THE JEFFERSON FUND GROUP TRUST
JEFFERSON GROWTH & INCOME FUND
SUPPLEMENT DATED MAY 8, 1998
TO THE PROSPECTUS DATED FEBRUARY 28,1998
Effective May 7, 1998, the Distribution Agreement between Rodman &
Renshaw, Inc. ("Rodman") and The Jefferson Fund Group Trust (the "Rodman
Distribution Agreement"), relating to the distribution of Class A and Class B
shares of the Jefferson Growth and Income Fund (the "Fund") was terminated.
On the same date, both Distribution Assistance Agreements (the "12b-1
Agreements") between Rodman and the Fund, relating to servicing and
distribution and servicing fees paid to Rodman, under plans adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940, were also terminated.
Among other things, the termination of these three agreements means that
Rodman no longer acts as the distributor or principal underwriter of the
Fund's shares.
Effective May 7, 1998, the Fund entered into an Underwriting Agreement
with Adviser Dealer Services, Inc. ("ADS"), a broker-dealer based in Dublin,
Ohio, who has agreed to act as the distributor and principal underwriter for
both Class A and Class B shares of the Fund pursuant to an agreement that
contains substantially the same terms and conditions as the Rodman Distribution
Agreement, except that, unlike Rodman, ADS is not contractually obligated to
reimburse the Fund for expenses in excess of 1.15% of the Fund's average net
assets for Class A Shares and 1.90% of the Fund's average net assets for Class
B Shares, although ADS may voluntarily do so. Because of this provision in the
Underwriting Agreement with ADS, Uniplan, Inc. the Fund's adviser (the
"Adviser") has agreed that, in the event that ADS does not reimburse the Fund
for expenses that exceed the above expense ratios on a forward-looking basis,
(or in the event that Rodman does not reimburse the Fund for expenses incurred
prior to May 7, 1998), it will voluntarily reimburse the Fund for expenses
exceeding the above amounts.
The new Underwriting Agreement with ADS also includes provisions that are
substantially the same as the former 12b-1 Agreements. The Fund has also
amended the Distribution and Servicing Plans for Class A and Class B Shares
to reflect the change in the distributor from Rodman to ADS. No other change
to the Plans have been made at this time. The substance of the Fund's
Distribution and Servicing Plans, pursuant to which the Fund has made and
will continue to make the Rule 12b-1 payments, are described on page 24
of the current Propsectus, under the section entitled "Distributor and
Distribution and Servicing Plans."
The agreement with ADS was approved by a majority of the Fund's trustees and
by a majority of the Fund's Independent Trustees at a special meeting called
for such purpose. In approving the agreement, the trustees determined that
the agreement is in the best interests of the Fund and its shareholders.
If you have any questions concerning the change in the Fund's distributor,
please call 1-800-871-3863.
STATEMENT OF ADDITIONAL INFORMATION
Dated February 28, 1998 as supplemented May 8, 1998
THE JEFFERSON FUND GROUP TRUST
JEFFERSON GROWTH AND INCOME FUND
This Statement of Additional Information is not a Prospectus and
should be read in conjunction with the Prospectus of The Jefferson Fund Group
Trust's Jefferson Growth and Income Fund dated February 28, 1998, together with
the Prospectus Supplement dated May 8, 1998. Requests for copies of the
Prospectus should be made in writing to The Jefferson Fund Group Trust, c/o
Firstar Trust Company, Mutual Fund Services, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701, or by calling (800) 216-9785.
THE JEFFERSON FUND GROUP TRUST
JEFFERSON GROWTH AND INCOME FUND
Table of Contents
Page No.
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INVESTMENT RESTRICTIONS 1
INVESTMENT CONSIDERATIONS 4
CONTINGENT DEFERRED SALES CHARGE (CLASS B SHARES) AND INITIAL
SALES CHARGE (CLASS A SHARES) 18
EXCHANGE PRIVILEGE 19
DISTRIBUTOR AND DISTRIBUTION AND SERVICING PLANS 20
TRUSTEES AND OFFICERS OF THE FUND 22
INVESTMENT ADVISOR, ADMINISTRATOR, CUSTODIAN, TRANSFER
AGENT AND ACCOUNTING SERVICES AGENT 26
DETERMINATION OF NET ASSET VALUE 29
CALCULATION OF TOTAL RETURN 29
ALLOCATION OF PORTFOLIO BROKERAGE 33
TAXES 34
SHAREHOLDER MEETINGS 36
INDEPENDENT ACCOUNTANTS 38
FINANCIAL STATEMENTS 39
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information and the Prospectus dated February 28, 1998, (together with the
Prospectus Supplement Dated May 8, 1998), and, if given or made,
such information or representations may not be relied upon as having been
authorized by The Jefferson Fund Group Trust.
This Statement of Additional Information does not constitute an offer
to sell securities.
INVESTMENT RESTRICTIONS
As set forth in the prospectus dated February 28, 1998 (and the
Prospectus Supplement Dated May 8, 1998) of The Jefferson Fund Group Trust
relating to its mutual fund, the Jefferson Growth and Income Fund (the "Fund")
under the caption "INVESTMENT OBJECTIVES AND POLICIES", the primary investment
objectives of the Fund are to produce long-term capital appreciation and cur-
rent income principally through investing in equity securities.
Fundamental Investment Restrictions
Consistent with its investment objectives, the Fund has adopted the
following investment restrictions which are matters of fundamental policy and
cannot be changed without approval of the holders of the lesser of: (i) 67% of
the Fund's shares present or represented at a shareholder's meeting at which the
holders of more than 50% of such shares are present or represented; or (ii) more
than 50% of the outstanding shares of the Fund.
1. The Fund will not purchase securities on margin or
participate in a joint-trading account.
2. The Fund will not borrow money or issue senior
securities, except for temporary bank borrowings for emergency or extraordinary
purposes (but not for the purpose of purchase of investments) and then only in
an amount not in excess of 5% of the value of its total assets and will not
pledge any of its assets except to secure borrowings. The Fund will not
purchase securities while it has any outstanding borrowings.
3. The Fund will not make short sales of securities or
maintain a short position for the account of the Fund unless at all times when a
short position is open the Fund owns an equal amount of such securities or owns
securities which, without payment of any further consideration, are convertible
into or exchangeable for securities of the same issue as, and
equal in amount to, the securities sold short.
