<PAGE>
As filed with the Securities and Exchange Commission on November 21, 1995
1933 Act Registration No. 33-58932
1940 Act Registration No. 811-7542
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-lA
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [__X__]
Pre-Effective Amendment No.____ [_____]
Post-Effective Amendment No.__2__ [__X__]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [__X__]
Amendment No. __4__ [__X__]
(Check appropriate box or boxes.)
CONSULTANTS TRUST
(Exact name of registrant as specified in charter)
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(Address of principal executive offices)
Registrant's telephone number, including area code: (804) 846-1361
DAVID D. BASTEN
Consultants Trust
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(Name and address of agent for service)
Copies to:
ARTHUR J. BROWN, Esq.
R. DARRELL MOUNTS, Esq.
Kirkpatrick & Lockhart LLP
South Lobby - 9th Floor
1800 M Street, N.W.
Washington, D.C. 20036-5891
Telephone: (202) 778-9000
It is proposed that this filing will become effective:
[ X ] Immediately upon filing pursuant to paragraph (b)
[ ] On (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On (date) pursuant to paragraph (a)(2) of Rule 485.
<PAGE>
Registrant has elected to register an indefinite number of
securities pursuant to Rule 24f-2 under the Investment Company Act of
1940. Pursuant to Rule 24f-2 (b)(2), the issuer need not file a Rule
24f-2 Notice for its most recent fiscal year because it did not sell any
securities pursuant to such declaration during the most recent fiscal
year.
<PAGE>
Consultants Trust
Contents of Registration Statement
This Registration Statement consists of the following papers and
documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
Consultants Trust
Form N-1A Cross Reference Sheet
Part A Item No. and Caption Prospectus Caption
--------------------------- ------------------
1. Cover Page.............. Cover Page
2. Synopsis................ Table of Fund Expenses
3. Condensed Financial Performance Information
Information.............
4. General Description of Investment Objectives and
Registrant.............. Policies; Investing in Mutual
Funds; Other Investment
Policies and Risk Factors;
Fund Shares; Appendix
5. Management of the Fund.. Management of the Trust;
Custodian, Transfer and
Dividend Disbursing Agent
5A. Management's Discussion of Not Applicable
Fund Performance..........
6. Capital Stock and Other Dividends, Other Distributions
Securities........ and Taxes; Fund Shares;
General Information
7. Purchase of Securities Purchase of Fund Shares
Being Offered...........
8. Redemption or Redemption of Fund Shares
Repurchase..............
9. Pending Legal Not Applicable
Proceedings.............
<PAGE>
Part B Item No. Statement of Additional
and Caption Information Caption
---------------- ----------------------
10. Cover page.............. Cover Page
11. Table of Contents....... Table of Contents
12. General Information and Not Applicable
History.............
13. Investment Objective and Investment Restrictions; Other
Policies................ Investment Policies; Portfolio
Transactions
14. Management of the Fund.. Management of the Trust
15. Control Persons and Principal Management of the Trust;
Holders of Distribution of Fund Shares;
Securities.............. Independent Accountants
16. Investment Advisory and Other Management of the Trust
Services..........
17. Brokerage Allocation.... Portfolio Transactions
18. Capital Stock and Other Other Information
Securities..............
19. Purchase, Redemption and Pricing and Additional Exchange
Pricing of Securities Being and Redemption Information
Offered......
20. Tax Status.............. Taxation
21. Underwriters............ Distribution of Fund Shares
22. Calculation of Performance Performance Information
Data....................
23. Financial Statements.... Financial Statements
Part C
Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C of this Registration
Statement.
<PAGE>
CONSULTANTS TRUST
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(804) 846-1361
(800) 544-6060
Consultants Trust ("Trust") is an open-end, management investment
company that offers shares of five separate diversified portfolios (each a
"Fund"). The investment objective of each Fund is as follows:
Growth Fund--This Fund's investment objective is growth of capital.
Capital Income Fund--This Fund's primary investment objective is to seek
to achieve high current income. The Fund's secondary objective is growth
of capital and income.
Total Return Fund--This Fund's investment objective is to maximize total
return from capital growth and income.
Special Markets Trust--This Fund's investment objective is to maximize
total return from capital growth and income.
Treasuries Trust--This Fund's investment objective is to seek current
income while limiting credit risk.
Each Fund, except the Treasuries Trust seeks to achieve its
objective by investing in shares of other open-end investment companies
("underlying funds"). The Treasuries Trust seeks to achieve its objective
by investing in obligations of the U.S. Treasury that are guaranteed as to
principal and interest by the full faith and credit of the U.S.
Government. An investor in a Fund that invests in underlying funds will
bear not only his proportionate share of the expenses of the Fund but
also, indirectly, similar expenses of the underlying funds. No assurance
can be given that any Fund will achieve its investment objective. Shares
of the Funds are offered through Yorktown Distributors, Inc. Each Fund's
minimum initial investment per shareholder is $500; subsequent investments
must be at least $100.
Fund shares are not deposits or obligations of, or endorsed or
guaranteed by, any bank, nor are they federally insured as otherwise
protected by the Federal Deposit Insurance Corporation, The Federal
Reserve Board or any other agency.
This Prospectus sets forth concisely the information about the
Trust and the Funds that a prospective investor should know before
investing. It should be read and retained for future reference. A
Statement of Additional Information, dated November 21, 1995 has been
filed with the Securities and Exchange Commission and, as amended from
time to time, is incorporated by reference herein. It is available, at no
charge, by contacting the Trust at the address or telephone numbers
provided above.
<PAGE>
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.
This Prospectus is dated November 21, 1995.
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<PAGE>
TABLE OF CONTENTS
Topic Page
TABLE OF FUND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . 5
Growth Fund. . . . . . . . . . . . . . . . . . . . . . . . . 5
Capital Income Fund . . . . . . . . . . . . . . . . . . . . 5
Total Return Fund . . . . . . . . . . . . . . . . . . . . . 5
Special Markets Trust . . . . . . . . . . . . . . . . . . . 6
Treasuries Trust . . . . . . . . . . . . . . . . . . . . . . 6
INVESTING IN MUTUAL FUNDS . . . . . . . . . . . . . . . . . . . . . . 7
Selection of Underlying Funds . . . . . . . . . . . . . . . 7
Risks And Other Considerations . . . . . . . . . . . . . . . 7
OTHER INVESTMENT POLICIES AND RISK FACTORS . . . . . . . . . . . . . 9
Income-Producing Equity Securities . . . . . . . . . . . . . 9
Fixed-Income Securities . . . . . . . . . . . . . . . . . . 9
Lower Rated Debt Securities . . . . . . . . . . . . . . . . . 9
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . 10
Other Information . . . . . . . . . . . . . . . . . . . . . 10
MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . 11
PURCHASE OF FUND SHARES . . . . . . . . . . . . . . . . . . . . . . . 12
Distribution Arrangements . . . . . . . . . . . . . . . . . 12
How Shares May Be Purchased . . . . . . . . . . . . . . . . 12
Systematic Investment Plan . . . . . . . . . . . . . . . . . 13
Exchange Privileges . . . . . . . . . . . . . . . . . . . . 13
Determining Net Asset Value . . . . . . . . . . . . . . . . 14
REDEMPTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . . . . 14
How Shares May Be Redeemed . . . . . . . . . . . . . . . . . 14
Systematic Withdrawal Plan . . . . . . . . . . . . . . . . . 14
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . 15
Dividends and Other Distributions . . . . . . . . . . . . . 15
Taxation of the Funds . . . . . . . . . . . . . . . . . . . 15
Taxation of Shareholders . . . . . . . . . . . . . . . . . . 15
Qualified Retirement Plans . . . . . . . . . . . . . . . . . 16
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 16
FUND SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT . . . . . . . . . . 17
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 17
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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<PAGE>
TABLE OF
FUND EXPENSES
The following tables are intended to assist investors in
understanding the expenses associated with investing in the Funds.
SHAREHOLDER TRANSACTION EXPENSES
Sales load imposed on purchases . . . . . . . . . . . . . . None
Redemption Fees . . . . . . . . . . . . . . . . . . . . . . None
Sales load imposed on reinvested dividends . . . . . . . . . None
Exchanges fees . . . . . . . . . . . . . . . . . . . . . . . None
(1)
ANNUAL OPERATING EXPENSES (after waivers or reimbursements)
(as a percentage of
average net assets)
<TABLE>
<CAPTION>
Capital Total Special
Growth Income Return Markets Treasuries
Fund Fund Fund Trust Trust
------ ------ ------ ------- ----------
<S> <C> <C> <C> <C> <C>
Management Fees 0.70% 0.70% 0.70% 0.70% 0.70%
12b-1 Fees 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses (estimated
after waivers or reim- 0.55% 0.55% 0.55% 0.55% 0.55%
bursements) ----- ----- ----- ----- -----
TOTAL OPERATING EXPENSES
(after waivers or reim- 1.50% 1.50% 1.50% 1.50% 1.50%
bursements) ===== ===== ===== ===== =====
</TABLE>
(1) The Fund's investment adviser, Yorktown Management &
Research Company, Inc. (the "Adviser"), has undertaken to waive its fee or
reimburse each Fund for a portion of its operating expenses during the
fiscal period ending May 31, 1996, so that total operating expenses (not
including taxes, extraordinary expenses, brokerage commissions and
interest) do not exceed 1.50% of a Fund's average daily net assets on an
annual basis. For this purpose, brokerage commissions include sales loads
paid in connection with the purchase or sale of shares of underlying
funds. Other Expenses and Total Operating Expenses without such waiver or
reimbursement would be 1.05% and 2.00%, respectively, for each Fund.
Long-term shareholders may pay more in 12b-1 fees than the amount of the
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<PAGE>
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc. ("NASD").
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<PAGE>
EXAMPLE
A Shareholder would pay the following expenses on a $1,000
investment assuming (1) a 5% annual return and (2) redemption at the end
of each period.
<TABLE>
<CAPTION>
Capital Total Special
Growth Income Return Markets Treasuries
Fund Fund Fund Trust Trust
<S> <C> <C> <C> <C> <C>
after 1 year $15.00 $15.00 $15.00 $15.00 $15.00
after 3 years $48.00 $48.00 $48.00 $48.00 $48.00
</TABLE>
The Example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Operating
Expenses remain the same in the years shown. The above tables and the
assumption in the Example of a 5% annual return are required by
regulations of the Securities and Exchange Commission ("SEC") applicable
to all mutual funds; the assumed 5% annual return is not a prediction of,
and does not represent, the projected or actual performance of the Funds'
shares. The Example should not be considered a representation of future
expenses. The actual expenses of each Fund may be more or less than those
shown.
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<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Growth Fund
The Growth Fund's investment objective is growth of capital. The
Fund seeks to achieve its objective by investing primarily in shares of
underlying funds that seek long-term capital growth or appreciation by
investing primarily in common stock or securities convertible into or
exchangeable for common stock (such as convertible preferred stock,
convertible debentures or warrants ("convertible securities")). The Fund
also may invest in funds that invest primarily in long or short-term bonds
and other fixed-income securities (such as securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities ("U.S.
Government securities"), commercial paper and preferred stock) whenever
the Adviser believes that these funds offer a potential for growth of
capital, such as during periods of declining interest rates.
Capital Income Fund
The Capital Income Fund's primary investment objective is to seek
to achieve high current income. The Fund's secondary objective is growth
of capital and income. The Fund seeks to achieve its objectives by
investing primarily in shares of underlying funds that seek to achieve an
objective of high current income by investing in income-producing equity
securities, including dividend-paying common stocks and convertible
securities, long or short-term bonds and other fixed-income securities
(such as U.S. Government securities, commercial paper and preferred
stock). The Capital Income Fund may invest in underlying funds that
invest only in debt securities rated at least investment grade by Standard
& Poor's ("S&P") or Moody's Investors Service, Inc. ("Moody's"), or in
underlying funds that invest in debt securities that are rated below
investment grade by S&P or Moody's. The Fund will not invest more than
35% of its net assets in underlying funds that may invest more than 35% of
their net assets in debt securities that are rated below investment grade.
See "Other Investment Policies and Risk Factors - Lower Rated Debt
Securities" for more information on lower rated debt securities.
Total Return Fund
The Total Return Fund's investment objective is to maximize total
return from capital growth and income. The Fund seeks to achieve its
objective by investing in shares of a broad range of underlying funds.
The Adviser will allocate the Fund's assets among one or more of five
general types of underlying funds: aggressive growth funds, growth funds,
growth and income funds, income (bond) funds and money market funds. The
Fund is unlikely at any time to have all its assets invested in only one
of these five general types of funds. The Adviser will vary the
proportion of each type of underlying fund based on the mix of such funds
that may, in the Adviser's view, be most likely to achieve the Fund's
investment objective.
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<PAGE>
In allocating assets among the five general types of underlying
funds, the Adviser will follow a multi-step investment analysis. First,
the Adviser will consider general political and economic trends and
current financial and market conditions in order to determine the current
phase of the business and investment cycle and to assess the risks and
opportunities in the financial markets. The Adviser will seek the most
likely combination of fund types that will provide the best opportunity
for maximizing total return consistent with prudent investment risks. The
Adviser will not rely on a model in reaching asset allocation decisions,
but will make its own assessment of the relative risk-reward levels of
various asset types based on its experience and analysis of current
conditions.
If the Adviser determines that the values of equity securities
are likely to rise, it may emphasize aggressive growth funds, growth funds
and growth and income funds. In periods of rising interest rates it may
emphasize holdings of money market funds, or in periods of falling
interest rates it may emphasize income funds, depending upon conditions in
the equity markets.
Second, after determining the proportion of assets to be
allocated to particular types of funds, the Adviser will identify whether
certain specific sub-categories of funds offer greater potential for
positive returns. For example, the Adviser may choose to emphasize growth
funds that invest in foreign securities or growth funds that concentrate
in a particular industry sector; or the Adviser may select income funds
based on whether they invest primarily in long or short-term debt
securities.
Within the framework of the foregoing guidelines, the underlying
funds in which the Total Return Fund invests consist of aggressive growth
funds and growth funds, which are generally funds that seek capital growth
and appreciation by investing primarily in common stock or convertible
securities; growth and income funds, which are generally funds that seek a
combination of capital appreciation and current income (including income
from dividends, income from interest, growth of income or any combination
thereof) by investing primarily in common stocks, preferred stocks, bonds
and other fixed-income securities (including convertible securities);
income funds, which are generally funds that seek high current income by
investing primarily in long or short-term bonds and other fixed-income
securities (such as U.S. Government securities, commercial paper,
preferred stocks and convertible securities); and money market funds,
which are generally funds that seek as high a level of current income as
is consistent with preservation of capital and liquidity by investing in a
broad range of high quality, short- term money market instruments that
have remaining maturities not exceeding 397 days (including U.S.
