SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
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Pre-Effective Amendment No. / /
Post-Effective Amendment No. 10 / X /
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT / /
OF 1940
Amendment No. 11 / X /
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(Check appropriate box or boxes.)
ANALYSTS INVESTMENT TRUST - FILE NOS. 33-64370 AND 811-7778
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9200 MONTGOMERY ROAD, BLDG. D, SUITE 13A, CINCINNATI, OHIO 45242
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(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number, including Area Code: (513) 984-3377
DAVID LEE MANZLER, JR., 9200 MONTGOMERY ROAD, BLDG. D, SUITE 13A,
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CINCINNATI, OHIO 45242
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/_/ on ________ pursuant to paragraph (b)
/X/ 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.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
ANALYSTS GROUP
OF
MUTUAL FUNDS
PROSPECTUS DATED DECEMBER 1, 1999
ANALYSTS STOCK FUND
ANALYSTS INTERNET.FUND
ANALYSTS FIXED INCOME FUND
Analysts Investment Trust
9200 Montgomery Road, Suite 13A
Cincinnati, OH 45242
(513) 792-5400
(513) 792-5408
FAX (513) 984-2411
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
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<PAGE>
ANALYSTS STOCK FUND
INVESTMENT OBJECTIVE
The investment objective of the Stock Fund is long term capital
appreciation.
PRINCIPAL STRATEGIES
The Fund will invest at least 65% of its assets in a broad range of
common stocks which the Fund's adviser, Equity Analysts Inc., believes have
above average prospects for appreciation. The adviser follows a stock investment
program diversified among the following categories (under normal circumstances,
no more than 50% of the total assets of the Fund will be invested in any
category): large capitalization (over $1 billion) domestic stocks; small (less
than $500 million) and medium (between $500 million and $1 billion)
capitalization domestic stocks; foreign stocks; real estate stocks; and natural
resources stocks and mutual funds which invest primarily in the above. To the
extent the Fund invests in other mutual funds, you will indirectly pay some
duplicative fees. The Fund's adviser manages the diversification among the
categories based on a fundamental analysis of market conditions and the
prospects for specific categories of stocks. Within each category, specific
stocks and industries are also selected based on the adviser's fundamental
analysis.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Company risk -- Fund value might decrease in response to the activities and
financial prospects of an individual company.
Market risk -- Fund value might decrease in response to general market and
economic conditions.
Volatility risk-- Common stocks tend to be more volatile than other investment
choices.
Foreign Risk -- Changes in foreign economies and political climates can
negatively affect the value of your investment in the Fund. Other factors that
can reduce the value of foreign investments include changes in currency rates of
exchange, reduced availability of information, different accounting standards,
reduced liquidity, price volatility, and possible difficulties in enforcing
contracts.
Smaller company risk -- In addition, the stocks of small and medium sized
companies are subject to certain risks including:
- - possible dependence on a limited product line, market, financial resources or
management group
- - less frequent trading and trading with smaller volume than larger stocks,
which may make it difficult for the Fund to buy or sell the stocks
- - greater fluctuation in value than larger, more established company stocks
As with any mutual fund investment, the Fund's returns will vary and you could
lose money.
IS THIS FUND RIGHT FOR YOU?
The Fund may be a suitable investment for:
- - long term investors seeking a Fund with a capital appreciation investment
strategy
- - investors willing to accept price fluctuations in their investment
- - investors who can tolerate the greater risks associated with common stock
investments
HOW THE FUND HAS PERFORMED
The chart and table below show the variability of the Fund's returns,
which is one indicator of the risks of investing in the Fund. The bar chart
shows changes in the Fund's returns from year to year since the Fund's
inception. The table shows how the Fund's average annual total returns over time
compare to those of a broad-based securities market index. Of course, the Fund's
past performance is not necessarily an indication of its future performance.
Annual Total Returns as of December 31, of each year*
[Insert bar chart with the following plot points:
1994.....................-3.20%
1995.....................19.83%
1996.....................14.55%
1997.....................19.38%
1998.....................13.83%]
* The Stock Fund's year-to-date return as of September 30, 1999 was ___%.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING 12/31/98:
1 YEAR 5 YEARS SINCE
------ ------- -----
INCEPTION**
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The Fund 13.83% 12.54% 14.32%
S&P 500 Index 28.58% 24.05% 21.61%
**August 25, 1993
During the period shown, the highest return for a calendar quarter was
18.34% in the fourth quarter of 1998, and the lowest return was -11.61 for the
third quarter of 1998.
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<PAGE>
ANALYSTS INTERNET.FUND
INVESTMENT OBJECTIVE
The investment objective of the Analysts internet.fund (the "Fund") is
long term growth through capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances at least 65% of the assets of the Fund will be
invested in common stock of Internet companies. The Internet is a global network
of computers that allows users to quickly and easily share information and
conduct business. Internet companies are defined as companies that derive at
least 50% of revenues from the internet, including:
- - internet access providers
- - companies that develop software tools to access the internet and facilitate
secure internet transactions
- - companies that manufacture personal computers and other hardware used in
conjunction with the internet
- - companies that manufacture software and other technologies used in
conjunction with the internet
- - companies engaging in electronic commerce
- - companies publishing information about the internet
- - companies that supply information, such as games, music and video, on the
internet
- - companies that consult on the design and implementation of internet
strategies
- - and other internet related businesses and technologies.
The types of companies that are considered "Internet companies" will change as
technology and applications change.
In selecting investments for the Fund, the Fund's adviser will focus on
Internet companies that are young, innovative, and emerging companies. The Fund
may also invest in established companies that have successfully implemented
internet strategies, companies which have captured a leadership position in a
sector using internet technologies, and companies engaged in older technologies
when the Fund's adviser believes that these companies may successfully integrate
existing technology with new emerging technologies
PRINCIPAL RISKS OF INVESTING IN THE FUND
Company risk -- Fund value might decrease in response to the activities and
financial prospects of an individual company.
Market risk -- Fund value might
decrease in response to general market and economic conditions.
Volatility risk -- Common stocks tend to be more volatile than other investment
choices.
Foreign Risk -- Changes in foreign economies and political climates can
negatively affect the value of your investment in the Fund. Other factors that
can reduce the value of foreign investments include changes in currency rates of
exchange, reduced availability of information, different accounting standards,
reduced liquidity, price volatility, and possible difficulties in enforcing
contracts.
Internet concentration risk -- The Fund is subject to special risks because the
Fund concentrates its investments in internet companies. Internet companies are
subject to competitive pressures and changing demands that may have a
significant effect on the financial condition of internet companies. Changes in
governmental policies, such as telephone and cable regulations and anti-trust
enforcement, may have a material effect on the products and services of these
companies. In addition, the rate of technological change is generally higher
than other companies, often requiring extensive and sustained investment in
research and development, and exposing such companies to the risk of rapid
product obsolescence.
Smaller company risk -- The stocks of small and medium sized companies are
subject to certain risks including:
- - possible dependence on a limited product line, market, financial resources or
management group
- - less frequent trading and trading with smaller volume than larger stocks,
which may make it difficult for the Fund to buy or sell the stocks
- - greater fluctuation in value than larger, more established company stocks.
As with any mutual fund investment, the Fund's returns will vary and you could
lose money.
IS THIS FUND RIGHT FOR YOU?
The Fund may be a suitable investment for:
- - long term investors seeking to diversify into internet securities
- - investors willing to accept significant price fluctuations in their
investment
- - investors who can tolerate the greater risks associated with internet
investments
The Fund is not a complete investment program.
HOW THE FUND HAS PERFORMED
Although past performance of a fund is no guarantee of how it will
perform in the future, historical performance may give you some indication of
the risk of investing in the fund because it demonstrates how its returns have
varied over time. The past performance information that would otherwise appear
in this prospectus has been omitted because the Fund is recently organized and
has a limited performance history
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<PAGE>
ANALYSTS FIXED INCOME FUND
INVESTMENT OBJECTIVE
The investment objective of the Fixed Income Fund is a high level of
income over the long term consistent with preservation of capital.
PRINCIPAL STRATEGIES
Under normal circumstances, at least 65% of the total assets of the Fund
will be invested in investment grade fixed income securities, including U.S.
government obligations, securities of foreign governments, domestic or foreign
corporate debt securities, preferred stocks, convertible preferred stocks,
mortgage backed securities, convertible bonds and debentures, repurchase
agreements and mutual funds which invest primarily in the above. To the extent
the Fund invests in other mutual funds, you will indirectly pay some duplicative
fees. In addition, the Fund may invest in CMO's, REMICs and floating and
variable rate obligations.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Interest rate risk -- the value of your investment may decrease when interest
rates rise.
Credit risk -- the issuer of the fixed income security may not be able to make
interest and principal payments when due.
Prepayment risk -- the mortgage backed
securities held by the Fund may be negatively affected by changes in prepayment
rates on the underlying mortgages. Certain preferred stocks and callable bonds
are also negatively affected by prepayment.
Foreign Risk -- Changes in foreign
economies and political climates can negatively affect the value of your
investment in the Fund. Other factors that can reduce the value of foreign
investments include changes in currency rates of exchange, reduced availability
of information, different accounting standards, reduced liquidity, price
volatility, and possible difficulties in enforcing contracts.
As with any mutual fund investment, the Fund's returns may vary and you could
lose money.
IS THIS FUND RIGHT FOR YOU?
The Fund may be a suitable investment for:
- - long term investors seeking a fund with an income and capital preservation
strategy
- - investors seeking to diversify their holdings with bonds and other fixed
income securities
- - investors willing to accept some price fluctuations in their investments.
HOW THE FUND HAS PERFORMED
The chart and table below show the variability of the Fund's returns,
which is one indicator of the risks of investing in the Fund. The bar chart
shows changes in the Fund's returns form year to year since the Fund's
inception. The table shows how the Fund's average annual total returns over time
compare to those of a broad-based securities market index. Of course, the Fund's
past performance is not necessarily an indication of its future performance.
Annual Total Returns as of December 31 of each year*
[Insert bar chart with the following plot points:
1994......................-6.36%
1995......................18.13%
1996......................6.16%
1997......................9.19%
1998......................1.54%]
*The Fixed Income Fund's year-to-date returns of September 30, 1999 was __%.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING 12/31/98:
1 YEAR 5 YEARS SINCE
------ ------- -----
INCEPTION**
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The Fund 1.54% 5.42% 4.45%
Lehman
Intermediate Index 8.65% 6.41% 5.97%
**August 25, 1993
During the period shown, the highest return for a calendar quarter was
6.19% in the second quarter of 1995, and the lowest return was -2.52% for the
first quarter of 1994.
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<PAGE>
COSTS OF INVESTING IN THE FUNDS:
This table describes the fees and expenses that you may pay if you buy and hold
shares of a Fund.
<TABLE>
<CAPTION>
FIXED
STOCK INTERNET.FUND INCOME
----- ------------- ------
<S> <C> <C> <C>
SHAREHOLDER FEES 1
(fees paid directly from your investment).....................None None None
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets)
Management Fees...............................................2.00% 3.00% 1.50%
Distribution Fees.............................................None None None
Total Annual Fund Operating Expenses..........................2.00% 3.00% 1.50%
</TABLE>
EXPENSE EXAMPLE:
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The example below is intended to help you compare the cost of
investing in the Funds with the cost of investing in other mutual funds. The
example uses the same assumptions as other mutual fund prospectuses: a $10,000
initial investment for the time periods indicated, 5% annual total return,
constant operating expenses, and sale of all shares at the end of each time
period. Although your actual expenses may be different, based on these
assumptions your costs will be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Stock Fund $200 $631 $___ $___
Internet.fund $300 $946 $___ $___
Fixed Income Fund $150 $473 $___ $___
<PAGE>
HOW TO BUY, SELL OR EXCHANGE SHARES IN THE FUND
If you need additional information on how to buy, sell or exchange shares
in the Fund, please contact:
Analysts Investment Trust
9200 Montgomery Road, Suite 13A
Cincinnati, Ohio 45242
(513) 792-5400
(513) 792-5402
FAX: (513) 984-2411
HOW TO BUY SHARES
INITIAL PURCHASE: The minimum initial investment for each Fund is $1,000. Due to
Federal limitations, the minimum initial investment for an Education IRA is
$500.00. You may diversify your investments by choosing a combination of any of
the Funds for your investment program.
BY MAIL - You may purchase shares of any Fund by following these steps:
- - Complete and sign an application;
- - Draft a check made payable to: Analysts Investment Trust;
- - Identify on the check and on the application the Fund(s) in which you would
like to invest;
- - Mail the application, check and any letter of instruction to the above
address.
BY WIRE - You may purchase shares of any Fund by wiring Federal Funds
from your bank, which may charge you a fee for doing so. If money is to be wired
for a newly established account, you must call the Fund first to open an account
and obtain an account number.