4. The Fund will not make investments for
the purpose of exercising control or management of any company.
5. The Fund will limit its purchases of securities of any
issuer (other than the United States or an instrumentality of the United States)
in such a manner that it will satisfy at all times the requirements of Section
5(b)(1) of the Investment Company Act of 1940 (i.e., that at least 75% of the
value of its total assets is represented by cash and cash items (including
receivables), U.S. Government Securities, securities of other investment
companies, and other securities for the purpose of the foregoing limited in
respect of any one issuer to an amount not greater than 5% of the value of the
total assets of the Fund and to not more than 10% of the outstanding voting
securities of such issuer.)
6. Excluding U.S. Government securities (including
securities issued or guaranteed by agencies and instrumentalities thereof), the
Fund will not concentrate 25% or more of the value of its total assets,
determined at the time an investment is made, in securities issued by companies
engaged in the same industry.
7. The Fund will not acquire or retain any security issued
by a company if (a) an officer or director of such company is an officer or
trustee of the Fund or an officer, director or other affiliated person of its
investment advisor; or (b) officers or trustees of the Fund or officers or
directors of its investment adviser owning beneficially more than one-half of
one percent of its securities together own beneficially more than five percent
of its securities.
8. The fund will not write (sell) or purchase options except
that the Fund may (a) write covered call options or covered put options on
securities that it is eligible to purchase (and on stock indices) and enter into
closing purchase transactions with respect to such options, and (b) in
combination therewith, or separately, purchase put and call options on
securities it is eligible to purchase; provided that the premiums paid by the
Fund on all outstanding options it has purchased do not
exceed 5% of its total assets. The Fund may enter into closing sale
transactions with respect to options it has purchased.
9. The Fund will not act as an underwriter or distributor of
securities other than shares of the Fund.
10. The Fund will not purchase any interest in any oil, gas
or any other mineral exploration or development lease or program.
11. The Fund will not purchase or sell real estate, real
estate mortgage loans or real estate limited partnerships.
12. The Fund will not purchase or sell commodities or
commodities contracts, except that the Fund may purchase and sell financial
futures contracts and related options.
13. The fund will not make loans, except by purchase of debt
obligations or by entering into repurchase agreements or through the lending of
the Fund's portfolio securities with respect to not more than 25% of its total
assets.
Non-Fundamental Investment Restrictions
It is contrary to the Fund's present policy, which may be changed by
the trustees without shareholder approval, to:
1. Purchase securities of other investment companies except
(a) as part of a plan of merger, consolidation or reorganization approved by the
shareholders of the Fund or (b) securities of registered investment companies
where no commission or profit results, other than the usual and customary
broker's commission and where as a result of such purchase the Fund would hold
less than 3% of any class of securities, including voting securities, of any
registered investment company and less than 5% of the Fund's assets, taken at
current value, would be invested in securities of registered investment
companies. All assets of the Fund invested in securities of registered
investment companies will be included in the daily net assets of the Fund for
purposes of calculating the monthly advisory fees payable to the Advisor. In
such event, shareholders of the Fund will in effect pay two
advisory fees on the assets invested in investment companies.
2. Invest in warrants or rights excluding
options (other than warrants or rights acquired by the Fund as a part of a unit
or attached to securities at the time of purchase) if, as a result, such
investments (valued at the lower of cost or market) would exceed 5% of the value
of the Fund's net assets; provided that not more than 2% of the Fund's net
assets may be invested in warrants not listed on the New York or American Stock
Exchanges.
3. Invest in securities of an issuer, which, together with
any predecessors or controlling persons, has been in operation for less than
three consecutive years and in equity securities for which market quotations are
not readily available (excluding restricted securities) if, as a result, the
aggregate of such investments would exceed 5% of the value of the Fund's net
assets; provided, however, that this restriction shall not apply to any
obligation of the U.S. Government or its instrumentalities or agencies. (Debt
securities having equity features are not considered "equity securities" for
purposes of this restriction.)
4. Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities the disposition of which
is restricted under federal securities laws, (c) repurchase agreements maturing
in more than seven days, and (d) OTC options, if, as a result, more than 10% of
a Fund's net assets (taken at current value) would then be invested in
securities described in Section 3, 4(a), 4(b), 4(c), and 4(d) above. For the
purpose of this restriction securities subject to a 7-day put option or
convertible into readily saleable securities are not included with subsections
(a) or (b).
All percentage limitations on investments set forth herein and in the
Prospectus will apply at the time of the making of an investment and shall not
be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment. If violated, the Fund
will immediately liquidate such investment so that no excess or
deficiency remains.
The phrase "shareholder approval," as used herein, means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Fund or (2) 67% or more of the shares of the Fund present at a meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy.
INVESTMENT CONSIDERATIONS
DEBT SECURITIES
---------------
As set forth in the Prospectus under the caption "Investment
Objectives and Policies," the Fund may invest in corporate debt securities of
domestic or foreign issuers that are assigned one of the six highest ratings of
either Standard & Poor's Corporation ("Standard & Poor's") or Moody's Investors
Service, Inc. ("Moody's"), or if unrated, are of comparable quality in the
opinion of the Fund's Advisor. A description of the ratings categories used is
set forth in "Description of Securities Ratings" located in the Fund's
Prospectus.
Securities rated Baa and BBB are the lowest which are considered
"investment grade" obligations. Moody's describes securities rated Baa as
"medium-grade" obligations; they are "neither highly protected nor poorly
secured . . . [i]nterest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any general length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well." S&P describes securities rated BBB as "regarded as
having an adequate capacity to pay interest and repay principal . . . whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity than in higher rated categories."
High yield securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of high yield securities have been found to be less
sensitive to interest rate changes than higher-rated investments, but more
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in high yield security prices because the advent
of a recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If an issuer of high
yield securities defaults, in addition to risking payment of all or a portion of
interest and principal, the Fund may incur additional expenses to seek recovery.
In the case of high yield securities structured as zero-coupon or pay-in-kind
securities, their market prices are affected to a greater extent by interest
rate changes, and therefore tend to be more volatile than securities which pay
interest periodically and in cash.
