
Set forth below are the substantial business engagements during at
least the past two fiscal years of each director, officer or partner of the
Manager:
Name and Position Business and
with Manager other connections
- ------------------ -----------------
Barr M. Rosenberg General Partner, Rosenberg Alpha L.P.
Managing General Partner (formerly RBR Partners (limited partner of
and Chief Investment Officer Manager)), 12 El Sueno, Orinda, California,
December, 1984 to present; Chairman of the
Board, Rosenberg Management Company S.A.,
2 Place Winston Churchill, L-1340 Luxembourg,
April 1989 to present; Chairman of the Board,
Rosenberg U.S. Japan Management Company
S.A., 2 Place Winston Churchill, L-1340
Luxembourg, July, 1989 to present. Chairman
of the Board, Rosenberg Global Management
Company, S.A., 2 Place Winston Churchill,
L-1340 Luxemburg, April 1990 to present;
Director and Chairman of the Board, Rosenberg
Nomura Asset Management Company, Ltd.,
Dai-Ichi Edobashi Bldg., 1-11-1 Nihonbashi
Chuo-Ku, Tokyo 103, Japan; Chairman of the
Board and Director of Barr Rosenberg
Investment Management, Inc., 4 Orinda Way,
Orinda, California, February 1990 to
present. Chairman, Barr Rosenberg European
Management, Ltd., 9A Devonshire Square,
London EC2M 4LY, United Kingdom, March 1990 to
present.
-5-
<PAGE>
Marlis S. Fritz Director, Barr Rosenberg European Management
General Partner Ltd., 9A Devonshire Square,
London EC2M 4LY, United Kingdom, May 1990 to
present; Director, Barr Rosenberg Investment
Management, Inc., 4 Orinda Way, Orinda,
California, February 1990 to present.
Kenneth Reid Director, Barr Rosenberg Investment
General Partner Management, Inc., 4 Orinda Way, Orinda,
and Director of Research California, February 1990 to present.
Po-Len Hew Treasurer, Barr Rosenberg Investment
Controller Management, Inc., May 1994 to present.
Edward H. Lymen Executive Vice President, Barr Rosenberg
Vice President Investment Management, Inc., 4 Orinda Way,
Orinda, Calfiforna, 1990 to present.
Item 29. PRINCIPAL UNDERWRITERS:
(a) Barr Rosenberg Funds Distributor, Inc. (the "Distributor") is the
principal underwriter of the Trust's Investor shares. The
Distributor does not act as principal underwriter, depositor
or investment adviser for any other investment company.
(b) Information with respect to the Distributor's directors and
officers is as follows:
Name and Principal Positions and Positions and
Offices with Offices with
Business Address Underwriter Registrant
------------------ ------------- -------------
David J. Huber President None
Lynn J. Mangum Director, Chairman None
Kevin J. Dell Vice President, None
Secretary
Michael D. Burns Vice President, Chief None
Financial Officer
Robert J. McMullan Vice President, Director, None
Treasurer
The business address of all directors and officers of the Distributor is
90 Park Avenue, New York, NY 10016.
(c) None
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
thereunder will be maintained at the offices of:
-6-
<PAGE>
1) Barr Rosenberg Series Trust
3435 Stelzer Road
Columbus, Ohio 43219
Rule 31a-1 (b)(1),(2),(3), (4), (5), (6), (7), (8), (9), (10), (11)
Rule 31a-2 (a)
2) Rosenberg Institutional Equity Management
Four Orinda Way
Building E
Orinda, CA 94563
Rule 31a-1 (f)
Rule 31a-2 (e)
3) Barr Rosenberg Funds Distributor, Inc.
90 Park Avenue
New York, NY 10016
Rule 31a-1 (d)
Rule 31a-2 (c)
Item 31. MANAGEMENT SERVICES.
None.
Item 32. UNDERTAKINGS.
The Registrant undertakes to comply with the last three paragraphs
of Section 16(c) of the Investment Company Act of 1940 as though such
provisions of the Act were applicable to the Trust.