Your bank must then wire the specified amount according to the following
instructions:
Firstar Bank/Cincinnati
ABA #0420-0001-3
DDA #48036-9362
Account #19-0086-Analysts Fixed Income Fund
Account #19-0085-Analysts Stock Fund
Account #19-0087-Analysts internet.fund
Shareholder Account Name -___________________
Shareholder Account Number - __________
You must mail a completed application to Analysts Investment Trust after
opening an account by wire transfer. Wire orders will be accepted only on a day
on which the Funds and the custodian bank are open for business. A wire purchase
will not be considered made until the wired money is received and the purchase
is accepted by the Funds. Any delays that may occur in wiring money, including
delays that may occur in processing by the banks, is not the responsibility of
the Funds or the custodian bank. There is presently no fee for the receipt of
wired funds, but the Funds may charge a fee in the future.
-6-
ADDITIONAL PURCHASES
You may buy additional shares of a Fund at any time (minimum of $25) by
mail or by bank wire. Each additional purchase request must contain:
- - Name of your account(s);
- - Account number(s);
- - Name of the Fund(s) in which you wish to invest.
Checks should be made payable to "Analysts Investment Trust" and should
be sent to the Analysts Investment Trust at the address indicated throughout
this prospectus. A bank wire should be sent as outlined above. ACH (Automatic
Clearing House) transactions should be established in advance by contacting the
Fund.
The Funds may limit the amount of purchases and reject any purchase
request in whole or in part. If your check or wire does not clear, you will be
responsible for any loss incurred. The Fund can sell other shares your own as
reimbursement for any loss incurred.
HOW TO SELL SHARES
You may sell shares in a Fund by mail or telephone, without a charge. The
proceeds of the sale may be more or less than the purchase price of your shares,
depending on the market value of the Fund's securities at the time of your sale.
Your request for a sale should be addressed to the Analysts Investment Trust and
must include:
- - Letter of instruction;
- - Fund name;
- - Account number(s);
- - Account name(s);
- - Dollar amount or the number of shares you wish to sell.
All registered share owner(s) must sign this request in the exact name(s)
and any special capacity in which they are registered. For joint accounts with
right of survivorship, only one signature is required for withdrawal.
For sales in excess of $50,000, the Funds may require that signatures be
guaranteed by a bank or member firm of a national securities exchange. Signature
guarantees are for the protection of shareholders. At the discretion of any
Fund, a shareholder may be required to furnish additional legal documents to
insure proper authorization. If you are not certain of the requirements for a
sale, please call the Transfer Agent at the number indicated throughout this
prospectus.
BY TELEPHONE - Telephone redemption privileges are automatically
available to all shareholders. Shareholders may sell shares on any business day
the New York Stock Exchange is open by calling the Transfer Agent before 4:00
p.m. Eastern Time. The Funds will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures will include
requiring a form of personal identification from the caller. Sale proceeds will
be mailed or wired at the shareholder's direction to the designated account. The
minimum amount that may be wired is $1,000. Wire charges of $10 will be deducted
from sales proceeds.
By using the telephone redemption and exchange privileges, a shareholder
authorizes the Funds to act upon the instruction of any person by telephone they
believe to be the shareholder. By telephone, the shareholder may sell shares
from the account and transfer the proceeds to the address of record or the bank
account designated or may exchange into another Fund. The Funds and the Transfer
Agent are not liable for following instructions communicated by telephone that
they reasonably believe to be genuine. However, if they do not employ reasonable
procedures to confirm that telephone instructions are genuine, they may be
liable for any losses due to unauthorized or fraudulent instructions. The Funds
may change, modify or terminate the telephone redemption or exchange privilege
at any time.
BY SYSTEMATIC WITHDRAWAL PROGRAM - Shareholders may request that a
predetermined amount be sent by check, ACH or wired to them periodically, each
month or calendar quarter. A shareholder's account must have Fund shares with a
value of at least $10,000 in order to start a Systematic Withdrawal Program, and
the minimum amount that may be withdrawn each month or quarter under the
Systematic Withdrawal Program is $100. This program may be terminated by a
shareholder or the Funds at any time without charge or penalty and will become
effective five business days following receipt of instructions.
In order to facilitate the delivery of the checks as close as possible to
the end of the month, shares will be sold on the 24th day of the month or the
last business day prior to the 24th day if the 24th falls on a holiday or
weekend. Shares may also be sold on the fifth day of the month at the
shareholder's request. A withdrawal under the Systematic Withdrawal Program
involves a sale of shares, and may result in a gain or loss for federal income
tax purposes. In addition, if the amount withdrawn exceeds the dividends
credited to the shareholder's account, the account ultimately may be depleted.
ADDITIONAL INFORMATION - Sale requests specifying a certain date or share
price cannot be accepted and will be returned. If you invest by wire, you may
sell your shares on the first business day following such purchase. However, if
you invest by a personal, corporate, cashier's or government check, the sales
proceeds will not be paid until your investment has cleared the bank, which may
take up to 15 calendar days from the date of purchase. Exchanges into any of the
other Funds are, however, permitted without the ten-day waiting period.
When the New York Stock Exchange is closed (or when trading is
restricted) for any reason other than its customary weekend or holiday closing
or under any emergency circumstances, as determined by the Securities and
Exchange Commission, we may suspend sales of Fund shares or postpone payment
dates. If you are unable to accomplish your transaction by telephone (for
example, during times of unusual market activity), consider sending your order
by express mail to the Funds, or facsimile to (513) 661-4901.
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<PAGE>
Because the Funds incur certain fixed costs in maintaining shareholder
accounts, each Fund may require any shareholder to sell all of his or her shares
in the Fund on 30 days' written notice if the value of his or her shares in the
Fund is less than $1,000 due to sales of Fund shares, or such other minimum
amount as the Fund may determine from time to time. An involuntary sale will
create a capital gain or a capital loss, which may have tax consequences about
which you should consult your tax adviser. A shareholder may increase the value
of his or her shares in the Fund to the minimum amount within the 30-day period.
Each share of each Fund are subject to a sale at any time if the Board of
Trustees determines in its sole discretion that failure to sell may have
materially adverse consequences to all or any of the shareholders of the Trust
or any Fund of the Trust.
HOW TO EXCHANGE SHARES
As a shareholder in any Fund, you may exchange shares valued at $1,000 or
more for shares of any other Fund in the Analysts Investment Trust or for shares
of the _____ Fund, an unaffiliated money market fund. You may make an exchange
by telephone or by written request.
BY TELEPHONE - Shareholders may call the Fund to exchange shares. An
exchange may also be made by written request signed by all registered owners of
the account mailed to the Fund. Requests for exchanges received prior to close
of trading on the New York Stock Exchange (4:00 p.m. Eastern Time) will be
processed at the next determined net asset value (NAV) as of the close of
business on the same day.
An exchange is made by selling shares of one Fund and using the proceeds
to buy shares of another Fund, with the NAV for the sale and the purchase
calculated on the same day. See "How to Sell Shares". An exchange results in a
sale of shares for federal income tax purposes. If you make use of the exchange
privilege, you may realize either a long term or short-term capital gain or loss
on the shares sold.
Before making an exchange, you should consider the investment objective
of the Fund to be purchased. If your exchange creates a new account, you must
satisfy the requirements of the Fund in which shares are being purchased. You
may make an exchange to a new account or an existing account; however, the
account ownership must be identical. Exchanges may be made only in states where
an exchange may legally be made. The Funds reserve the right to terminate or
modify the exchange privilege in the future upon 60 days prior notice to the
shareholders.
SHARE PRICE CALCULATION
The value of an individual share in a Fund, the net asset value (NAV), is
calculated by dividing the total value of the Fund's investments and other
assets (including accrued income), less any liabilities (including estimated
accrued expenses), by the number of shares outstanding, rounded to the nearest
cent. Net asset value per share is determined as of the close of the New York
Stock Exchange (normally 4:00 p.m. Eastern Time) on each day that the exchange
is open for business, and on any other day on which there is sufficient trading
in the Fund's securities to materially affect the net asset value. The Stock
Exchange is closed on weekends, Federal holidays and Good Friday. The net asset
value per share of each Fund will fluctuate.
Requests to purchase, exchange and redeem shares are processed at the NAV
calculated after the Transfer Agent receives your order in the form described
above in the applicable section. The Funds' assets are generally valued at their
market value. If market prices are not available, or if an event occurs after
the close of the trading market that materially affects the values, assets may
be valued at their fair value.
DIVIDENDS AND DISTRIBUTIONS
The Stock Fund, the internet.fund, and the Fixed Income intend to
distribute substantially all of their net investment income as dividends to
shareholders on a quarterly basis. Each Fund intends to distribute its capital
gains once a year, at year-end.
Dividends and capital gain distributions are automatically reinvested in
additional shares at the net asset value per share on the distribution date. An
election to receive a cash payment of dividends and/or capital gain
distributions may be made in the application to purchase shares or by separate
written notice to the Transfer Agent. You will receive a confirmation statement
reflecting the payment and reinvestment of dividends and summarizing all other
transactions. If cash payment is requested, a check normally will be mailed
within five business days after the payable date. If you withdraw your entire
account, all dividends accrued to the time of withdrawal, including the day of
withdrawal, will be paid at that time. Distributions of less than $10 and
distributions on shares purchased within the last 30 days, however, will not be
paid in cash and will be reinvested. You may elect to have distributions on
shares held in IRA's and 403(b) plans paid in cash only if you are 59 1/2 years
old or permanently and totally disabled or if you otherwise qualify under the
applicable plan.
-8-
<PAGE>
TAXES
In general, selling shares of a Fund and receiving distributions (whether
reinvested or taken in cash) are taxable events. Depending on the purchase price
and the sale price, you may have a gain or a loss on any shares sold. Any tax
liabilities generated by your transactions or by receiving distributions are
your responsibility. Because distributions of long term capital gains are
subject to capital gains taxes, regardless of how long you have owned your
shares, you may want to avoid making a substantial investment when a Fund is
about to make a long term capital gain distribution. The tax consequences
described in this section apply whether distributions are taken in cash or
reinvested in additional shares.
Each Fund will mail to each shareholder after the close of the
calendar year a statement setting forth the federal income tax status of
distributions made during the year. Dividends and capital gains distributions
may also be subject to state and local taxes. You should consult with your tax
adviser regarding specific questions as to federal, state or local taxes, the
tax effect of distributions and withdrawals from the Funds and the use of the
Exchange Privilege.
Unless you furnish your certified taxpayer identification number (social
security number for individuals) and certify that you are not subject to backup
withholding, the Funds will be required to withhold and remit to the IRS 31% of
the dividends, distributions and sales proceeds payable to the shareholder. The
Funds may be fined $50 annually for each account for which a certified taxpayer
identification number is not provided. In the event that such a fine is imposed
with respect to a specific shareholder account in any year, the Fund will make a
corresponding charge against the shareholder account.
MANAGEMENT OF THE FUNDS
Equity Analysts Inc., 9200 Montgomery Road, Suite 13A, Cincinnati, Ohio
45242 ("EAI"), serves as investment adviser to the Funds. In this capacity, EAI
is responsible for the selection and on going monitoring of the securities in
each Fund's investment portfolio and managing the Funds' business affairs. EAI
is a Cincinnati-based company that has been in business since 1984,is registered
as an investment adviser with the Securities and Exchange Commission and a
member of the National Association of Securities Dealers. EAI offers investment
management services, mutual funds, variable insurance products, and financial
analysis to a wide range of clients, including businesses, individuals, pension
plans, and institutions. David Lee Manzler Jr., president of EAI, has been
primarily responsible for the investment decisions and the day-to-day management
of the Funds since ____. Mr. Manzler has been an officer and a Director of the
EAI since May, 1990. The management fees paid during the fiscal year ended
December 31, 1998 by each Fund were: Stock Fund - 2.00%; internet.fund - 3.00%;
and Fixed Income Fund - 1.50%.
OTHER INFORMATION ABOUT INVESTMENTS
GENERAL From time to time, any Fund may take temporary defensive positions that
are inconsistent with the Fund's principal investment strategies in attempting
to respond to adverse market, economic, political, or other conditions. For
example, any Fund may hold all or a portion of its assets in money market
instruments, securities of other no-load mutual funds or repurchase agreements.
If a Fund invests in shares of another mutual fund, the shareholders of the Fund
generally will be subject to duplicative management fees. As a result of
engaging in these temporary measures, the Funds may not achieve their investment
objectives. The Funds may also invest in these securities for liquidity
purposes.
The investment objectives and strategies of any Fund may be changed
without shareholder approval.
YEAR 2000 ISSUE
Like other mutual funds, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by the Funds' adviser or the Funds' various service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Issue."
The Funds' adviser has taken steps that it believes are reasonably
designed to address the Year 2000 Issue with respect to computer systems that
are used and to obtain reasonable assurances that comparable steps are being
taken by the Funds' major service providers. At this time, however, there can be
no assurance that these steps will be sufficient to avoid any adverse impact on
the Funds. In addition, the Funds' adviser cannot make any assurances that the
Year 2000 Issue will not affect the companies in which the Funds invest or
worldwide markets and economies.
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<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
Fund's financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in each Fund, assuming reinvestment of all dividends and distributions. This
information has been audited by Berge & Company LTD., whose report, along with
each Funds' financial statements, are included in the Funds' annual report,
which is available upon request and without charge.