The secondary market on which high yield securities are traded may be
less liquid than the market for higher grade securities. Less liquidity in the
secondary trading market could adversely affect the price at which the Fund
could sell a high yield security, and could adversely affect the daily net asset
value of the shares. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity of high
yield securities especially in a thinly-traded market. When secondary markets
for high yield securities are less liquid than the market for higher grade
securities, it may be more difficult to value the securities because such
valuation may require more research, and elements of judgment may play a greater
role in the valuation because there is less reliable, objective data available.
The Advisor will seek to minimize the risks of investing in all
debt securities through diversification, in-depth credit
analysis and attention to current developments in interest rates and market
conditions.
Securities are purchased and sold principally in response to current
assessments of future changes in business conditions and the levels of interest
rates on debt securities of varying maturities, the availability of new
investment opportunities at higher relative yields, and current evaluations of
an issuer's continuing ability to meet its obligations in the future. The
average maturity or duration of the fixed-income securities in the Fund's
portfolio may be varied in response to anticipated changes in interest rates and
to other economic factors, although under normal circumstances the Fund's debt
securities will be primarily those with more than one year remaining to
maturity. Securities may be bought and sold in anticipation of a decline or a
rise in market interest rates. In addition, a security may be sold and another
of comparable quality and maturity (usually, but not always, of a different
issuer) purchased at approximately the same time to take advantage of what are
believed to be short-term differentials in values or yields.
DEPOSITORY RECEIPTS
-------------------
The Fund may invest in foreign securities in the form of American
Depositary Receipts (ADR's) convertible into securities of foreign issuers.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADR's are receipts typically
issued by a United States bank or trust company evidencing ownership of the
underlying foreign securities. Generally, ADR's, in registered form, are
designed for use in the United States securities market.
WARRANTS
---------
The Fund may invest up to 5% of its net assets in warrants or rights
(valued at the lower of cost or market) which entitle the holder to buy equity
securities at a specific price for a specified period of time, provided that no
more than 2% of its net assets are invested in warrants not listed on the New
York or American Stock Exchanges. The Fund may invest in warrants or rights
acquired by the Fund as part of a unit or attached to securities at the time of
purchase without limitation.
PORTFOLIO TURNOVER
------------------
A change in securities held by the Fund is known as "portfolio
turnover" and almost always involves the payment by the Fund of brokerage
commissions or dealer markup and other transaction costs on the sale of
securities as well as on the reinvestment of the proceeds in other securities.
As a result of the investment policies of the Fund, under certain market
conditions its portfolio turnover may be higher than those of many other
investment companies. It is, however, impossible to predict portfolio turnover
in future years. For purposes of reporting portfolio turnover rates, all
securities the maturities of which at the time of purchase are one year or less
are excluded. High portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs, which will be borne directly
by the Fund.
FORWARD COMMITMENTS
-------------------
The Fund may make contracts to purchase securities for a fixed price
at a future date beyond customary settlement time ("forward commitments") if the
Fund either (i) holds, and maintains until the settlement date
in a segregated account, cash or high grade debt obligations in
an amount sufficient to meet the purchase price or (ii) enters
into an offsetting contract for the forward sale of securities of equal value
that it owns. Forward commitments may be considered securities in themselves.
They involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in addition to the risk of
decline in value of the Fund's other assets. The Fund may dispose of a
commitment prior to settlement and may realize short-term profits or losses upon
such disposition.
REPURCHASE AGREEMENTS
---------------------
The Fund may enter into repurchase agreements with domestic commercial
banks or registered broker/dealers with respect to not more than 25% of its
total assets (taken at current value), except that no such limit applies when
the Fund is investing for temporary defensive purposes. A repurchase agreement
is a contract under which the Fund would acquire a security for a relatively
short period (usually not more than one week) subject to the obligation of the
seller to repurchase and the Fund to resell such security at a fixed time and
price (representing the Fund's cost plus interest). The value of the underlying
securities (or collateral) will be at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. The Fund
bears a risk of loss in the event that the other party to a repurchase agreement
defaults on its obligations and the Fund is delayed or prevented from exercising
its rights to dispose of the collateral securities. The Advisor will monitor
the creditworthiness of the counterparties.
SECURITIES LOANS
The Fund may make secured loans of its portfolio
securities amounting to no more than 25% of its total assets.
The risks in lending portfolio securities, as with other
extensions of credit, consist of possible delay in recovery of the securities or
possible loss of rights in the collateral should the borrower fail financially.
However, such loans will be made only to broker-dealers that are believed by the
Advisor to be of relatively high credit standing. Securities loans are made to
broker-dealers pursuant to agreements requiring that loans be continuously
secured by collateral in cash, U.S. Government securities or other high quality
debt securities at least equal at all times to the market value of the
securities lent. The borrower pays to the lending Fund an amount equal to any
dividends or interest received on the securities lent. The Fund may invest the
cash collateral received in interest-bearing, short-term securities or receive a
fee from the borrower. Although voting rights or rights to consent with respect
to the loaned securities pass to the borrower, the Fund retains the right to
call the loans at any time on reasonable notice, and it will do so in order that
the securities may be voted by the Fund if the holders of such securities are
asked to vote upon or consent to matters materially affecting the investment.
The Fund may also call such loans in order to sell the securities involved.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
---------------------------------------------
The Fund may enter into agreements with banks or broker-dealers for
the purchase of securities at an agreed-upon price on a specified future date.
Such agreements might be entered into, for example, when the Fund anticipates a
decline in interest rates and is able to obtain a more advantageous yield by
committing currently to purchase securities to be issued later. When the Fund
purchases securities on a when-issued or delayed delivery basis, it is required
either: (I) to create a segregated account with the Fund's custodian and to
maintain in that account cash, U.S. Government securities or other high grade
debt obligations in an amount equal on a daily basis to the amount of the Fund's
when-issued or delayed delivery commitments; or (ii) to enter
into an offsetting forward sale of securities it owns equal in
value to those purchased. The Fund will only make commitments
to purchase securities on a when-issued or delayed-delivery basis with the
intention of actually acquiring the securities. However, the Fund may sell
these securities before the settlement date if it is deemed advisable as a
matter of investment strategy. When the time comes to pay for when-issued or
delayed-delivery securities, the Fund will meet its obligations from then
available cash flow or the sale of securities, or, although it would not
normally expect to do so, from the sale of the when-issued or delayed-delivery
securities themselves (which may have a value greater or less than the Funds'
payment obligation).
