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THE JOHNSON REALTY FUND
PROSPECTUS
JANUARY 2, 1998
JOHNSON MUTUAL FUNDS TRUST
5556 CHEVIOT ROAD
CINCINNATI, OH 45247
(513) 385-4001
(800) 541-0170
FAX (513) 385-8947
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TABLE OF CONTENTS
Page
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FUND EXPENSES.............................................................. 2
INVESTMENT OBJECTIVES AND STRATEGIES....................................... 3
HOW TO BUY, SELL OR EXCHANGE SHARES IN EACH FUND........................... 4
HOW TO BUY SHARES ......................................................... 4
HOW TO SELL SHARES......................................................... 6
HOW TO EXCHANGE SHARES..................................................... 7
SHARE PRICE CALCULATION.................................................... 7
DIVIDENDS AND DISTRIBUTIONS................................................ 8
TAXES ................................................................. 8
OPERATION OF THE FUND...................................................... 9
INVESTMENT POLICIES AND TECHNIQUES.........................................10
GENERAL INFORMATION........................................................12
INVESTMENT PERFORMANCE.....................................................12
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THE JOHNSON REALTY FUND Prospectus Dated January 2, 1998
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The Johnson Realty Fund
The Realty Fund's investment objective is above average income and long
term capital growth. The Fund invests primarily in real estate related equity
securities believed by its Adviser, Johnson Investment Counsel, Inc., to provide
above average income and/or to have above average prospects for appreciation.
No-Load Mutual Funds
The Realty Fund is a "no-load" investment, which means there are no
sales charges or commissions for the purchase, sale or exchange of Fund shares.
In addition, there are no 12b-1 fees, distribution expenses or deferred sales
charges to the shareholders. The minimum initial investment for the Fund is
$2,000.
The Johnson Mutual Funds Trust
The Johnson Mutual Funds Trust (the "Trust") is a family of five
no-load mutual funds. The Johnson Realty Fund was organized as a series of the
Trust on November 12, 1997, and commenced operations on January 2, 1998. The
Johnson Realty Fund's investment objective is listed above. Information on the
other series in the Trust, the Johnson Growth Fund, the Johnson Fixed Income
Fund, the Johnson Opportunity Fund and the Johnson Municipal Income Fund, may be
obtained by calling or writing the Trust at the address and telephone number
listed throughout this prospectus.
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This Prospectus gives you information about the Johnson Realty Fund and
the Johnson Mutual Funds Trust that you should be aware of before investing.
Please read and retain this Prospectus for future reference. Additional
information is included in the Statement of Additional Information dated January
2, 1998 and filed with the Securities and Exchange Commission. It is
incorporated into this Prospectus by reference. To obtain a copy without charge,
call or write:
Johnson Mutual Funds Trust
5556 Cheviot Road, Cincinnati, Ohio 45247
(513) 385-4001 (800) 541-0170
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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FUND EXPENSES
The purpose of the table below is to assist shareholders in
understanding the costs and expenses that shareholders in the Fund will bear
directly or indirectly. The expense information for the Fund is based on
estimated amounts for the current fiscal year. The expenses are expressed as a
percentage of average net assets.
Shareholders should be aware that the Fund is a no-load fund and,
accordingly, a shareholder does not pay any front or back end loads or
commission to buy, sell or exchange shares of the Fund. In addition, the Fund
does not have a 12b-1 Plan. Unlike most other mutual funds, the Fund does not
pay separately for transfer agency, fund accounting, pricing, custodial,
auditing or legal services, nor does it pay separately general administrative or
other operating expenses. The Adviser pays all of the expenses of the Fund
except brokerage, taxes, interest and extraordinary expenses.
<TABLE>
<CAPTION>
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SHAREHOLDER TRANSACTION EXPENSES: REALTY FUND
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<S> <C>
Maximum Front End Load . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NONE
Deferred Load . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NONE
Redemption Fee(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NONE
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NONE
Annual Fund Operating Expenses (as a percentage of average net assets)(2)
Management Fees (after fee waiver)(2) . . . . . . . . . . . . . . . . . . . . . . . . 0.95%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NONE
Total Fund Operating Expenses (after fee waiver)(2) . . . . . . . . . . . . . . . . . 0.95%
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</TABLE>
(1) A processing fee of $10 will be deducted from any wire sales proceeds
and paid to the custodian.
(2) The Fund's total operating expenses are equal to the management fee
paid to the Adviser. The Adviser is authorized to charge the Realty
Fund a management fee of 1.30%, of the average daily net assets of the
Fund. The expenses shown in the above fee table reflect the fee waiver
for the Fund for the year ending December 31, 1998. The Adviser intends
these fee waivers to be permanent, although the Adviser reserves the
right to remove them at any time after December 31, 1998. Additionally,
the Adviser intends to waive additional fees for the fiscal year ending
December 31, 1998, and anticipates that the fee will be less than 0.95%
for 1998.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) sale of your shares at the end of each time period:
1 YEAR 3 YEARS
Realty Fund $10 $30
The example should not be considered a representation of past or future
expenses. The Fund's actual expenses may be more or less than those shown.
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INVESTMENT OBJECTIVES AND STRATEGIES
The Johnson Realty Fund's investment objective is above average income
and long term capital growth. The Johnson Realty Fund (the "Fund") invests
primarily in equity securities of companies in the real estate industry,
including but not limited to REITs (real estate investment trusts), and other
real estate related equity securities, such as common stock, preferred stock
and/or convertible securities of companies engaged in real estate related
businesses. Under normal circumstances, at least 65% of the Fund's total assets
will be in the real estate industry. The Fund will not attempt to duplicate the
real estate market as a whole in terms of the proportion of invested assets in
any specific region or property category. Due to the Fund's concentration in the
real estate industry, the Fund is not intended to be a complete investment
program.
WHAT IS A REIT?
A REIT is an investment vehicle that invests in interests in real
estate. A REIT is not taxed as a corporation if it meets the definitional
requirements of the Internal Revenue Code of 1986 (the "Code"). To qualify under
the Code, a REIT must invest substantially all of its assets in interests in
real estate, cash or government securities, derive most of its income from real
estate rental income or real estate secured mortgage loan interest, and
distribute to its shareholders 95% or more of its taxable income. If the REIT
meets these requirements, it may deduct dividends paid for tax purposes, thereby
eliminating federal income tax. REITs typically have high income pay-out ratios
and therefore may provide significant income returns.
A REIT can be categorized as an equity REIT, a mortgage REIT or a hybrid
REIT. An equity REIT owns or leases land or buildings and derives the majority
of its income from rental income. In addition, an equity REIT may realize
capital gains upon the sale of land or buildings that have appreciated in value
from the time of purchase to the time of sale, or similarly realize capital
losses from the sale of property that has depreciated in value.
A mortgage REIT invests in real estate mortgage loans and generates
income primarily from the interest payments on mortgage loans. A hybrid REIT has
both the characteristics of an equity REIT and a mortgage REIT and derives its
income primarily from rental income and mortgage loan interest.
Of the REIT sector, the Fund will invest primarily in equity REITs, as
opposed to mortgage REITs. The focus of the equity REITs will be those that
invest in office, residential, retail, industrial, and other specialty
properties including hotels, self-storage facilities, healthcare facilities, and
parking facilities.
WHAT ELSE MIGHT THE FUND INVEST IN?
In addition to REITs, the Fund may invest in other real estate related
equity securities, such as common stock, preferred stock and/or convertible
securities of companies engaged in real estate related businesses. Real estate
related equity securities may include equity securities issued by real estate
developers, home-builders, and hotels. They may also include companies with
substantial real estate holdings as an investment, or as part of their
operations, as well as companies whose products and services are directly
related to the real estate industry, such as building supply manufacturers,
mortgage lenders, or mortgage servicing companies.
The Fund may also invest in other securities outside the real estate
industry at the sole discretion of the Adviser. Please see "Investment Policies
and Techniques" for a more detailed discussion of the various other types of
securities the Fund is authorized to invest in.
WHAT ARE SOME OF THE RISKS OF THE FUND?
The concentration of the Fund's investments in the real estate
industry will subject the Fund to risks associated with the direct ownership of
real estate, in addition to those risks that apply to the equity market as a
whole. Some of these risks include decreases in real estate values,
overbuilding, environmental liabilities, and increases in operating costs. In
addition, the Fund will generally be subject to economic and regulatory risks
such as increases in interest rates, increases in property taxes, regulatory
limitations on rental income and changes in local zoning laws.