For the years ended July 31, 1999:
<TABLE>
<CAPTION>
BEGINNING NET NET TOTAL DISTRIBUTIONS DISTRIBUTIONS TOTAL
NAV INVESTMENT GAINS OPERATIONS FROM FROM DISTRIBUTIONS
$ INCOME $(a) (LOSSES)$ $ DIVIDENDS CAPITAL $
$ (b) GAINS $
--------- ----------- --------- ---------- ------------- ------------ -------------
STOCK FUND
<S> <C> <C> <C> <C> <C> <C> <C>
1999 24.99 0.02 3.56 3.58 0.16 0.00 0.16
1998 24.18 0.09 0.93 1.02 0.06 0.15 0.21
1997 18.28 0.32 6.06 6.38 0.35 0.13 0.48
1996 17.87 0.34 0.81 1.15 0.31 0.43 0.74
1995 15.79 0.24 2.11 2.35 0.27 0.00 0.27
INTERNET.FUND
1999 9.52 -0.04 0.38 0.34 0.00 0.00 0.00
FIXED
INCOME FUND
1999 14.27 0.78 -1.03 -0.25 0.78 0.00 0.78
1998 14.43 0.80 -0.18 0.62 0.78 0.00 0.78
1997 13.62 0.79 0.78 1.57 0.76 0.00 0.76
1996 13.57 0.78 0.01 0.79 0.74 0.00 0.74
1995 13.38 0.80 0.18 0.98 0.79 0.00 0.79
NAV END TOTAL NET ASSETS RATIO OF RATIO OF PORTFOLIO
OF RETURN END OF EXPENSES NET TURNOVER
PERIOD % PERIOD TO AVG INCOME RATE %
$ $MILLIONS NET TO AVG
ASSETS % ASSETS %
--------- --------- --------- --------- --------- ---------
STOCK FUND
1999 28.41 14.36 8.97 2.00 0.08 89.30
1998 24.99 4.25 8.18 2.00 0.37 5.47
1997 24.18 35.47 6.39 2.00 1.54 5.11
1996 18.28 6.84 3.64 2.00 1.89 6.19
1995 17.87 15.01 2.55 2.00 1.45 32.02
INTERNET.FUND
1999 9.86 14.77* 0.75 3.00 -1.68 0.00
FIXED
INCOME FUND
1999 13.24 -1.77 3.87 1.50 5.57 9.70
1998 14.27 4.30 4.67 1.50 5.50 9.91
1997 14.43 12.05 4.03 1.50 5.63 0.97
1996 13.62 5.84 2.32 1.50 5.65 22.34
1995 13.57 7.61 1.48 1.50 6.03 18.01
<FN>
*ANNUALIZED
</FN>
</TABLE>
-10-
<PAGE>
INVESTMENT ADVISER
Equity Analysts Inc.
9200 Montgomery Road
Building D, Suite 13A
Cincinnati, Ohio 45242
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
AUDITORS
Berge & Company LTD
20 West Ninth Street
Cincinnati, Ohio 45202
LEGAL COUNSEL
Brown Cummins & Brown Co., L.P.A.
3500 Carew Tower
441 Vine Street
Cincinnati, OH 45202
-11-
<PAGE>
[BACK COVER PAGE]
Several additional sources of information are available to you. The
Statement of Additional Information (SAI), incorporated into this prospectus by
reference, contains detailed information on Fund policies and operations.
Shareholder reports contain management's discussion of market conditions,
investment strategies and performance results as of the Funds' latest
semi-annual or annual fiscal year end.
Call the Funds collect at 513-792-5400 to request free copies of the
SAI and the Funds' annual and semi-annual reports, to request other information
about the Funds and to make shareholder inquiries.
You may also obtain information about the Funds (including the SAI and
other reports) from the Securities and Exchange Commission on their Internet
site at HTTP://WWW.SEC.GOV or at their Public Reference Room in Washington, D.C.
Call the SEC at 800-SEC-0330 for room hours and operation. You may also obtain
fund information by sending a written request and duplicating fee to the Public
Reference Section of the SEC, Washington, D.C. 20549-6609.
Investment Company Act #811-7254
-12-
<PAGE>
ANALYSTS INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 1, 1999
*ANALYSTS STOCK FUND
*ANALYSTS FIXED INCOME FUND
*ANALYSTS INTERNET.FUND
This Statement of Additional Information ("SAI") is not a prospectus. It
should be read in conjunction with the Prospectus of Analysts Investment Trust
dated December 1, 1999. This SAI incorporates by reference the Fund's Annual
Report to Shareholders for the fiscal year ended July 31, 1999 ("Annual
Report"). A free copy of the Prospectus or Annual Report can be obtained by
writing the Trust at 9200 Montgomery Road, Building D, Suite 13A, Cincinnati,
Ohio 45242, or by calling the Trust at (513) 984-3377.
TABLE OF CONTENTS
-----------------
PAGE
DESCRIPTION OF THE TRUST AND FUND.............................................2
TRUSTEES AND OFFICERS.........................................................4
ADDITIONAL INFORMATION ABOUT FUND INVESTEMENTS................................4
INVESTMENT LIMITATIONS ......................................................12
STATE RESTRICTIONS...........................................................14
THE INVESTMENT ADVISER.......................................................15
PORTFOLIO TRANSACTIONS AND BROKERAGE.........................................16
DETERMINATION OF SHARE PRICE.................................................17
INVESTMENT PERFORMANCE.......................................................17
CUSTODIAN AND TRANSFER AGENT.................................................19
ACCOUNTANTS..................................................................19
DISTRIBUTOR..................................................................19
FINANCIAL STATEMENTS.........................................................20
1
<PAGE>
DESCRIPTION OF THE TRUST AND FUND
Analysts Investment Trust (the "Trust") is a diversified, open-end
investment company established under the laws of Ohio by an Agreement and
Declaration of Trust dated May 28, 1993 (the "Trust Agreement"). The Trust
Agreement permits the Trustees to issue an unlimited number of shares of
beneficial interest of separate series without par value. Shares of two series
have been authorized. The Analysts Stock Fund and Analysts Fixed Income Fund,
were organized on May 28, 1993 and commenced operation on August 25, 1993. The
Analysts internet.fund was organized on March 25, 1999 and commenced operation
on May 4, 1999.
The Funds do not issue share certificates. All shares are held in
non-certificate form registered on the books of the Trust and the Transfer Agent
for the account of the shareholder. Each share of a series represents an equal
proportionate interest in the assets and liabilities belonging to that series
which each other share of that series and is entitled to such dividends and
distributions out of income belonging to the series as are declared by the
Trustees. The shares do not have cumulative voting rights or any preemptive or
conversion rights, and the Trustees have the authority from time to time to
divide or combine the shares of any series into a greater or lesser number of
shares of that series so long as the proportionate beneficial interest in the
assets belonging to that series and the rights of shares of any other series are
in no way affected. In case of any liquidation of a series, the holders of
shares of the series being liquidated will be entitled to receive as a class a
distribution out of the assets, net of the liabilities, belonging to that
series. Expenses attributable to any series are borne by that series. Any
general expenses of the Trust not readily identifiable as belonging to a
particular series are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. No shareholder
is liable to further calls or to assessment by the Trust without his express
consent.
Any Trustee of the Trust may be removed by vote of the shareholders
holding not less than two-thirds of the outstanding shares of the Trust. The
Trust does not hold an annual meeting of shareholders. When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each whole share he owns and fractional votes for fractional shares he owns.
All shares of each Fund have equal voting rights and liquidations rights. The
Declaration of Trust can be amended by the Trustees, except that any amendment
that adversely effects the rights of shareholders must be approved by the
shareholders affected. Each share of each Fund is subject to redemption at any
time if the Board of Trustees determines in its sole discretion that failure to
do so redeem may have materially adverse consequences to all or any of the
Fund's shareholders.
Upon sixty days prior written notice to shareholders, a Fund may make
redemption payments in whole or in part in securities or other property if the
Trustees determine that existing conditions make cash payments undesirable. Each
share of each Fund is subject to redemption at any time if the Board of Trustees
determines in its sole discretion that failure to so redeem may have materially
adverse consequences to all or any of the shareholders of the Trust or any Fund
of the Trust. For example, if the Trustees determine that failure to redeem
might have materially adverse tax consequences to all or any of the shareholders
due to changes in tax laws, the Trustees may exercise their discretion to redeem
shares.
For other information concerning the purchase and redemption of shares
of the Funds, see "How to Buy Shares," "How to Sell Shares" and "How to Exchange
Shares" in the Prospectus.
2
<PAGE>
For a description of the methods used to determine the share price and value of
each Fund's assets, see "Share Price Calculation" in the Prospectus.
As of September 23, 1999, the following persons five percent (5%) or
more of the Stock Fund: David L. Manzler, Sr., 8425 Blue Cut Lane, Cincinnati,
Ohio - 8.13%.
As of September 23, 1999, no persons owned five percent (5%) or more of
the Fixed Income Fund.
As of September 23, 1999, the following persons five percent (5%) or
more of the internet.fund: Equity Analysts Inc., 9200 Montgomery Road, Suite
13A, Cincinnati, OH - 12.32%, J. Richard McFarland Pension Plan, 9157 Montgomery
Road, Cincinnati, OH - 6.82%, James Busemeyer, 2544 Grandin Road, Cincinnati, OH
- - 6.54%, J.D. Seibert Pension and Profit Sharing Plan, 20 West 9th Street,
Cincinnati, OH - 6.47%.
As of September 23, 1999, the Trustees and Officers as a group
beneficially owned 14.53% of the Stock Fund, 3.05% of the Fixed Income Fund, and
20.01% of the internet.fund.
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are
shown below. Each Trustee who is an "interested person" of the Trust, as defined
in the Investment Company Act of 1940, is indicated by an asterisk.
NAME POSITION
- ---- --------
*David Lee Manzler, Jr. President, Treasurer and Trustee
*David L. Manzler, Sr. Vice President, Secretary and Trustee
Walter E. Bowles, III Trustee
Robert W. Buechner Trustee
Anthony J. Schement Trustee
James S. Todd Trustee
The principal occupations of the executive officers and Trustees of
the Trust during the past several years are set forth below:
DAVID L. MANZLER, SR., 9200 Montgomery Road, Bldg. D, Suite 13A,
Cincinnati, Ohio is Vice President and a Director of Equity Analysts Inc. He is
also President of Equity Analysts Agency Inc., an insurance and pension plan
administrator, and a Director of Cincinnati Steel Products Co., a steel
fabrication company. Mr. Manzler is the father of David Lee Manzler, Jr.
DAVID LEE MANZLER, JR., 9200 Montgomery Road, Bldg. D, Suite 13A,
Cincinnati, Ohio is President and a Director of Equity Analysts Inc. He is also
the President of Manzler Aviation, Inc. Prior to June, 1990, he was a captain in
the U.S. Marine Corps. Mr. Manzler is the son of David L. Manzler, Sr.
WALTER E. BOWLES, III, 6645 Miami Trails Drive, Loveland, Ohio has been
President of Webco Environmental Management, Inc., an environmental consulting
3
<PAGE>
firm, since September, 1993. Prior to April, 1994, Mr. Bowles was a Business
Environmental Engineer for James River Corp., a manufacturer of paper and paper
products.
ROBERT W. BUECHNER, 105 East Fourth Street, Suite 300, Cincinnati, Ohio
is President of the law firm Buechner, Haffer, O'Connell, Meyers & Healey Co.,
L.P.A.
ANTHONY J. SCHEMENT, 8032 Deershadow Lane, Cincinnati, Ohio is a
Director of BMF Federal Savings Bank. Mr. Schement was President of BMF Federal
Savings Bank from July, 1989 until October, 1992.
JAMES S. TODD, [to be supplied]
The compensation paid to the Trustees of the Trust for the fiscal year ended
July 31,1999 is set forth in the following table:
TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION TRUST (THE TRUST IS NOT
NAME FROM TRUST (1) IN A FUND COMPLEX) (1)
- --------------------------------------------------------------------------------
David Lee Manzler, Jr. $0 $0
David L. Manzler, Sr. $0 $0
Walter E. Bowles, III $400 $400
Robert W. Buechner $400 $400
David J. Orth(2) $___ $___
Anthony J. Schement $400 $400
(1) Trustee fees are Trust expenses. However, because the management agreement
obligates the Adviser to pay all of the operating expenses of the Trust
(with limited exceptions), the Adviser makes the actual payment.
(2) Effective March 25, 1999, Mr. Orth is no longer a Trustee.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
This section contains additional information about some of the
investments a Fund may make and some of the techniques it may use.
A. EQUITY SECURITIES Each Fund may invest in equity securities. Equity
securities include common stock, common stock equivalents (such as rights and
warrants) and investment companies which invest primarily in the above. Warrants
are options to purchase common stock at a specified price valid for a specific
time period. Rights are similar to warrants, but normally have a short duration
and are distributed by the issuer to its shareholders. A Fund may not invest
more than 5% of its net assets at the time of purchase in rights and warrants.
Real estate stocks are common stocks or common stock equivalents of
domestic real estate investment trusts and other companies which operate as real
estate corporations or which have a significant portion of their assets in real
estate. No Fund will acquire any direct ownership of real estate.
4
<PAGE>
Gold and natural resources stocks are common stocks or common stock
equivalents of companies principally engaged in exploration, mining or
processing of gold or other precious metals and minerals. Gold and natural
resources stocks involve additional risk because of the price volatility of gold
and other precious metals and minerals and the increased impact such volatility
has on the market value of such stocks.