OPTIONS TRANSACTIONS
---------------------
The Fund will not write options that are not "covered." A written
call option is "covered" if the Fund owns the underlying security subject to the
call or has an absolute and immediate right to acquire that security without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if the Fund
holds on a share-for-share basis a call on the same security as the call written
where the exercise price of the call held is equal to or less than the exercise
price of the call written or greater than the exercise price of the call written
if the difference is maintained by the Fund in cash, Treasury bills or other
high grade short-term obligations in a segregated account with its custodian. A
written put option is "covered" if the Fund maintains cash, Treasury bills or
other high grade obligations with a value equal to the exercise price in a
segregated account with its custodian, or holds on a share-for-share basis a put
on the same security as the put written where the exercise price of the put held
is equal to or greater than the exercise price of the put written. The premium
paid by the purchaser of an option will reflect, among other
things, the relationship of the exercise price to the market
price and volatility of the underlying security, the remaining
term of the option, and supply and demand interest rates.
If the writer of an option wishes to terminate his obligations, he may
effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he has been notified of the exercise of an option. Likewise, an investor
who is the holder of an option may liquidate his position by effecting a
"closing sale transaction." This is accomplished by selling an option of the
same series as the option previously purchased. There is no guarantee that the
Fund will be able to effect a closing purchase or a closing sale transaction at
any particular time.
Effecting a closing transaction in the case of a written call option
will permit the Fund to write another call option on the underlying security
with either a different exercise price or expiration date or both, or in the
case of a written put option will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by depositing cash or high
grade obligations. Also, effecting a closing transaction will permit the cash
or proceeds from the concurrent sale of any securities subject to the option to
be used for other Fund investments. If the Fund desires to sell a particular
security from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale of the
security.
The Fund will realize a profit from a closing transaction if the price
of the transaction is less than the premium received from writing the option or
is more than the premium paid to purchase the option; the Fund will realize a
loss from a closing transaction if the price of the transaction
is more than the premium received from writing the option or is
less than the premium paid to purchase the option. Because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from the
repurchase of a call option is likely to be offset in whole or in part by
appreciation of the underlying security owned by the Fund.
The Fund may write options in connection with buy-and-write
transactions; that is, the Fund will purchase a security and then write a call
option against that security. The exercise price of the call the Fund
determines to write will depend upon the expected price movement of the
underlying security. The exercise price of a call option may be below ("in-the-
money"), equal to ("at-the-money") or above ("out-of-the-money") the current
value of the underlying security at the time the option is written. Buy-and-
write transactions using in-the-money call options may be used when it is
expected that the price of the underlying security will remain flat or decline
moderately during the option period. Buy-and-write transactions using at-the-
money call options may be used when it is expected that the price of the
underlying security will remain fixed or advance moderately during the option
period. Buy-and-write transactions using out-of-the-money call options may be
used when it is expected that the premiums received from writing the call option
plus the appreciation in the market price of the underlying security up to the
exercise price will be greater than the appreciation in the price of the
underlying security alone. If the call options are exercised in such
transactions, the Fund's maximum gain will be the premium received by it for
writing the option, adjusted upwards or downwards by the difference between the
Fund's purchase price of the security and the exercise price. If the options
are not exercised and the price of the underlying security declines, the amount
of such decline will be offset in part, or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market
price of the underlying security rises or otherwise is above
the exercise price, the put option will expire worthless and
the Fund's gain will be limited to the premium received. If the market price of
the underlying security declines or otherwise is below the exercise price, the
Fund may elect to close the position or take delivery of the security at the
exercise price. In that event, the Fund's return will be the premium received
from the put option minus the cost of closing the position or, if it chooses to
take delivery of the security, the premium received from the put option minus
the amount by which the market price of the security is below the exercise
price. Out-of-the-money, at-the-money and in-the-money put options may be used
by the Fund in the same market environments that call options are used in
equivalent buy-and-write transactions.
The extent to which the Fund will be able to write and purchase call
and put options will also be restricted by the Fund's intention to qualify the
Fund as a regulated investment company under the federal income tax law. See
"Taxes."
OTC Options. The Fund will enter into over-the-counter ("OTC")
options transactions only with primary dealers in U.S. Government securities and
only pursuant to agreements that will assure that the Fund will at all times
have the right to repurchase the option written by it from the dealer at a
specified formula price. The Fund will treat the amount by which such formula
price exceeds the intrinsic value of the option (i.e., the amount, if any, by
which the market price of the underlying security exceeds the exercise price of
the option) as an illiquid investment.
It is the present policy of the Fund not to enter into any OTC option
transaction if, as a result, more than 15% of the Fund's net assets would be
invested in (i) OTC options purchased by the Fund and other illiquid
investments.
LIMITATIONS ON THE USE OF OPTIONS STRATEGIES
--------------------------------------------
The Fund's ability to engage in the options strategies described above
will depend on the availability of liquid markets in such instruments. Markets
in certain options are relatively new and still developing. It is impossible to
predict the amount of trading interest that may exist in various types of
options. Therefore no assurance can be given that the Fund will be able to
utilize these instruments effectively for the purposes set forth above.
Furthermore, the Fund's ability to engage in options transactions may be limited
by tax considerations.
RISK FACTORS IN OPTIONS TRANSACTIONS
------------------------------------
The option writer has no control over when the underlying securities
must be sold, in the case of a call option, or purchased, in the case of a put
option, since the writer may be assigned an exercise notice at any time prior to
the termination of the obligation. If an option expires unexercised, the writer
realizes a gain in the amount of the premium. Such a gain, of course, may, in
the case of a covered call option, be offset by a decline in the market value of
the underlying security during the option period. If a call option is
exercised, the writer realizes a gain or loss from the sale of the underlying
security. If a put option is exercised, the writer must fulfill the obligation
to purchase the underlying security at the exercise price, which will usually
exceed the then market value of the security.