-7-
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust, as amended, of the
Registrant is on file with the Secretary of The Commonwealth of Massachusetts
and notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and that the obligations of or arising out of this instrument are not binding
for any of the trustees or shareholders individually but are binding only upon
the assets and property of the Registrant.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for the effectiveness of this registration statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 21 to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Orinda, and the State of California, on the 28th day of July, 1998.
BARR ROSENBERG SERIES TRUST
By /s/Marlis S. Fritz
----------------------
Marlis S. Fritz
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following persons in
the capacities indicated and on the 28th day of July, 1998.
SIGNATURE TITLE DATE
/s/Marlis S. Fritz Vice President, July 28, 1998
____________________ Trustee
Marlis S. Fritz
Kenneth Reid* President, Trustee July 28, 1998
____________________ (principal executive officer)
Kenneth Reid
Po-Len Hew* Treasurer July 28, 1998
____________________ (principal financial
Po-Len Hew and accounting officer)
Nils H. Hakansson* Trustee July 28, 1998
____________________
Nils H. Hakansson
Barr M. Rosenberg* Trustee July 28, 1998
____________________
Barr M. Rosenberg
William F. Sharpe* Trustee July 28, 1998
____________________
William F. Sharpe
*By: /s/Marlis S. Fritz
__________________
Marlis S. Fritz
Attorney-in-Fact
Date: July 28, 1998
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
99.11 Consent of PricewaterhouseCoopers LLP
99.16 Schedule for Computation of Performance Information
27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832545
<NAME> BARR ROSENBERG SERIES TRUST
<SERIES>
<NUMBER> 042
<NAME> BARR ROSENBERG SERIES TRUST, MARKET NEUTRAL FUND
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> DEC-18-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 190284882
<INVESTMENTS-AT-VALUE> 207843567
<RECEIVABLES> 11986119
<ASSETS-OTHER> 30750
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 404442932
<PAYABLE-FOR-SECURITIES> 13341080
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 187799069
<TOTAL-LIABILITIES> 201140149
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 203547941
<SHARES-COMMON-STOCK> 3537423<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 1201284
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2113934
<ACCUM-APPREC-OR-DEPREC> 667492
<NET-ASSETS> 203302783
<DIVIDEND-INCOME> 322963
<INTEREST-INCOME> 1915589
<OTHER-INCOME> 0
<EXPENSES-NET> 1043550
<NET-INVESTMENT-INCOME> 1195002
<REALIZED-GAINS-CURRENT> (2109737)
<APPREC-INCREASE-CURRENT> 667492
<NET-CHANGE-FROM-OPS> (247243)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3701007<F1>
<NUMBER-OF-SHARES-REDEEMED> 163584<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 203302783
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 700708
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1256513
<AVERAGE-NET-ASSETS> 17538964<F1>
<PER-SHARE-NAV-BEGIN> 10.00<F1>
<PER-SHARE-NII> .08<F1>
<PER-SHARE-GAIN-APPREC> (.12)<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.96<F1>
<EXPENSE-RATIO> 3.34<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>INVESTOR SHARES
</FN>
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 21 to the registration statement on Form N1-A (the "Registration
Statement") of our report dated May 13, 1998, relating to the financial
statements and financial highlights of Barr Rosenberg Market Neutral Fund (a
portfolio of Barr Rosenberg Series Trust) which appears in the March 31, 1998
Annual Report to Shareholders of Barr Rosenberg Series Trust which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Independent Accountants" and
"Financial Statements" in the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
San Francisco, CA
July 27, 1998
<PAGE>
<TABLE>
<S><C>
BARR ROSENBERG SERIES TRUST
MARKET NEUTRAL FUND
INSTITUTIONAL CLASS
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 03/31/98
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- ------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV= REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 12/16/97 TO 03/31/98 ):
( 997.00 /1,000) - 1 = -0.30%
</TABLE>
<PAGE>
<TABLE>
<S><C>
BARR ROSENBERG SERIES TRUST
MARKET NEUTRAL FUND
INVESTOR CLASS
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 03/31/98
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- ------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION ( 12/18/97 TO 03/31/98 ):
( 996.00 /1,000)- 1 = -0.40%
</TABLE>