Government securities, bank obligations, commercial paper, corporate debt
securities and repurchase agreements).
Aggressive growth funds generally seek greater capital
appreciation by engaging in investment practices that entail special
risks. Such funds may invest in securities that their adviser believes
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<PAGE>
will be accorded market recognition at an appreciated value within a short
period of time due to developments such as reorganizations, above-average
earnings growth, material litigation, technological breakthroughs and new
management or management policies. Such investments involve greater risks
than is inherent in ordinary investments, due to, among other things, the
unreliable nature of the company's earnings growth. Aggressive growth
funds may also invest in the securities of small and less seasoned
companies that may have limited operating history and marketability and
may be subject to more abrupt or erratic market movements over time than
securities of larger, more seasoned companies or the market as a whole.
Such funds may also engage in leverage and in short term trading which
increases portfolio turnover, potential tax costs and brokerage
commissions.
The Total Return Fund may invest in underlying funds that invest
only in debt securities rated at least investment grade by S&P or Moody's
or in underlying funds that invest in debt securities that are rated below
investment grade by S&P or Moody's. The Fund will not invest more than
35% of its net assets in underlying funds that may invest more than 35% of
their net assets in debt securities that are rated below investment grade.
See "Other Investment Policies and Risk Factors - Lower Rated Debt
Securities" for more information on lower rated debt securities.
Special Markets Trust
The Special Markets Trust's investment objective is to maximize
total return from capital growth and income. The Fund seeks to achieve
its objective by investing primarily in shares of underlying funds whose
portfolios mirror those of one index or another of market securities, such
as the Standard & Poor's 500 Composite Stock Price Index, the New York
Stock Exchange Composite Index, the Nasdaq Composite Index or the Russell
4500 Index. Such funds generally are not managed in the traditional
sense, using economic, financial and market analysis, nor will the adverse
financial situation of an issuer directly result in the elimination of its
security from the index and consequently the fund.
Treasuries Trust
The Treasuries Trust's investment objective is to seek current
income while limiting credit risk. Under normal conditions, the Fund
invests at least 65% (and normally 100%) of its total assets in
obligations of the U.S. Treasury (such as Treasury bills, notes and bonds)
that are guaranteed as to principal and interest by the full faith and
credit of the U.S. Government. Treasury bills, notes and bonds
historically have involved little risk of loss of principal if held to
maturity. Such securities, however, are subject to variations in market
value due to interest rate fluctuations. If interest rates fall, the
market value of fixed-income securities tends to rise; if interest rates
rise, the value of fixed-income securities tends to fall. Moreover, the
longer the remaining maturity of a fixed-income debt security, the greater
the effect of interest rate changes on the market value of the security.
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<PAGE>
This market risk affects all fixed-income securities, but U.S. Government
securities are generally subject to less market risk.
INVESTING IN MUTUAL FUNDS
Selection of Underlying Funds
The Adviser selects underlying funds in which to invest the
assets of the Growth Fund, Capital Income Fund, Total Return Fund and
Special Markets Trust based, in part, upon an analysis of their past
performance and their investment objectives, policies and the investment
style of their investment advisers. The Adviser also considers other
factors in the selection of underlying funds including, but not limited
to, the underlying funds' size, cost structure, shareholder services,
liquidity and the reputation and stability of their investment advisers.
The underlying funds in which a Fund invests may include new funds or
funds with limited operating history. Underlying funds may, but need not,
have the same investment objectives, policies and limitations as the Fund.
For example, although the Growth Fund will not borrow money for investment
purposes, it may invest up to 25% of its total assets in an underlying
fund that borrows money for investment purposes (i.e., engages in the
speculative activity of leveraging).
Normally, the Growth Fund, Capital Income Fund and Total Return
Fund each will invest in approximately ten to seventy-five underlying
funds and the Special Markets Trust will invest in ten to fifteen
underlying funds. Each Fund may invest up to 25% of its total assets in
any one underlying fund. The Funds may invest in shares of the same
underlying fund; however, the percentage of each Fund's assets so invested
may vary and the Funds and their affiliates may not hold more than 3% of
an underlying fund's shares. In the event a Fund holds more than 1% of an
underlying fund's shares, the underlying fund will be obligated to redeem
only 1% of the underlying fund's outstanding securities during any period
of less than 30 days. Any shares of an underlying fund held by a Fund in
excess of 1% of the underlying fund's outstanding shares, therefore, will
be considered not readily marketable securities that, together with other
such securities, may not exceed 15% of that Fund's net assets. In
accordance with the Investment Company Act of 1940 ("1940 Act"), if an
underlying fund submits a matter to shareholders for vote, a Fund holding
shares of such fund will either vote the shares (i) in accordance with
instructions received from Fund shareholders or (ii) in the same
proportion as the vote of all other holders of such securities.
The Funds may not purchase shares of closed-end investment
companies or of investment companies that are not registered with the SEC.
The Funds intend only to invest in underlying funds that intend to qualify
for treatment as regulated investment companies ("RIC") under the Internal
Revenue Code of 1986, as amended ("Code"). If a fund fails to qualify as
a RIC it may be subject to federal income tax. No assurance can be given,
however, that an underlying fund will qualify as a RIC and the Funds may
not sell shares of an underlying fund that does not so qualify.
- 10 -
<PAGE>
Risks And Other Considerations
As a fundamental policy, the Growth Fund, Capital Income Fund,
Total Return Fund and Special Markets Trust will each invest at least 25%
of its total assets in shares of mutual funds. Any investment in a mutual
fund involves risk, and, although the Growth Fund, Capital Income Fund,
Total Return Fund and Special Markets Trust each invest in a number of
underlying funds, this practice does not eliminate investment risk.
Investment decisions by the investment advisers of the underlying funds
are made independently of the Funds and the Adviser. Therefore, the
investment adviser of one underlying fund may be purchasing shares of the
same issuer whose shares are being sold by the investment adviser of
another underlying fund. The result of this would be an indirect expense
to a Fund without accomplishing any investment purpose.
Some of the underlying funds also could incur more risks than
others. For example, they may trade their portfolios more actively (which
results in higher brokerage expenses), may engage in investment practices
that entail greater risks or invest in companies whose securities and
other investments are more volatile. Moreover, while each Fund has a
policy of investing no more than 25% of its total assets in the securities
of underlying funds that invest 25% or more of their total assets in any
one industry, a Fund through its investments in underlying funds
indirectly may invest more than 25% of its assets in any one industry. In
addition, the underlying funds in which the Growth Fund, Capital Income
Fund, Total Return Fund and Special Markets Trust invest may have policies
themselves that, among other things, permit them to invest up to 100% of
their assets in securities of foreign issuers and to engage in foreign
currency transactions with respect to their investments; invest up to 15%
of their net assets in illiquid securities; lend their portfolio
securities; borrow money in amounts up to 33 % of their assets for
investment purposes leverage; invest 25% or more of their total assets in
one industry; write (sell) or purchase call or put options on securities
or on stock or bond indexes; enter into futures contracts; and write
(sell) or purchase options on futures contracts, sell securities short;
invest up to 5% of their assets in warrants; and invest in convertible
securities. The risks associated with certain of these investment
practices are described in the Appendix.
Under certain circumstances, an underlying fund may determine to
make a payment for redemption of its shares to a Fund wholly or partly by
a distribution in kind of securities from its portfolio, in lieu of cash,
in conformity with the rules of the SEC. In such cases, the Funds may
hold securities distributed by an underlying fund until the Adviser
determines that it is appropriate to dispose of such securities. Such
disposition generally will entail additional costs to the Fund.
The Growth Fund, Capital Income Fund, Total Return Fund and
Special Markets Trust each may purchase shares of underlying funds that
impose a front-end sales load and shares of underlying funds that do not
impose a front-end sales load. An underlying fund is currently permitted
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<PAGE>
under the rules of the NASD to impose front-end sales loads as high as
8.5% of the public offering price (9.29% of the net amount invested);
provided that it does not also impose an asset-based sales charge. The
Adviser anticipates, however, investing each Fund's assets in funds that
impose no front-end sales load or impose a front-end sales load on shares
purchased by the Fund of no more than 1% of the public offering price of
the shares. Fund purchases may often qualify for so-called quantity
discounts whereby a lower front-end sales load is applied to purchases of,
for example, $50,000 or more. Additionally, where possible, the Adviser
will seek to reduce the front-end sales load imposed by purchasing shares
pursuant to (i) letters of intent, permitting it to obtain reduced
front-end sales loads by aggregating its intended purchases over time;
(ii) rights of accumulation, permitting it to obtain reduced front-end
sales loads as it purchases additional shares of an underlying fund; and
(iii) rights to obtain reduced front-end sales loads by aggregating its
purchases of several funds within a family of mutual funds. In addition
to any front-end sales load imposed by an underlying fund, the underlying
fund may impose annual distribution and service fees of up to 1% of the
fund's average daily net assets. Moreover, these Funds may invest in
shares of underlying funds that are sold with a contingent deferred sales
charge of up to 1.0%.
Front-end sales loads generally are split into the dealer
reallowance (which typically comprises at least 80% of the amount of the
charge) and the underwriter's retention. Yorktown Distributors. Inc.
("Distributors"), the distributor of shares of the Funds, generally will
be designated as the dealer entitled to receive the dealer reallowance
portion of the sales charge on purchases of load fund shares by the Funds.
However, Distributors will not retain any dealer reallowance in excess of
1% of the public offering price on any transaction, nor will it be
designated as the dealer entitled to receive the dealer reallowance
portion of the sales charge where such reallowance would exceed 1% of the
public offering price.
Investing in the Growth Fund, Capital Income Fund, Total Return
Fund and Special Markets Trust also involves certain additional expenses
and certain tax consequences that would not be present in a direct
investment in the underlying funds. An investor in these Funds should
recognize that he may invest directly in mutual funds and that, by
investing in mutual funds indirectly through the Funds, he will bear not
only his proportionate share of the expenses of the Funds (including
operating costs and investment advisory and administrative fees) but also
indirectly similar expenses of the underlying funds as well as sales loads
and distribution fee expenses.
OTHER INVESTMENT POLICIES AND RISK FACTORS
Income-Producing Equity Securities
The underlying funds in which the Capital Income Fund may invest
may seek to achieve their objective of high current income by investing in
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income-producing equity securities. Unlike most fixed-income securities,
the amount of dividends, if any, paid on equity securities is not fixed
and the holders of equity securities are not entitled to be paid a fixed
amount of principal. Equity securities may have greater potential for
capital appreciation than fixed-income securities, but carry a
correspondingly greater risk of capital loss. Additionally, convertible
securities may offer higher income than the common stocks into which they
are convertible. Prior to their conversion, convertible securities have
the same general characteristics as non-convertible debt securities.
While convertible securities generally offer lower interest or dividend
yields than non-convertible debt securities of similar quality, they may
reflect changes in value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock because
they rank senior to common stock.
Fixed-Income Securities
The Capital Income Fund and Total Return Fund may each invest in
underlying funds that invest in fixed income securities. The market value
of fixed-income securities is affected by changes in interest rates. If
interest rates fall, the market value of fixed-income securities tends to
rise; if interest rates rise, the value of fixed-income securities tends
to fall. Moreover, the longer the remaining maturity of a fixed-income
security, the greater the effect of interest rate changes on the market
value of the security. This market risk affects all fixed-income
securities, but U.S. Government securities are generally subject to less
market risk.
Lower Rated Debt Securities
The Capital Income Fund and Total Return Fund may each invest in
underlying funds that invest only in debt securities rated at least
investment grade by S&P or Moody's or in underlying funds that invest in
debt securities rated below investment grade by S&P or Moody's.
Investment grade debt securities are those that at the time of purchase
have been assigned one of the four highest ratings by S&P or Moody's or,
if unrated, determined by the underlying fund's investment adviser to be
of comparable quality. This includes debt securities rated BBB by S&P or
Baa by Moody's that have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to a weakened
capacity for such securities to make principal and interest payments than
is the case for higher grade debt securities. Debt securities rated below
investment grade (commonly referred to as "junk bonds") are deemed by
these agencies to be predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal and may involve
major risk exposure to adverse conditions. Debt securities rated lower
than B may include securities that are in default or face the risk of
default with respect to principal or interest.
Ratings of debt securities represent the rating agency's opinion
regarding their quality and are not a guarantee of quality. Subsequent to
its purchase by an underlying fund, the rating of an issue of debt
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securities may be reduced below the minimum rating required for purchase
by that fund. Credit ratings attempt to evaluate the safety of principal
and interest payments and do not evaluate the risks of fluctuations in
market value. Also, rating agencies may fail to make timely changes in
credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than the rating
indicates. See the Statement of Additional Information for more
information about S&P and Moody's ratings.
Lower rated debt securities generally offer a higher current
yield than that available from higher grade issues. However, lower rated
securities involve higher risks, in that they are especially subject to
adverse changes in general economic conditions and in the industries in
which the issuers are engaged, to changes in the financial condition of
the issuers and to price fluctuation in response to changes in interest
rates. Accordingly, the yield on lower rated debt securities will
fluctuate over time. During periods of economic downturn or rising
interest rates, highly leveraged issuers may experience financial stress
that could adversely affect their ability to make payments of principal
and interest and increase the possibility of default. In addition, the
market for lower rated securities has expanded rapidly in recent years,
and its growth paralleled a long economic expansion. In the past, the
prices of many lower rated debt securities declined substantially,
reflecting an expectation that many issuers of such securities might
experience financial difficulties. As a result, the yields on lower rated
debt securities rose dramatically, but such higher yields did not reflect
the value of the income stream that holders of such securities expected,
but rather the risk that holders of such securities could lose a
substantial portion of their value as a result of the issuers' financial
restructuring or default. There can be no assurance that such declines
will not recur. The market for lower rated debt securities generally is
thinner and less active than that for higher quality securities, which may
limit an underlying fund's ability to sell such securities at their fair
value in response to changes in the economy or the financial markets.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may also decrease the values and liquidity of lower
rated securities, especially in a thinly traded market.
An underlying fund may invest in zero coupon securities and
payment-in-kind securities which will be subject to greater fluctuation of
market value in response to changing interest rates than securities which
usually trade at a deep discount from their face or par value and of
comparable maturities that make periodic distributions of interest in
cash.