An exchange-traded option may be closed out only on a national
securities exchange (an "Exchange") which generally provides a liquid secondary
market for an option of the same series. An over-the-counter option may be
closed out only with the other party to the option transaction. If a liquid
secondary market for an exchange-traded option does not exist,
it might not be possible to effect a closing transaction with
respect to a particular option with the result that the Fund
would have to exercise the option in order to realize any profit. If the Fund
is unable to effect a closing purchase transaction in a secondary market, it
will not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. Reasons for the absence of a
liquid secondary market on an Exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an Exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
(iv) unusual or unforseen circumstances may interrupt normal operations on an
Exchange; (v) the facilities of an Exchange or the Options Clearing Corporation
may not at all times be adequate to handle current trading volume; or (vi) one
or more Exchanges could, for economic or other reasons, decide or be compelled
at some future date to discontinue the trading of options (or a particular class
or series of options), in which event the secondary market on the Exchange (or
in that class or series of options) would cease to exist, although outstanding
options on the Exchange that had been issued by the Options Clearing Corporation
as a result of trades on that Exchange would continue to be exercisable in
accordance with their terms.
The Exchanges have established limitations governing the maximum
number of options which may be written by an investor or group of investors
acting in concert. It is possible that the Fund and other clients of the
Advisor may be considered to be such a group. These position limits may
restrict the Funds' ability to purchase or sell options on a particular
security.
FUTURES TRANSACTIONS
--------------------
The Fund may sell futures contracts, purchase put
options on futures contracts and write call options on futures
contracts for the purpose of hedging its portfolio. Information concerning
futures contracts and options on futures contracts is set forth below.
FUTURES CONTRACTS. A futures contract sale creates an obligation by
the seller to deliver the type of commodity or financial instrument called for
in the contract in a specified delivery month for a stated price. A futures
contract purchase creates an obligation by the purchaser to take delivery of the
underlying commodity or financial instrument in a specified delivery month at a
stated price. The specific instruments delivered or taken, respectively, at
settlement date are not determined until at or near that date. The
determination is made in accordance with the rules of the exchange on which the
futures contract sale or purchase was made. An index futures contract is
similar except that the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the
securities index value at the close of the last trading day of the contract and
the price at which the futures contract is originally struck. Futures contracts
are traded only on commodity exchanges -- known as "contract markets" --
approved for such trading by the Commodity Futures Trading Commission ("CFTC"),
and must be executed through a futures commission merchant or brokerage firm
which is a member of a contract market.
Although futures contracts by their terms call for actual delivery or
acceptance of commodities or securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out of a futures contract sale is effected by purchasing a futures
contract for the same aggregate amount of the specific type of financial
instrument or commodity and the same delivery date. If the price of the initial
sale of the futures contract exceeds the price of the offsetting purchase, the
seller is paid the difference and realizes a gain. Conversely, if the price of
the offsetting purchase exceeds the price of the offsetting
purchase, the seller is paid the difference and realizes a
gain. Conversely, if the price of the offsetting purchase
exceeds the price of the initial sale, the seller realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by the purchaser
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, the purchaser realizes a gain, and if the purchase price exceeds
the offsetting sale price, he realizes a loss.
The purchase (that is, assuming a long position in) or sale (that is,
assuming a short position in) of a futures contract differs from the purchase or
sale of a security, in that no price or premium is paid or received. Instead,
an amount of cash or U.S. Treasury bills generally not exceeding 5% of the
contract amount must be deposited with the broker. This amount is known as
initial margin. Subsequent payments to and from the broker, known as variation
margin, are made on a daily basis as the price of the underlying futures
contract fluctuates making the long and short positions in the futures contract
more or less valuable, a process known as "marking to market." At any time
prior to the settlement date of the futures contract, the position may be closed
out by taking an opposite position which will operate to terminate the position
in the futures contract. A final determination of variation margin is then
made, additional cash is required to be paid to or released by the broker, and
the purchaser realizes a loss or gain. In addition, a commission is paid on
each completed purchase and sale transaction.
The Fund may engage in transactions in futures contracts for the
purpose of hedging against changes in the values of securities it owns or
intends to acquire. The Fund may sell such futures contracts in anticipation of
a decline in the value of its investments. The risk of such a decline can be
reduced without employing futures as a hedge by selling long-term securities and
either reinvesting the proceeds in securities with shorter maturities or by
holding assets in cash. This strategy, however, entails increased transaction
costs in the form of brokerage commissions and dealer spreads.
The sale of futures contracts provides an alternative means of
hedging the Fund against a decline in the value of its
investments in fixed-income securities. As such values decline, the value of
the Fund's position in the futures contracts will tend to increase, thus
offsetting all or a portion of the depreciation in the market value of the
Fund's fixed-income securities which are being hedged. While the Fund will
incur commission expenses in establishing and closing out futures positions,
commissions on futures transactions may be significantly lower than transaction
costs incurred in the purchase and sale of fixed-income securities. Employing
futures as a hedge may also permit the Fund to assume a defensive posture
without reducing its yield on its investments.
CALL OPTIONS ON FUTURES CONTRACTS. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared to
either the futures contract upon which it is based, or upon the price of the
underlying debt securities, it may or may not be less risky than ownership of
the futures contract or underlying debt securities. As with the purchase of a
futures contract, the Fund may purchase a call option on a futures contract to
hedge against a market advance when the Fund is not fully invested.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities or commodities which
are deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, the Fund will retain the
full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund's portfolio holdings.
PUT OPTIONS ON FUTURES CONTRACTS. The purchase of put options on a
futures contract is similar in some respects to the purchase of protective put
options on portfolio securities. The Fund may purchase put options on futures
contracts to hedge the Fund's portfolio against the risk of
rising interest rates or declines in stock market prices. The
Fund may purchase put options on futures contracts in
circumstances where it would sell futures contracts.
The Fund may write a put option on a futures contract as a partial
hedge against increasing prices of the assets which are deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Fund will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of assets that the Fund intends to purchase.
INDEX FUTURES. A securities index assigns relative values to the
securities comprising the index. An index futures contract is a bilateral
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the index value at the close of the last trading day of the contract and the
price at which the futures contract is originally struck. No physical delivery
of the underlying securities in the index is made.
The Fund will engage in transactions in index futures contracts only
as a hedge against changes resulting from market conditions in the values of
securities held in the Fund's portfolio or which the Fund intends to purchase.
In connection with its purchase of index futures contracts, the Fund will
deposit an amount of cash and cash equivalents, equal to the market value of the
futures contracts, in a segregated account with its Custodian and/or in the
margin account with a broker.