Some real estate related investments are not fully diversified, and
thus are subject to the risks associated with financing a limited number of
projects. REITS also are heavily dependent upon the
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management team. They are also subject to heavy cash flow dependency, defaults
by borrowers, and self-liquidation. Additionally, equity REITs may be affected
by changes in the value of the underlying property owned by the trusts, and
mortgage REITs may be affected by the quality of any mortgage loans extended.
The Adviser seeks to mitigate these risks by selecting REITs diversified by
sector as well as geographic location.
As all investment securities are subject to inherent market risks and
fluctuations in value due to earnings, economic and political conditions and
other factors, the Fund cannot give any assurance that its investment objective
will be achieved. In addition, it should be noted that the Fund has no operating
history. Current yields or rates of total return quoted by the Fund may be
higher or lower than past quotations, and there can be no assurance that the
current yield or rate of total return will be maintained. See "Investment
Policies and Techniques" for a more detailed discussion of the Fund's investment
practices and the risks involved in such practices.
TEMPORARY DEFENSIVE PURPOSES
For temporary defensive purposes, the Fund may hold all or a portion of
its assets in money market instruments, securities of other no-load mutual
funds, and/or repurchase agreements. If the Fund invests in shares of another
mutual fund, the shareholders of the Fund generally will be subject to
duplicative management fees.
HOW TO BUY, SELL OR EXCHANGE SHARES IN THE FUND
The Fund and its transfer agent, Johnson Financial Services, Inc., can
be contacted at the same mailing address and telephone numbers. If you need
additional information on how to buy, sell or exchange shares in the Fund,
please contact:
FUNDS: TRANSFER AGENT:
Johnson Mutual Funds Trust Johnson Financial, Inc.
5556 Cheviot Road 5556 Cheviot Road
Cincinnati, Ohio 45247 Cincinnati, Ohio 45247
(513)-385-4001 (513) 385-4001
(800)-541-0170 (800) 541-0170
FAX: (513) 385-8947 FAX: (513) 385-8947
HOW TO BUY SHARES
The minimum initial investment for the Fund is $2,000, and $100 for each
subsequent investment.
INITIAL PURCHASE
BY MAIL - You may purchase shares of the Fund by completing and signing
an application, drafting a check made payable to: Johnson Mutual Funds,
identifying on the check "Johnson Realty Fund", and mailing it to the Transfer
Agent.
BY WIRE - You may purchase shares of the Fund by wiring Federal Funds
from your bank, which may charge you a fee for doing so. If money is to be wired
for a newly established account, you must call the Funds and provide the
following information:
Name(s) in which account is to be registered;
Address;
Social security or tax identification number;
Amount being wired;
Name of the Fund, (Johnson Realty Fund);
Name of the wiring bank;
Name and phone number of a contact person at the bank initiating
the wire.
The Fund or the Transfer Agent will provide you with your account
number and your bank must
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then wire the specified amount according to the following instructions:
The Provident Bank/Cincinnati, Johnson Mutual Funds
ABA #042000424
Account #0198-483
For Further Credit to:
Name of the Fund,(Johnson Realty Fund);
Shareholder Account Name - _________________________
Shareholder Account Number - _____________ (4 digit)
You must mail a completed application to Johnson Mutual Funds after
opening an account by wire transfer. If a completed application is not received
or your social security or tax identification number is not certified with a
Form W-9, your account will be subject to back-up withholding within 60 days.
Wire orders will be accepted only on a day on which the Fund and the
custodian bank are open for business. A wire purchase will not be considered
made until the wired money is received and the purchase is accepted by the Fund.
Any delays that may occur in wiring money, including delays that may occur in
processing by the banks, are not the responsibility of the Fund or the custodian
bank. There is presently no fee for the receipt of wired funds, but the Fund
reserve the right to charge shareholders for this service.
ADDITIONAL PURCHASES
You may buy additional shares of the Fund at any time (minimum of $100)
by mail or by bank wire. Each additional purchase request must contain:
Name of your account(s);
Account number(s);
Name of the Fund, (Johnson Realty Fund).
Checks should be made payable to "Johnson Mutual Funds" and should be
sent to The Johnson Mutual Funds at the address indicated throughout this
prospectus. A bank wire should be sent as outlined above. ACH (Automatic
Clearing House) transactions should be established in advance.
AUTOMATIC INVESTMENT OPTION
You may arrange to make additional investments ($100 minimum)
automatically on a monthly or bi-monthly basis by transfers from your checking
account. You must complete the "Optional Automatic Investment Plan" section of
the application and provide the Trust with a voided check for the account you
wish to use for the automatic investment. You may terminate this automatic
investment program at any time.
OTHER PURCHASE INFORMATION
You may exchange securities that you own for shares of the Fund,
provided the securities meet the Fund's investment criteria and the Adviser
deems them to be a desirable investment for the Fund. Any exchange will be a
taxable event and you may incur certain transaction costs relating to the
exchange. Contact the Fund for additional information.
If an order, with payment in proper form, is received before the close
of trading on the New York Stock Exchange (currently 4:00 p.m. Eastern Time) by
the Fund, shares will be purchased at the net asset value determined as of the
close of trading on that day. Otherwise, Fund shares will be purchased at the
net asset value determined as of the close of trading on the New York Stock
Exchange on the next business day.
The Fund does not issue share certificates. All shares are held in
non-certificate form registered on the books of the Fund's Transfer Agent for
the account of the shareholder. The rights to limit the amount of purchases and
to refuse to sell to any person are reserved by the Fund. If your check or wire
does not clear, you will be responsible for any loss incurred. If you are
already a shareholder in the Johnson Mutual Funds the Fund can sell shares from
any identically registered account in any of the Funds as reimbursement for any
loss incurred. You may be prohibited or restricted from making future purchases
in any of the Johnson Mutual Funds.
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HOW TO SELL SHARES
You may sell shares in the Fund by mail or telephone, without a charge.
Shares will be sold at the next share price (net asset value) calculated after
receipt of your properly completed request for a sale, or telephone call.
BY MAIL - You may sell shares at no charge by mail. All sales will be
made at the net asset value (NAV) determined after the Transfer Agent has
received the sale request in proper order. The proceeds of the sale may be more
or less than the purchase price of your shares, depending on the market value of
the Fund's securities at the time of your sale. Your request should be addressed
to the Johnson Mutual Funds. "Proper order" means your request for a sale must
include:
Letter of instruction;
Name of the Fund,(Johnson Realty Fund);
Account number(s);
Account name(s);
Dollar amount or the number of shares you wish to sell.
All registered share owner(s) must sign this request in the exact
name(s) and any special capacity in which they are registered. For joint
accounts with right of survivorship, only one signature is required for
withdrawal.
For sales in excess of $50,000, the Fund requires that signatures be
guaranteed by a bank or member firm of a national securities exchange. Signature
guarantees are for the protection of shareholders. At the discretion of the Fund
a shareholder may be required to furnish additional legal documents to insure
proper authorization. If you are not certain of the requirements for a sale,
please call the Transfer Agent at the number indicated throughout this
prospectus.
The Fund, at its discretion and with shareholder consent, may use
securities from the Fund's portfolio to pay you for your shares, provided that
the Adviser deems that such a distribution of securities will not adversely
affect the Fund's portfolio. Any such transfer of securities to you will be a
taxable event and you may incur certain transaction costs relating to the
transfer. Contact the Funds for additional information.
BY TELEPHONE - Telephone redemption privileges are automatically
available to all shareholders. Shareholders may sell shares on any business day
the New York Stock Exchange is open by calling the Transfer Agent before 4:00
p.m. Eastern Time. The Funds will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures will include
requiring a form of personal identification from the caller. Sale proceeds will
be mailed or wired at the shareholder's direction to the designated account. The
minimum amount that may be wired is $1,000 (wire charges of $10 will be deducted
from sales proceeds).
By using the telephone redemption and exchange privileges, a
shareholder authorizes the Fund to act upon the instruction of any person by
telephone to sell shares from the account and transfer the proceeds to the bank
account designated or effect an exchange into another Fund. The Fund and the
Transfer Agent are not liable for following instructions communicated by
telephone that they reasonably believe to be genuine. However, if they do not
employ reasonable procedures to confirm that telephone instructions are genuine,
they may be liable for any losses due to unauthorized or fraudulent
instructions. The Fund may change, modify or terminate the telephone redemption
or exchange privilege at any time.