B. FOREIGN SECURITIES The Stock Fund and the Fixed Income Fund may
invest up to 50% of the value of its assets in equity or fixed income securities
of foreign issuers when these securities meet its standards of selection. The
Funds may make such investments either directly in, or by purchasing American
Depositary Receipts for, foreign securities that are listed on an exchange in
the United States or quoted in the domestic over-the-counter market. The Stock
Fund and the Fixed Income Fund may also purchase securities of such issuers in
foreign markets, either on foreign securities exchanges or in the
over-the-counter markets. Foreign fixed income securities include debt
obligations issued by foreign companies, foreign governments or international
organizations. The internet.fund may invest up to 20% of its net assets in
American Depositary Receipts. American Depositary Receipts are
dollar-denominated receipts that are generally issued in registered form by
domestic banks, and represent the deposit with the bank of a security of a
foreign issuer.
Foreign government obligations generally consist of debt securities
supported by national, state or provincial governments or similar political
units or governmental agencies. Such obligations may or may not be backed by the
national government's full faith and credit and general taxing powers.
Investments in foreign securities also include obligations issued by
international organizations. International organizations include entities
designated or supported by governmental entities to promote economic
reconstruction or development as well as international banking institutions and
related government agencies.
Investments in foreign securities may present certain risks, including
those resulting from changes in restrictions on foreign currency transactions
and rates of exchange, future political and economic developments, reduced
availability of public information concerning issuers, and the fact that foreign
issuers are not generally subject to uniform accounting, auditing and financial
reporting standards or to other regulatory practices and requirements comparable
to those applicable to domestic issuers. Other risks associated with investments
in foreign securities include less liquid markets, difficulty in enforcing
contractual obligations, delays in settlement of securities transactions and
greater price volatility. In addition, investments in developing countries
involves exposure to economic structures that are generally less diverse and
mature than in the United States, and to political systems which may be less
stable. The market prices of these securities and the ability of the Funds to
hold such securities could be affected by social, economic and political
instability.
FOREIGN CURRENCY TRANSACTIONS - The Stock Fund and the Fixed Income Fund
can purchase securities denominated in a foreign currency. When a Fund purchases
or sells a security denominated in a foreign currency, it may be required to
settle the purchase transaction in the relevant foreign currency or to receive
the proceeds of the sale in the relevant foreign currency. In either event, the
Fund will be obligated to acquire or dispose of the foreign currency by selling
or buying an equivalent amount of U.S. dollars. To effect the conversion of the
amount of foreign currency involved in the purchase or sale of a foreign
security, the Fund may purchase or sell such foreign currency on a "spot" (i.e.
cash) basis.
5
<PAGE>
In addition, the Fund may wish to lock in the U.S. dollar value of the
transaction at or near the time of the purchase or sale at the exchange rate or
rates then prevailing between the U.S. dollar and the currency in which the
foreign security is denominated. Therefore, the Fund may enter into a forward
foreign currency exchange contract. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future date,
which 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. These contracts are
traded directly between currency traders (usually large commercial banks) and
their customers. By entering into a forward contract in U.S. dollars for the
purchase or sale of the amount of foreign currency involved in an underlying
security transaction, the Fund is able to protect itself against a possible loss
between trade and settlement dates resulting from an adverse change in the
relationship between the U.S. dollar and such foreign currency. This process is
known as transaction hedging. Transaction hedging may protect the Fund from a
possible loss, but will limit potential gains which might result from a positive
change in the currency relationships.
Some or all of a Fund's portfolio securities may be denominated in
foreign currencies. As a result, in addition to the risk of change in the market
value of portfolio securities, the value of the portfolio in U.S. dollars is
subject to fluctuations in the exchange rate between such foreign currencies and
the U.S. dollar. When it is desirable to limit or reduce exposure in a foreign
currency in order to moderate potential changes in the U.S. dollar value of the
portfolio, the Fund may enter into a forward foreign currency exchange contract
to sell, for a fixed amount of U.S. dollars, the amount of foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. This technique is known as portfolio
hedging. Hedging against a decline in the value of currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. The Fund may also employ forward foreign
currency exchange contracts to hedge against an increase in the value of the
currency in which the securities the Fund intends to buy are denominated.
A Fund may also hedge its foreign currency exchange rate risk by
engaging in currency futures contracts and options transactions described above.
Neither Fund will engage in foreign currency transactions for speculative
purposes.
C. FIXED INCOME SECURITIES
The Stock Fund and the Fixed Income Fund may invest in fixed income
securities. Fixed income securities include debt securities of domestic and
foreign corporations, U.S. government securities, securities of foreign
governments, adjustable rate preferred stock, mortgage-related securities,
repurchase agreements, municipal obligations, zero coupon bonds, asset-backed
and receivable-backed securities and participation interests in such securities,
as well as investment companies which invest primarily in the above. Preferred
stock and certain common stock equivalents such as convertible bonds and
debentures may also be considered to be fixed income securities. Convertible
preferred stock is preferred stock that can be converted into common stock
pursuant to its terms. Convertible debentures are debt instruments that can be
converted into common stock pursuant to their terms.
Fixed income securities are generally considered to be interest rate
sensitive, which means that their value will tend to decrease when interest
rates rise and increase when interest rates fall. Securities with shorter
6
<PAGE>
maturities, while offering lower yields, generally provide greater price
stability than longer term securities and are less affected by changes in
interest rates. Each Fund may invest in fixed income securities of any maturity,
and will make maturity decisions based upon the Adviser's analysis of market
conditions.
SECURITIES RATINGS - The Adviser considers debt securities to be of
investment grade quality if they are rated BBB or higher by Standard & Poor's
Corporation ("S&P"), Baa or higher by Moody's Investors Services, Inc.
("Moody's"), or if unrated, determined by the Adviser to be of comparable
quality. Investment grade debt securities generally have adequate to strong
protection of principal and interest payments. In the lower end of this
category, credit quality may be more susceptible to potential future changes in
circumstances and the securities may have speculative elements. If the rating of
a security by S&P or Moody's drops below investment grade, the Adviser will
dispose of the security as soon as practicable (depending on market conditions)
unless the Adviser determines based on its own credit analysis that the security
provides the opportunity of meeting the Fund's objective without presenting
excessive risk. Neither Fund will invest more than 5% of the value of its net
assets in securities that are below investment grade. In addition, neither Fund
will invest in securities rated lower than B by S&P or Moody's. If a particular
fixed income security is unrated, the Adviser will generally look to the rating
of other debt of the issuer, if a rating is available.
U.S. GOVERNMENT SECURITIES - U.S. government securities may be backed by
the credit of the government as a whole or only by the issuing agency. U.S.
Treasury bonds, notes, and bills and some agency securities, such as those
issued by the Federal Housing Administration and the Government National
Mortgage Association (GNMA), are backed by the full faith and credit of the U.S.
government as to payment of principal and interest and are the highest quality
government securities. Other securities issued by U.S. government agencies or
instrumentalities, such as securities issued by the Federal Home Loan Banks and
the Federal Home Loan Mortgage Corporation, are supported only by the credit of
the agency that issued them, and not by the U.S. government. Securities issued
by the Federal Farm Credit System, the Federal Land Banks, and the Federal
National Mortgage Association (FNMA) are supported by the agency's right to
borrow money from the U.S. Treasury under certain circumstances, but are not
backed by the full faith and credit of the U.S. government.
Participation interests in U.S. government obligations are pro rata
interests in such obligations which are generally underwritten by government
securities dealers. Certificates of safekeeping for U.S. government obligations
are documentary receipts for such obligations. Both participation interests and
certificates of safekeeping are traded on exchanges and in the over-the-counter
market.
The Stock Fund and the Fixed Income Fund may invest in U.S. government
obligations and related participation interests. In addition, each Fund may
invest in custodial receipts that evidence ownership of future interest
payments, principal payments or both on certain U.S. government obligations.
Such obligations are held in custody by a bank on behalf of the owners. These
custodial receipts are known by various names, including Treasury Receipts,
Treasury Investors Growth Receipts ("TIGRs") and Certificates of Accrual on
Treasury Securities ("CATS"). Custodial receipts generally are not considered
obligations of the U.S. government.
7
<PAGE>
ADJUSTABLE RATE PREFERRED STOCKS - Adjustable rate preferred stocks have
a variable dividend which, rather than being set for the life of an issue,
generally is determined quarterly according to a formula based upon a specified
premium to, or discount from, the yield on certain U.S. Treasury securities. The
market value of these stocks should therefore be less sensitive to interest rate
fluctuations than those of other fixed income securities and preferred stocks.
They may also have conversion, exchange or other additional features which are
designed to enhance stability of principal. Nevertheless, the market value of an
adjustable rate preferred stock can be expected to fluctuate with, among other
factors, changes in interest rates generally or the creditworthiness of the
issuer.
CORPORATE DEBT SECURITIES - Corporate debt securities are bonds or notes
issued by corporation and other business organizations, including business
trusts, in order to finance their credit needs. Corporate debt securities
include commercial paper which consists of short term (usually from one to two
hundred seventy days) unsecured promissory notes issued by corporations in order
to finance their current operations.
The Stock Fund and the Fixed Income Fund may invest in fixed income
securities rated B or higher by Standard & Poor's Corporation ("S&P") or by
Moody's Investors Services, Inc. (Moody's), or if unrated, determined by the
Adviser to be comparable quality. Generally, investments in securities in the
lower rating categories provide higher yields but involve greater volatility of
price and risk of loss of principal and interest than investments in securities
with higher ratings. Securities rated lower than Baa by Moody's or BBB by S&P
are considered speculative. In addition, lower ratings reflect a greater
possibility of an adverse change in the financial conditions affecting the
ability of the issuer to make payments of principal and interest. The market
price of lower rated securities generally responds to short term corporate and
market developments to a greater extent than higher rated securities which react
primarily to fluctuations in the general level of interest rates. Lower rated
securities will also be affected by the market's perception of their credit
quality and the outlook for economic growth. In the past, economic downturns or
an increase in interest rates have under certain circumstances caused a higher
incidence of default by the issuers of these securities and may do so in the
future, especially in the case of highly leveraged issuers.
The prices for these securities may be affected by legislative and
regulatory developments. For example, new federal rules require that savings and
loan associations gradually reduce their holdings of high-yield securities. An
effect of such legislation may be to significantly depress the prices of
outstanding lower rated securities. The market for lower rated securities may be
less liquid than the market for higher rated securities. Furthermore, the
liquidity of lower rated securities may be affected by the market's perception
of their credit quality. Therefore, judgment may at times play a greater role in
valuing these securities than in the case of higher rated securities, and it
also may be more difficult during certain adverse market conditions to sell
lower rated securities at their fair value to meet redemption requests or to
respond to changes in the market.
If the rating of a security by S&P or Moody's drops below investment
grade, the Adviser will dispose of the security as soon as practicable
(depending on market conditions) unless the Adviser determines based on its own
credit analysis that the security provides the opportunity of meeting the Fund's
objective without presenting excessive risk. The Adviser will consider all
factors which it deems appropriate, including ratings, in making investment
8
<PAGE>
decisions for the Funds and will attempt to minimize investment risk through
diversification, investment analysis and monitoring of general economic
conditions and trends. While the Adviser may refer to ratings, it does not rely
exclusively on ratings, but makes its own independent and ongoing review of
credit quality. Neither Fund will invest more than 5% of the value of its net
assets insecurities that are below investment grade.
MUNICIPAL SECURITIES - Municipal securities are issued to obtain funds
to construct, repair or improve various public facilities such as airports,
bridges, highways, hospitals, housing, schools, streets, and water and sewer
works, to pay general operating expenses or to refinance outstanding debts. They
also may be issued to finance various private activities, including the lending
of funds to public or private institutions for construction of housing,
educational or medical facilities or the financing of privately owned or
operated facilities. Municipal securities consist of tax exempt bonds, tax
exempt notes and tax exempt commercial paper. Tax exempt notes generally are
used to provide short term capital needs and generally have maturities of one
year or less. Tax exempt commercial paper typically represents short term,
unsecured, negotiable promissory notes.
The two principal classifications of municipal securities are "general
obligations" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private issuer of
the facility, and therefore investments in these bonds have more potential risk
that the issuer will not be able to meet scheduled payments of principal and
interest. Neither Fund will invest more than 5% of its net assets in municipal
securities.
ZERO COUPON AND PAY IN KIND BONDS - The Stock Fund and the Fixed Income
Fund may invest in zero coupon and pay in kind bonds. Corporate debt securities
and municipal securities include so-called "zero coupon" bond and "pay-in-kind"
bonds. Zero coupon bonds are issued at a significant discount from their
principal amount in lieu of paying interest periodically. Pay-in-kind bonds
allow the issuer, at its opinion, to make current interest payments on the bonds
either in cash or in additional bands. The value of zero coupon bonds and
pay-in-kind bonds is subject to greater fluctuation in response to changes in
market interest rates than bonds which make regular payments of interest. Both
of these types of bonds allow any issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds which make regular payment of interest. Even though zero
coupon bonds and pay-in-kind bonds do not pay current interest in cash, the
applicable Fund is required to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders. Thus, a Fund could be
required at times to liquidate other investments in order to satisfy its
dividend requirements. Neither Fund will invest more than 5% of its net assets
in zero coupon bonds or pay-in-kind bonds.