LIMITATIONS ON THE USE OF OPTIONS AND FUTURES PORTFOLIO STRATEGIES
------------------------------------------------------------------
The Fund will not "over-hedge," that is the Fund will not make open
short positions in futures contracts if, in the aggregate, the
value of its open positions (marked to market) exceeds the
current market value of its securities portfolio plus or minus
the unrealized gain or loss on such open positions, adjusted for the historical
volatility relationship between the portfolio and futures contracts.
The Fund's ability to engage in the options and futures strategies
described above will depend on the availability of liquid markets in such
instruments. Markets in certain options and futures are relatively new and
still developing. It is impossible to predict the amount of trading interest
that may exist in various types of options or futures. Therefore no assurance
can be given that the Fund will be able to utilize these instruments effectively
for the purposes set forth above. Furthermore, the Fund's ability to engage in
options and futures transactions may be limited by tax considerations and CFTC
rules.
RISK FACTORS IN FUTURES TRANSACTIONS
------------------------------------
Investment by the Fund in futures contracts involves risk. Some of
that risk may be caused by an imperfect correlation between movements in the
price of the futures contract and the price of the security or other investment
being hedged. The hedge will not be fully effective where there is such
imperfect correlation. For example, if the price of the futures contract moves
more than the price of the hedged security, the Fund would experience either a
loss or gain on the future which is not completely offset by movements in the
price of the hedged securities. To compensate for imperfect correlations, the
Fund may purchase or sell futures contracts in a greater dollar amount than the
hedged securities if the volatility of the hedged securities is historically
greater than the volatility of the futures contracts. Conversely, the Fund may
purchase or sell fewer contracts if the volatility of the price of the hedged
securities is historically less than that of the futures contracts. The risk of
imperfect correlation generally tends to diminish as the
maturity date of the futures contract approaches.
Futures contracts on U.S. Government securities historically have
reacted to an increase or decrease in interest rates in a manner similar to that
in which the underlying U.S. Government securities reacted.
Futures contracts may be used to hedge against a possible increase in
the price of securities which the Fund anticipates purchasing, or options
thereon. In such instances, it is possible that the market may instead decline.
If the Fund does not then invest in such securities because of concern as to
possible further market decline or for other reasons, the Fund may realize a
loss on the futures contract that is not offset by a reduction in the price of
the securities purchased.
The amount of risk the Fund assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.
The liquidity of a secondary market in a futures contract may be
adversely affected by "daily price fluctuation limits" established by commodity
exchanges which limit the amount of fluctuation in a futures contract price
during a single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures positions. Prices have in the past
exceeded the daily limit on a number of consecutive trading days.
The successful use of transactions in futures and related options also
depends on the ability of the Adviser to forecast correctly the direction and
extent of interest rate movements within a given time frame. To the extent
interest rates remain stable during the period in which a
futures contract or related option is held by the Fund or such
rates move in a direction opposite to that anticipated, the
Fund may realize a loss on the hedging transaction which is not fully or
partially offset by an increase in the value of portfolio securities. As a
result, the Fund's total return for such period may be less than if it had not
engaged in the hedging transaction.
CONTINGENT DEFERRED SALES CHARGE (CLASS B SHARES)
AND INITIAL SALES CHARGE (CLASS A SHARES)
As described in the Prospectus under the caption "How to Redeem," the
contingent deferred sales charge is waived on redemptions of Class B shares for
certain classes of individuals or entities on account of: (i) the fact that the
Fund's sales-related expenses are lower for certain of such classes than for
classes for which the contingent deferred sales load is not waived; (ii) waiver
of the contingent deferred sales load with respect to certain of such classes is
consistent with certain Internal Revenue Code policies concerning the favored
tax treatment of accumulations; and (iii) with respect to certain of such
classes, considerations of fairness, and competitive and administrative factors.
As described in the Prospectus under the caption "Alternative Purchase
Arrangements--Initial Sales Charge Alternative - Class A Shares," Class A shares
of the Fund are sold pursuant to an initial sales charge, which declines as the
amount of purchase reaches certain defined levels.
EXCHANGE PRIVILEGE
As described in the Prospectus under the caption "Exchange Privilege,"
a shareholder may exchange shares of the Fund for shares of the Firstar Money
Market Fund at their current net asset values. With respect to
Class B shares, the original purchase date(s) of shares
exchanged will carry over to the investment in the new fund for
purposes of calculating any contingent deferred sales charge. For example, if a
shareholder invests in the Class B shares of the Fund and 6 months later
exchanges those shares for shares of another fund, no sales charge would be
imposed upon the exchange but the investment in the other fund would be subject
to the 5% contingent deferred sales charge until one year after the date of the
shareholder's investment in the first Fund, as described in the Prospectus under
"Alternative Purchase Arrangements." With respect to Class B shares subject to
a contingent deferred sales charge, if less than all of an investment is
exchanged out of the Fund, any portion of the investment attributable to capital
appreciation and/or reinvested dividends or capital gains distributions will be
exchanged first, and thereafter any portions exchanged will be from the earliest
investment made in the Fund from which the exchange was made. The Fund reserves
the right to modify or discontinue the exchange privilege at any time. Orders
for exchanges received after the close of regular trading on the Exchange on any
business day will be executed at the respective net asset values determined at
the close of the next business day.
DISTRIBUTOR AND DISTRIBUTION AND SERVICING PLANS
As stated in the text of the Prospectus under the caption
"Distributor and Distribution and Servicing Plans," shares of the Fund are
continuously offered through firms ("participating brokers") which are members
of the National Association of Securities Dealers, Inc. and which have dealer
agreements with the Distributor, or which have agreed to act as introducing
brokers for the Distributor ("introducing brokers"). Under the Underwriting
Agreement between the Fund and the Distributor (the "Underwriting Agreement"),
the Distributor is not obligated to sell any specific amount of shares of the
Fund and will purchase shares for resale only against orders for shares.
Pursuant to the Distribution and Servicing Plans
described in the Prospectus, in connection with the
distribution of Class B shares of the Fund, the Distributor receives certain
distribution fees from the Fund, and in connection with personal services
rendered to Class A and Class B shareholders of the Fund and the maintenance of
shareholder accounts, the Distributor receives certain servicing fees from the
Fund. Subject to the percentage limitations on these distribution and servicing
fees set forth in the Prospectus, the distribution and servicing fees may be
paid in respect of services rendered and expenses borne in the past with respect
to each such class as to which no distribution and servicing fees were paid on
account of such limitations. As described in the Prospectus, the Distributor
pays all or a portion of the distribution and servicing fees it receives from
the Fund to participating and introducing brokers.