BY SYSTEMATIC WITHDRAWAL PROGRAM - Shareholders may request that a
predetermined amount be sent by check or wired to them periodically, each month
or calendar quarter. A shareholder's account must have Fund shares with a value
of at least $10,000 in order to start a Systematic Withdrawal Program, and the
minimum amount that may be withdrawn each month or quarter under the Systematic
Withdrawal Program is $100. This program may be terminated by a shareholder or
the Fund at any time without charge or penalty and will become effective five
business days following receipt of your instructions. In order to facilitate the
delivery of the checks as close as possible to the end of the month, shares will
be sold on the 24th day of the month or the last business day prior to the 24th
day if the 24th falls on a holiday or weekend. A withdrawal under the Systematic
Withdrawal Program involves a sale of shares, and may result in a gain or loss
for federal income tax purposes. In addition, if the amount withdrawn exceeds
the dividends credited to the shareholder's account, the account ultimately may
be depleted.
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ADDITIONAL INFORMATION - Sale requests specifying a certain date or
share price cannot be accepted and will be returned. If you invest by wire, you
may sell your shares on the first business day following such purchase. However,
if you invest by a personal, corporate, cashier's or government check, or
through any of our telephone services, the sales proceeds will not be paid until
the first business day after the 10th calendar day following receipt of payment
by the Fund. Exchanges into any of the other Funds are, however, permitted
without the ten day waiting period.
We will mail or wire the proceeds to you on or before the 5th business
day following the sale. Also, when the New York Stock Exchange is closed (or
when trading is restricted) for any reason other than its customary weekend or
holiday closing or under any emergency circumstances, as determined by the
Securities and Exchange Commission, we may suspend sales of Fund shares or
postpone payment dates. If you are unable to accomplish your transaction by
telephone (for example, during times of unusual market activity), consider
sending your order by express mail to the Funds, or facsimile to (513) 385-8947.
Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, the Fund reserves the right to require any shareholder to sell all of
his or her shares in the Fund on 30 days' written notice if the value of his or
her shares in the Fund is less than $2,000 due to sales of Fund shares, or such
other minimum amount as the Fund may determine from time to time. An involuntary
sale will create a capital gain or a capital loss, which may have tax
consequences about which you should consult your tax adviser. A shareholder may
increase the value of his or her shares in the Fund to the minimum amount within
the 30 day period. Shares of the Fund are subject to a sale at any time if the
Board of Trustees determines in its sole discretion that failure to sell may
have materially adverse consequences to all or any of the shareholders of the
Trust or any Fund of the Trust.
HOW TO EXCHANGE SHARES
As a shareholder in any Fund, you may exchange shares valued at $1,000
or more for shares of any other Fund in the Johnson Mutual Fund Trust.
Information on other funds within the Johnson Mutual Funds Trust, including the
Johnson Growth Fund, the Johnson Opportunity Fund, the Johnson Fixed Income
Fund, and the Johnson Municipal Income Fund may be obtained by writing or
calling the Trust, at the address and telephone numbers listed throughout this
prospectus. You may make an exchange by telephone or by written request.
BY TELEPHONE - Shareholders may call the Transfer Agent to exchange
shares. An exchange may also be made by written request signed by all registered
owners of the account mailed to the Transfer Agent. Requests for exchanges
received prior to close of trading on the New York Stock Exchange (4:00 p.m.
Eastern Time) will be processed at the next determined net asset value as of the
close of business on the same day.
An exchange is made by selling shares of one Fund and using the
proceeds to buy shares of another Fund, with the NAV for the sale and the
purchase calculated on the same day. See "How to Sell Shares". An exchange
results in a sale of shares for federal income tax purposes. If you make use of
the exchange privilege, you may realize either a long term or short term capital
gain or loss on the shares sold.
Before making an exchange, you should consider the investment objective
of the Fund to be purchased. If your exchange creates a new account, you must
satisfy the requirements of the Fund in which shares are being purchased. You
may make an exchange to a new account or an existing account; however, the
account ownership must be identical. Exchanges may be made only in states where
an exchange may legally be made. The Fund reserves the right to terminate or
modify the exchange privilege in the future upon 60 days prior notice to the
shareholders.
SHARE PRICE CALCULATION
The value of an individual share in the Fund, the net asset value,
(NAV) is calculated by dividing the total value of the Fund's investments and
other assets (including accrued income), less any liabilities (including
estimated accrued expenses), by the number of shares outstanding, rounded to the
nearest cent. Net asset value per share is determined as of the close of the New
York Stock Exchange (4:00 p.m. Eastern Time) on each day that the exchange is
open for business, and on any other day on which there is sufficient trading in
the Fund's securities to materially affect the net asset value. The net asset
value per share of each Fund will fluctuate.
Securities that are traded on any exchange or on the NASDAQ
over-the-counter market are valued
<PAGE> 10
at the last quoted sale price of the day. Lacking a last sale price, a security
is valued at its last bid price except when, in the Adviser's opinion, the last
bid price does not accurately reflect the current value of the security. All
other securities for which over-the-counter market quotations are readily
available are valued at their last bid price. When market quotations are not
readily available, or when the Adviser determines the last bid price does not
accurately reflect the current value or when restricted securities are being
valued, such securities are valued as determined in good faith by the Adviser,
in conformity with guidelines adopted by and subject to review of the Board of
Trustees of the Trust.
Fixed income securities may be valued on the basis of prices furnished
by a pricing service when the Adviser believes such prices accurately reflect
the fair market value of such securities. A pricing service utilizes electronic
data processing techniques to determine prices for normal institutional-size
trading units of debt securities without regard to sale or bid prices. When
prices are not readily available from a pricing service, or when restricted or
illiquid securities are being valued, securities are valued at fair value as
determined in good faith by the Adviser, subject to review of the Board of
Trustees. Short term investments in fixed income securities with maturities of
less than 60 days when acquired, or which subsequently are within 60 days of
maturity, are valued by using the amortized cost method of valuation.
DIVIDENDS AND DISTRIBUTIONS
The Realty Fund intends to distribute substantially all of its net
investment income as dividends to shareholders on a quarterly basis. The Fund
intends to distribute its net long term capital gains and net short term capital
gains at least once a year, at year end.
Dividends and capital gain distributions are automatically reinvested
in additional shares at the net asset value per share on the distribution date.
An election to receive a cash payment of dividends and/or capital gain
distributions may be made in the application to purchase shares or by separate
written notice to the Transfer Agent. Shareholders will receive a confirmation
statement reflecting the payment and reinvestment of dividends and summarizing
all other transactions. If cash payment is requested, a check normally will be
mailed within five business days after the payable date. If you withdraw your
entire account, all dividends accrued to the time of withdrawal, including the
day of withdrawal, will be paid at that time. Distributions of less than $10 and
distributions on shares purchased within the last 30 days, however, will not be
paid in cash and will be reinvested. You may elect to have distributions on
shares held in IRA's and 403(b) plans paid in cash only if you are 59-1/2 years
old or permanently and totally disabled or if you otherwise qualify under the
applicable plan.
TAXES
The Fund intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended. By so qualifying,
the Fund will not be subject to federal income taxes to the extent that it
distributes substantially all of its net investment income and any net realized
capital gains.
For federal income tax purposes, the Fund is treated as a separate
entity for the purpose of computing taxable net income and net realized capital
gains and losses. Dividends paid by the Fund from ordinary taxable income are
taxable to shareholders as ordinary income, but may be eligible in part for the
dividends received deduction for corporations. Pursuant to the Tax Reform Act of
1986, all distributions of net capital gains to individuals are taxed at the
same rate as ordinary income. All distributions of net capital gains to
corporations are taxed at regular corporate rates. Any distributions designated
as being made from net realized long term capital gains are taxable to
shareholders as long term capital gains regardless of the holding period of the
shareholder. The tax consequences described in this section apply whether
distributions are taken in cash or reinvested in additional shares.
The Fund will mail to each shareholder after the close of the calendar
year a statement setting forth the federal income tax status of distributions
made during the year. Dividends and capital gains distributions may also be
subject to state and local taxes. Shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state or local taxes, the
tax effect of distributions and withdrawals from the Fund and the use of the
Exchange Privilege.
Unless a shareholder of the Fund furnishes his or her certified
taxpayer identification number (social security number for individuals) and
certifies that he or she is not subject to backup withholding, the Fund will be
required to withhold and remit to the U.S. Internal Revenue Service 31% of the
dividends, distributions and sales proceeds payable to the shareholder.
Shareholders should be aware that, under
<PAGE> 11
Internal Revenue Service regulations, the Fund may be fined $50 annually for
each account for which a certified taxpayer identification number is not
provided. In the event that such a fine is imposed with respect to a specific
shareholder account in any year, the Fund will make a corresponding charge
against the shareholder account.