FINANCIAL SERVICE INDUSTRY OBLIGATIONS - Financial service industry
obligations including among others, the following:
(1) CERTIFICATES OF DEPOSIT. Certificates of deposit are negotiable
certificates evidencing the indebtedness of a commercial bank or a savings and
loan association to repay funds deposited with it for a definite period of time
(usually from fourteen days to one year) at a stated or variable interest rate.
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(2) TIME DEPOSITS. Time Deposits are non-negotiable deposits
maintained in a banking institution or a savings and loan association for a
specified period of time at a stated interest rate. Time deposits are considered
to be illiquid prior to their maturity.
(3) BANKERS' ACCEPTANCES. Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft which has been
drawn on it by a customer, which instruments reflect the obligation both of the
bank and of the drawer to pay the face amount of the instrument upon maturity.
MORTGAGE-RELATED SECURITIES - Mortgage-related securities include
securities representing interests in a pool of mortgages. These securities,
including securities issued by FNMA and GNMA, provide investors with payments
consisting of both interest and principal as the mortgages in the underlying
mortgage pools are repaid. Pools of mortgage loans are assembled for sale to
investors (such as the Funds) by various governmental, government-related and
private organizations, such as dealers. Unscheduled or early payments on the
underlying mortgages may shorten the securities' effective maturities.
Other types of securities representing interests in a pool of mortgage
loans are known as collateralized mortgage obligations (CMOs) and real estate
mortgage investment conduits (REMICs) and multi-class pass-throughs. CMOs and
REMICs are debt instruments collateralized by pools of mortgage loans or other
mortgage-backed securities. Multi-class pass-through securities are equity
interests in a trust composed of mortgage loans or other mortgage-backed
securities. Payments of principal and interest on underlying collateral provides
the funds to pay debt service on the CMO or REMIC or make scheduled
distributions on the multi-class pass-through securities. CMOs, REMICs and
multi-class pass-through securities (collectively "CMOs" unless the context
indicates otherwise) may be issued by agencies or instrumentalities of the U.S.
government (such as the Federal Home Loan Mortgage Corporation) or by private
organizations.
CMOs are issued with a variety of classes or "tranches," which have
different maturities and are often retired in sequence. One or more tranches of
a CMO may have coupon rates which reset periodically at a specified increment
over an index such as the London Interbank Offered Rate ("LIBOR"). These
"floating rate CMOs," typically are issued with lifetime "caps" on their coupon
rate, which means that there is a ceiling beyond which the coupon rate may not
be increased. The yield of some floating rate CMOs varies in excess of the
change in the index, which would cause the value of such CMOs to fluctuate
significantly once rates reach the cap.
REMICs, which have elected to be treated as such under the Internal
Revenue Code, are private entities formed for the purpose of holding a fixed
pool of mortgages secured by an interest in real property. REMICs are similar to
CMOs in that they issue multiple classes of securities. As with other CMOs, the
mortgages which collateralize the REMICs in which a Fund may invest include
mortgages backed by GNMA certificates or other mortgage pass-throughs issued or
guaranteed by the U.S. government, its agencies or instrumentalities or issued
by private entities, which are not guaranteed by any government agency.
Yields on privately issued CMOs as described above have been
historically higher than the yields on CMOs issued or guaranteed by U.S.
government agencies. However, the risk of loss due to default on such
instruments is higher since they are not guaranteed by the U.S. government. In
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addition, in the event of a bankruptcy or other default of a broker who issued a
CMO held by a Fund, the Fund could experience both delays in liquidating its
position and losses. Each Fund may also invest not more than 5% of its net
assets in "stripped" CMOs, which represent only the income portion or the
principal portion of the CMO. Some "stripped" CMOs, known as "inverse floaters,"
have coupon rates which are set periodically at a rate inverse to the index
rate.
The average life of securities representing interests in pools of
mortgage loans is likely to be substantially less than the original maturity of
the mortgage pools as a result of prepayments or foreclosures of such mortgages.
Prepayments are passed through to the registered holder with the regular monthly
payments of principal and interest, and have the effect of reducing future
payments. To the extent the mortgages underlying a security representing an
interest in a pool of mortgages are prepaid, a Fund may experience a loss (if
the price at which the respective security was acquired by the Fund was at a
premium over par, which represents the price at which the security will be
redeemed upon prepayment). In addition, prepayments of such securities held by a
Fund will reduce the share price of the Fund to the extent the market value of
the securities at the time of prepayment exceeds their par value. Furthermore,
the prices of mortgage-related securities can be significantly affected by
changes in interest rates. Prepayments may occur with greater frequency in
periods of declining mortgage rates because, among other reasons, it may be
possible for mortgagors to refinance their outstanding mortgages at lower
interest rates. In such periods, it is likely that any prepayment proceeds would
be reinvested by a Fund at lower rates of return.
ASSET-BACKED AND RECEIVABLE-BACKED SECURITIES - The Stock Fund and the
Fixed Income Fund are permitted to invest in asset-backed and receivable-backed
securities. Several types of asset-backed and receivable-backed securities are
available to investors, including CARs(sm) (Certificates for Automobile
Receivables(sm)) and interests in pools of credit card receivables. Asset-backed
and receivable-backed securities are undivided fractional interests in pools of
consumer loans (unrelated to mortgage loans) held in a trust. Payments or
principal and interest are passed through to certificateholders and are
typically supported by some form of credit enhancement, such as a letter of
credit, surety bond, limited guaranty, or senior/subordination. The degree of
credit enhancement varies, but generally amounts to only a fraction of the
asset-backed and receivable-backed security's par value until exhausted. If the
credit enhancement is exhausted, certificateholders may experience losses or
delays in payment if the requirement payments of principal and interest are not
made to the trust with respect to the underlying loans. The value of these
securities also may change because of changes in the market's perception of the
creditworthiness of the servicing agent for the loan pool, the originator of the
loans or the financial institution providing the credit enhancement.
Asset-backed and receivable-backed securities are ultimately dependent upon
payment of consumer loans by individuals, and the certificateholder generally
has no recourse against the entity that originated the loans. The underlying
loans are subject to prepayments, which shorten, the securities' weighted
average life and may lower their return. As prepayments flow through at par,
total returns would be affected by the prepayments; if a security were trading
at a premium, its total return would be lowered by prepayments, and if a
security were trading at a discount, its total return would be increased by
prepayments. Neither Fund will invest more then 5% if its net assets in
asset-backed or receivable-backed securities.
FLOATING AND VARIABLE RATE OBLIGATIONS - The Stock Fund and the Fixed
Income Fund may invest in floating and variable rate obligations. Floating rate
obligations have an interest rate which is fixed to a specified interest rate,
such as a bank prime rate, and is automatically adjusted when the specified
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interest rate changes. Variable rate obligations have an interest rate which is
adjusted at specified intervals to a specified interest rate. Periodic interest
rate adjustments help stabilize the obligations' market values.
A Fund may purchase these obligations from the issuers or may purchase
participation interests in pools of these obligations from banks or other
financial institutions. Variable and floating rate obligations usually carry
demand features that permit a Fund to sell the obligations back to the issuers
or to financial intermediaries at par value plus accrued interest upon short
notice at any time or prior to specific dates. The inability of the issuer or
financial intermediary to repurchase an obligation on demand could affect the
liquidity of the Fund's portfolio. Frequently, obligations with demand features
are secured by letters of credit or comparable guarantees.
D. REPURCHASE AGREEMENTS A repurchase agreement is a short-term
investment in which the purchaser (i.e.., the Fund) acquires ownership of a U.S.
Government security (which may be of any maturity) and the seller agrees to
repurchase the obligation at a future time at a set price, thereby determining
the yield during the purchaser's holding period (usually not more than seven
days from the date of purchase). Any repurchase transaction in which a Fund
engages will require full collateralization of the seller's obligation during
the entire term of the repurchase agreement. In the event of a bankruptcy or
other default of the seller, a Fund could experience both delays in liquidating
the underlying security and losses in value. However, both Funds intend to enter
into repurchase agreements only with Star Bank, N.A. (the Trust's Custodian),
other banks with assets of $1 billion or more and registered securities dealers
determined by the Adviser (subject to review by the Board of Trustees) to be
creditworthy. The Adviser monitors the creditworthiness of the banks and
securities dealers with which a Fund engages in repurchase transactions.
E. FORWARD COMMITMENTS AND REVERSE REPURCHASE AGREEMENTS - The Stock
Fund and the Fixed Income Fund may enter into reverse repurchase agreements.
Reverse repurchase agreements involve sales of portfolio security by a Fund to
member banks of the Federal Reserve System or recognized securities dealers,
concurrently with a agreement by the Fund to repurchase the same securities at a
later date at a fixed price, which is generally equal to the original sales
price plus interest. The Fund retains record ownership and the right to receive
interest and principal payments on the portfolio security involved. The Fund's
objective in such a transaction would be to obtain funds to pursue additional
investment opportunities whose yield would exceed the cost of the reverse
repurchase transaction. Generally, the use of reverse repurchase agreements
should reduce portfolio turnover and increase yield. In the event of bankruptcy
or other default by the purchaser, the Fund could experience both delays in
repurchasing the portfolio securities and losses. Reverse repurchase agreements
constitute a borrowing by a Fund and will not represent more than 5% of the net
assets of either Fund.
Each Fund will direct its Custodian to place cash or U.S. government
obligations in a separate account of the Trust in an amount equal to the
commitments of the Fund to purchase or repurchase securities as a result of its
forward commitment or reverse repurchase agreement obligations. With respect to
forward commitments to sell securities, the Trust will direct its Custodian to
place the securities in a separate account. When a separate account is
maintained in connection with forward commitment transactions to purchase
securities or reverse repurchase agreements, the securities deposited in the
separate account will be valued daily at market for the purpose of determining
the adequacy of the securities in the account. If the market value of such
securities declines, additional cash or securities will be placed in the account
on a daily basis so that the market value of the account will equal the amount
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of the Fund's commitments to purchase or repurchase securities. To the extent
funds are in a separate account, they will not be available for new investment
or to meet redemptions.
Securities purchased on a forward commitment basis, securities subject
to reverse repurchase agreements and the securities held in each Fund's
portfolio are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes in the level of
interest rates (which will generally result in all of those securities changing
in value in the same way, i.e. all those securities experiencing appreciation
when interest rates decline and depreciation when interest rates rise).
Therefore, if in order to achieve a higher level of income, the Fund remains
substantially fully invested at the same time that it has purchased securities
on a forward commitment basis or entered into reverse repurchase transactions,
there will be a possibility that the market value of the Fund's assets will have
greater fluctuation.
With respect to 75% of the total assets of each Fund, the value of the
Fund's commitments to purchase or repurchase the securities of any one issuer,
together with the value of all securities of such issuer owned by the Fund, may
not exceed 5% of the value of the Fund's total assets at the time the commitment
to purchase or repurchase such securities is made; provided, however, that this
restriction does not apply to U.S. government obligations or repurchase
agreements with respect thereto. In addition, each Fund will maintain as asset
coverage of 300% for all of its borrowings and reverse repurchase agreements.
Subject to the foregoing restrictions, there is no limit on the percentage of
the Fund's total assets which may be committed to such purchases or repurchases.
F. LOAN PARTICIPATION INTERESTS The Stock Fund and the Fixed Income Fund
may invest in loan participation interests. Loan participation interests are
interests in debt obligations (such as corporate loans) that are owned by banks
or other financial institutions. Loan participation interests are subject to the
credit risks generally associated with the corporate borrower; however, certain
loan participation interests may be backed by irrevocable letters of credit or a
guarantee of the bank or financial institution. In the event of a default by the
corporate borrower, a Fund may be required to assert its rights through the
financial intermediary which may subject the Fund to delays, expenses and risks
that are greater than those that would have been involved if the Fund had
purchased a direct obligation (such as commercial paper) of such borrower.
Moreover, the Fund may also be subject to the risk that the financial
intermediary may become insolvent. Neither Fund will invest more than 5% of its
net assets at the time of purchase in loan participation interests.
G. ILLIQUID SECURITIES The portfolio of each Fund may contain illiquid
securities. Illiquid securities generally include securities which cannot be
disposed of promptly and in the ordinary course of business without taking a
reduced price. Securities may be illiquid due to contractual or legal
restrictions on resale or lack of a ready market. The following securities are
considered to be illiquid: repurchase agreements and time deposits maturing in
more than seven days, options traded in the over-the-counter market, nonpublicly
offered securities, stripped CMOs, CMOs for which there is no established
market, restricted securities, and mortgage-related securities which cannot be
disposed of within seven days in the usual course of business without taking a
reduced price. The Adviser and the Trustees will continually monitor the
secondary markets for mortgage-related securities and are responsible for making
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the determination of which securities are considered to be illiquid. No Fund
will invest more then 5% of its net assets in illiquid securities.