Portfolio Turnover
The Adviser anticipates that the annual portfolio turnover rate
for each Fund will not exceed 100%, but may vary from year to year, and
will not be a limiting factor when the Adviser deems portfolio changes
appropriate. A high portfolio turnover rate (100% or more), whether
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incurred by a Fund or an underlying fund, involves correspondingly greater
transaction costs, which will be borne directly by the Fund or underlying
fund, and increases the potential for short-term capital gains and taxes.
Other Information
When the Adviser believes unusual circumstances warrant a
defensive posture, each Fund temporarily may hold cash or invest all or a
portion of its assets in money market mutual funds (except for the
Treasuries Trust) or in money market instruments, including repurchase
agreements. Repurchase agreements are transactions in which the Fund
purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer at
an agreed-upon date and price reflecting a market rate of interest
unrelated to the coupon rate or maturity of the purchased securities.
Although repurchase agreements carry certain risks not associated with
direct investments in securities, including possible decline in the market
value of the underlying securities and delays and costs to the fund if the
other party to the repurchase agreement becomes bankrupt, each Fund
intends to enter into repurchase agreements only with banks and dealers in
transactions believed by the Adviser to present minimal credit risks in
accordance with guidelines established by the Trust's Board of Trustees.
Each Fund may borrow money for temporary purposes from a bank and
may engage in reverse repurchase agreements, but not in excess of 10% of
its total assets. Each Fund may invest up to 15% of its net assets in
securities that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which a Fund has valued
the securities and includes, among other things, repurchase agreements
maturing in more than seven days and restricted securities. A
considerable period may elapse between a Fund's decision to sell such
securities and the time when the Fund is able to sell such securities.
If, during such a period, adverse market conditions were to develop, a
Fund may obtain a less favorable price than prevailed when it decided to
sell. An underlying fund may also invest up to 15% of its net assets in
illiquid securities.
The Funds' investment objectives and certain investment
limitations, as described in the statement of additional information, are
fundamental and may not be changed without the affirmative vote of a
majority of the Fund's outstanding voting securities as defined in the
1940 Act. All other investment policies, unless otherwise noted, are
nonfundamental and may be changed by the Trust's Board of Trustees without
shareholder approval.
MANAGEMENT OF THE TRUST
The Trust's Board of Trustees has overall responsibility for the
operation of the Trust. Pursuant to that responsibility, the Board has
selected the Adviser to act as investment adviser and administrator for
the Funds. The Adviser supervises all matters relating to the operation
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of each Fund and is responsible for making investment decisions for each
Fund, furnishing corporate officers and clerical staff and providing
office space, office equipment and office services.
The Adviser receives a monthly fee for its services, calculated
daily, payable at an annual rate of 0.70% of average daily net assets of
each Fund. Each Fund incurs various other expenses in its operations,
such as custody and transfer agency fees, brokerage commissions,
professional fees, expenses of board and shareholder meetings, fees and
expenses relating to the registration of its shares, taxes and
governmental fees, fees and expenses of the trustees, costs of obtaining
insurance, expenses of printing and distributing shareholder materials,
organizational expenses and extraordinary expenses, including costs or
losses in litigation. The Adviser has agreed to waive its advisory fee or
reimburse the Funds monthly to the extent that expenses of a Fund
(excluding taxes, extraordinary expenses, brokerage commissions and
interest) exceed an annual rate of 1.50% of the Fund's average daily net
assets. For this purpose, brokerage commissions include sales loads paid
in connection with the purchase or sale of underlying funds.
The Adviser is located at 2303 Yorktown Avenue, Lynchburg,
Virginia 24501 and is controlled by David D. Basten. The Adviser also
acts as investment adviser and administrator for American Pension
Investors Trust ("APIT"), an open-end investment company consisting of
five portfolios with over $78 million in assets at November 17, 1995.
The Adviser places orders for the purchase and sale of portfolio
investments for a Fund's account with brokers or dealers, selected by it
in its discretion, including Distributors. Where Distributors acts as the
dealer with respect to the purchases of load fund shares, it will retain
dealer reallowances on those purchases up to a maximum of 1% of the public
offering price of the shares. Distributors may not be designated as the
dealer on any sales where such reallowance exceeds 1% of the public
offering price. In the event Distributors is unable to act as dealer with
respect to a particular transaction, the Adviser will direct such order to
another broker-dealer. Factors in the selection of such a broker-dealer
include the receipt of research, analysis and advice and similar services
and the sale of Fund shares by such broker-dealer. Distributors also may
receive distribution payments from the underlying funds or their
underwriter in accordance with the Rule 12b-1 distribution plans of those
funds.
David D. Basten, the President and a Director of the Adviser, is
responsible for the day-to-day management of the Funds' portfolios. Mr.
Basten also acts as portfolio manager of APIT's portfolios.
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PURCHASE OF FUND SHARES
Distribution Arrangements
Yorktown Distributors, Inc. ("Distributors"), whose address is
2303 Yorktown Avenue, Lynchburg, Virginia 24501, is the distributor of
shares of the Funds. Distributors is controlled by David D. Basten.
Under a plan of distribution ("Plan") adopted by the Trust's
Board of Trustees pursuant to Rule 12b-1 under the 1940 Act, Distributors
receives a fee that is accrued daily and paid monthly at the annual rate
of 0.25% of the average daily net assets of each Fund. This fee
compensates Distributors for all of its activities intended to result in
the sale of Fund shares including Distributors' costs in connection with
distribution activities as well as the provision of services to
shareholders in the Funds. The fee may be retained or passed through by
Distributors to brokers-dealers, banks and others which provide
distribution or shareholder services.
During the period it is in effect, the Plan obligates the Trust
to pay fees to Distributors as compensation for its service and
distribution activities, not as reimbursement for specific expenses
incurred. Thus, even if Distributors' expenses exceed its fees, the Trust
will not be obligated to pay more than those fees and, if Distributors'
expenses are less than such fees, it will retain the full fee and realize
a profit.
Distributors may also pay certain banks, fiduciaries, custodians
for public funds, investment advisers and broker-dealers a fee for
administrative services in connection with the distribution of Fund
shares. Such fees would be based on the average net asset value
represented by shares of the administrators' customers invested in the
Funds. This fee is in addition to any fees these entities may receive
from Distributors out of the fee paid by the Funds under the Plan.
Distributors may also provide additional incentives to brokers
that sell shares of the Funds. In some instances, these incentives may be
offered only to brokers which have sold or may sell significant amounts of
shares. Such brokers may be named the dealer of record on underlying fund
shares purchased by the Funds, with the result that those brokers could
receive commissions or fees from the underwriters of those underlying
funds. These commissions could be paid as long as a Fund held the
underlying fund shares in its portfolio.
Applicable banking laws prohibit certain deposit-taking
institutions from underwriting or distributing securities. There is
currently no precedent prohibiting banks from performing administrative
services in connection with the distribution of Fund shares. If a bank
were prohibited from performing such administrative services, its
shareholder clients would be permitted to remain shareholders of the Funds
and alternate means of servicing such shareholder would be sought. It is
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not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
How Shares May Be Purchased
Application forms for the purchase of Fund shares can be obtained
from Distributors or from a broker-dealer that has entered into an
agreement with Distributors. Each Fund's minimum initial investment is
$500 and the minimum for additional investments is $100. An exception to
these minimums is granted for investments made pursuant to special plans
or if approved by Distributors. All orders are executed at the net asset
value per share next computed after receipt by Fund Services, Inc., the
Funds' transfer agent, of a completed and signed purchase application
together with a check to cover the purchase. The Funds do not impose a
front-end sales load when Fund shares are purchased; however, a
broker-dealer may charge its client a fee for selling Fund shares. A
broker-dealer is responsible for the prompt transmission of a purchase
order to the Funds' transfer agent. The Trust and Distributors reserve
the right to reject any purchase order.
When shares of a Fund are initially purchased, an account with
that Fund is automatically established for the shareholder. Any shares of
that Fund subsequently purchased or received as a distribution are
credited directly to the shareholder account. No share certificates are
issued unless specifically requested in writing to the Trust.
Certificates are issued in full shares only. In addition, no certificates
are issued for shares purchased by check until 15 business days have
elapsed, unless the Trust is reasonably assured that payment for the
shares has been collected. There is no charge for certificate issuance.
Systematic Investment Plan
Shareholders may purchase Fund shares through a Systematic
Investment Plan. Under the Plan, Fund Services, Inc., at regular
intervals, will automatically debit a shareholder's bank checking account
in an amount of $100 or more (subject to the $500 minimum initial
investment), as specified by the shareholder. A shareholder may elect to
invest the specified amount monthly or quarterly. The purchase of Fund
shares will be effected at their offering price at the close of normal
trading on the New York Stock Exchange, Inc. ("NYSE") on or about the 15th
day of the month. To obtain an application for the Systematic Investment
Plan, write to Distributors at the address shown on the back cover of this
Prospectus.
Exchange Privileges
Shares of any Fund may be exchanged for shares of any other Fund
without a sales charge or transfer fee, on the basis of the relative net
asset value of each Fund that is next computed after receipt by the
transfer agent, Fund Services, Inc. at P.O. Box 26305, Richmond, Virginia
23260, of the exchange request in "good order."
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An exchange request is considered in "good order" only if:
1. The dollar amount or number of shares to be purchased is
indicated.
2. The written request is signed by the registered owner and
by any co-owner of the account in exactly the same name
or names used in establishing the account.
3. Where share certificates have been issued, the written
request is accompanied by the certificates for shares to
be redeemed, properly endorsed in form for transfer, and
either the share certificates or separate instructions of
assignment (stock powers) signed by each registered owner
and co-owner exactly as the shares are registered.
4. The signatures on the written exchange request and on any
share certificates (or on accompanying stock powers) are
guaranteed by a bank, broker, dealer, municipal
securities dealer, municipal securities broker,
government securities dealer, government securities
broker, credit union (if authorized under state law),
national securities exchange, registered securities
association, clearing agency and savings association.
Signature guarantees from a notary public are not
acceptable.
Other supporting legal documents may be required from
corporations or other organizations, fiduciaries or persons other than the
stockholder of record making the exchange request. In addition, exchanges
are only available in states where they may legally be made. If there is a
question concerning the exchange of Fund shares, contact Distributors or
your broker.
The Exchange Authorization Form may be obtained from authorized
dealers, agents or Distributors. Telephone exchanges are not available.
The Trust reserves the right to terminate or modify the exchange offer
described herein and will give shareholders 60 days' notice when required
by SEC rules. See the Statement of Additional Information for further
details. For tax purposes, an exchange is treated as a redemption and a
subsequent purchase. Any capital gains or losses on the shares exchanged
should be reported for tax purposes. The price of the acquired shares is
the new cost basis for income tax purposes.
Determining Net Asset Value
The net asset value of each Fund's shares is determined as of the
close of normal trading (currently 4:00 p.m. eastern time) on the NYSE
each day that the NYSE is open for business. The net asset value per
share is computed by dividing the value of the Fund's securities plus any
cash and other assets (including dividends accrued but not yet collected)
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minus all liabilities (including accrued expenses) by the total number of
Fund shares outstanding.
The assets of the Growth Fund, Capital Income Fund, Total Return
Fund and Special Markets Trust consist primarily of the underlying funds,
that are valued daily at their respective net asset values under the 1940
Act. An underlying fund values securities in its portfolio for which
market quotations are readily available at their current market value
(generally the last reported sales price) and all other securities and
assets at fair value as determined in good faith by or under the direction
of the board of directors of the underlying fund. Money market funds with
portfolio securities that mature in 397 days or less may use the amortized
cost or penny-rounding methods to value their securities. The assets of
the Treasuries Trust are generally valued based on market quotations.
Other Fund assets are valued based on their current market value
when market quotations are readily available. If such value cannot be
established, assets are valued at fair value as determined in good faith
by or under the direction of the Trust's Board of Trustees. Securities
having 60 days or less remaining to maturity are valued at their amortized
cost.
REDEMPTION OF FUND SHARES
How Shares May Be Redeemed
Shares of any Fund may be redeemed by mailing redemption requests
to the Funds' transfer agent, Fund Services, Inc., at P.O. Box 2630,
Richmond, Virginia 23260. Upon receipt at the offices of Fund Services,
Inc. of a redemption request in "good order," as described in "Exchange
Privileges" above, the shares will redeemed at the net asset value per
share computed at the close of normal trading on the NYSE on that day.
Redemption requests received after the close of normal trading will be
executed at the net asset value per share next computed.
Redemption proceeds will be forwarded by check within seven days
of the receipt of a redemption request. However, the Trust reserves the
right to take up to seven days to make payment. If the shares to be
redeemed were paid for by check, then to allow clearance the redemption
proceeds may be delayed for up to 15 days after the purchase date. The
redemption proceeds may be more or less than the original cost.
Other supporting legal documents may be required from
corporations or other organizations, fiduciaries or persons other than the
stockholder of record making the redemption request. If there is a
question concerning the redemption of Fund shares, contact Distributors,
your broker or Fund Services, Inc.
Because of the high cost of maintaining small accounts, the Trust
reserves the right to redeem shareholder accounts of less than $100 net
asset value resulting from redemptions or exchanges. If the Trust elects
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to redeem such shares, it will notify the shareholder of its intention to
do so and provide the shareholder with the opportunity to increase the
amount invested to $100 or more within 30 days of notice.
Systematic Withdrawal Plan
An investor who has made an initial investment of at least
$10,000 in a Fund or otherwise has accumulated shares valued at no less
than $10,000 is eligible for a Systematic Withdrawal Plan. If so
eligible, the investor may arrange for fixed withdrawal payments (minimum
payment - $100; maximum payment - 1% per month or 3% per quarter of the
total net asset value of the Fund shares in the shareholder account at
inception of the Systematic Withdrawal Plan) at regular monthly or
quarterly intervals. Withdrawal payments are made to the investor or to
the beneficiaries designated by him. An investor is not eligible for a
Systematic Withdrawal Plan if he is making regular purchase payments
pursuant to the Systematic Investment Plan described above.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Dividends and Other Distributions
Dividends from net investment income, if any, of each Fund are
declared by the Trust's Board of Trustees and distributed at least
annually. Any net capital gain (the excess of net long-term capital gain
over net short-term capital loss) realized from the sale of portfolio
securities also is distributed by each Fund at least annually. Unless the
Trust receives instructions to the contrary from a shareholder before the
record date, it will be assumed that the shareholder wishes to receive
both dividends and capital gain distributions declared by a Fund in
additional shares of that Fund. Instructions continue in effect until the
Trust is notified in writing that a change is desired. All reinvested
dividends and capital gain distributions are reinvested in additional
shares of the appropriate Fund on the payment date, as determined by the
Board of Trustees, at those shares' net asset value on that day. Account
statements are mailed to shareholders evidencing each reinvestment.