Each Distribution and Servicing Plan may be terminated with respect to
the class of shares of the Fund by vote of a majority of the trustees who are
not interested persons of the Fund (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Plan or the
Distribution Agreement (the "Independent Trustees"), or by vote of a majority of
the outstanding voting securities of that class. Any change in either Plan that
would materially increase the cost to the class of shares of the Fund requires
approval by the affected class of shareholders of the Fund. The trustees review
quarterly a written report of such costs and the purposes for which such costs
have been incurred. The Plan may be amended by vote of the trustees, including
a majority of the Independent trustees, cast in person at a meeting called for
the purpose. For so long as the Plan is in effect, selection and nomination of
those Trustees who are not interested persons of the Fund shall be committed to
the discretion of such disinterested persons.
The Underwriting Agreement may be terminated with respect to the Fund
or class of shares thereof at any time on 60 days' written notice without
payment of any penalty either by the Distributor or by the Fund
by vote of a majority of the outstanding voting securities of
the Fund or that class, as the case may be, or by vote of a
majority of the Independent Trustees.
The Underwriting Agreement and the Distribution and Servicing Plans
will continue in effect with respect to the Fund and each class of shares
thereof for successive one-year periods, provided that each such continuance is
specifically approved: (i) by the vote of a majority of the Independent
Trustees; and (ii) by the vote of a majority of the entire Board of Trustees
cast in person at a meeting called for that purpose.
If the Underwriting Agreement or the Distribution and Servicing Plans
are terminated (or not renewed) with respect to the Fund, they may continue in
effect with respect to any class of the Fund as to which they have not been
terminated (or have been renewed).
The trustees believe that the Distribution Plans provide benefits to
the Fund. The trustees believe that the Plans result in greater sales and/or
fewer redemptions of Fund shares, although it is impossible to know for certain
the level of shares and redemptions of Fund shares in the absence of the Plan or
under an alternative distribution scheme. The effect on sales and/or
redemptions is believed to benefit the Fund by reducing Fund expense ratios
and/or by affording greater flexibility to Fund managers.
The Advisor has undertaken to voluntarily reimburse the Fund for
expenses in excess of 1.15% and 1.90% of average net assets of Class A Shares
and Class B Shares, respectively. Such reimbursements to the Fund may be
modified or discontinued by the Advisor at any time. From September 1, 1995
(commencement of operations) until May 7, 1998, such reimbursement obligation
was the responsibility of Rodman & Renshaw, Inc., who was the Fund's
distributor for such periods. For the fiscal years ended October 31, 1997 and
October 31, 1996, and for the period September 1, 1995 (commencement of
operations) through October 31, 1995, total expenses of the Fund would have
exceeded 1.15% and 1.90% of the average net assets of Class A Shares and Class
B Shares, respectively. As a result, Rodman & Renshaw, Inc. reimbursed the
Fund, $117,913, $144,639, and $27,342, respectively, for the same periods.
TRUSTEES AND OFFICERS OF THE FUND
The name, address, principal occupations during the past five years
and other information with respect to each of the trustees and officers of the
Fund are as follows:
LAWRENCE KUJAWSKI*<F2>
- -----------------
839 N. Jefferson Street
Milwaukee, Wisconsin 53202
(PRESIDENT, TREASURER AND A TRUSTEE)
Mr. Kujawski has been the President of Matrix Venture Funds, Inc., a
firm specializing in the valuation of closely held securities, acquisitions,
venture capital financing and consulting, since he founded Matrix Venture Funds,
Inc. in 1982.
RICHARD IMPERIALE*<F2>
- -----------------
839 N. Jefferson Street
Milwaukee, Wisconsin 53202
(CHAIRMAN, SECRETARY AND
A TRUSTEE OF THE FUND)
Mr. Imperiale has been the President of Uniplan, Inc., the Fund's
investment advisor, since he founded Uniplan, Inc. in 1985.
F.L. KIRBY
- -----------
181 W. Madison Street
Chicago, Illinois 60602
(A TRUSTEE OF THE FUND)
Mr. Kirby is a senior vice president of Schroders, a broker-dealer,
a position he has held since March 16, 1998. From 1994 until March 1998, he
was a Director, and an Executive Committee member of Rodman & Renshaw, Inc.,
the Fund's former distributor. In these capacities, he was in charge of all
retail sales for Rodman & Renshaw, Inc. From 1993 through 1994, Mr. Kirby was
a senior vice president at Oppenheimer & Co., another broker-dealer. From
1991 through 1993, he was a senior vice president, a director and an Executive
Committee member of Rodman & Renshaw, Inc.
*<F2>Messrs. Kujawski and Imperiale are trustees who are "interested
persons" of the Fund as that term is defined in the Investment Company Act of
1940.
JOHN L. KOMIVES
- ----------------
101 S. Second Street
Milwaukee, Wisconsin 53204
(TRUSTEE)
Dr. Komives is the President of Lakeshore Group Ltd., a position he
has held since he founded the firm in 1975. Dr. Komives is a member of the
board of directors of the following firms: F.W. Boelter Cos., Inc., Milwaukee,
Wisconsin; Eagle Technology, Inc., Mequon, Wisconsin; Ebert and Associates,
Inc., Milwaukee, Wisconsin; Ft. Kincaid Industries, Inc., Milwaukee, Wisconsin;
Metrix Customer Support Systems (MCSS), Waukesha, Wisconsin; Metal Processing
Co., Milwaukee, Wisconsin; Orthokinetics, Inc., Pewaukee, Wisconsin; Premier
Plastics, Inc., Waukesha, Wisconsin; Renquist Associates, Inc., Racine,
Wisconsin; World Venture Management, Inc., Milwaukee, Wisconsin; Zigman, Joseph
& Stephenson, Inc., Milwaukee, Wisconsin. He also serves as a member of the
following boards: Acme Institute of Technology, West Allis, Wisconsin; Board of
Governors, Mount Mary College, Wauwatosa, Wisconsin; and Board of Governors of
the Center for Entrepreneurial Studies, Marquette University, Milwaukee,
Wisconsin.