H. INVESTMENT COMPANIES Each Fund is permitted to invest in other
investment companies. Other investment companies offer diversification that may
not be attainable otherwise. For example, investment in another investment
company could enhance the Fund's diversification among issuers of foreign
securities, fixed income securities or in a particular industry sector. A Fund
will not purchase more than 3% of the outstanding voting stock of any investment
company. If the Fund acquires securities of another investment company, the
shareholders of the Fund may be subject to duplicative management fees.
Investment by the Fund in CMO's and foreign banks that are deemed to be
investment companies under the Investment Company Act of 1940 will be included
in the limitation on investments in other investment companies.
I. RESTRICTED SECURITIES Restricted securities are securities the resale
of which is subject to legal or contractual restrictions. Restricted securities
may be sold only in privately negotiated transactions, in a public offering with
respect to which a registration statement is in effect under the Securities Act
of 1933 or pursuant to Rule 144 or Rule 144A promulgated under such Act. Where
registration is required, the Fund may be obligated to pay all or part of the
registration expense, and a considerable period may elapse between the time of
the decision to sell and the time such security may be sold under an effective
registration statement. If during such a period adverse market conditions were
to develop, the Fund might obtain a less favorable price than the price it could
have obtained when it decided to sell.
J. OPTION TRANSACTIONS Each Fund may engage in option transactions
involving equity securities, debt securities, futures contracts, stock indexes,
and foreign currencies. An option involves either (a) the right or the
obligation to buy or sell a specific instrument or currency at a specific price
until the expiration date of the option, or (b) the right to receive payments or
the obligation to make payments representing the difference between the closing
price of a market index and the exercise price of the option expressed in
dollars times a specified multiple until the expiration date of the option.
Options are sold (written) on equity securities, debt securities, futures
contracts, stock indexes and foreign currencies. The purchaser of the option on
an equity security, debt security, futures contract or foreign currency pays the
seller (the writer) a premium for the right granted but is not obligated to buy
or sell the underlying security, futures contract or currency. The purchaser of
an option on a stock index pays the seller a premium for the right granted, and
in return the seller of such an option is obligated to make the payment. A
writer of an option may terminate the obligation prior to expiration of the
option by making an offsetting purchase of an identical option. Options are
traded on organized exchanges and in the over-the-counter market. Options which
each Fund sells (writes) will be covered or secured, which means that it will
own the underlying security, futures contracts or currency in the case of a call
option and that the Fund will segregate with the Trust's Custodian liquid assets
sufficient to purchase the underlying security, futures contracts or currency in
the case of a put option. Each Fund will also segregate and maintain with the
Custodian liquid assets equal to the market value of each put option sold
(written) by the Fund on a stock index. In addition, when a Fund writes options,
it may be required to maintain a margin account, to pledge the underlying
securities or U.S. Government obligations or to deposit assets in escrow with
the Custodian.
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The purchase and writing of options involves certain risks. The purchase
of options limits a Fund's potential loss to the amount of the premium paid and
can afford the Fund the opportunity to profit from favorable movements in the
price of an underlying security or instrument to a greater extent than if
transactions were effected in the security or instrument directly. However, the
purchase of an option could result in a Fund losing a greater percentage of its
investment than if the transaction were effected directly. When a Fund writes a
covered call option, it will receive a premium, but it will give up the
opportunity to profit from a price increase in the underlying security or
instrument above the exercise price as long as its obligation as a writer
continues, and it will retain the risk of loss should the price of the security
or instrument decline. When a Fund writes a secured put option, it will assume
the risk that the price of the underlying security or instrument will fall below
the exercise price, in which case the Fund may be required to purchase the
security or instrument at a higher price than the market price of the security
or instrument. In addition, there can be no assurance that a Fund can effect a
closing transaction on a particular option it has written or that a liquid
secondary market will exist for any particular option at a specific time.
Further, the total premium paid for any option may be lost if the Fund does not
exercise the option or, in the case of over-the-counter options, the writer does
not perform its obligations.
K. HEDGING TRANSACTIONS Each Fund may hedge all or a portion of its
portfolio investments through the use of options, futures contracts and options
on futures contracts. The objective of the hedging program is to protect a
profit or offset a loss in a portfolio security from future price erosion or to
assure a definite price for a security by acquiring the right or option to
purchase or to sell a fixed amount of the security for a future date. For
example, in order to hedge against an anticipated rise in interest rates that
might cause the value of a Fund's portfolio securities to decline, the Fund
might sell interest rate futures contracts. When hedging of this character is
successful, any depreciation in the value of the hedged portfolio securities
will be substantially offset by an increase in the Fund's equity in the interest
futures position. Alternatively, an interest rate futures contract may be
purchased when a Fund anticipates the future purchase of a security but expects
the rate of return then available in the securities market to be less favorable
than rates currently available in the futures markets.
There is no assurance that the objective of the hedging program will be
achieved, since the success of the program will depend on the Adviser's ability
to predict the future direction of the relevant currency, stock index, futures
contract or interest rates and incorrect predictions by the Adviser may have
adverse effect on the Funds. In this regard, it should be noted that the skills
and techniques necessary to arrive at such predictions are different from those
needed to predict price changes in individual stocks. The Adviser is registered
as a Commodity Trading Adviser with the Commodity Futures Trading Commission, is
a member of the National Futures Association and has prior experience in the use
of options, futures contracts and options on futures contracts.
The hedging strategy involves the use of one or more techniques,
including buying and selling options (described above), futures contracts and
options on such futures contracts. A futures contract is a binding contractual
commitment which involves either (a) the delivery and payment for a specified
amount of securities or currency at a price agreed upon at the time the contract
is entered into but with actual delivery made during a specified period in the
future, or (b) the payment or receipt of payments representing, respectively,
the loss or gain of a specified group of stocks or market index. The securities
or currency underlying the contract may be government or corporate bonds (an
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interest rate futures contract), foreign currency (a foreign currency futures
contract), or a group of stocks such as a popular market index (a stock index
futures contract). Interest rate futures contracts are currently available in
standardized amounts on government obligations (such as Treasury bills, notes
and bonds), Government National Mortgage Association certificates, corporate
bonds, domestic certificates of deposit and Eurodollar certificates of deposit.
It is expected that other financial instruments will at later dates be subject
to other futures contracts. As new futures contracts are developed and offered
to investors, the Advisor will, consistent with each Fund's investment
objectives and policies, consider making investments in such new futures
contracts. Ordinarily a Fund would enter into interest rate futures contracts to
hedge its investments in fixed income securities such as preferred stocks and
money market obligations, stock index futures contracts to hedge its investments
in common stocks and foreign currency futures contracts to hedge currency risks
associated with investments in foreign securities.
Futures contracts are traded on exchanges licensed and regulated by the
Commodity Futures Trading Commission and analogous foreign regulatory agencies.
Each Fund will be subject to any limitations imposed by the exchanges with
respect to futures contracts trading and positions. A clearing corporation
associated with the particular exchange assumes responsibility for all purchases
and sales and guarantees delivery and payment on the contracts. Although most
futures contracts call for actual delivery or acceptance of the underlying
securities or currency, in most cases the contracts are closed out before
settlement date without the making or taking of delivery. Closing out is
accomplished by entering into an offsetting transaction, which may result in a
profit or a loss. There is no assurance that either Fund will be able to close
out a particular futures contract.
A hedging strategy involving options and futures contracts entails some
risks. For example, the total premium paid for an option on a futures contract
may be lost if a Fund does not exercise the option or the writer does not
perform his obligations. It is also possible that the futures contracts selected
by a Fund will not follow the price movement of the underlying securities or
stock index. If this occurs, the hedging strategy may not be successful.
Further, if a Fund sells a stock index futures contract and is required to pay
an amount measured by any increase in the market index, it will be exposed to an
indeterminate liability. In addition, a liquid secondary market may not exist
for any particular option or futures contract at any specific time.
Each Fund will incur transactional costs in connection with the hedging
program. When a Fund purchases or sells a futures contract, an amount of cash
and liquid assets will be deposited in a segregated account with the Trust's
Custodian to guarantee performance of the futures contract. The amount of such
deposits will depend upon the requirements of each exchange and broker and will
vary with each futures contract. Because open futures contract positions are
marked to market and gains and losses are settled on a daily basis, a Fund may
be required to deposit additional funds in such a segregated account if it had
incurred a net loss on its open futures positions on any day.
The Trust has filed a supplemental notice of eligibility with the
Commodity Futures Trading Commission ("CFTC") to claim relief from regulation as
a commodity "pool" within the meaning of the CFTC's regulations. In its filing,
the Trust has represented that each Fund's transactions in futures and options
on futures contracts will constitute bona fide hedging transactions within the
meaning of such regulations and that each Fund will enter into commitments which
require as deposits for initial margin for futures contracts or premiums for
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options no futures contracts no more than 5% of the fair market value of its
assets.
L. LOANS OF PORTFOLIO SECURITIES Each Fund may make short and long term
loans of its portfolio securities. Under the lending policy authorized by the
Board of Trustees and implemented by the Advisor in response to requests of
broker-dealers or institutional investors which the Advisor deems qualified, the
borrower must agree to maintain collateral, in the form of cash or U.S.
government obligations, with the Fund on a daily mark-to market basis in an
amount at least equal to 100% of the value of the loaned securities. The Fund
will continue to receive dividends or interest on the loaned securities and may
terminate such loans at any time or reacquire such securities in time to vote on
any matter which the Board of Trustees determines to be important. With respect
to loans of securities, there is the risk that the borrower may fail to return
the loaned securities or that the borrower may not be able to provide additional
collateral. No loan of securities will be made if, as a result, the aggregate
amount of such loans would exceed 5% of the value of the Fund's total assets.
M. SHORT SALES Each Fund may sell a security short in anticipation of a
decline in the market value of the security. When a Fund engages in a short
sale, it sells a security which it does not own. To complete the transaction,
the Fund must borrow the security in order to deliver it to the buyer. The Fund
must replace the borrowed security by purchasing it at the market price at the
time of replacement, which may be more or less than the price at which the Fund
sold the security. The Fund will incur a loss as a result of the short sale if
the price of the security increases between the date of the short sale and the
date on which the Fund replaces the borrowed security. The Fund will realize a
profit if the security declines in price between those dates.
In connection with its short sales, a Fund will be required to maintain
a segregated account with its Custodian of cash or high grade liquid assets
equal to the market value of the securities sold less any collateral deposited
with its broker. The Fund will limit its short sales so that no more than 5% of
its net assets (less all its liabilities other than obligations under short
sales) will be deposited as collateral and allocated to the segregated account.
However, the segregated account and deposits will not necessarily limit the
Fund's potential loss on a short sale, which is limited.
INVESTMENT LIMITATIONS
FUNDAMENTAL - The investment limitations described below have been
adopted by the Trust with respect to each Fund and are fundamental
("Fundamental"), i.e. they may not be changes without the affirmative vote of a
majority of the outstanding shares of the applicable Fund. As used in the
Prospectus and the Statement of Additional Information, the term "majority" of
the outstanding shares of the Trust (or of any series) means the lesser of (1)
67% or more of the outstanding shares of the Trust (or applicable series)
present at the meeting, if the holders of more than 50% of the outstanding
shares of the Trust (or applicable series) are present or represented at such
meeting; or (2) more than 50% of the outstanding shares of the Trust (or the
applicable series). Other investment practices which may be changed by the Board
of Trustees without the approval of shareholders to the extent permitted by
applicable law, regulation or regulatory policy are considered non-fundamental
("Non-Fundamental").
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1. BORROWING MONEY. The Funds will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when borrowing is
made. The limitation does not preclude a Fund from entering into reverse
repurchase transactions, provided that the Fund has an asset coverage of 300%
for all borrowings and repurchase commitments of the Fund pursuant to reverse
repurchase transactions.
2. SENIOR SECURITIES. The Funds will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is (a) consistent with or permitted by the
Investment Company Act of 1940, as amended, the rules and regulations
promulgated thereunder, or interpretations of the Securities and Exchange
Commission or its staff and (b) as described in the Prospectus and the Statement
of Additional Information.
3. UNDERWRITING. The Funds will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. REAL ESTATE. The Funds will not purchase or sell real estate. This
limitation is not applicable to investments in securities which are secured by
or represent interests in real estate. This limitation does not preclude the
Fund from investing in mortgage-related securities, or investing in companies
which are engaged in the real estate business or have a significant portion of
their assets in real estate (including real estate investment trusts).
5. COMMODITIES. The Funds will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. LOANS. The Funds will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. CONCENTRATION. Neither the Stock Fund nor the Fixed Income Fund will
invest 25% or more of its assets in a particular industry. The internet.fund
will not invest 25% or more of its assets in a particular industry, except that
the internet.fund will invest more than 25% of its assets in the Internet
industry. This limitation is not applicable to investments in obligations issued
or guaranteed by the U.S. government, its agencies and instrumentalities or
repurchase agreements with respect thereto.
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
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fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken.