OPERATION OF THE FUND
The Johnson Realty Fund is a diversified series of The Johnson Mutual
Funds Trust, an open-end management investment company organized as an Ohio
business trust on September 30, 1992. The Board of Trustees supervises the
business activities of the Trust. Like other mutual funds, the Trust retains
various organizations to perform specialized services. It retains Johnson
Investment Counsel, Inc., 5556 Cheviot Road, Cincinnati, Ohio 45247 (the
"Adviser") to manage the Trust's investments and its business affairs. The
Adviser is a Cincinnati-based company of which Timothy E. Johnson is the
controlling shareholder. Since its inception in 1965, it has grown to become the
largest independent investment advisory firm in the Cincinnati area. The Adviser
has over $1.8 billion of assets under management with services extending to a
wide range of clients, including businesses, individuals, foundations, and
institutional endowments. Johnson Investment Counsel, Inc. solely provides
investment management, through individually managed portfolios and has no
commission-based affiliations from the sale of products.
A committee of the Adviser is responsible for the investment decisions
and the day-to-day management for the Fund. The committee consists of a group of
investment professionals at Johnson Investment Counsel, Inc. including, but not
limited to, Fred A. Brink, Matthew L. Grever, CFA, and Norman G. Miller, Ph.D.
Fred A. Brink is a research analyst for Johnson Investment Counsel,
Inc. Prior to joining Johnson Investment Counsel, Inc., Mr. Brink served as a
Fund Manager and Trust Investment Officer for Star Bank, NA. During his six year
tenure at Star Bank, Mr. Brink managed the Star Capital Appreciation Fund, the
REIT portions of the Stellar and Strategic Income Funds, as well as two in-house
REIT Funds. Mr. Brink earned a Bachelor of Business Administration degree in
Finance from the University of Cincinnati in 1991, and is currently enrolled in
the Chartered Financial Analyst program through the Institute of Chartered
Financial Analysts.
Matthew L. Grever, CFA is the Vice President of Acquisitions for a
midwestern-based real estate investment and development company that specializes
in the acquisition of retail shopping centers across the United States. Mr.
Grever holds a B.B.A. in accounting and real estate and an MBA with
concentration in finance, from The University of Cincinnati. Mr. Grever was
awarded the designation of Charter Financial Analyst (CFA) from The Institute of
Chartered Financial Analysts in 1997. Mr. Grever has been involved in anchor
tenant lease and operating covenant negotiation, real estate acquisition,
redevelopment analysis, and deal structuring, real estate joint venture
negotiation, as well as real estate acquisition, construction and permanent
financing. Prior to his current position, Mr. Grever was Vice President of a
large Midwestern based commercial mortgage banking company. Mr. Grever is a
part-time research analyst for Johnson Investment Counsel, Inc.
Norman G. Miller, Ph.D., is the Director of the Real Estate Program at
the University of Cincinnati (since 1981) and is the holder of the West Shell,
Jr. Professorship in real estate (since 1988). Dr. Miller received his Ph.D.
from the Ohio State University in 1977, after which he was an Assistant
Professor at the University of Georgia until 1981. Dr. Miller is active on the
Editorial Board of several national and international journals, including The
Journal of Real Estate Research, The Journal of Real Estate Literature, The
Journal of Property Finance, and Real Estate Economics, and is also co-managing
editor of Real Estate Finance. Dr. Miller has assisted several institutional
investors in developing research programs for use in investment selection, has
consulted with clients from the Pacific Rim region, and has worked with national
data firms on real estate market analysis techniques. Dr. Miller is a regular
member of the national forecast panel for the Housing Market Report and is a
part-time research analyst for Johnson Investment Counsel, Inc.
The Realty Fund is authorized to pay the Adviser a fee equal to an
annual average rate of 1.30% of its average daily net assets, although the
Adviser has committed to limit its fee to 0.95% of such assets. The Adviser
intends that these fee limitations will be permanent, although the Adviser
reserves the right to remove them at any time after December 31, 1998.
Additionally, the Fund has committed to waiving additional fees during 1998 and
anticipates that the fee will be less than 0.95% for the one year period. The
Adviser pays all of the expenses of the Fund except brokerage, taxes, interest
and extraordinary
<PAGE> 12
expenses. It should be noted that most investment companies pay their own
operating expenses directly, while the Fund's expenses except those specified
above, are paid by the Adviser.
The Trust retains Johnson Financial, Inc. to serve as transfer agent
and dividend paying agent. Johnson Financial, Inc. is a wholly owned subsidiary
of Adviser and thus it and the Adviser may be deemed to be under common control.
Johnson Financial, Inc. operates under separate contractual agreements with the
Trust.
INVESTMENT POLICIES AND TECHNIQUES
This section contains general information about various types of
securities and investment techniques. The Fund may invest in any security or
employ any investment technique described in this section.
EQUITY SECURITIES - The Fund may invest in equity securities, which
include common stocks, convertible preferred stocks, convertible debentures,
rights, warrants, REITs (real estate investment trusts), REOCs (real estate
Operating Companies), and other real estate related companies. Convertible
preferred stock is preferred stock that can be converted into common stock
pursuant to its terms. Convertible debentures are debt instruments that can be
converted into common stock pursuant to their terms. Warrants are options to
purchase equity securities at a specified price valid for a specific time
period. Rights are similar to warrants, but normally have a short duration and
are distributed by the issuer to its shareholders. The Fund may not invest more
than 5% of its net assets at the time of purchase in rights and warrants.
FIXED INCOME SECURITIES - The Fund may invest in fixed income
securities which include corporate debt securities, U.S. government securities,
mortgage-backed securities, zero coupon bonds, asset-backed and
receivable-backed securities and participation interests in such securities.
Preferred stock and certain common stock equivalents may also be considered to
be fixed income securities. Fixed income securities are generally considered to
be interest rate sensitive, which means that their value will generally decrease
when interest rates rise and increase when interest rates fall. Securities with
shorter maturities, while offering lower yields, generally provide greater price
stability than longer term securities and are less affected by changes in
interest rates.
CORPORATE DEBT SECURITIES - The Fund may invest in corporate debt
securities, which are long and short term debt obligations issued by companies
(such as publicly issued and privately placed bonds, notes and commercial
paper). The Fund will not invest more than 5% of the value of its net assets in
securities, including convertible securities, that are below investment grade.
The Adviser considers corporate debt securities to be of investment grade
quality if they are rated BBB or higher by Standard & Poor's Corporation
("S&P"), Baa or higher by Moody's Investors Services, Inc. ("Moody's"), or if
unrated, determined by the Adviser to be of comparable quality. Investment grade
debt securities generally have adequate to strong protection of principal and
interest payments. In the lower end of this category, credit quality may be more
susceptible to potential future changes in circumstances and the securities have
speculative elements. If the rating of a security by S&P or Moody's drops below
investment grade, the Adviser will dispose of the security as soon as
practicable (depending on market conditions) unless the Adviser determines based
on its own credit analysis that the security provides the opportunity of meeting
the Fund's objective without presenting excessive risk.
U.S. GOVERNMENT SECURITIES - U.S. government securities may be backed
by the credit of the government as a whole or only by the issuing agency. U.S.
Treasury bonds, notes, and bills and some agency securities, such as those
issued by the Federal Housing Administration and the Government National
Mortgage Association (GNMA), are backed by the full faith and credit of the U.S.
government as to payment of principal and interest and are the highest quality
government securities. Other securities issued by U.S. government agencies or
instrumentalities, such as securities issued by the Federal Home Loan Banks and
the Federal Home Loan Mortgage Corporation, are supported only by the credit of
the agency that issued them, and not by the U.S. government. Securities issued
by the Federal Farm Credit System, the Federal Land Banks, and the Federal
National Mortgage Association (FNMA) are supported by the agency's right to
borrow money from the U.S. Treasury under certain circumstances, but are not
backed by the full faith and credit of the U.S. government.
MORTGAGE-BACKED SECURITIES - represent an interest in a pool of
mortgages. These securities, including securities issued by FNMA and GNMA,
provide investors with payments consisting of both interest and principal as the
mortgages in the underlying mortgage pools are repaid. Unscheduled or early
<PAGE> 13
payments on the underlying mortgages may shorten the securities' effective
maturities. The average life of securities representing interests in pools of
mortgage loans is likely to be substantially less than the original maturity of
the mortgage pools as a result of prepayments or foreclosures of such mortgages.