Taxation of the Funds
Each Fund is treated as a separate corporation for federal income
tax purposes and intends to qualify for treatment as a RIC under the Code
so that it will be relieved of federal income tax on that part of its
investment company taxable income (consisting generally of net investment
income and net short-term capital gain) and net capital gain that is
distributed to its shareholders. To the extent however, that a Fund does
not distribute to its shareholders by the end of any calendar year
substantially all of its ordinary income for that year and substantially
all of its capital gain net income for the one-year period ending on
October 31 of that year, plus certain other amounts, a 4% excise tax will
be imposed on that Fund.
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Taxation of Shareholders
Shareholders, other than tax-exempt entities (including those
that hold shares pursuant to qualified retirement plans), are subject to
current taxation on dividends paid, and capital gain distributions made,
by a Fund. Dividends from a Fund's investment company taxable income are
taxable as ordinary income to its shareholders, whether received in cash
or in additional Fund shares, to the extent of the Fund's earnings and
profits. Distributions of a Fund's net capital gain are taxable as
long-term capital gain to its shareholders, whether received in cash or in
additional Fund shares, regardless of the period of time the shares have
been held.
If any Fund realizes gain from the disposition of shares of any
underlying fund held by the Fund as capital assets for more than one year,
or if any Fund receives a distribution from any underlying fund that is
designated as a capital gain distribution (regardless of how long the Fund
held the shares thereof), the amount of that gain or distribution,
respectively, is included in any capital gain distribution made by the
Fund to its shareholders. Any other gain on disposition of shares of an
underlying fund and any other distribution received therefrom is included
in the Fund's investment company taxable income.
Each Fund notifies its shareholders of the tax status of
distributions following the end of each calendar year. Each Fund is
required to withhold 31% of all dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other
noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Withholding at that rate from dividends
and capital gain distributions is also required for such shareholders who
otherwise are subject to backup withholding.
A redemption of Fund shares will result in taxable gain or loss
to the redeeming shareholder, depending upon whether the redemption
proceeds are more or less than the shareholder's adjusted basis for the
redeemed shares. Similar tax consequences will result upon an exchange of
shares of one Fund for shares of another Fund.
If Fund shares are sold at a loss after being held for six months
or less, the loss will be treated as long-term, instead of short-term,
capital loss to the extent of any capital gain distributions received on
those shares. Investors also should be aware if shares are purchased
shortly before the record date for any distribution, the shareholder will
pay full price for the shares and receive some portion of the price back
as a taxable dividend or capital gain distribution.
The foregoing is only a summary of some of the important federal
income tax considerations generally affecting the Funds and their
shareholders; see the Statement of Additional Information for a further
discussion. Because other federal, state or local tax considerations may
apply, investors are urged to consult their tax advisers.
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Qualified Retirement Plans
An investment in shares of any Fund may be appropriate for
individual retirement accounts, tax deferred annuity plans under section
403(b) of the Code, self-employed individual retirement plans (commonly
referred to as "Keogh plans"), simplified employee pension plans and other
qualified retirement plans (including section 401(k) plans). Capital gain
distributions and dividends received on Fund shares held by any of these
accounts or plans are automatically, reinvested in additional Fund shares,
and taxation thereof is deferred until distributed by the account or plan.
Investors who are considering establishing such an account or plan may
wish to consult their attorneys or other tax advisers with respect to
individual tax questions. The option of investing in these accounts or
plans through regular payroll deductions may be arranged with Distributors
and the employer.
PERFORMANCE INFORMATION
From time to time, quotations of each Fund's average annual total
return ("Standardized Return") may be included in advertisements, sales
literature or shareholder reports. Standardized Return shows percentage
rates reflecting the average annual change in the value of an assumed
initial investment of $1,000, assuming the investment has been held for
periods of one year, five years and ten years as of a stated ending date.
If a five and/or ten-year period has not yet elapsed, data will be
provided as of the end of a shorter period corresponding to the life of
the Fund. Standardized Return assumes that all dividends and capital gain
distributions were reinvested in shares of the Fund.
In addition, other total return performance data
("Non-Standardized Return") regarding a Fund may be included in
advertisements, sales literature or shareholder reports. Non-Standardized
Return shows a percentage rate of return encompassing all elements of
return (i.e., income and capital appreciation or depreciation); and it
assumes reinvestment of all dividends and capital gain distributions.
Non-Standardized Return may be quoted for the same or different periods as
those for which Standardized Return is quoted. Non-Standardized Return
may consist of cumulative returns, annual rates, year-by-year rates or any
combination thereof. Cumulative total return represents the cumulative
change in value of an investment in the Fund for various periods. Average
annual total return refers to the annual compound rate of return of an
investment in the Fund. The total return of a Fund is increased to the
extent that the Adviser has waived all or a portion of its advisory fee or
reimbursed all or a portion of the Fund's expenses. Total return figures
are based on historical performance of the Funds, show the performance of
a hypothetical investment and are not intended to indicate future
performance.
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FUND SHARES
The Trust is a Massachusetts business trust which is registered
with the SEC as an open-end, management investment company and was
organized as a Declaration of Trust dated March 1, 1993. The Trust
currently consists of five separate Funds: the Growth Fund, the Capital
Income Fund, the Total Return Fund, the Special Markets Trust and the
Treasuries Trust. The Board of Trustees may elect to add additional
series to the Trust in the future, although it has no present plan to do
so. Prior to the date of this prospectus, the Trust does not have any
operating history.
The Trust is authorized to issue an unlimited number of shares of
beneficial interest without par value. Shares of beneficial interest of
each Fund, when issued, are fully paid, nonassessable, fully transferable,
redeemable at the option of the shareholder and have equal dividend and
liquidation rights and noncumulative voting rights. The shares of each
Fund will be voted separately except when an aggregate vote of all Funds
is required by the 1940 Act or otherwise.
Prior to the public offering of Fund shares, the Adviser will be
each Fund's sole shareholder and therefore a control person of each Fund.
The Trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing
trustees unless and until such time as less than a majority of the
trustees holding office have been elected by shareholders, at which time
the trustees then in office will call a shareholders' meeting for the
election of trustees. Under the 1940 Act shareholders of record of no
less than two-thirds of the outstanding shares of the Trust may remove a
trustee by vote cast in person or by proxy at a meeting called for that
purpose. The trustees are required to call a meeting of shareholders for
the purpose of voting upon the question of removal of any trustee when
requested in writing to do so by the shareholders of record of not less
than 10% of the Trust's outstanding shares.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
_____________________________________________________, serves as
the Trust's custodian. Fund Services, Inc., 1500 Forest Avenue, Suite
111, Richmond, Virginia 23229, is the Trust's transfer and dividend
disbursing agent.
GENERAL INFORMATION
Fund shareholders are kept informed through semi-annual and
annual reports. Any inquiries should be directed in writing to the Trust
at P.O. Box 2529, 2303 Yorktown Avenue, Lynchburg, Virginia 24501.
Shareholders may direct general telephone inquiries to the Trust at the
numbers listed on the back cover of this Prospectus. Telephone inquiries
regarding shareholder account information should be directed to the
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Trust's transfer agent at the number listed on the back cover to this
Prospectus.
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APPENDIX
INVESTMENT PRACTICES OF UNDERLYING FUNDS
Foreign Securities
An underlying fund may invest up to 100% of its assets in
securities of foreign issuers or in securities of issuers in a single
foreign country or group of countries. Investments in foreign securities
involve risks relating to political and economic developments abroad as
well as those that may result from the differences between the regulation
to which U.S. issuers are subject and the regulation to which foreign
issuers are subject. These risks may include expropriation, confiscatory
taxation, withholding taxes on dividends and interest, limitations on the
use or transfer of an underlying fund's assets and political or social
instability or diplomatic developments.
Individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Securities of many
foreign companies may be less liquid and their prices more volatile than
securities of comparable U.S. companies. Moreover, the underlying funds
generally calculate their net asset values and complete orders to
purchase, exchange or redeem shares only on days when the NYSE is open.
However, foreign securities in which the underlying funds may invest may
be listed primarily on foreign stock exchanges that may trade on other
days (such as U.S. holidays and weekends). As a result, the net asset
value of an underlying fund's portfolio may be significantly affected by
such trading on days when the Adviser does not have access to the
underlying funds and shareholders do not have access to their respective
Funds.
Additionally, because foreign securities ordinarily are
denominated in currencies other than the U.S. dollar, changes in foreign
currency exchange rates will affect the value of an underlying Fund's
portfolio securities (and in turn, an underlying Fund's net asset value)
irrespective of the performance of the underlying investment, the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and capital gain, if any, to be
distributed to shareholders by the underlying fund. If the value of a
foreign currency rises against the U.S. dollar, the value of the
underlying fund's assets denominated in that currency will increase;
correspondingly, if the value of a foreign currency declines against the
U.S. dollar, the value of the underlying fund's assets denominated in that
currency will decrease. The exchange rates between the U.S. dollar and
other currencies are determined by supply and demand in the currency
exchange markets, international balances of payments, governmental
intervention, speculation and other economic and political conditions.
The costs attributable to foreign investing that an underlying fund must
bear frequently are higher than those attributable to domestic investing.
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<PAGE>
For example, the costs of maintaining custody of foreign securities exceed
custodian costs related to domestic securities.
Growth Fund, Capital Income Fund and Total Return Fund may each
invest in an underlying fund that may invest substantially in securities
of issuers located in emerging market countries. The risks of investing
in foreign securities may be greater with respect to securities of issuers
in, or denominated in the currencies of, emerging market countries. The
economies of emerging market countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to
be adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures
imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be adversely affected by
economic conditions in the countries with which they trade. The
securities markets of emerging market countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets
of the U.S. and other developed countries. Disclosure and regulatory
standards in many respects are less stringent in emerging market countries
than in the U.S. and other major markets. There also may be a lower level
of monitoring and regulation of emerging markets and the activities of
investors in such markets, and enforcement of existing regulations may be
extremely limited. Investing in local markets, particularly in emerging
market countries, may require the Fund to adopt special procedures, seek
local government approvals or take other actions, each of which may
involve additional costs to the fund. Certain emerging market countries
may also restrict investment opportunities in issuers in industries deemed
important to national interests.
Foreign Currency Transactions
In connection with its portfolio transactions in securities
traded in a foreign currency, an underlying fund may enter into forward
contracts to purchase or sell an agreed upon amount of a specific currency
at a future date that may be any fixed number of days from the date of the
contract agreed upon by the parties at a price set at the time of the
contract. Under such an arrangement, concurrently with the entry into a
contract to acquire a foreign security for a specified amount of currency,
the fund would purchase with U.S. dollars the required amount of foreign
currency for delivery at the settlement date of the purchase; the fund
would enter into similar forward currency transactions in connection with
the sale of foreign securities. The effect of such transactions would be
to fix a U.S. dollar price for the security to protect against a possible
loss resulting from an adverse change in the relationship between the U.S.
dollar and the subject foreign currency during the period between the date
the security is purchased or sold and the date on which payment is made or
received, the normal range of which is three to fourteen days. These
contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no commissions
are charged at any stage for trades. Although such contracts tend to
minimize the risk of loss due to a decline in the value of the subject
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<PAGE>
currency, they tend to limit commensurately any potential gain that might
result should the value of such currency increase during the contract
period.
Lending of Portfolio Securities
An underlying fund may lend portfolio securities constituting up
to 33 % of its total assets to brokers, dealers, banks or other
institutional investors, provided that (1) the loan is secured by cash or
equivalent collateral equal to at least 100% of the current market value
of the loaned securities that is maintained with the fund custodian while
portfolio securities are on loan and (2) the borrower pays the fund an
amount equivalent to any dividends or interest received on such
securities. The fund may pay reasonable administrative and custodial fees
in connection with a loan and may pay a negotiated portion of the interest
earned on the cash or equivalent collateral to the borrower or placing
broker. Although a fund does not have the right to vote securities on
loan, the fund could terminate the loan and regain the right to vote if
the vote were considered important. Loans of securities involve a risk
that the borrower may fail to return the securities or may fail to provide
additional collateral. Each Fund may also lend portfolio securities
pursuant to similar conditions in an amount up to 33 % of its total
assets, although no fund has any current intention of doing so during the
coming year in excess of 5% of its net assets.
Leverage Through Borrowing
The Growth Fund, Capital Income Fund, Total Return Fund and
Special Markets Trust each may invest in underlying funds that may borrow
up to 33 1/3% of the value of its total assets less all liabilities and
indebtedness other than the borrowing from banks to increase its holdings
of portfolio securities. Such borrowing constitutes leverage, a
speculative technique. Under the 1940 Act, a fund is required to maintain
continuous asset coverage of 300% with respect to such borrowings and to
sell (within three days) sufficient portfolio holdings to restore such
coverage if it should decline to less than 300% due to market fluctuations
or otherwise, even if disadvantageous from an investment standpoint.
Leveraging will exaggerate the effect of any increase or decrease in the
value of portfolio securities on a fund's net asset value, and money
borrowed will be subject to interest costs (which may include commitment
fees and/or the cost of maintaining minimum average balances) that may or
may not exceed the income received from the securities purchased with
borrowed funds.
Industry Concentration
An underlying fund may concentrate its investments (invest 25% or
more of its total assets) within one industry. Because the scope of
investment alternatives within an industry is limited, the value of the
shares of such an underlying fund may be subject to greater market
fluctuation than an investment in a fund that invests in a broader range
of securities.
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<PAGE>
Options Activities
An underlying fund may write (i.e., sell) call options ("calls")
if the calls are "covered" throughout the life of the option. A call is
"covered" if the fund owns the optioned securities. When a fund writes a
call, it receives a premium and gives the purchaser the right to buy the
underlying security at any time during the call period (usually not more
than nine months in the case of common stock) at a fixed exercise price
regardless of market price changes during the call period. If the call is
exercised, the fund will forego any gain from an increase in the market
price of the underlying security over the exercise price. Each Fund also
is authorized to write covered call options, but has no intention of doing
so during the current fiscal year.
An underlying fund may purchase a call on securities only to
effect a "closing transaction," which is the purchase of a call covering
the same underlying security and having the same exercise price and
expiration date as a call previously written by the fund on which it
wishes to terminate its obligation. If the fund is unable to effect a
closing transaction, it will not be able to sell the underlying security
until the call previously written by the fund expires (or until the call
is exercised and the fund delivers the underlying security).