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such a merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
NON-FUNDAMENTAL - The following limitations have been adopted by the
Trust with respect to each Fund and are Non-Fundamental.
i. PLEDGING. The Funds will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of a Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
ii. MARGIN PURCHASES. The Funds will not purchase securities or
evidences of interest thereon on "margin." This limitation is not applicable to
short term credit obtained by a Fund for the clearance of purchases and sales or
redemption of securities, or to arrangements with respect to transactions
involving options, futures contracts, short sales and other permitted
investments and techniques.
iii. OPTIONS. The Funds will not purchase or sell puts, calls, options
or straddles except as described in the Prospectus and the Statement of
Additional Information.
iv. ILLIQUID INVESTMENTS. No Fund will invest more than 5% of its net
assets in securities for which there are legal or contractual restrictions on
resale and other illiquid securities.
STATE RESTRICTIONS
To comply with the current blue sky regulations of the State of Ohio,
each Fund presently intends to observe the following restrictions, which may be
changed by the Board of Trustees without shareholder approval.
Each Fund will not purchase or retain securities of any issuer if the
Trustees and officers of the Trust or of the Adviser, who individually own
beneficially more than 0.5% of the outstanding securities of such issuer,
together own beneficially more than 5% of such securities. Each Fund will not
purchase securities issued by other investment companies except by purchase in
the open market where no commission or profit to a sponsor or dealer results
from such purchase other than customary broker's commission or except when such
purchase is part of a plan of merger, consolidation, reorganization or
acquisition. Each Fund will not borrow (other than by entering into reserve
19
<PAGE>
repurchase agreements), pledge, mortgage or hypothecate more than one-third of
its total assets. In addition, each Fund will engage in borrowing (other than
reverse repurchase agreements) only for emergency or extraordinary purposes and
not for leverage. Each Fund will not invest more than 15% of its total assets in
securities of issuers which, together with any predecessors, have a record of
less than three years continuous operation or securities of issuers which are
restricted as to disposition. Each Fund will not purchase the securities of any
issuer if such purchase at the time thereof would cause more then 10% of the
voting securities of any issuer to be held by the Fund. Neither Fund will
purchase securities of an issuer if, as to 50% of the Fund's total assets, the
purchase at the time thereof would cause more than 25% of the Fund's total
assets to be invested in the securities of any one issuer and, as to the
remaining 50% of the Fund's assets, the purchase at the time thereof would cause
more than 25% of the Fund's total assets to be invested in the securities of any
one issuer. This limitation does not apply to obligations of the United States
government or its agencies or instrumentalities.
THE INVESTMENT ADVISER
The Trust's investment adviser is Equity Analyst Inc., 9200 Montgomery
Road, Building D, Suite 13A, Cincinnati, Ohio 45242 (the "Adviser"). David Lee
Manzler, Jr. and David L. Manzler, Sr. may be deemed to be controlling persons
and affiliates of the Adviser due to their ownership of its shares and their
positions, respectively, as officers and directors of the Adviser. The Manzlers,
because of their affiliation, may receive benefits from the management fees paid
to the Adviser.
Under the terms of the management (the "Agreement"), the Adviser manages
the Funds' investments subject to approval of the Board of Trustees and pays all
of the expenses of the Funds except brokerage, taxes, interest and extraordinary
expenses. As compensation For the Adviser's management services and agreement to
pay the Fund's expenses, Analysts Stock Fund is obligated to pay the Adviser's
fee computed and accrued daily and paid monthly at an annual rate of 2.00% of
the average daily net assets of the Fund up to and including $20,000,000, 1.75%
of such assets from $20,000,000 to and including $40,000,000, 1.5% of such
assets from $40,000,000 to and including $100,000,000 and 1.25% of such assets
in excess of $100,000,000. As compensation for the Adviser's management services
and agreement to pay the Fund's expenses, Analysts Fixed Income Fund is
obligated to pay the Adviser a fee computed and accrued daily and paid monthly
at an annual rate of 1.5% of the average daily net assets of the Fund up to and
including $20,000,000, 1.25% of such assets from $20,000,000 to and including
$40,000,000, 1.00% of such assets from $40,000,000 to and including $100,000,000
and 0.75% of such assets in excess of $100,000,000. As compensation for the
Adviser's management services and agreement to pay the Fund's expenses, Analysts
internet.fund is obligated to pay the Adviser a fee computed and accrued daily
and paid monthly at an annual rate of 3.00% of the average daily net assets of
the Fund up to and including $20,000,000, 2.75% of such assets from $20,000,000
to and including $40,000,000, 2.50% of such assets from $40,000,000 to and
including $100,000,000 and 2.25% of such assets in excess of $100,000,000.
For the fiscal year ended July 31, 1999, the Analyst Stock Fund paid
advisory fees of $169,539 to the Adviser, the Analysts Fixed Income Fund paid
advisory fees of $68,193 to the Adviser, and the Analysts internet.fund paid
advisory fees of $3,586 to the Adviser. For the fiscal year ended July 31, 1998,
the Analyst Stock Fund paid advisory fees of $144,760 to the Adviser and the
Analysts Fixed Income Fund paid advisory fees of $66,346 to the Adviser. For the
20
<PAGE>
fiscal year ended July 31, 1997 the Analysts Stock Fund paid advisory fees of
$92,420 to the Adviser and the Analysts Fixed Income Fund paid advisory fees of
$48,746 to the Adviser.
The Adviser retains the right to use the name "Analysts" in connection
with another investment company or business enterprise with which the Adviser is
or may become associated, the Trust's right to use the name "Analysts"
automatically ceases thirty days after termination of the Agreement and may be
withdrawn by the Adviser on thirty days notice.
Equity Analysts Inc. is also the exclusive underwriter for the
distribution of shares of the Funds. Equity Analysts Inc. is obligated to sell
shares of each Fund on a best efforts basis for no compensation. Shares of each
Fund are offered to the public on a continuous basis.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
the Adviser is responsible for the Trust's portfolio decisions and the placing
of the Trust's portfolio transactions. In placing portfolio transactions, the
Adviser seeks to the best qualitative execution for the Trust, taking into
account such factors as price (including the applicable brokerage commission or
dealer spread), the execution capability, financial responsibility and
responsiveness of the broker or dealer and the brokerage and research services
provided by the broker or dealer. The Advisor generally seeks favorable prices
and commissions rates that are reasonable in relation to the benefits received.
Consistent with the Rules of Fair Practices of the National Association of
Securities Dealers, Inc., and subject to its obligation of seeking best
qualitative execution, the Advisor may give consideration to sales of shares of
the Trust as a favor in the selection of brokers and dealers to execute
portfolio transactions.
The Adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Trust and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and economic
analysis, statistical services and information with respect to the availability
of securities or purchasers or sellers of securities and analyses of reports
concerning performance of accounts. The research services and other information
furnished by brokers through whom the Trust effects securities transactions may
also be used by the Adviser in servicing all of its accounts and all such
services may not be used by the Advisor in connection with the Trust. Similarly,
research and information provided by brokers or dealers serving other clients
may be useful to the Adviser in connection with its services to the Trust.
Although research services and other information are useful to the Trust and the
Adviser, it possible to place a dollar value on the research and other
information received. It is opinion of the Board of Trustees and the Adviser
that the review and study of the research and other information will not reduce
the overall cost to the Adviser of performing its duties to the Trust under the
Agreement.
21
<PAGE>
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to market makers may include the spread between the bid and
asked prices.
To the extent that the Trust and another of the Adviser's clients seek
to acquire the same security at about the same time, the Trust may not be able
to acquire as large a position in such security as it desires or it may have to
pay a higher price for the security. Similarly, the Trust may not be able to
obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the other client desires to sell the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one client, the resulting
participation in volume transactions could produce better executions for the
Trust. In the event that more than one client wants to purchase or sell the same
security on a given date, the purchases and sales will normally be made random
client selection.
For the fiscal year ended July 31, 1999, the Analysts Stock Fund, the
Analysts Fixed Income Fund, and the Analysts internet.fund paid brokerage
commissions of $19,733, $1,384, and $3,285 respectively. For the fiscal year
ended July 31, 1998, the Analysts Stock Fund and the Analysts Fixed Income Fund
paid brokerage commissions of $3,202 and $2,269 respectively. For the fiscal
year ended July 31, 1997, the Analysts Stock Fund and the Analysts Fixed Income
Fund paid brokerage commissions of $5,691 and $3,474 respectively.
DETERMINATION OF SHARE PRICE
The prices (net asset values) of the shares of each Fund is determined
as of the close of trading of the New York Stock Exchange (4:00P.M., Eastern
time) on each day the Trust is open for business. The Trust is open for business
every day except Saturdays, Sundays, and the following holidays: New Year's Day,
Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
Securities which are traded on any exchange or on the NASDAQ
over-the-counter market are valued at the last quoted sale price of the day.
Lacking a last sale price, a security is generally valued at its last bid price,
except when, in the Adviser's opinion, the last bid price does not accurately
reflect the current value of the security. All other securities for which
over-the-counter market quotations are readily available are valued at their
last bid price. When market quotations are not readily available, when the
Adviser determines the last bid price does not accurately reflect the current
value, or when restricted securities are being valued, such securities are
valued as determined in good faith by the Adviser, subject to review of the
Board of Trustees of the Trust.
Fixed income securities (including mortgage-related securities and
asset-backed and receivable-backed securities) may be valued on the basis of
prices furnished by a pricing service when the Adviser believes such prices
accurately reflect the fair market value of such securities. A pricing service
utilizes electronic data processing techniques to determine prices for normal
institutional-size trading units of debt securities without regard to sale or
bid prices. When prices are not readily available from a pricing service, or
when restricted or illiquid securities are being valued, securities are valued
22
<PAGE>
at fair value as determined in good faith by the Adviser, subject to review of
the Board of Trustees. Short term investments in fixed income securities with
maturities of less than 60 days when acquired, or which subsequently are within
60 days of maturity, are valued by using the amortized cost method of valuation.
For valuation purposes, quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents at the time of pricing. In
computing the net asset value of a Fund, the values of foreign portfolio
securities are generally based upon market quotations which, depending upon the
exchange or market, may be last sale price, last bid price, or the mean between
last bid and asked prices as of, in each case, the close of the appropriate
exchange or another designated time.
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed at various times before the
close of business on each day on which the New York Stock Exchange is open.
Trading of these securities may not take place on every New York Stock Exchange
business day. In addition, trading may take place in various foreign markets on
Saturdays or on other days when the New York Stock Exchange is not open and on
which a Fund's share price is not calculated. Therefore, the value of the
portfolio of a Fund holding foreign securities may be significantly affected on
days when shares of the Fund may not be purchased or redeemed.
The calculation of the share price of a Fund holding foreign securities
in its portfolio does not take place contemporaneously with the determination of
the values of many of the foreign portfolio securities used in such calculation.
Events affecting the values of foreign portfolio securities that occur between
the time their prices are determined and the calculation of the Fund's share
price will not be reflected in the calculation unless the Adviser determines,
subject to review by the Board of Trustees, that the particular event would
materially affect net asset value, in which case an adjustment will be made.
INVESTMENT PERFORMANCE
Each Fund may periodically advertise "average annual total returns."
"Average annual total return," as defined by the Securities and Exchange
Commission, is computed by finding the average annual compounded rates of a
return (over the one and five year periods and the period from initial public
offering through the end of a Fund's most recent fiscal year) that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the applicable
period of the hypothetical $1,000 investment made at the
beginning of the applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
23
<PAGE>
A Fund's "yield" is determined in accordance with the method defined by
the Securities and Exchange Commission. A yield quotation is based on a 30-day
(or one month) period and is computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
Yield = 2[(a-b/cd+1)6 - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Solely for the purpose of computing yield, dividend income is recognized
by accruing 1/360 of the stated dividend rate of the security each day that the
Fund owns the security. Generally, interest earned (for the purpose of "a"
above) on debt obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation (including
actual accrued interest) at the close of business on the last business day prior
to the start of the 30-day (or one month) period for which yield is being
calculated, or, with respect to obligations purchased during the month, the
purchase price (plus actual accrued interest). With respect to the treatment of
discount and premium on mortgage or other receivable-backed obligations which
are expected to be subject to monthly paydowns of principals and interest, gain
or loss attributable to actual monthly paydowns is accounted for as an increase
or decrease to interest income during the period and discount or premium on the
remaining security is not amortized. The Fixed Income Fund's yield for the one
month period ended July 31, 1999 was 6.29%.
A Fund's investment performance will vary depending upon the market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time period
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with the Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
From time to time, in advertisements, sales literature and information
furnished to present or prospective shareholders, the performance of the Funds
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of the appropriate
Fund or considered to be representative of the stock market in general or the
fixed income securities market in general. Analysts Stock Fund will use the
Standards & Poor's 500 Stock Index and the Dow Jones Industrial Average.
Analysts Fixed Income Fund will use the Shearson Lehman Intermediate
Government/Corporate Bond Index. The Shearson Lehman Intermediate
Government/Corporate Bond Index measures the price, income and total return of a
group of fixed income securities maturing in one to ten years. It contains all
24
<PAGE>
public obligations of the U.S. Treasury (excluding flower bonds and
foreign-targeted issues), all publicly traded debt of agencies of the U.S.
Government, quasi-federal corporations and corporate debt guaranteed by the U.S.
Government, and all public, fixed rate, non-convertible, investment grade,
domestic corporate debt. The Index does not include mortgage-backed securities
or collateralized mortgage obligations. The investment performance figures for
the Funds and the indices will include reinvestment of dividends and capital
gains distributions.