Prepayments are passed through to the registered holder with the regular monthly
payments of principal and interest, and have the effect of reducing future
payments. To the extent the mortgages underlying a security representing an
interest in a pool of mortgages are prepaid, a Fund may experience a loss (if
the price at which the respective security was acquired by the Fund was at a
premium over par, which represents the price at which the security will be sold
upon prepayment). In addition, prepayments of such securities held by a Fund
will reduce the share price of the Fund to the extent the market value of the
securities at the time of prepayment exceeds their par value. Furthermore, the
prices of mortgage-backed securities can be significantly affected by changes in
interest rates. Prepayments may occur with greater frequency in periods of
declining mortgage rates because, among other reasons, it may be possible for
mortgagors to refinance their outstanding mortgages at lower interest rates. In
such periods, it is likely that any prepayment proceeds would be reinvested by a
Fund at lower rates of return.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs) - Securities collateralized
by mortgages or mortgage-backed securities. CMOs are issued with a variety of
classes or series, which have different maturities and are often retired in
sequence. CMOs may be issued by governmental or non-governmental entities such
as banks and other mortgage lenders. Non-government securities may offer a
higher yield but also may be subject to greater price fluctuation than
government securities. Investments in CMOs are subject to the same risks as
direct investments in the underlying mortgage and mortgage-backed securities. In
addition, in the event of a bankruptcy or other default of an entity who issued
the CMO held by the Fund, the Fund could experience both delays in liquidating
its position and losses.
ZERO COUPON BONDS - Zero coupon bonds do not make regular interest
payments. Instead they are sold at a deep discount from their face value. The
Fund will accrue income on such bonds for tax and accounting purposes, in
accordance with applicable law. This income will be distributed to shareholders.
Because no cash is received at the time such income is accrued, the Fund may be
required to liquidate other portfolio securities to satisfy its distribution
obligations. Because a zero coupon bond does not pay current income, its price
can be very volatile when interest rates change. In calculating its dividend,
the Fund takes into account as income a portion of the difference between a zero
coupon bond's purchase price and its face value. Certain types of CMOs pay no
interest for a period of time and therefore present risks similar to zero coupon
bonds.
The Federal Reserve creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the coupon payments and the
principal payment from an outstanding Treasury security and selling them as
individual securities. A broker-dealer creates a derivative zero by depositing a
Treasury security with a custodian for safekeeping and then selling the coupon
payments and principal payment that will be generated by this security
separately. Examples are Certificates of Accrual on Treasury Securities (CATs),
Treasury Investment Growth Receipts (TIGRs) and generic Treasury Receipts (TRs).
These derivative zero coupon obligations are not considered to be government
securities unless they are part of the STRIPS program. Original issue zeros are
zero coupon securities issued directly by the U.S. government, a government
agency, or by a corporation.
FOREIGN SECURITIES - The Fund may invest in foreign equity securities
through the purchase of American Depository Receipts. American Depository
Receipts are certificates of ownership issued by a U.S. bank as a convenience to
the investors in lieu of the underlying shares which it holds in custody. The
Fund may also invest in dollar denominated foreign fixed-income securities
issued by foreign companies, foreign governments or international organizations
and determined by the Adviser to be comparable in quality to investment grade
domestic securities. The Fund will not invest in a foreign security if,
immediately after a purchase and as a result of the purchase, the total value of
foreign securities owned by the Fund would exceed 30% of the value of the total
assets of the Fund. To the extent that the Fund does invest in foreign
securities, such investments may be subject to special risks, such as changes in
restrictions on foreign currency transactions and rates of exchange, and changes
in the administrations or economic and monetary policies of foreign governments.
REPURCHASE AGREEMENTS - A repurchase agreement is a short term
investment in which the purchaser acquires ownership of a U.S. Government
security (which may be of any maturity) and the seller agrees to repurchase the
obligation at a future time at a set price, thereby determining the yield during
the purchaser's holding period (usually not more than seven days from the date
of purchase). Any repurchase transaction in which the Fund engages will require
full collateralization of the seller's obligation during the entire term of the
repurchase agreement. In the event of a bankruptcy or other default of the
seller, the
<PAGE> 14
Fund could experience both delays in liquidating the underlying security and
losses in value. However, the Fund intends to enter into repurchase agreements
only with the Trust's custodian, other banks with assets of $1 billion or more
and registered securities dealers determined by the Adviser (subject to review
by the Board of Trustees) to be creditworthy. The Adviser monitors the
creditworthiness of the banks and securities dealers with which the Fund engages
in repurchase transactions, and the Fund will not invest more than 15% of its
net assets in illiquid securities, including repurchase agreements maturing in
more than seven days.
WHEN ISSUED SECURITIES AND FORWARD COMMITMENTS
The Fund may buy and sell securities on a when-issued or delayed
delivery basis, with payment and delivery taking place at a future date. The
price and interest rate that will be received on the securities are each fixed
at the time the buyer enters into the commitment. The Fund may enter into such
forward commitments if they hold, and maintain until the settlement date in a
separate account at the Fund's Custodian, cash or U.S. government securities in
an amount sufficient to meet the purchase price. The Fund will not invest more
than 25% of their respective total assets in forward commitments. Forward
commitments involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date. Any change in value could increase
fluctuations in the Fund's share price and yield. Although the Fund will
generally enter into forward commitments with the intention of acquiring
securities for its portfolio, the Fund may dispose of a commitment prior to the
settlement if the Adviser deems it appropriate to do so.
OPTIONS TRANSACTIONS
The Fund may write (sell) covered call options on individual securities
and on stock indices and engage in related closing transactions. A covered call
option on a security is an agreement to sell a particular portfolio security if
the option is exercised at a specified price, or before a set date. An option on
a stock index gives the option holder the right to receive, upon exercising the
option, a cash settlement amount based on the difference between the exercise
price and the value of the underlying stock index. Risks associated with writing
covered options include the possible inability to effect closing transactions at
favorable prices and an appreciation limit on the securities set aside for
settlement. There is no assurance of liquidity in the secondary market for
purposes of closing out covered call option positions.
The Fund may purchase put and call options on individual securities and
on stock indices for the purpose of hedging against the risk of unfavorable
price movements adversely affecting the value of the Fund's securities or
securities the Fund intends to buy. The Fund may also sell put and call options
in closing transactions.
GENERAL
The Fund may engage in short sales if, at the time of the short sale,
the Fund owns or has the right to obtain an equal amount of the security being
sold short at no additional cost. The Fund may also borrow money for liquidity
purposes in an amount not exceeding 5% of the Fund's total assets at the time
the borrowing is made. Assets of the Fund may be pledged in connection with
borrowings. See "Investment Limitations" in the Statement of Additional
Information.
GENERAL INFORMATION
FUNDAMENTAL POLICIES
The investment limitations set forth in the Statement of Additional
Information as fundamental policies may not be changed without the affirmative
vote of the majority of the outstanding shares of the Fund. The investment
objective of the Fund may be changed without the affirmative vote of a majority
of the outstanding shares of the Fund.
PORTFOLIO TURNOVER
The Fund does not intend to purchase or sell securities for short term
trading purposes. The Fund will, however, sell any portfolio security (without
regard to the length of time it has been held) when the Adviser believes that
market conditions, creditworthiness factors or general economic conditions
warrant such action. It is anticipated that the Fund will have a portfolio
turnover rate of less than 100%.
<PAGE> 15
SHAREHOLDER RIGHTS
Any Trustee of the Trust may be removed by vote of the shareholders
holding not less than two-thirds of the outstanding shares of the Trust. The
Trust does not hold an annual meeting of shareholders. When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each whole share he owns and fractional votes for fractional shares he owns.
All shares of the Fund have equal voting rights and liquidation rights.
The beneficial ownership, either directly or indirectly, of more than
25% of the voting securities of the Fund creates a presumption of control of the
Fund under Section 2(a)(9) of the Investment Company Act of 1940. As of January
2, 1998, the Oakmont Trust, which is controlled by officers and/or employees of
the Adviser, owned in aggregate more than 25% of the shares of the Realty Fund.
INVESTMENT PERFORMANCE
The Fund may periodically advertise "average annual total return." The
"total return" of the Fund refers to the dividends and distributions generated
by an investment in the Fund plus the change in the value of the investment from
the beginning of the period to the end of the period. The "average annual total
return" of the Fund refers to the rate of total return for each year of the
period which would be equivalent to the cumulative total return for the period.
All dividends and distributions earned on the investment are assumed to be
reinvested.
The Fund may also periodically advertise its total return and
cumulative total return over various periods in addition to the value of a
$10,000 investment (made on the date of the initial public offering of the
Fund's shares) as of the end of a specified period. The "total return" and
"cumulative total return" for the Fund are calculated as indicated above for
"total return."