An underlying fund also may write and purchase put options
("puts"). When a fund writes a put, it receives a premium and gives the
purchaser of the put the right to sell the underlying security to the fund
at the exercise price at any time during the option period. When a fund
purchases a put, it pays a premium in return for the right to sell the
underlying security at the exercise price at any time during the option
period. An underlying fund also may purchase stock or bond index puts,
which differ from puts on individual securities in that they are settled
in cash based on the values of the securities in the underlying index
rather than by delivery of the underlying securities. Purchase of a stock
or bond index put is designed to protect against a decline in the value of
the portfolio generally rather than an individual security in the
portfolio. If any put is not exercised or sold, it will become worthless
on its expiration date.
A fund's option positions may be closed out only on an exchange
that provides a secondary market for options of the same series, but there
can be no assurance that a liquid secondary market will exist at any given
time for any particular option. In this regard, trading in options on
certain securities (such as U.S. Government securities) is relatively new,
so that it is impossible to predict to what extent liquid markets will
develop or continue.
An underlying fund's custodian, or a securities depository acting
for it, generally acts as escrow agent as to the securities on which the
fund has written puts or calls, or as to other securities acceptable for
such escrow so that no margin deposit is required of the fund. Until the
underlying securities are released from escrow, they cannot be sold by the
fund.
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<PAGE>
In the event of a shortage of the underlying securities
deliverable on exercise of an option, the Options Clearing Corporation
("OCC") has the authority to permit other, generally comparable securities
to be delivered in fulfillment of option exercise obligations. If the OCC
exercises its discretionary authority to allow such other securities to be
delivered, it may also adjust the exercise prices of the affected options
by setting different prices at which otherwise ineligible securities may
be delivered. As an alternative to permitting such substitute deliveries,
the OCC may impose special exercise settlement procedures.
Futures Contracts
An underlying fund may enter into futures contracts for the
purchase or sale of debt securities and stock indexes. A futures contract
is an agreement between two parties to buy and sell a security or an index
for a set price on a future date. Futures contracts are traded on
designated "contract markets" that, through their clearing corporation,
guarantee performance of the contracts.
Generally, if market interest rates increase, the value of
outstanding debt securities declines (and vice versa). Entering into a
futures contract for the sale of debt securities has an effect similar to
the actual sale of securities, although sale of the futures contract might
be accomplished more easily and quickly. For example, if an underlying
fund holds long-term U.S. Government securities and it anticipates a rise
in long-term interest rates (and therefore a decline in the value of those
securities), it could, in lieu of disposing of those securities, enter
into futures contracts for the sale of similar long-term securities. If
rates thereafter increase and the value of the fund's portfolio securities
thus declines, the value of the fund's futures contracts would increase,
thereby protecting the fund by preventing the net asset value from
declining as much as it otherwise would have. Similarly, entering into
futures contracts for the purchase of debt securities has an effect
similar to the actual purchase of the underlying securities, but permits
the continued holding of securities other than the underlying securities.
For example, if an underlying fund expects long-term interest rates to
decline, it might enter into futures contracts for the purchase of
long-term securities so that it could gain rapid market exposure that may
offset anticipated increases in the cost of securities it intends to
purchase while continuing to hold higher-yield short-term securities or
waiting for the long-term market to stabilize.
A stock index futures contract may be used to hedge an underlying
fund's portfolio with regard to market risk as distinguished from risk
relating to a specific security. A stock index futures contract does not
require the physical delivery of securities, but merely provides for
profits and losses resulting from changes in the market value of the
contract to be credited or debited at the close of each trading day to the
respective accounts of the parties to the contract. On the contract's
expiration date, a final cash settlement occurs. Changes in the market
value of a particular stock index futures contract reflect changes in the
specified index of equity securities on which the contract is based.
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<PAGE>
There are several risks in connection with the use of futures
contracts. In the event of an imperfect correlation between the futures
contract and the portfolio position that is intended to be protected, the
desired protection may not be obtained and the fund may be exposed to risk
of loss. Further, unanticipated changes in interest rates or stock price
movements may result in a poorer overall performance for the fund than if
it had not entered into futures contracts on debt securities or stock
indexes.
In addition, the market prices of futures contracts may be
affected by certain factors. First, all participants in the futures
market are subject to margin deposit and maintenance requirements. Rather
than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions that could distort the
normal relationship between the securities and futures markets. Second,
from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures
market may also cause temporary price distortions.
Finally, positions in futures contracts may be closed out only on
an exchange or board of trade that provides a secondary market for such
futures. There is no assurance that a liquid secondary market on an
exchange or board of trade will exist at any particular time.
Options on Futures Contracts
An underlying fund may purchase and write (sell) put and call
options on futures contracts. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put), at a specified exercise price at any
time during the option period. When an option on a futures contract is
exercised, delivery of the futures position is accompanied by cash
representing the difference between the current market price of the
futures contract and the exercise price of the option. A fund may
purchase put options on futures contracts in lieu of, and for the same
purpose as, a sale of a futures contract. It also may purchase such put
options in order to hedge a long position in the underlying futures
contract in the same manner as it purchases "protective puts" on
securities.
As with options on securities, the holder of an option on a
futures contract may terminate its position by selling an option of the
same series. There is no guarantee that such closing transactions can be
effected. An underlying fund is required to deposit initial margin and
variation margin with respect to put and call options on futures contracts
written by it pursuant to brokers' requirements similar to those
applicable to futures contracts described above and, in addition, net
option premiums received will be included as initial margin deposits.
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<PAGE>
In addition to the risks that apply to all options transactions,
there are several special risks relating to options on futures contracts.
The ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market.
There can be no certainty that liquid secondary markets for all options on
futures contracts will develop. Compared to the use of futures contracts,
the purchase of options on futures contracts involves less potential risk
to an underlying fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). However, there may be
circumstances when the use of an option on a futures contract would result
in a loss to the fund when the use of a futures contract would not, such
as when there is no movement in the prices of the underlying securities.
Writing an option on a futures contract involves risks similar to those
arising in the sale of futures contracts, as described above.
Short Sales
An underlying fund may sell securities short. In a short sale,
the fund sells securities that it does not own, making delivery with
securities "borrowed" from a broker. The fund is then obligated to
replaced the borrowed securities by purchasing them at the market price at
the time of replacement. This price may or may not be less than the price
at which the securities were sold by the fund. Until the securities are
replaced, the fund is required to pay to the lender any dividends or
interest that accrue during the period of the loan. In order to borrow
the securities, the fund may also have to pay a premium that would
increase the cost of the securities sold. The proceeds of the short sale
will be retained by the broker, to the extent necessary to meet margin
requirements, until the short position is closed out.
The fund also must deposit in a segregated account an amount of
cash or U.S. Government securities equal to the difference between (a) the
market value of the securities sold short at the time they were sold short
and (b) the value of the collateral deposited with the broker in
connection with the sale (not including the proceeds from the short sale).
Each day the short position is open, the fund must maintain the segregated
account at such a level that the amount deposited in it plus the amount
deposited with the broker as collateral (1) equals the current market
value of the securities sold short and (2) is not less than the market
value of the securities at the time they were sold short. Depending upon
market conditions, up to 80% of the value of a fund's net assets may be
deposited as collateral for the obligation to replace securities borrowed
to effect short sales and allocated to a segregated account in connection
with short sales.
A fund will incur a loss as a result of a short sale if the price
of the security increases between the date of the short sale and the date
on which the fund replaces the borrowed security. The fund will realize a
gain if the security declines in price between those dates. The amount of
any gain will be decreased and the amount of any loss increased by the
amount of any premium, dividends or interest the fund may be required to
pay in connection with the short sale.
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<PAGE>
A short sale is "against the box" if at all times when the short
position is open the fund owns an equal amount of the securities or
securities convertible into, or exchangeable without further consideration
for, securities of the same issue as the securities sold short. Such a
transaction serves to defer a gain or loss for federal income tax
purposes.
Warrants
An underlying fund may invest in warrants, which are options to
purchase a specified security, usually an equity security such as common
stock, at a specified price (usually representing a premium over the
applicable market value of the underlying equity security at the time of
the warrant's issuance) and usually during a specified period of time.
Moreover, they are usually issued by the issuer of the security to which
they relate. While warrants may be traded, there is often no secondary
market for them. The prices of warrants do not necessarily move parallel
to the prices of the underlying securities. Holders of warrants have no
voting rights, receive no dividends and have no rights with respect to the
assets of the issuer. To the extent that the market value of the security
that may be purchased upon exercise of the warrant rises above the
exercise price, the value of the warrant will tend to rise. To the extent
that the exercise price equals or exceeds the market value of such
security, the warrants will have little or no market value. If a warrant
is not exercised within the specified time period, it will become
worthless and the fund will lose the purchase price paid for the warrant
and the right to purchase the underlying security.
Convertible Securities
An underlying fund may invest in a convertible security which is
a bond, debenture, note, preferred stock or other security that may be
converted into or exchanged for a prescribed amount of common stock of the
same or a different issuer within a particular period of time at a
specified price or formula. A convertible security entitles the holder to
receive interest paid or accrued on debt or the dividend paid on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities have characteristics
similar to nonconvertible debt securities in that they ordinarily provide
a stable stream of income with generally higher yields than those of
common stocks of the same or similar issuers. Convertible securities rank
senior to common stock in a corporation's capital structure but are
usually subordinated to comparable nonconvertible securities. While no
securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer's common stock,
although the extent to which such risk is reduced depends in large measure
upon the degree to which the convertible security sells above its value as
a fixed income security. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than common
stocks, but lower yields than comparable nonconvertible securities, (2)
are less subject to fluctuation in value than the underlying stock since
they have fixed income characteristics and (3) provide the potential for
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<PAGE>
capital appreciation if the market price of the underlying common stock
increases.
The value of a convertible security is a function of its
"investment value" (determined by its yield comparison with the yields of
other securities of comparable maturity and quality that do not have a
conversion privilege) and its "conversion value" (the security's worth, at
market value, if converted into the underlying common stock). The
investment value of a convertible security is influenced by changes in
interest rates, with investment value declining as interest rates increase
and increasing as interest rates decline. The credit standing of the
issuer and other factors also may have an effect on the convertible
security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock.
If the conversion value is low relative to the investment value, the price
of the conversion value decreases as the convertible security approaches
maturity. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. In
addition, a convertible security generally will sell at a premium over its
conversion value determined by the extent to which investors place value
on the right to acquire the underlying common stock while holding a fixed
income security. A convertible security may be subject to redemption at
the option of the issuer at a price established in the convertible
security's governing instrument. If a convertible security held by the
fund is called for redemption, the fund will be required to permit the
issuer to redeem the security, convert it into the underlying common stock
or sell it to a third party.
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<PAGE>
EXECUTIVE OFFICES
Consultants Trust
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060
INVESTMENT ADVISER
Yorktown Management &
Research Company, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060
DISTRIBUTOR
Yorktown Distributors, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060
TRANSFER AND DIVIDEND
DISBURSING AGENT
Fund Services, Inc.
P.O. Box 26305
Richmond, Virginia 23260
(800) 628-4077
CUSTODIAN
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
217 E. Redwood Street
Baltimore, Maryland
21202-3316
No person has been authorized to give any information or to make
any representations not contained in this Prospectus in connection with
the offering made by this Prospectus and, if given or made, such
information and representations must not be relied upon as having been
authorized by the Trust or its distributor. This Prospectus does not
constitute an offering by the Trust or its distributor in any jurisdiction
to any person to whom such offering may not lawfully be made.
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<PAGE>
CONSULTANTS TRUST
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(804) 846-1361
(800) 544-6060
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information sets forth information
regarding Consultants Trust ("Trust") and its five series: the Growth
Fund, the Capital Income Fund, the Total Return Fund, the Special Markets
Trust and the Treasuries Trust (collectively the "Funds"). Yorktown
Management and Research Company, Inc. ("Adviser") furnishes administrative
and advisory services to the Trust and the five Funds; Yorktown
Distributors, Inc. ("Distributors") serves as the distributor of Fund
shares.
___________________________________
This Statement of Additional Information is not a prospectus and
should be read only in conjunction with the Prospectus of the Funds dated
November 21, 1995. The Prospectus may be obtained from:
Yorktown Distributors, Inc.
2303 Yorktown Avenue, P.O. Box 2529
Lynchburg, Virginia 24501
___________________________________
November 21, 1995
<PAGE>
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 3
OTHER INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . 5
Ratings of Debt Obligations . . . . . . . . . . . . . . . . 5
Repurchase Agreements . . . . . . . . . . . . . . . . . . . 5
Reverse Repurchase Agreements . . . . . . . . . . . . . . . 6
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . 6
MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Adviser and Administrator . . . . . . . . . . . . 7
Trustees and Officers . . . . . . . . . . . . . . . . . . . 8
DISTRIBUTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . . . 10
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 11
PRICING AND ADDITIONAL EXCHANGE AND REDEMPTION . . . . . . . . . . . 13
Determining Net Asset Value . . . . . . . . . . . . . . . . 13
Additional Exchange and Redemption Information . . . . . . . 14
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 14
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . 16
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 17
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . 21
STATEMENT OF ASSETS AND LIABILITIES . . . . . . . . . . . . . . . . . 22
<PAGE>
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental and, like
the Funds' investment objectives, may not be changed with respect to a
Fund without the affirmative vote of the lesser of (1) more than 50% of
the outstanding shares of the Fund or (2) 67% or more of the shares of the
Fund present at a shareholders' meeting if more than 50% of the
outstanding shares of the Fund are represented at the meeting in person or
by proxy.
Each Fund may not:
1. Purchase securities of any one issuer if as a result more
than 5% of the Fund's total assets would be invested in such issuer or the
Fund would own or hold more than 10% of the outstanding voting securities
of that issuer, except that up to 25% of the Fund's total assets may be
invested without regard to this limitation and provided that this
limitation does not apply to U.S. Government securities or to securities
issued by other open-end investment companies;
2. Purchase any security if, as a result of such purchase,
25% or more of the value of the Fund's total assets would be invested in
the securities of issuers having their principal business activities in
the same industry; provided, however, that (a) the Growth Fund, Capital
Income Fund, Total Return Fund and Special Markets Trust will each invest
at least 25% of its total assets in securities issued by other open-end
investment companies and (b) this limitation does not apply to U.S.