In addition, the performance of either Fund may be compared to other
groups of mutual funds tracked by any widely used independent research firm
which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of the applicable Fund. Performance rankings and
ratings reported periodically in national financial publications such as
Barron's may also be used.
ANALYSTS STOCK FUND. The average annual total returns of the Stock Fund
for the year ended July 31, 1999 and from the inception (August 25, 1993)
through July 31, 1999 were 14.36% and 14.04%, respectively.
ANALYSTS FIXED INCOME FUND. The average annual total returns of the
Fixed Income Fund for the year ended July 31, 1999 and for the period from
inception (August 25,1993) through July 31,1999 were -1.77% and 3.58%,
respectively.
ANALYSTS INTERNET.FUND. The average annual total returns of the
internet.fund for the period from inception (May 4,1999) through July 31,1999
were ___%.
CUSTODIAN AND TRANSFER AGENT
Firstar Bank, N.A., 432 Walnut Street, Cincinnati, Ohio is Custodian of
the Funds' investments. The Custodian acts as each Fund's depository, safekeeps
its portfolio securities, collects all income and other payments with respect
thereto, disburses funds at the Fund's request and maintains records in
connection with its duties. The Trust acts as each Fund's transfer agent and, in
such capacity, maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Fund's shares, acts as dividend distribution disbursing agent
and performs other accounting and shareholder service functions.
ACCOUNTANTS
The firm of Berge and Company LTD, 20 West Ninth Street, Cincinnati,
Ohio 45202, has been selected as independent public accountants for the Trust
for the fiscal year ending July 31, 2000.
DISTRIBUTOR
The Adviser is the exclusive agent for distribution of shares of the
Fund. The Distributor is obligated to sell the shares of the Fund on a best
efforts basis only against purchase orders for the shares. Shares of the Fund
are offered to the public on a continuous basis. [The Distributor receives no
fees for its services.]
25
<PAGE>
FINANCIAL STATEMENTS
The financial statements and independent auditor's report required to
be included in this Statement of Additional Information are incorporated herein
by reference to the Trust's Annual Report to Shareholders for the period ended
July 31, 1999. The Funds will provide the Annual Report without charge at
written request or request by telephone.
26
<PAGE>
ANALYSTS INVESTMENT TRUST
PART C. OTHER INFORMATION
-----------------
ITEM 23. EXHIBITS
- -------- --------
(a) ARTICLES OF INCORPORATION. Copy of Registrant's
Declaration of Trust, which was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 6, is
hereby incorporated by reference.
BY-LAWS. Copy of Registrant's By-laws, which was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 6, is hereby incorporated by reference.
(c) INSTRUMENTS DEFINING RIGHTS OF SOCIETY HOLDERS - None.
(d) INVESTMENT ADVISORY CONTRACTS.
(i) Copy of Registrant's Management Agreement with
its Adviser, Equity Analysts Inc., for the
Analysts Stock Fund and the Analysts Fixed
Income Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 6, is
hereby incorporated by reference.
(ii) Copy of Registrant's Management Agreement for
the Analysts internet.fund, which was filed as
an Exhibit to Registrant's Post-Effective
Amendment No. 9, is hereby incorporated by
reference.
(e) UNDERWRITING CONTRACTS. Copy of Registrant's
Underwriting Agreement with Equity Analysts Inc., which
was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 6, is hereby incorporated by reference.
(f) Bonus, Profit Sharing - None.
<PAGE>
(g) Custodian Agreements. Copy of Registrant's Custody
Agreement with the Custodian, Firstar Bank, N.A.
(formerly Star Bank, N.A.), which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 6,
is hereby incorporated by reference.
(h) Other Material Contracts - None.
(i) Legal Opinion.
(i) Opinion of Brown, Cummins & Brown Co., L.P.A.,
which was filed with Registrant's Form 24F-2
for the fiscal year ended July 31, 1997, is
hereby incorporated by reference.
(ii) Consent of Brown, Cummins & Brown Co., L.P.A.
is filed herewith.
(j) Other Opinions.Consent of Berge and Company LTD. is
filed herewith.
(k) Omitted Financial Statements. Financial Statements
Omitted from Item 23 - None.
(l) Initial Capital Agreements. Copy of Letter of Initial
Stockholder, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 6, is hereby
incorporated by reference.
(m) Rule 12b-1 Plan - None.
(n) Financial Data Schedule - None.
(o) Rule 18f-3 Plan - None.
(p) Powers of Attorney.
(i) Power of Attorney for Registrant and
Certificate with respect thereto, which were
filed as an Exhibit to Registrant's
Post-Effective Amendment No. 6, are hereby
incorporated by reference.
(ii) Powers of Attorney for Trustees and officers of
Registrant, which were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 7,
are hereby incorporated by reference.
<PAGE>
(iii) Power of Attorney for James S. Todd is filed
herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT
- -------- -----------------------------------------------------------------
None
ITEM 25. INDEMNIFICATION
- -------- ---------------
(a) Article VI of the Registrant's Declaration of Trust
provides for indemnification of officers and Trustees
as follows:
SECTION 6.4 INDEMNIFICATION OF TRUSTEES,
OFFICERS, ETC. Subject to and except as otherwise
provided in the Securities Act of 1933, as amended, and
the 1940 Act, the Trust shall indemnify each of its
Trustees and officers (including persons who serve at
the Trust's request as directors, officers or trustees
of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person") against
all liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered
Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or
legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or
with which such person may be or may have been
threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer,
director or trustee, and except that no Covered Person
shall be indemnified against any liability to the Trust
or its Shareholders to which such Covered Person would
otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered
Person's office.
SECTION 6.5 ADVANCES OF EXPENSES. The Trust shall
advance attorneys' fees or other expenses incurred by a
Covered Person in defending a proceeding to the full
extent permitted by the Securities Act of 1933, as
amended, the 1940 Act, and Ohio Revised Code Chapter
1707, as amended. In the event any of these laws
conflict with Ohio Revised Code Section 1701.13(E), as
amended, these laws, and not Ohio Revised Code Section
1701.13(E), shall govern.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC.
The right of indemnification provided by this Article
VI shall not be exclusive of or affect any other rights
to which any such Covered Person may be entitled. As
<PAGE>
used in this Article VI, "Covered Person" shall include
such person's heirs, executors and administrators.
Nothing contained in this article shall affect any
rights to indemnification to which personnel of the
Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such
person.
The Registrant may not pay for insurance which protects
the Trustees and officers against liabilities rising
from action involving willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties
involved in the conduct of their offices.
(b) The Registrant may maintain a standard mutual fund and
investment advisory professional and directors and
officers liability policy. The policy, if maintained,
would provide coverage to the Registrant, its Trustees
and officers, and its Adviser, among others. Coverage
under the policy would include losses by reason of any
act, error, omission, misstatement, misleading
statement, neglect or breach of duty.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
trustees, officers and controlling persons of the
Registrant pursuant to the provisions of Ohio law and
the Agreement and Declaration of the Registrant or the
By-laws of the Registrant, or otherwise, the Registrant
has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against
public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of
Analysts Investment Trust in the successful defense of
any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
- -------- ----------------------------------------------------
A. Equity Analysts Inc. (the "Adviser") is a registered investment
adviser and broker-dealer. Prior to January 1, 1993, it also
provided pension administration.
B. The following list sets forth the business and other connections
of the Directors and officers of Equity Analysts Inc. during the
past two years.
(1) David L. Manzler, Sr.
(a) Vice President and a Director of Equity Analysts
Inc., 9200 Montgomery Road, Bldg. D, Suite 13A,
Cincinnati, Ohio 45242.
<PAGE>
(b) Vice President, Secretary and a Trustee of The
Analysts Trust, 9200 Montgomery Road, Bldg. D, Suite
13A, Cincinnati, Ohio 45242.
(c) President of Equity Analysts Agency Inc., 9200
Montgomery Road, Bldg. D, Suite 13A, Cincinnati,
Ohio 45242.
(d) Director of Cincinnati Steel Products Co., 4540
Steel Place, Cincinnati, Ohio 45209.
(2) David Lee Manzler, Jr.
(a) President, Secretary and Director of Equity Analysts
Inc., 9200 Montgomery Road, Bldg. D, Suite 13A,
Cincinnati, Ohio 45242.
(b) President, Treasurer and a Trustee of The Analysts
Trust, 9200 Montgomery Road, Bldg. D, Suite 13A,
Cincinnati, Ohio 45242.
(3) Bernard J. McEvoy - A Director, part-time employee and
registered representative of Equity Analysts Inc., 9200
Montgomery Road, Bldg. D, Suite 13A, Cincinnati, Ohio
45242.
ITEM 27. PRINCIPAL UNDERWRITERS
- -------- ----------------------
(a) Equity Analysts Inc. acts as underwriter only for
Analysts Investment Trust.
(b)
POSITION WITH POSITION WITH
NAME UNDERWRITER REGISTRANT
---- ----------- ----------
David L. Manzler, Sr. Vice President Vice President,
and Director Secretary and Trustee
David Lee Manzler, Jr. President, President, Treasurer
Secretary and Director and Trustee
Bernard J. McEvoy Director None
The address of all of the above-named persons is 9200
Montgomery Road, Bldg. D, Suite 13A, Cincinnati, Ohio 45242.
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
- -------- --------------------------------
Accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act
of 1940 and the Rules promulgated thereunder will be
maintained by the Registrant at 9200 Montgomery Road, Bldg.
D, Suite 13A, Cincinnati, Ohio 45242 or by Firstar Bank,
N.A., the Registrant's Custodian at 425 Walnut Street,
Cincinnati, Ohio 45202.
ITEM 29. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A OR B
- -------- -------------------------------------------------
None.
ITEM 30. UNDERTAKINGS
- -------- ------------
The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cincinnati, State of Ohio, on the 1st day of October.
ANALYSTS INVESTMENT TRUST
By: /s/ Donald S. Mendelsohn,
-----------------------------
Donald S. Mendelsohn,
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
David L. Manzler, Sr.* Vice President, *By:/s/ Donald S. Mendelsohn,
Secretary and -------------------------
Trustee Attorney-in-Fact
David Lee Manzler, Jr.* President, October 1, 1999
Treasurer and
Trustee
Walter E. Bowles, III* Trustee
Robert W. Buechner* Trustee
Anthony J. Schement* Trustee
James S. Todd* Trustee
<PAGE>
EXHIBIT INDEX
-------------
1. Consent of Brown, Cummins & Brown Co., L.P.A....................EX-99.23.i
2. Consent of Berge and Company LTD................................EX-99.23.j
3. Power of Attorney...............................................EX-99.23.p
<PAGE>
BROWN, CUMMINS & BROWN CO., L.P.A
ATTORNEYS AND COUNSELORS AT LAW
3500 CAREW TOWER
J.W. BROWN (1911-1995) 441 VINE STREET
JAMES R. CUMMINS CINCINNATI, OHIO 45202
ROBERT S BROWN TELEPHONE (513) 381-2121
DONALD S. MENDELSOHN TELECOPIER (513) 381-2125 OF COUNSEL
LYNNE SKILKEN GILBERT BETTMAN
AMY G. APPLEGATE
MELANIE S. CORWIN
JOANN M. STRASSER
PAMELA L. KOGUT
October 1, 1999
The Analysts Investment Trust
9200 Montgomery Road, Bldg. D
Cincinnati, Ohio 45242
Gentlemen:
A legal opinion that we prepared was filed with your Form 24 F-2 for
the fiscal year ended July 31, 1997 (the "Legal Opinion"). We hereby give you
our consent to incorporate by reference the Legal Opinion into Post-Effective
Amendment No. 10 to your Registration Statement (the "Amendment"), and consent
to all references to us in the Amendment.
Very truly yours,
Brown, Cummins & Brown Co., L.P.A.
BCB/mle
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the use of
our report dated August 25, 1999 and to all references to our firm included in
or made a part of this Post-Effective Amendment No. 10 to the Registration
Statement for Analysts Investment Trust.
/s/
Berge & Company LTD.
October 1, 1999
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Analyst Investment Trust, a business trust organized under
the laws of the State of Ohio (hereinafter referred to as the "Trust"),
periodically files amendments to its Registration Statement with the Securities
and Exchange Commission under the provisions of the Securities Act of 1933 and
the Investment Company Act of 1940, as amended; and
WHEREAS, the undersigned is a Trustee of the Trust;
NOW, THEREFORE, the undersigned hereby constitutes and appoints JAMES
R. CUMMINS and DONALD S. MENDELSOHN, and each of them, his attorneys for him/her
and in his name, place and stead, and in his office and capacity in the Trust,
to execute and file any Amendment or Amendments to the Trust's Registration
Statement, hereby giving and granting to said attorneys full power and authority
to do and perform all and every act and thing whatsoever requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
23rd day of September, 1999.
/s/______________________
James Todd
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
Before me, a Notary Public, in and for said county and state,
personally appeared JAMES TODD, known to me to be the person described in and
who executed the foregoing instrument, and who acknowledged to me that he
executed and delivered the same for the purposes therein expressed.
WITNESS my hand and official seal this 23rd day of September, 1999.
/s/ JOANN M. STRASSER
-----------------------
Notary Public
My commission has no expiration