The Fund may periodically advertise its yield for a thirty-day or one
month period. The "yield" of the Fund refers to the income generated by an
investment in the Fund over the period, calculated on a per share basis (using
the net asset value per share on the last day of the period and the average
number of shares outstanding during the period). The Fund's yield quotation will
always be accompanied by the Fund's average annual total return information
described above.
The Fund may also include in advertisements data comparing performance
with other mutual funds as reported in non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations and publications that monitor the performance of mutual funds
(such as Morningstar or Lipper Analytical Services). Performance information may
be quoted numerically or may be presented in a table, graph or other
illustration. In addition, Fund performance may be compared to well-known
indices of market performance including the Standard & Poor's (S&P) 500 Index,
S&P MidCap 400 Index, S&P/BARRA Growth and Value Indices, the Dow Jones
Industrial Average, the NAREIT Index, the Wilshire REIT Index, or the Lehman
Brothers Indices. The Trust's annual report contains additional performance
information that is available upon request and without charge, by writing or
calling the Trust.
The advertised performance data of the Fund is based on historical
performance and is not intended to indicate future performance. Yields and rates
of total return quoted by the Fund may be higher or lower than past quotations,
and there can be no assurance that any yield rate of total return will be
maintained. The principal value of an investment in each Fund will fluctuate so
that a shareholder's shares, when sold, may be worth more or less than the
shareholder's original investment.
INVESTMENT ADVISER TRANSFER AGENT
Johnson Investment Counsel, Inc. Johnson Financial, Inc.
5556 Cheviot Road 5556 Cheviot Road
Cincinnati, Ohio 45247 Cincinnati, Ohio 45247
AUDITORS CUSTODIAN
McCurdy & Associates CPA's, Inc. The Provident Bank
27955 Clemens Road Three East Fourth Street
Westlake, Ohio 44145 Cincinnati, Ohio 45202
<PAGE> 16
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the sale of the Fund. Representations other than those contained in this
Prospectus must not be relied upon as being authorized by the Fund. This
Prospectus does not constitute an offer by the Fund to sell its shares in any
state to any person to whom it is unlawful to make such offer in such state.
<PAGE> 17
JOHNSON MUTUAL FUNDS TRUST
THE JOHNSON REALTY FUND
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 2, 1998
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus of Johnson Mutual Funds dated January 2,
1998. A copy of the Prospectus can be obtained by writing the Trust at 5556
Cheviot Road, Cincinnati, Ohio 45247, or by calling the Trust at (513) 385-4001.
<PAGE> 18
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
JOHNSON MUTUAL FUNDS TRUST
5556 CHEVIOT ROAD
CINCINNATI, OHIO 45247
TABLE OF CONTENTS
-----------------
PAGE
----
DESCRIPTION OF THE TRUST 3
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS 3
INVESTMENT LIMITATIONS 6
TRUSTEES AND OFFICERS 8
THE INVESTMENT ADVISER 9
PORTFOLIO TRANSACTIONS AND BROKERAGE 9
DETERMINATION OF SHARE PRICE 10
INVESTMENT PERFORMANCE 10
CUSTODIAN 11
TRANSFER AGENT 11
ACCOUNTANTS 11
FINANCIAL STATEMENTS 13
<PAGE> 19
DESCRIPTION OF THE TRUST
Johnson Mutual Funds Trust (the "Trust"), formerly Johnson Investment
Mutual Funds Trust, is an open-end investment company established under the laws
of Ohio by an Agreement and Declaration of Trust dated September 30, 1992 (the
"Trust Agreement"). The Trust Agreement permits the Trustees to issue an
unlimited number of shares of beneficial interest of separate series without par
value. Shares of five series have been authorized, which shares constitute the
interests in the Johnson Growth Fund, the Johnson Opportunity Fund, the Johnson
Fixed Income Fund, the Johnson Municipal Income Fund, and the Johnson Realty
Fund.
Each share of a series represents an equal proportionate interest in
the assets and liabilities belonging to that series with each other share of
that series and is entitled to such dividends and distributions out of income
belonging to the series as are declared by the officers of the Trust, subject to
the review and approval of the Board of Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
any series into a greater or lesser number of shares of that series so long as
the proportionate beneficial interest in the assets belonging to that series and
the rights of shares of any other series are in no way affected. In case of any
liquidation of a series, the holders of shares of the series being liquidated
will be entitled to receive as a class a distribution out of the assets, net of
the liabilities, belonging to that series. Expenses attributable to any series
are borne by that series. Any general expenses of the Trust not readily
identifiable as belonging to a particular series are allocated by Officers of
the Trust, or the Trustees in such manner as the Trustees determine to be fair
and equitable. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.
Upon sixty days prior written notice to shareholders, a Fund may make
redemption payments in whole or in part in securities or other property if the
Trustees determine that existing conditions make cash payments undesirable. For
other information concerning the purchase and redemption of shares of the Funds,
see "How to Buy, Sell, or Exchange Shares in Each Fund," "How to Buy Shares,"
"How to Sell Shares" and "How to Exchange Shares" in the Prospectus. For a
description of the methods used to determine the share price and value of each
Fund's assets, see "Share Price Calculation" in the Prospectus.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
This section contains a more detailed discussion of some of the
investments the Fund may make and some of the techniques it may use, as
described in the Prospectus (see "Investment Objectives and Strategies" and
"Investment Policies and Techniques").
A. Corporate Debt Securities. Corporate debt securities are
bonds or notes issued by corporations and other business organizations,
including business trusts, in order to finance their credit needs. Corporate
debt securities include commercial paper which consists of short term (usually
from one to two hundred seventy days) unsecured promissory notes issued by
corporations in order to finance their current operations.
B. Real Estate Related Equity Securities. For the purpose of
determining whether the Fund has at least 65% of its total assets invested in
the real estate industry, the Fund will include a maximum of 5% of its assets
invested in securities of companies considered to be real estate related solely
because the companies have substantial real estate holdings as part of their
operations (and not as investments).
C. Zero Coupon and Pay in Kind Bonds. Corporate debt
securities and municipal obligations include so-called "zero coupon" bonds and
"pay-in-kind" bonds. Zero coupon bonds are issued at a significant discount from
their principal amount in lieu of paying interest periodically. Pay-in-kind
bonds allow the issuer, at its option, to make current interest payments on the
bonds either in cash or in additional bonds. The value of zero coupon bonds and
pay-in-kind bonds is subject to greater fluctuation in response to changes in
market interest rates than bonds which make regular payments of interest. Both
of these types of bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds that make regular payment of interest. Even though zero
coupon bonds and pay-in-kind bonds do not pay current interest in cash, the Fund
is required to accrue interest income on such investments and to distribute such
amounts at least annually to shareholders. Thus, the Fund could be required at
times to liquidate other investments in order to satisfy its dividend
requirements. The Fund will not invest more than 5% of its net assets in
pay-in-kind bonds.
<PAGE> 20
D. Financial Service Industry Obligations. Financial service
industry obligations include among others, the following:
(1) Certificates of Deposit. Certificates of deposit are
negotiable certificates evidencing the indebtedness of a commercial bank or a
savings and loan association to repay funds deposited with it for a definite
period of time (usually from fourteen days to one year) at a stated or variable
interest rate.
(2) Time Deposits. Time deposits are non-negotiable
deposits maintained in a banking institution or a savings and loan association
for a specified period of time at a stated interest rate. Time Deposits are
considered to be illiquid prior to their maturity.
(3) Bankers' Acceptances. Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft which has been
drawn on it by a customer, which instruments reflect the obligation both of the
bank and of the drawer to pay the face amount of the instrument upon maturity.
E. Asset-Backed and Receivable-Backed Securities. Asset-backed
and receivable-backed securities are undivided fractional interests in pools of
consumer loans (unrelated to mortgage loans) held in a trust. Payments of
principal and interest are passed through to certificate holders and are
typically supported by some form of credit enhancement, such as a letter of
credit, surety bond, limited guaranty, or senior/subordination. The degree of
credit enhancement varies, but generally amounts to only a fraction of the
asset-backed or receivable-backed security's par value until exhausted. If the
credit enhancement is exhausted, certificateholders may experience losses or
delays in payment if the required payments of principal and interest are not
made to the trust with respect to the underlying loans. The value of these
securities also may change because of changes in the market's perception of the
creditworthiness of the servicing agent for the loan pool, the originator of the
loans or the financial institution providing the credit enhancement.