Government securities;
3. Purchase or sell real estate (including real estate
limited partnerships);
4. Purchase or sell commodities or commodity contracts,
except that the Fund may purchase or sell interest rate, stock index and
foreign currency futures contracts and options thereon, may engage in
transactions in foreign currencies and may purchase or sell options on
foreign currencies for hedging purposes;
5. Make loans, except (a) the purchase of a portion of an
issue of debt securities; (b) engaging in repurchase agreements; or (c)
engaging in securities loan transactions limited to one-third of the
Fund's total assets;
6. Borrow money, except to the extent permitted by the
Investment Company Act of 1940 ("1940 Act");
7. Underwrite securities issued by other persons, except to
the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed an underwriter under federal securities
laws; or
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<PAGE>
8. Issue senior securities, except as appropriate to
evidence indebtedness that the Fund is permitted to incur and the issuance
of additional classes of securities that the Board of Trustees may
establish, provided that the Fund's use of options, futures contracts and
options thereon and currency-related contracts will not be deemed senior
securities for this purpose.
The following investment restrictions are non-fundamental and may
be changed by the vote of the Trust's Board of Trustees without
shareholder approval. Each Fund may not:
1. Purchase or retain the securities of any issuer if, to
the knowledge of the Fund's management, those trustees or officers of the
Trust and the directors and officers of the Adviser who individually own
beneficially more than 1/2 of 1% of the outstanding securities of such
issuer, together own beneficially more than 5% of such outstanding
securities;
2. Invest in oil, gas or other mineral exploration or
development programs or leases, provided that the Fund may invest in
securities issued by companies engaged in such activities;
3. Invest more than 15% of its net assets in illiquid
securities, a term which means securities that cannot be disposed of
within seven days in the ordinary course of business at approximately the
amount at which the Fund has valued the securities and includes, among
other things, repurchase agreements maturing in more than seven days;
4. Make short sales of securities or purchase securities on
margin, except (a) for such short-term credits as may be necessary for the
clearance of the purchases of portfolio securities and (b) in connection
with the Fund's use of options, futures contracts and options on future
contracts;
5. Invest in warrants, valued at the lower of cost or
market, in excess of 5% of the value of its net assets, which amount may
include warrants that are not listed on the New York or American Stock
Exchanges, provided that such warrants, valued at the lower of cost or
market, do not exceed 2% of the Fund's net assets, and further provided
that this restriction does not apply to warrants attached to, or sold as a
unit with other securities;
6. Purchase any security if as a result the Fund would have
more than 5% of its total assets invested in securities of companies which
together with any predecessors have been in continuous operation for less
than three years; or
7. Borrow money, except from banks for temporary purposes
and for reverse repurchase agreements, and then in an aggregate amount not
in excess of 10% of the Fund's total assets, provided the Fund may not
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<PAGE>
purchase securities while borrowings in excess of 5% of the Fund's total
assets are outstanding.
If a percentage restriction is adhered to at the time of an
investment or transaction, a later increase or decrease in percentage
resulting from a change in values of portfolio securities or the amount of
total assets will not be considered a violation of any of the foregoing
fundamental and non-fundamental restrictions. The Funds have no current
intention of engaging in any of the activities listed in fundamental
investment restriction 4 during the coming year.
OTHER INVESTMENT POLICIES
The following supplements the information contained in the
Prospectus concerning the Funds' investment policies.
Ratings of Debt Obligations
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
("S&P") are private services that provide ratings of the credit quality of
debt obligations. A description of ratings assigned to corporate debt
obligations by Moody's and S&P is included in the Appendix to this
Statement of Additional Information. These ratings represent Moody's and
S&P's opinions as to the quality of the securities that they undertake to
rate. It should be emphasized, however, that ratings are general and are
not absolute standards of quality. Consequently, securities with the same
maturity, interest rate and rating may have different market prices.
Subsequent to its purchase by an underlying fund, an issue of securities
may cease to be rated or its ratings may be reduced below the minimum
rating required for purchase by an underlying fund.
Repurchase Agreements
The Funds may enter into repurchase agreements secured by U.S.
Government securities with U.S. banks and dealers. A repurchase agreement
is a transaction in which a Fund purchases a security from a bank or
recognized securities dealer and simultaneously commits to resell that
security to the bank or dealer at an agreed-upon date and price reflecting
a market rate of interest unrelated to the coupon rate or maturity of the
purchased security. The Fund maintains custody of the underlying security
prior to its repurchase; thus, the obligation of the bank or securities
dealer to pay the repurchase price on the date agreed to is, in effect,
secured by such security. If the value of such security is less than the
repurchase price, the other party to the agreement shall provide
additional collateral so that at all times the collateral is at least
equal to the repurchase price.
Although repurchase agreements carry certain risks not associated
with direct investments in securities, each Fund intends to enter into
repurchase agreements only with banks and dealers believed by the Adviser
to present minimum credit risks in accordance with guidelines established
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<PAGE>
by the Trust's Board of Trustees. The Adviser will review and monitor the
creditworthiness of such institutions under the Board's general
supervision. To the extent that the proceeds from any sale of collateral
upon a default in the obligation to repurchase were less than the
repurchase price, the Fund would suffer a loss. If the other party to the
repurchase agreement petitions for bankruptcy or otherwise becomes subject
to bankruptcy or other liquidation proceedings, there might be
restrictions on the Fund's ability to sell the collateral and the Fund
could suffer a loss. An open-end investment company ("underlying fund")
in which the Growth Fund, Capital Income Fund, Total Return Fund and
Special Markets Trust may invest also may enter into repurchase agreements
with banks and broker-dealers.
Reverse Repurchase Agreements
Although they have no intention of doing so during the coming
year, each Fund may enter into reverse repurchase agreements with banks
and broker-dealers up to an aggregate value of not more than 10% of its
total assets. Such agreements involve the sale of securities held by a
Fund subject to the Fund's agreement to repurchase the securities at an
agreed-upon date and price reflecting a market rate of interest. Such
agreements are considered to be borrowings and may be entered into only
for temporary or emergency purposes. While a reverse repurchase agreement
is outstanding, a Fund will maintain with its custodian in a segregated
account cash, U.S. government securities or other liquid, high-grade debt
obligations, marked to market daily, in an amount at least equal to the
Fund's obligations under the reverse repurchase agreement.
Commercial Paper
The Funds temporarily may invest in commercial paper. Commercial
paper represents short-term unsecured promissory notes issued in bearer
form by bank holding companies, corporations and finance companies. The
commercial paper purchased by the Funds consists of direct obligations of
domestic issuers that, at the time of investment, are (i) rated Prime-l by
Moody's or A-l by S&P, (ii) issued or guaranteed as to principal and
interest by issuers or guarantors having an existing debt security rating
of Aa or better by Moody's or AA or better by S&P or (iii) securities
that, if not rated, are, in the opinion of the Adviser, of an investment
quality comparable to rated commercial paper in which the Funds may
invest. See the Appendix to this Statement of Additional Information for
more information on ratings assigned to commercial paper.
MANAGEMENT OF THE TRUST
Investment Adviser and Administrator
Yorktown Management & Research Company, Inc. provides investment
advisory and administrative services for the Funds and the Trust pursuant
to an Investment Advisory and Administrative Services Agreement ("Advisory
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<PAGE>
Agreement") dated November ___, 1995. The Adviser is controlled, as a
result of stock ownership, by David D. Basten.
The Advisory Agreement provides that, subject to overall
supervision by the Board of Trustees, the Adviser shall act as investment
adviser and shall manage the investment and reinvestment of the assets of
each Fund, obtain and evaluate pertinent economic data relative to the
investment policies of each Fund, place orders for the purchase and sale
of securities on behalf of each Fund, and report to the Board of Trustees
periodically to enable them to determine that the investment policies of
each Fund and all other provisions of this Advisory Agreement are being
properly observed and implemented. Under the terms of the Advisory
Agreement, the Adviser is further obligated to cover basic administrative
and operating services including, but not limited to, bookkeeping, office
space and equipment, executive and clerical personnel, and telephone and
communications services and to furnish supplies, stationery and postage
relating to the Adviser's obligations under the Advisory Agreement.
For its services, the Adviser receives a monthly fee, calculated
daily, payable at an annual rate of 0.70% of each Fund's average daily net
assets. The Adviser has agreed to waive its advisory fee or reimburse the
Funds monthly to the extent that expenses of a Fund (excluding taxes,
extraordinary expenses, brokerage commissions and interest) exceed an
annual rate of 1.50% of the Fund's average daily net assets. For this
purpose, brokerage commissions include sales loads paid in connection with
the purchase or sale of shares of underlying funds.
The Advisory Agreement provides that it will remain in effect for
two years and may be renewed from year to year thereafter with respect to
a Fund, provided that renewal is specifically approved at least annually
by the affirmative vote of the Trust's Board of Trustees or by vote of a
majority of the outstanding voting securities of that Fund. In either
case, renewal of the Advisory Agreement must be approved by a majority of
the Trustees who are not parties to the Advisory Agreement or "interested
persons" of any such party. Any approval of the Advisory Agreement or the
renewal thereof with respect to a Fund shall be effective to continue the
Advisory Agreement with respect to that Fund notwithstanding that (a) the
Advisory Agreement or the renewal thereof has not been approved by any
other Fund or (b) the Advisory Agreement or renewal has not been approved
by the vote of a majority of the outstanding voting securities of the
Trust as a whole.
Under the Advisory Agreement, the Adviser will not be liable for
any error of judgment or mistake of law or for any loss suffered by a Fund
in connection with the performance of the Advisory Agreement, except a
loss resulting from willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its duties or from reckless
disregard of its duties and obligations thereunder. The Advisory
Agreement may be terminated as to a Fund, without penalty, by the Board of
Trustees or by the vote of a majority of the outstanding voting securities
(as defined in the 1940 Act) of that Fund, on 60 days' written notice to
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the Adviser or by the Adviser on 60 days' written notice to the Trust.
The Advisory Agreement may not be terminated by the Adviser unless another
investment advisory agreement has been approved by the Fund in accordance
with the 1940 Act. The Advisory Agreement terminates automatically upon
assignment (as defined in the 1940 Act).
Trustees and Officers
Information concerning the trustees and officers of the Trust is
set forth below.
<TABLE>
<CAPTION>
Name, Age, Position(s) Held With the Principal Occupation(s) During
Trust and Address Past Five Years
<S> <C>
David D. Basten; 44 * President and Director, Yorktown
President and Trustee Management & Research Company,
P.O. Box 2529 Inc.; President and Director,
2303 Lynchburg Avenue Yorktown Distributors, Inc.;
Lynchburg, Virginia 24501 President, Yorktown Financial
Corp. (insurance); Vice
President, The Travel Center of
Virginia, Inc.; Partner, The
Rivermont Company (real estate);
Partner, Maban Enterprises (real
estate development); Managing
Partner, Basten-Mason Properties
estate); Partner, D.A.D., A
Virginia General Partnership
(real estate)
Mark A. Borel; 43 President, Borel Construction
Trustee Company, Inc.; Secretary/
P.O. Box 640 Treasurer, Trademark Investments
Lynchburg, Virginia 24505 Corp. (real estate); Partner, HAB
Company, L.C. (real estate);
Former Secretary, Hardwood floor
Specialists, Inc.
Wayne C. Johnson; 42 Director of Personnel, C.B. Fleet
Trustee Company, Inc.
Route 2, Box 438 (pharmaceuticals)
Forest, Virginia 24501
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<PAGE>
Louis B. Basten, III; 53 * Secretary/Treasurer, Yorktown
Secretary/Treasurer Management & Research Company,
P.O. Box 2529 Inc.; Secretary/Treasurer,
2303 Yorktown Avenue Yorktown Distributors, Inc.;
Lynchburg, Virginia 24501 President, Mid-State Insurance;
Secretary/Treasurer, The Travel
Center of Virginia, Inc.;
Partner, The Rivermont Company
(real estate). He is the brother
of David D. Basten.
Charles D. Foster; 35 Chief Financial Officer
Chief Financial Officer Yorktown Management & Research
P.O. Box 2529 Company, Inc.; Chief Financial
2303 Yorktown Avenue Officer, Yorktown Distributors,
Lynchburg, Virginia 24501 Inc.
M. Dennis Stratton; 32 Controller, Yorktown Management &
Controller Research Company, Inc.,;
P.O. Box 2529 Controller, Yorktown
2303 Yorktown Avenue Distributors, Inc.
Lynchburg, Virginia 24501
</TABLE>
_____________________________
* "Interested Person" as that term is defined in the 1940 Act by
virtue of his positions with the Trust, the Adviser and
Distributors or family relationships to such persons.
The Trust pays trustees who are not "interested persons" of the
Trust $900 per meeting of the board. For the fiscal year ended May 31,
1995, no Trustee received any compensation from the Trust. For the fiscal
year ended May 31, 1995, Messrs. Borel and Johnson each received total
compensation from American Pension Investors Trust, another investment
company advised by the Adviser, amounting to $3,600. There are no pension
or retirement benefits accrued as part of the Trust's expenses and there
are no estimated annual benefits to be paid upon retirement. Because the
Adviser performs substantially all of he services necessary for the opera-
tion of the Trust and the Funds, the Trust requires no employees. No
officer, director or employee of the Adviser currently receives any
compensation from the Trust for acting as a trustee or officer.
DISTRIBUTION OF FUND SHARES
Yorktown Distributors, Inc., located at 2303 Yorktown Avenue,
Lynchburg, Virginia, acts as distributor of shares under a distribution
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<PAGE>
agreement with the Trust dated November ___, 1995 ("Distribution
Agreement") that requires Distributors to use its best efforts to sell
shares of the Funds. Shares of the Funds are offered continuously. Under
a plan of distribution adopted by the Trust in the manner prescribed by
Rule 12b-1 under the 1940 Act ("Plan"), each Fund pays Distributors a fee
that is accrued daily and paid monthly at the annual rate of 0.25% of the
average daily net assets of each Fund for distribution and shareholder
servicing activities.
The fee received by Distributors may be spent on any activities
or expenses related to the sale of the Funds' shares, including, but not
limited to, commissions and other compensation to persons who engage in or
support distribution of shares, prospectuses and reports for other than
existing shareholders, advertising, preparation and distribution of sales
literature, overhead, travel and telephone expenses and the provision of
personal services to shareholders in the Funds and the maintenance of
shareholder accounts.
The Plan, together with any related agreements, will continue in
effect only so long as it is approved annually, and any material amendment
approved by votes of a majority of both (a) the Trust's Board of Trustees
and (b) those trustees who are not "interested persons" of the Trust, as
defined in the 1940 Act, and have no direct or indirect financial interest
in the operation of the Plan or any agreement related to it, cast in
person at a meeting called for the purpose of voting on the Plan and such
related agreements. The Plan may be terminated at any time with respect
to a Fund by vote of a majority of the disinterested trustees or by vote
of a majority of the outstanding voting securities of the Fund.