Asset-backed and receivable-backed securities are ultimately dependent upon
payment of consumer loans by individuals, and the certificateholder generally
has no recourse against the entity that originated the loans. The underlying
loans are subject to prepayments that shorten the securities' weighted average
life and may lower their return. As prepayments flow through at par, total
returns would be affected by the prepayments: if a security were trading at a
premium, its total return would be lowered by prepayments, and if a security
were trading at a discount, its total return would be increased by prepayments.
The Fund will not invest more than 5% of its net assets in asset-backed or
receivable-backed securities.
F. Forward Commitments and Reverse Repurchase Agreements. The
Fund will direct its Custodian to place cash or U.S. government obligations in a
separate account of the Trust in an amount equal to the commitments of the Fund
to purchase or repurchase securities as a result of its forward commitment or
reverse repurchase agreement obligations. With respect to forward commitments to
sell securities, the Trust will direct its Custodian to place the securities in
a separate account. When a separate account is maintained in connection with
forward commitment transactions to purchase securities or reverse repurchase
agreements, the securities deposited in the separate account will be valued
daily at market for the purpose of determining the adequacy of the securities in
the account. If the market value of such securities declines, additional cash or
securities will be placed in the account on a daily basis so that the market
value of the account will equal the amount of the Fund's commitments to purchase
or repurchase securities. To the extent funds are in a separate account, they
will not be available for new investment or to meet redemptions. Reverse
repurchase agreements constitute a borrowing by the Fund and will not represent
more than 5% of the net assets of the Fund. The Fund will not invest more than
25% of its total assets in forward commitments.
Securities purchased on a forward commitment basis, securities
subject to reverse repurchase agreements and the securities held in the Fund's
portfolio are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes in the level of
interest rates (which will generally result in all of those securities changing
in value in the same way, i.e., all those securities experiencing appreciation
when interest rates decline and depreciation when interest rates rise).
Therefore, if in order to achieve a higher level of income, the Fund remains
substantially fully invested at the same time that it has purchased securities
on a forward commitment basis or entered into reverse repurchase transactions,
there will be a possibility that the market value of the Fund's assets will have
greater fluctuation.
With respect to 75% of the total assets of the Fund, the value
of the Fund's commitments
<PAGE> 21
to purchase or repurchase the securities of any one issuer, together with the
value of all securities of such issuer owned by the Fund, may not exceed 5% of
the value of the Fund's total assets at the time the commitment to purchase or
repurchase such securities is made; provided, however, that this restriction
does not apply to U.S. government obligations or repurchase agreements with
respect thereto. In addition, the Fund will maintain an asset coverage of 300%
for all of its borrowings and reverse repurchase agreements. Subject to the
foregoing restrictions, there is no limit on the percentage of the Fund's total
assets that may be committed to such purchases or repurchases.
G. Restricted Securities. Restricted securities are securities
the resale of which is subject to legal or contractual restrictions. Restricted
securities may be sold only in privately negotiated transactions, in a public
offering with respect to which a registration statement is in effect under the
Securities Act of 1933 or pursuant to Rule 144 or Rule 144A promulgated under
such Act. Where registration is required, the Fund may be obligated to pay all
or part of the registration expense, and a considerable period may elapse
between the time of the decision to sell and the time such security may be sold
under an effective registration statement. If during such a period adverse
market conditions were to develop, the Fund might obtain a less favorable price
than the price it could have obtained when it decided to sell. The Fund will not
invest more than 5% of its net assets in restricted securities.
H. Option Transactions. The Fund may engage in option
transactions involving individual securities and market indexes. An option
involves either (a) the right or the obligation to buy or sell a specific
instrument at a specific price until the expiration date of the option, or (b)
the right to receive payments or the obligation to make payments representing
the difference between the closing price of a market index and the exercise
price of the option expressed in dollars times a specified multiple until the
expiration date of the option. Options are sold (written) on securities and
market indexes. The purchaser of an option on a security pays the seller (the
writer) a premium for the right granted but is not obligated to buy or sell the
underlying security. The purchaser of an option on a market index pays the
seller a premium for the right granted, and in return the seller of such an
option is obligated to make the payment. A writer of an option may terminate the
obligation prior to expiration of the option by making an offsetting purchase of
an identical option. Options are traded on organized exchanges and in the
over-the-counter market. Options on securities that the Fund sells (writes) will
be covered or secured, which means that it will own the underlying security in
the case of a call option. When the Fund writes options, it may be required to
maintain a margin account, to pledge the underlying securities or U.S.
government obligations or to deposit assets in escrow with the Custodian.
The purchase and writing of options involves certain risks. The
purchase of options limits the Fund's potential loss to the amount of the
premium paid and can afford the Fund the opportunity to profit from favorable
movements in the price of an underlying security to a greater extent than if
transactions were effected in the security directly. However, the purchase of an
option could result in the Fund losing a greater percentage of its investment
than if the transaction were effected directly. When the Fund writes a covered
call option, it will receive a premium, but it will give up the opportunity to
profit from a price increase in the underlying security above the exercise price
as long as its obligation as a writer continues, and it will retain the risk of
loss should the price of the security decline. In addition, there can be no
assurance that the Fund can effect a closing transaction on a particular option
it has written.
I. Loans of Portfolio Securities. The Fund may make short and
long term loans of its folio securities. Under the lending policy authorized by
the Board of Trustees and implemented by the Adviser in response to requests of
broker-dealers or institutional investors which the Adviser deems qualified, the
borrower must agree to maintain collateral, in the form of cash or U.S.
government obligations, with the Fund on a daily mark-to-market basis in an
amount at least equal to 100% of the value of the loaned securities. The Fund
will continue to receive dividends or interest on the loaned securities and may
terminate such loans at any time or reacquire such securities in time to vote on
any matter that the Board of Trustees determines to be serious. With respect to
loans of securities, there is the risk that the borrower may fail to return the
loaned securities or that the borrower may not be able to provide additional
collateral. No loan of securities will be made if, as a result, the aggregate
amount of such loans would exceed 5% of the value of the Fund's net assets.
INVESTMENT LIMITATIONS
Fundamental. The investment limitations described below have been
adopted by the Trust with respect to the Fund and are fundamental
("Fundamental"), i.e., they may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. As used in the Prospectus and
this Statement of Additional Information, the term "majority" of the outstanding
shares of the Trust (or of any
<PAGE> 22
series) means the lesser of (1) 67% or more of the outstanding shares of the
Trust (or the applicable series) present at a meeting, if the holders of more
than 50% of the outstanding shares of the Trust (or applicable series) are
present or represented at such meeting; or (2) more than 50% of the outstanding
shares of the Trust (or the applicable series). Other investment practices which
may be changed by the Board of Trustees without the approval of shareholders to
the extent permitted by applicable law, regulation or regulatory policy are
considered non-fundamental ("Non-Fundamental").
1. Borrowing Money. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. Senior Securities. The Fund will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is (a) consistent with or permitted by the
Investment Company Act of 1940, as amended, the rules and regulations
promulgated thereunder or interpretations of the Securities and Exchange
Commission or its staff and (b) as described in the Prospectus and Statement of
Additional Information.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. The Fund will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities that are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts
(REITs)).
5. Commodities. The Fund will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts or from investing in securities or other instruments backed by
commodities.
6. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing non-publicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
Concentration. The Fund will not invest 25% or more of its total assets in any
particular industry other than the real estate industry. This limitation is not
applicable to investments in obligations issued or guaranteed by the U.S.
government, its agencies and instrumentalities or repurchase agreements with
respect thereto.
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken. This paragraph does not apply to the borrowing policy set
forth in paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
Non-Fundamental. The following limitations have been adopted by the
Trust with respect to the
<PAGE> 23
Fund and are Non-Fundamental.
i. Pledging. The Funds will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
ii. Borrowing. The Fund will not purchase any security while borrowings
(including reverse repurchase agreements) representing more than 5% of its total
assets are outstanding.
iii. Margin Purchases. The Fund will not purchase securities or
evidences of interest thereon on "margin." This limitation is not applicable to
short term credit obtained by the Fund for the clearance of purchases and sales
or redemption of securities, or to arrangements with respect to transactions
involving options, futures contracts, short sales and other permitted
investments and techniques.
iv. Short Sales. The Fund will not effect short sales of securities
unless it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short.
v. Options. The Fund will not purchase or sell futures, puts, calls,
options or straddles.
vi. Illiquid Investments. The Fund will not invest more than 5% of its
net assets in securities for which there are legal or contractual restrictions
on resale and other illiquid securities.
<PAGE> 24
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Trust and their principal
occupations during the last five years are set forth below. Each Trustee who is
an "interested person" of the Trust, as defined in the Investment Company Act of
1940, is indicated by an asterisk.
<TABLE>
<CAPTION>
NAME (AGE) POSITIONS HELD PRINCIPAL OCCUPATIONS
- ---- ----- -------------- ---------------------
<S> <C> <C>
Timothy E. Johnson (55)* President and Trustee President and a Director of Johnson Investment
5556 Cheviot Road Counsel, Inc., the Trust's Adviser and
Cincinnati, Ohio 45247 Professor of Finance at the University of Cincinnati.
President and Director of Johnson Financial, Inc. (a)
John W. Craig (63) Trustee Retired director of Corporate Affairs at
5813 Twin Oak Drive R.A. Jones & Co., Inc. a manufacturing and
Cincinnati, Ohio 45224 packaging company, and the Chairman and Chief
Executive Officer of CP&I, Inc.
Ronald H. McSwain (55) Trustee President of McSwain Carpets, Inc. and a
765 Hedgerow Lane partner of P&R Realty, a real estate
Cincinnati, Ohio 45246 development partnership.
Kenneth S. Shull (68) Trustee Retired plant engineer at The Procter &
2145 Bluebell Drive Gamble Company.
Cincinnati, Ohio 45224
Dale H. Coates (39) Vice President Portfolio Manager of the Trust's Adviser.
5556 Cheviot Road
Cincinnati, Ohio 45247
Richard T. Miller (51) Vice President Portfolio Manager of the Trust's Adviser.
5556 Cheviot Road
Cincinnati, Ohio 45247
Dianna J. Rosenberger (33) Chief Financial Officer Portfolio Manager of the Trust's Adviser.
5556 Cheviot Road and Treasurer Chief Operating Officer of Johnson Financial,
Cincinnati, Ohio 45247 Inc. (a)
David C. Tedford (44) Secretary Office Administrator of the Trust's Adviser.
5556 Cheviot Road
Cincinnati, Ohio 45247
</TABLE>
Johnson Financial, Inc. is a wholly owned subsidiary of Johnson Investment
Counsel, Inc., the Adviser.
<PAGE> 25
The compensation paid to the Trustees of the Trust for the year ended December
31,1996 is set forth in the following table:
Total Compensation from Trust
(the Trust is not in a Fund Complex) (1)
----------------------------------------
Timothy E. Johnson $0
John W. Craig $3,000
Ronald H. McSwain $3,000
Kenneth S. Shull; $3,000
(1) Trustee fees are Trust expenses. However, because the management agreement
obligates the Adviser to pay all of the operating expenses of the Trust (with
limited exceptions), the Adviser makes the actual payment.
As of January 2, 1998, the Oakmont Trust, an entity that is affiliated
with the Adviser, owned all of the outstanding shares of the Johnson Realty
Fund. The Trust's address is 5556 Cheviot Road, Cincinnati, Ohio, 45247.
<PAGE> 26
THE INVESTMENT ADVISER
The Fund's investment adviser is Johnson Investment Counsel, Inc., 5556
Cheviot Road, Cincinnati, Ohio 45247. Timothy E. Johnson may be deemed to be a
controlling person and an affiliate of the Adviser due to his ownership of its
shares and his position as the President and a director of the Adviser. Mr.
Johnson, because of such affiliation, may receive benefits from the management
fees paid to the Adviser.
Under the terms of the Management Agreement, the Adviser manages the
Fund's investments subject to approval of the Board of Trustees and pays all of
the expenses of the Fund except brokerage, taxes, interest and extraordinary
expenses. As compensation for its management services and agreement to pay the
Fund's expenses, the Fund is obligated to pay the Adviser a fee computed and
accrued daily and paid monthly at an annual rate of 1.30% of the average daily
net assets of the Realty Fund. However, the Adviser has committed to limit its
fee to 0.95% of such assets for the Realty Fund. The Adviser intends that these
fee limitations will be permanent, although the Adviser reserves the right to
remove them at any time after December 31, 1998.
The Adviser retains the right to use the name "Johnson" in connection
with another investment company or business enterprise with which the Adviser is
or may become associated. The Trust's right to use the name "Johnson"
automatically ceases thirty days after termination of the Management Agreement
and may be withdrawn by the Adviser on thirty days written notice.
The Adviser may make payments to banks or other financial institutions
that provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Fund believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Fund believes that there would be no material impact on the Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. The Fund may from time to time
purchase securities issued by banks that provide such services; however, in
selecting investments for the Fund, no preference will be shown for such
securities.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
the Adviser is responsible for the Fund's portfolio decisions and the placing of
the Fund's portfolio transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for the Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
The Adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Trust and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Trust effects securities
transactions may also be used by the Adviser in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to the Adviser in connection with its services to the
Fund. Although
<PAGE> 27
research services and other information are useful to the Fund and the Adviser,
it is not possible to place a dollar value on the research and other information
received. It is the opinion of the Board of Trustees and the Adviser that the
review and study of the research and other information will not reduce the
overall cost to the Adviser of performing its duties to the Fund under the
Management Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to market makers may include the spread between the bid and
asked prices.
To the extent that the Fund and another of the Adviser's clients seek
to acquire the same security at about the same time, the Trust may not be able
to acquire as large a position in such security as it desires or it may have to
pay a higher price for the security. Similarly, the Fund may not be able to
obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the other client desires to sell the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one client, the resulting
participation in volume transactions could produce better executions for the
Fund. In the event that more than one client wants to purchase or sell the same
security on a given date, the purchases and sales will normally be allocated
using the following rules: (1) All client accounts would have their entire order
filled or receive no shares at all, unless the account's purchase would exceed
$50,000. In that case, filling part of the order for that account would be
acceptable. (2) The orders would be filled beginning with the account least
invested in that security type, relative to its goal, and proceed through the
list with the last order filled for the account most invested in that security
type, relative to its goal. Based on rule 1, some accounts may be skipped to
meet the exact number of shares purchased. For the sale of a security, the
orders would be filled beginning with the most fully invested account moving to
the least fully invested.
DETERMINATION OF SHARE PRICE
The prices (net asset values) of the shares of the Fund are determined
as of the close of trading of the New York Stock Exchange (4:00 P.M., Eastern
time) on each day the Trust is open for business and on any other day on which
there is sufficient trading in the Fund's securities to materially affect the
net asset value. The Trust is open for business on every day except Saturdays,
Sundays and the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
For a description of the methods used to determine the net asset value (share
price), see "Share Price Calculation" in the Prospectus.
INVESTMENT PERFORMANCE
"Average annual total return," as defined by the Securities and
Exchange Commission, is computed by finding the average annual compounded rates
of return (over the one and five year periods and the period from initial public
offering through the end of a Fund's most recent fiscal year) that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)(n)=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
applicable period of the hypothetical $1,000 investment made at the beginning
of the applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
The Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with the Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
<PAGE> 28
From time to time, in advertisements, sales literature and information
furnished to present or prospective shareholders, the performance of the Fund
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of the Fund or
considered to be representative of the real estate securities market in general.
The Fund will use the NAREIT Index and the Wilshire REIT Index. The NAREIT Index
measures the price, income and total return of all publicly traded REITs,
including mortgage-backed REITs and equity REITs. The Wilshire REIT Index
includes all publicly traded REITs with capitalizations above $100 million.
In addition, the performance of the Fund may be compared to other
groups of mutual funds tracked by any widely used independent research firm
which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of the Fund. Performance rankings and ratings
reported periodically in national financial publications such as Barron's may
also be used.
CUSTODIAN
The Provident Bank, One East Fourth Street, Cincinnati, Ohio, is the
current custodian of the Fund's investments. The Custodian acts as the Fund's
depository, holds its portfolio securities in safekeeping, collects all income
and other payments with respect thereto, disburses funds at the Fund's request
and maintains records in connection with its duties.
TRANSFER AGENT
Johnson Financial, Inc., 5556 Cheviot Road, Cincinnati, Ohio, acts as
the Fund's transfer agent and, in such capacity, maintains the records of each
shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of the Fund's shares, acts as
dividend and distribution disbursing agent and performs other accounting and
shareholder service functions. Johnson Financial is affiliated with Johnson
Investment Counsel, Inc., the Fund's Adviser. The Adviser pays Johnson
Financial, Inc. $6,000 per month according to a flat fee schedule for services
rendered.
ACCOUNTANTS
The firm of McCurdy & Associates CPA's, Inc. of Westlake, Ohio, has
been selected as independent public accountants for the Trust for the fiscal
year ending December 31, 1998.