While the Plan is in effect, the selection and nomination of
trustees who are not interested persons of the Trust, as defined in the
1940 Act, shall be committed to the discretion of the trustees who are
themselves not interested persons. Under the Plan, any person authorized
to direct the disposition of monies paid by the Trust must provide to the
Board of Trustees for its review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were
made.
Distributors also may receive dealer reallowances (up to a
maximum of 1% of the public offering price) and/or distribution payments
on purchases by the Funds of shares other open-end investment companies
(underlying funds") sold with a sales load and/or which have a
distribution plan. Distributors has agreed to waive its Rule 12b-1 fee or
reimburse such fees to the Funds monthly to the extent it receives Rule
12b-1 payments from underlying funds in accordance with the Rule 12b-1
distribution plans of those funds.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Trust's Board of Trustees,
the Adviser is responsible for the execution of the Funds' portfolio
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<PAGE>
transactions. In executing portfolio transactions, the Adviser seeks to
obtain the best net results for the Funds. With respect to purchases of
shares of underlying funds subject to a front-end sales load at the time
of purchase (load fund shares"), the Adviser anticipates directing, to the
extent possible, substantially all of the Funds' orders to Distributors.
Where Distributors acts as the dealer with respect to purchases of load
fund shares, it retains dealer reallowances on those purchases up to a
maximum of 1% of the public offering price of the shares. Distributors is
not designated as the dealer on any sales where such reallowance exceeds
1% of the public offering price. In the event Distributors is unable to
execute a particular transaction, the Adviser will direct such order to
another broker-dealer.
Distributors may assist in the execution of Fund portfolio
transactions to purchase underlying fund shares for which it may receive
distribution payments from the underlying funds or their underwriters or
sponsors in accordance with the normal distribution arrangements of those
funds. These payments are separate from the dealer reallowances noted
above.
Distributors may retain brokerage commissions on portfolio
transactions of underlying funds held in the Funds' portfolios, including
funds which have a policy of considering sales of their shares in
selecting broker-dealers for the execution of their portfolio
transactions. Payment of brokerage commissions to Distributors on such
transactions is not a factor considered by the Adviser in selecting an
underlying fund for investment.
Under the 1940 Act, a mutual fund must sell its shares at the
price (including sales load, if any) described in its prospectus, and
current rules under the 1940 Act do not permit negotiations of sales
loads. The Adviser takes into account the amount of the applicable sales
load, if any, when it is considering whether or not to purchase shares of
an underlying fund. The Adviser anticipates investing all of the assets
of the Growth Fund, Capital Income Fund, Total Return Fund and Special
Markets Trust in funds that impose no front-end sales load or impose a
front-end sales load on the Fund of no more than 1% of the public offering
price. The Adviser, to the extent possible, seeks to reduce the sales
load imposed by purchasing shares pursuant to (i) letters of intent,
permitting purchases over time; (ii) rights of accumulation, permitting it
to obtain reduced sales charges as it purchases additional shares of an
underlying fund; and (iii) rights to obtain reduced sales charges by
aggregating its purchases of several funds within a "family" of mutual
funds. The Adviser also takes advantage of exchange or conversion
privileges offered by any "family" of mutual funds.
A factor in the selection of brokers is the receipt of research,
analysis, advice and similar services. The extent that commissions
reflect an element of value for research services cannot be presently
determined. To the extent that research services of value are provided by
broker-dealers with or through whom the Adviser places the Funds'
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<PAGE>
portfolio transactions, the Adviser may be relieved of expenses that it
might otherwise bear. Any research and other services provided by brokers
to the Adviser or the Funds is considered to be in addition to and not in
lieu of services required to be performed by the Adviser under its
Advisory Agreement.
Another important factor in the selection of brokers is the sale
of Fund shares. Where all major factors are equal, the fact that a broker
has sold Fund shares may be considered in placing portfolio transactions.
The Trust expects that purchases and sales of money market
instruments will usually be principal transactions and purchases and sales
of other debt securities may be principal transactions. Thus, the Funds
will normally not pay brokerage commissions in connection with those
transactions. Money market instruments are generally purchased directly
from the issuer or from an underwriter or market maker for the securities
and other debt securities may be purchased in a similar manner. Purchases
from underwriters include an underwriting commission or concession and
purchases from dealers serving as market makers include the spread between
the bid and asked price. Where transactions are made in the
over-the-counter market, the Funds will deal with the primary market
makers unless more favorable prices are obtainable elsewhere.
Because of the possibility of further regulatory developments
affecting the securities exchanges and brokerage practices generally, the
foregoing practices may be modified.
The portfolio turnover rate may vary greatly from year to year
for any Fund and will not be a limiting factor when the Adviser deems
portfolio changes appropriate. The annual portfolio turnover rate is
calculated by dividing the lesser of a Fund's annual sales or purchases of
portfolio securities (exclusive of purchases or sales of securities whose
maturities at the time of acquisition were one year or less) by the
monthly average value of the securities in the Fund during the year.
PRICING AND ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION
Determining Net Asset Value
The net asset value per share of each Fund is determined as of
the close of regular trading (currently 4:00 p.m., eastern time) on the
New York Stock Exchange, Inc. ("NYSE") on each Monday through Friday when
the NYSE is open. Currently, the NYSE is closed on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The assets of Growth Fund, Capital Income Fund, Total Return Fund
and Special Markets Trust consist primarily of mutual fund shares that are
valued each business day of the fund at their respective net asset values
pursuant the 1940 Act. Where market quotations are readily available,
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<PAGE>
portfolio securities for the Treasuries Trust as well as other portfolio
securities for the other Funds are valued based upon market quotations,
provided such quotations adequately reflect, in the judgment of the
Adviser, the fair value of the security. Where such market quotations are
not readily available, securities are valued based upon appraisals
received from a pricing service using a computerized matrix system or
based upon appraisals derived from information concerning the security or
similar securities received from recognized dealers in those securities.
The amortized cost method of valuation generally is used with respect to
debt obligations with 60 days or less remaining until maturity unless the
Trust's Board of Trustees determines that this does not represent fair
value. All other securities or assets will be valued at fair value as
determined in good faith by or under the direction of the Trust's Board of
Trustees.
Additional Exchange and Redemption Information
As discussed in the Prospectus, shares of any Fund may be
exchanged for shares of any other Fund. Shareholders will receive at
least 60 days' notice of any termination or material modification of this
exchange privilege, except no notice need be given if, under extraordinary
circumstances, either redemptions are suspended under the circumstances
described below or a Fund temporarily delays or ceases the sale of its
shares because it is unable to investment amounts effectively in
accordance with the Fund's investment objective, policies and
restrictions.
Each Fund will redeem its shares at the net asset value per share
next determined after receipt of a request for redemption that is in "good
order." Redemptions may be suspended at times (i) when the NYSE is closed
(other than customary weekends and holidays) or trading on the NYSE is
restricted, (ii) when an emergency exists (as determined by the SEC)
making disposal of portfolio securities or the valuation of the assets of
the Funds not reasonably practicable or (iii) as the SEC may otherwise
permit.
PERFORMANCE INFORMATION
The Funds' performance data quoted in advertising and other
promotional materials ("Performance Advertisements") represents past
performance and is not intended to indicate future performance. The
investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
the original cost.
Average annual total return quotes ("Standardized Return") used
in the Funds' Performance Advertisements are calculated according to the
following formula:
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<PAGE>
n
P (1 + T) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of that period.
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the
last day of the most recent quarter prior to submission of the
advertisement for publication. In calculating the ending redeemable
value, all dividends and distributions by the Funds are assumed to have
been reinvested at net asset value on the reinvestment dates during the
period. Total return, or "T" in the formula above, is computed by finding
the average annual compounded rate of return over the period that would
equate the initial amount invested to the ending redeemable value.
The Funds may also from time to time include in performance
advertisements total return figures that are not calculated according to
the formula set forth above ("Non-Standardized Return"). The Funds
calculate Non-Standardized Return for a specified period of time by
assuming the investment of $1,000 in shares and assuming the reinvestment
of each dividend or other distribution at net asset value. Percentage
rates of return are then determined by subtracting the value of the
investment at the beginning of the period from the ending value and by
dividing the remainder by the beginning value.
In connection with communicating a Fund's performance information
to current or prospective shareholders, the Trust also may compare these
figures to the performance of other mutual funds tracked by mutual fund
rating services or other unmanaged indexes that may assume reinvestment of
distributions but generally do not reflect deductions for administrative
and management costs.
TAXATION
In order to qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended, each
Fund must distribute annually to its shareholders at least 90% of its
investment company taxable income (consisting generally of net investment
income plus net short-term capital gain, if any) and must meet several
additional requirements. With respect to each Fund, these requirements
include the following: (1) the Fund must derive at least 90% of its gross
income each taxable year from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of
securities and certain other income; (2) the Fund must derive less than
30% of its gross income each taxable year from the sale or other
disposition of securities held for less than three months; (3) at the
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<PAGE>
close of each quarter of the Fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs and other securities, with
those other securities limited, in respect of any one issuer, to an amount
that does not exceed 5% of the value of the Fund's total assets and that
does not represent more than 10% of the outstanding voting securities of
the issuer; and (4) at the close of each quarter of the Fund's taxable
year not more than 25% of the value of its total assets may be invested in
securities (other than U.S. Government securities and securities of other
RICs) of any one issuer.
Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on
a date in one of those months will be deemed to have been paid by the Fund
and received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the
year in which that December 31 falls.
A portion of the dividends from a Fund's investment company
taxable income (whether paid in cash or reinvested in additional Fund
shares) may be eligible for the dividends-received deduction allowed to
corporations. The eligible portion may not exceed the aggregate dividends
received by the Fund either directly from U.S. corporations (excluding
RICs, among others) or indirectly from such corporations through
underlying funds in which it invests. However, dividends received by a
corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the alternative
minimum tax.
Under certain circumstances, a sales charge incurred by a Fund on
the acquisition of an underlying fund's shares may not be taken into
account in determining the gain or loss on the disposition of those
shares. Generally, a redemption of an underlying fund's shares will
result in taxable gain or loss to the redeeming Fund, depending on whether
the redemption proceeds are more or less than the Fund's adjusted basis
for the redeemed shares (which normally includes any sales charge paid);
an exchange of an underlying fund's shares for shares of another
underlying fund normally will have similar tax consequences. However, if
a Fund disposes of an underlying fund's shares ("A shares") within 90 days
after its purchase thereof and subsequently acquires shares of another
underlying fund on which a sales charge normally is imposed or of the same
fund ("B shares"), without paying the sales charge (or paying a reduced
charge) due to an exchange privilege or a reinstatement privilege, then
(1) any gain on the disposition of the A shares will be increased, or the
loss thereon decreased, by the amount of the sales charge paid when the A
shares were acquired and (2) that amount will increase the adjusted basis
of the B shares that were subsequently acquired.
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<PAGE>
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., 217 E. Redwood Street, Baltimore,
Maryland 21202-3316, was appointed by the trustees to serve as the Trust's
independent certified public accountants, providing professional services
including (1) audit of the annual financial statements, (2) assistance and
consultation in connection with SEC filings and semi-annual reports,
including semi-annual financial statements, and (3) preparation of the
federal income tax returns filed on behalf of the Funds.
OTHER INFORMATION
The Trust is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for the
obligations of the Trust or a Fund. However, the Trust's Declaration of
Trust disclaims shareholder liability for acts or obligations of the Trust
or the Funds and requires that notice of such disclaimer be given in each
note, bond, contract, instrument, certificate or undertaking made or
issued by the trustees or by any officers or officer by or on behalf of
the Trust, a Fund, the trustees or any of them in connection with the
Trust. The Declaration of Trust provides for indemnification from each
Fund's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability
is limited to circumstances in which a Fund itself would be unable to meet
its obligations, a possibility that the Adviser believes is remote and not
material. Upon payment of any liability incurred by a shareholder solely
by reason of being or having been a shareholder, the shareholder paying
such liability will be entitled to reimbursement from the general assets
of the Fund. The trustees intend to conduct the operations of each Fund
in such a way as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund.
The Prospectus and this Statement of Additional Information do
not contain all the information included in the Trust's registration
statement filed with the SEC under the Securities Act of 1933 and the 1940
Act with respect to the securities offered hereby, certain portions of
which have been omitted pursuant to the rules and regulations of the SEC.
The registration statement, including the exhibits filed therewith, may be
examined at the offices of the SEC in Washington, D.C.
Statements contained in the Prospectus and this Statement of
Additional Information as to the contents of any contract or other
documents referred to are not necessarily complete, and in each instance
reference is made to the copy of such contracts or other documents filed
as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
- 16 -
<PAGE>
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER
AND BOND RATINGS
Description of Moody's Investors Service, Inc. ("Moody's") Short-Term Debt
Ratings
Prime-1. Issuers (or supporting institutions) rated Prime-1
("P-1") have a superior ability for repayment of senior short-term debt
obligations. P-1 repayment ability will often be evidenced by many of the
following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative
capitalization structure with moderate reliance on debt and ample asset
protection; broad margins in earnings coverage of fixed financial charges
and high internal cash generation; well-established access to a range of
financial markets and assured sources of alternate liquidity. Prime-2.
Issuers (or supporting institutions) rated Prime-2 ("P-2") have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Description of Standard & Poor's ("Standard & Poor's") Commercial Paper
Ratings
A. Issues assigned this highest rating are regarded as having
the greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety. A-1. This designation indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus (+) sign
designation. A-2. Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of safety is
not as high as for issues designated A-1.
Description of Moody's Long-Term Debt Ratings
Aaa. Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged". Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues; Aa. Bonds which are rated Aa are judged to be of
high quality by all standards. Together with the Aaa group they comprise
what are generally known as high-grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
- 17 -
<PAGE>
amplitude or there may be other elements present which make the long-term
risk appear somewhat larger than the Aaa securities; A. Bonds which are
rated A possess many favorable investment attributes and are considered as
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the future; Baa.
Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well; Ba. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class; B.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small. Caa. Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest; Ca. Bonds which are rated Ca represent
obligations which are speculative in a high degree. Such issues are often
in default or have other marked shortcomings; C. Bonds which are rated C
are the lowest rated class of bonds, and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa to B. The modifier 1 indicates that the
Company ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
that the company ranks in the lower end of its generic rating category.
Description of Standard & Poor's Corporate Debt Ratings
AAA. Debt rated AAA has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is extremely
strong; AA. Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree. A. Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories; BBB. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
pay interest and repay principal for debt in this category than in higher
rated categories; BB, B, CCC, CC, C. Debt rated BB, B, CCC, CC, and C is
regarded, on balance, as predominantly speculative with respect to
- 18 -
<PAGE>
capacity to pay interest and repay principal in accordance with the terms
of the obligation. BB indicates the lowest degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. BB. Debt
rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB- rating; B. Debt
rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating; CCC. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely payment of
interest and repayment of principal. In the event of adverse business,
financial, or economic conditions, it is not likely to have the capacity
to pay interest and repay principal. The CCC rating category is also used
for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating; CC. The rating CC is typically applied to debt
subordinated to senior debt that is assigned an actual or implied CCC
ratings; C. The rating C is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC-debt rating. The C
rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued; CI. The rating CI is
reserved for income bonds on which no interest is being paid; D. Debt
rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardy.
- 19 -
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees
of Consultants Trust:
We have audited the accompanying statement of assets and
liabilities of the Growth Fund, Treasuries Trust, Capital Income Fund,
Total Return Fund and Special Markets Trust (the "Funds" which comprise
Consultants Trust), as of May 31, 1995. This financial statement is the
responsibility of Consultants Trust's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statement
is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred
to above presents fairly, in all material respects, the financial position
of the Funds as of May 31, 1995, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Baltimore, Maryland
June 16, 1995
- 20 -
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
CONSULTANTS TRUST
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995
<S> <C> <C> <C> <C> <C>
Capital Total Special
Growth Treasuries Income Return Markets
Fund Trust Fund Fund Trust
Assets:
Cash $20,000 $20,000 $20,000 $20,000 $20,000
Deferred organization 10,435 10,435 10,435 10,435 10,435
costs
30,435 30,435 30,435 30,435 30,435
Liabilities:
Organization costs
payable 10,435 10,435 10,435 10,435 10,435
to Adviser
Net assets
$20,000 $20,000 $20,000 $20,000 $20,000
Shares of beneficial interest
outstanding
(unlimited number of no 1,000 2,000 1,333 800 667
par value shares
authorized for each fund)
Net asset value and offering
price $20.00 $10.00 $15.00 $25.00 $30.00
per share
</TABLE>
The accompanying notes are an integral
part of the financial statements.
- 21 -
<PAGE>
CONSULTANTS TRUST
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
____________________
1. Organization:
Consultants Trust (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act
of 1940, as amended ("1940 Act"), as an open-end management
investment company. It is composed of five separate portfolios
(the "Funds"). The Funds have had no operations, other than
those relating to organizational matters, including the issuance
of the indicated number of shares of beneficial interest (the
"initial shares").
2. Significant Accounting Policies:
a. Portfolio Valuation
The assets of the Growth Fund, Capital Income Fund, Total
Return Fund and Special Markets Trust will consist
primarily of mutual fund shares that will be valued at
their respective net asset values pursuant to the 1940
Act. Where market quotations are readily available,
other portfolio securities will be valued based upon
market quotations. All other securities or assets will
be valued at fair value as determined in good faith by or
under the direction of the Trust's Board of Trustees.
b. Security Transactions
Security transactions will be accounted for on the trade
date.
3. Organization Costs:
The estimated costs incurred by the Trust in connection with its
organization and the registration of the Funds' shares have been
deferred and will be amortized using the straight-line method
over the period of benefit not to exceed five years beginning
with the commencement of operations of the Funds. These costs
have been paid by Yorktown Management & Research Company, Inc.,
the Funds' investment adviser, and will be reimbursed by the
Funds. If any initial shares are redeemed by any holder thereof
during the amortization period, the redemption proceeds shall be
reduced by the pro rata portion of unamortized expenses which the
number of shares redeemed bears to the number of initial shares
then outstanding.
- 22 -
<PAGE>
PART C. OTHER INFORMATION
--------------------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
(1) Report of Coopers & Lybrand L.L.P., Independent
Accountants (filed herewith)
(2) Statement of Assets and Liabilities (filed
herewith)
(b) Exhibits
--------
(1) Declaration of Trust 1/
(2) By-Laws 1/
(3) Voting Trust Agreement - None
(4) Instruments Defining Rights of Holders of
Securities - None
(5) Form of Investment Advisory and Administrative
Services Agreement 2/
(6) (a) Form of Distribution Agreement 2/
(b) Form of Sub-Distribution Agreement 2/
(7) Bonus, Profit-Sharing, Pension or Other Similar
Contracts - None
(8) Form of Custodian Agreement 2/
(9) Form of Transfer and Dividend Disbursing Agency
Agreement 2/
(10) Opinion and Consent of Counsel 2/
(11) Consent of Independent Accountants (filed
herewith)
(12) Financial Statements Omitted from Item 23 - None
(13) Initial Capitalization Agreement 2/
(14) Prototype for Retirement Plans - None
(15) Form of Plan of Distribution Pursuant to Rule
12b-1 2/
(16) Performance Information - None
(17) Financial Data Schedule - None
(18) Rule 18f-3 Plan - None
--------------------
1/ Incorporated by reference from the Trust's initial Registration
Statement, SEC File No. 33-58932, filed March 1, 1993.
2/ Incorporated by reference from Pre-Effective Amendment No. 2 to
the Trust's Registration Statement, SEC File No. 58932, filed October 6,
1993.
C-1
<PAGE>
Item 25. Persons Controlled by or under Common Control with
Registrant
---------------------------------------------------
None
Item 26. Number of Holders of Securities
-------------------------------
Number of Record Shareholders
Title of Class as of November 15, 1995
------------- -----------------------------
Shares of Beneficial Interest
of the:
Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Capital Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Total Return Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Special Markets Trust . . . . . . . . . . . . . . . . . . . . . . . . . 1
Treasuries Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 27. Indemnification
---------------
Section 3 of Article X of the Declaration of Trust,
"Indemnification," provides that the appropriate series of the Registrant
will indemnify the trustees and officers of the Registrant to the fullest
extent permitted by law against claims and expenses asserted against or
incurred by them by virtue of being or having been a trustee or officer;
provided that no such person shall be indemnified where there has been an
adjudication or other determination, as described in Article X, that such
person is liable to the Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office or did not act in
good faith in the reasonable belief that his action was in the best
interest of the Registrant. Section 3 of Article X also provides that the
Registrant may maintain insurance policies covering such rights of
indemnification.
Additionally, "Limitation of Liability" in Article X of the
Declaration of Trust provides that the trustees or officers of the
Registrant shall not be personally liable to any person extending credit
to, contracting with or having a claim against the Registrant or a
particular series; and that, provided they have exercised reasonable care
and have acted under the reasonable belief that their actions are in the
best interest of the Registrant, the trustees and officers shall not be
liable for neglect or wrongdoing by them or any officer, agent, employee
or investment adviser of the Registrant.
Section 2 of Article XI of the Declaration of Trust additionally
provides that, subject to the provisions of Section 1 of Article XI and to
C-2
<PAGE>
Article X, trustees shall not be liable for errors of judgment or mistakes
of fact or law, for any act or omission in accordance with advice of
counsel or other experts, or for failing to follow such advice, with
respect to the meaning and operation of the Declaration of Trust.
Article IX of the By-Laws provides that the Registrant may
purchase and maintain insurance on behalf of any person who is or was a
trustee, officer or employee of the Registrant, or is or was serving at
the request of the Registrant as a trustee, officer or employee of a
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the
Registrant would have the power to indemnify him against such liability to
the Registrant or its shareholders, provided that the Registrant may not
purchase or maintain insurance that protects any such person against any
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office.
Paragraph 9 of the Investment Advisory and Administrative
Services agreement provides that except as may be determined by applicable
legal standards, Yorktown Management & Research Company, Inc. ("Yorktown")
shall have no liability to the Trust, or its shareholders or creditors,
for any error in business judgment, or for any loss arising out of any
investment, or for any other act or omission in performance of its
obligations to the Trust pursuant to the Agreement except (1) for actions
and omissions constituting violations of the Investment Company Act of
1940, the Securities Act of 1933 ("1933 Act") or other federal securities
laws, (2) in circumstances where API has failed to conform to reasonable
business standards, and (3) by reason of its willful misfeasance, bad
faith or reckless disregard of its duties and obligations.
Section 9 of the Distribution Agreement provides that the
Registrant will indemnify Yorktown Distributors, Inc. ("Distributors") and
its officers, directors and controlling persons against all liabilities
arising from any alleged untrue statement of material fact in the
Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or
necessary to make the statements in it, in light of the circumstances
under which they were made, not misleading, except insofar as liability
arises from untrue statements or omissions made in reliance upon and in
conformity with information furnished by Distributors to the Registrant
for use in the Registration Statement; and provided that this indemnity
agreement shall not protect any such persons against liabilities arising
by reason of their bad faith, gross negligence against or willful
misfeasance; and shall not insure to the benefit of any such persons
unless a court of competent jurisdiction or controlling precedent
determines that such result is not against public policy as expressed in
the Securities Act of 1933. Section 9 of the Distribution Agreement also
provides that Distributors agree to indemnify, defend and hold the
Registrant, its officers and Trustees free and harmless of any claims
C-3
<PAGE>
arising out of any alleged untrue statement or any alleged omission of
material fact contained in information furnished by Distributors for use
in the Registration Statement or arising out of an agreement between
Distributors and any retail dealer, or arising out of supplementary
literature or advertising used by Distributors in connection with the
Agreement.
Section 10 of the Distribution Agreement provides that the
Trustees and the shareholders of a series shall not be liable for any
obligations of the Registrant or any series under the Agreement and that
Distributors shall look only to the assets and property of the Registrant
in settlement of such rights or claims and not to such Trustees or
shareholders.
Registrant undertakes to carry out all indemnification provisions
of its Declaration of Trust and By-Laws in accordance with Sections 17(h)
and 17(i) of the Investment Company Act of 1940.
Insofar as indemnification for liability arising under the 1933
Act, as amended, may be provided to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment of the Registrant of expenses incurred or paid by a
trustee, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustee,
officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
---------------------------------------------------
Information regarding the officers and directors of the Trust's
Adviser, Yorktown Management & Research Company, Inc. is included in its
Form ADV (as most recently amended on March 24, 1995) as filed with the
Securities and Exchange Commission (Registration Number 801-23441) and is
incorporated herein by reference.
Item 29. Principal Underwriters
----------------------
Yorktown Distributors, Inc. is the distributor of the Trust's
shares. Distributors also acts as the principal underwriter for American
Pension Investors Trust. The information set forth below is furnished for
those directors or officers of Distributors who also serve as trustees or
officers of the Trust.
C-4
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
----------------- --------------- -------------
David D. Basten Director and Trustee and
2303 Yorktown Avenue President President
Lynchburg, VA 24501
Louis B. Basten, III Director Secretary/Treasurer
Charles D. Foster Chief Financial Chief Financial
2303 Yorktown Avenue Officer Officer
Lynchburg, VA 24501
Item 30. Location of Accounts and Records
--------------------------------
With the exceptions noted below, Yorktown Management & Research
Company, Inc., the adviser, (2303 Yorktown Avenue, Lynchburg, Virginia
24501), maintains the books, accounts and records required to be
maintained pursuant to Section 31(a) of the Investment Company Act of 1940
("1940 Act") and the rules promulgated thereunder.
Yorktown Distributors, Inc., the distributor of Trust shares,
(2303 Yorktown Avenue, Lynchburg, Virginia 24501), maintains the books,
accounts and records required to be maintained pursuant to Section
31(a)-1(d) of the 1940 Act.
Fund Services, Inc. (1500 Forest Avenue, Suite 111, Richmond,
Virginia 23229), the Trust's transfer and dividend disbursing agent,
maintains the books, records and accounts required to be maintained
pursuant to Rule 31a-1(b)(2)(iv) under the 1940 Act.
Item 31. Management Services
-------------------
None
Item 32. Undertaking
-----------
Registrant hereby undertakes to file a Post-Effective Amendment
to this Registration Statement, containing financial statements that need
not be certified, within four to six months after the effective date of
this Registration Statement.
C-5
<PAGE>
CONSULTANTS TRUST
EXHIBIT INDEX
----------------
Exhibit
Number Page
------- ----
(1) Declaration of Trust 1/
(2) By-Laws 1/
(3) Voting trust agreement - None
(4) Instruments Defining Rights of Holders of Securities - None
(5) Form of Investment Advisory and Administration Contract 2/
(6) (a) Form of Distribution Agreement 2/
(b) Form of Sub-Distribution Agreement 2/
(7) Bonus, profit sharing or pension plans - None
(8) Form of Custodian Agreement 2/
(9) Form of Transfer and Dividend Disbursing Agency Agreement 2/
(10) Opinion and consent of counsel 2/
(11) Accountants' Consent (filed herewith) . . . . . . . . . . . . .
(12) Financial Statements omitted from Part B - None
(13) Initial Capitalization Agreement 2
(14) Prototype Retirement Plan - None
(15) Form of Plan of Distribution pursuant to
Rule 12b-1 2/
(16) Schedule for Computation of Performance Quotations - None
(17) Financial Data Schedule - None
(18) Rule 18f-3 Plan - None
-------------------------------
1/ Incorporated by reference from the Trust's initial Registration
Statement, SEC File No. 33-58932, filed March 1, 1993.
2/ Incorporated by reference from Pre-Effective Amendment No. 2 to
the Trust's Registration Statement, SEC File No. 33-58932, filed
October 6, 1993.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it
meets all the requirements for effectiveness of this Post-Effective
Amendment No. 2 to its Registration Statement pursuant to 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment
to be signed on its behalf by the undersigned, thereto duly authorized, in
the City of Lynchburg, and the Commonwealth of Virginia on the 17th day
of November, 1995.
CONSULTANTS TRUST
By: /s/ David D. Basten
--------------------------
David D. Basten, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David D. Basten Trustee and President November 17, 1995
------------------- (Principal Executive
David D. Basten Officer)
____________________ Trustee _____________, 1995
Mark A. Borel
/s/ Wayne C. Johnson Trustee November 17, 1995
--------------------
Wayne C. Johnson
<PAGE>
Charles D. Foster Chief Financial Officer November 17, 1995
--------------------
Charles D. Foster
</TABLE>
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Post-Effective Amendment No. 2
to the Registration Statement on Form N-1A (File Number 33-58932) of
Consultants Trust of our report dated June 16, 1995, on our audit of the
statements of assets and liabilities of the Growth Fund, Treasuries Trust,
Capital Income Fund, Total Return Fund and the Special Markets Trust as of
May 31, 1995, which is included in the Registration Statement. We also
consent to the reference of our firm under the caption "Independent
Accountants."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
November 21, 1995
<PAGE>