J. MICHAEL BORDEN
- -----------------
2938 North Shore Drive
Delavan, Wisconsin 53115
(TRUSTEE)
Since 1988, Mr. Borden has been the president of Total Quality
Plastics, Inc., a manufacturer of injection molding, the president of Rock
Valley Trucking, and the president of Freedom Plastics, Inc. Mr. Borden has
been the president and chief executive officer of Hufcor, Inc., a manufacturer
of movable walls and accordion partitions, since 1978. From 1980 through 1994,
he was also a member of the board of directors, a member of the executive
committee, the chairman of the finance and executive committees and a vice
president of Catholic Knights Insurance Society.
DENNIS J. LASSER
- ----------------
Binghampton, New York
(TRUSTEE)
Mr. Lasser is an Associate Professor of Finance, School of Management,
SUNY-Binghamton, New York, a position he has held since 1988.
JAMES L. STANKO
- ----------------
Rancho Santa Fe, California
(TRUSTEE)
Mr. Stanko has been Chairman of Winstar Associates, a company he
founded in 1992. From 1982 until 1992 he was a Managing Director of Oppenheimer
& Co. From 1976 until 1982, Mr. Stanko was Chairman of Carroll McEntee and
McGinley Money Markets, Inc.
The Fund's standard method of compensating trustees is to pay each
trustee who is not an officer of the Fund a fee of $250 for each meeting of the
trustees attended. The Fund also may reimburse its trustees for travel expenses
incurred in order to attend meetings of the trustees. For the fiscal year ended
October 31, 1997, officers and trustees received $4,000 in the aggregate
remuneration from the Fund as set forth more fully in the compensation table:
COMPENSATION TABLE
(for the fiscal year ended October 31, 1997)
Pension or
Retirement
Benefits
Aggregate Accrued as Estimated Total
Compensation Part of Fund Annual Benefits Compensation
Name of Trustee From Registrant Expenses Upon Retirement From Registrant
- --------------- --------------- --------- --------------- ---------------
Lawrence Kujawski 0 0 0 0
Richard Imperiale 0 0 0 0
F.L. Kirby 0 0 0 0
John Komives $1,000 0 0 $1,000
J. Michael Borden 1,000 0 0 1,000
Dennis Lasser 1,000 0 0 1,000
James Stanko 1,000 0 0 1,000
OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
--------------------------------------------------
Percent
of
Name and Address Of Percent of Total
Beneficial Owner Number of Shares Class Fund
----------------- ---------------- --------- -------
Firstar Trust Company - 83,991.118 14.03% 11.67%
Custodian for Sidney Shindell - Class A Shares
IRA Rollover
929 N. Astor Street
Milwaukee, Wisconsin
53202-3454
Donaldson Lufkin Jenrette 59,713.435 9.97% 8.30%
Securities Corporation Inc. Class A Shares
For the exclusive benefit of
our customers 11,114.087 9.18% 1.54%
P.O. Box 2052 Class B Shares -----
Jersey City, NJ 07303-2052
9.84%
Clarke & Co. 59,706.320 9.97% 8.30%
235 West Schrock Rd. Class A. Share
Westerville, Ohio 43081-2874
Marshall & Ilsley Trust 56,736.928 9.48% 7.88%
Company, trustee Class A Shares
FBO Hough Mfg. Corp.
Retirement Trust
1000 N. Water Street
Milwaukee, Wisconsin
53202-3197
Firstar Trust Co. - Custodian 49,891.406 8.33% 6.93%
for Class A Shares
Carlisle F. Meredith IRA
40344 Charleston Pike
Hamilton, Virginia 20158-3216
Wexford Clearing Services Corp. 7,674.643 6.34% 1.07%
Robert J. Haasl & JoAnn Haasl Class B Shares
Jt. Ten.
PDI Inc.
P.O. Box 130
Circle Pines, Minnesota
55014-0130
Officers and Trustees as a 54,947.124 9.18% 7.63%
Group1<F3> Class A Shares
(7 persons)
No person is deemed to "control," as that term is defined in the
Investment Company Act of 1940, the Fund. No other person owns of record or
beneficially 5% or more of the outstanding securities of any class of the Fund.
1<F3> This includes shares held by Uniplan Inc., as well as shares held by Mr.
Imperiale in his capacity as trustee of the Uniplan Inc. Profit Sharing Plan and
by Mr. Imperiale and Mr. Komives in their capacities as custodian under the
Uniform Transfer to Minors Act.
INVESTMENT ADVISOR, ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT
AND ACCOUNTING SERVICES AGENT
As set forth in the Prospectus under the caption "MANAGEMENT OF THE
FUND," the investment adviser to the Fund is Uniplan, Inc. (the "Advisor").
Pursuant to an investment advisory agreement between the Fund and the Advisor
(the "Advisory Agreement") the Advisor furnishes continuous investment advisory
services and management to the Fund. The Advisor is controlled by Richard P.
Imperiale, who owns 90% of its outstanding capital stock. Mr. Imperiale is also
a trustee of the Fund.
The Advisory Agreement will remain in effect as long as its
continuance is specifically approved at least annually, by (i) the trustees of
the Fund, or by the vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding shares of
the Fund, and (ii) by the vote of a majority of the trustees of
the Fund who are not parties to the Advisory Agreement or interested persons of
the Advisor, cast in person at a meeting called for the purpose of voting on
such approval. The Advisory Agreement provides that it may be terminated at any
time without the payment of any penalty, by the trustees of the Fund or by vote
of a majority of the Fund's shareholders, on sixty days written notice to the
Advisor, and by the Advisor on the same notice to the Fund and that it shall be
automatically terminated if it is assigned.
The Advisory Agreement provides that the Advisor shall not be liable
to the Fund or its shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations or duties. The
Advisory Agreement also provides that the Advisor and its officers, directors
and employees may engage in other businesses, devote time and attention to any
other business whether of a similar or dissimilar nature, and render investment
advisory services to others. For the fiscal years ended October 31, 1997 and
October 31, 1996, and for the period September 1, 1995 (commencement of
operations) through October 31, 1995, the fees paid under the Advisory Agreement
were $38,956, $18,010 and $1,000, respectively.
The Advisor and the Distributor have entered into an agreement
pursuant to which the Advisor may purchase certain receivables of the
Distributor for the purpose of providing financing to the Distributor to enable
the Distributor to pay certain distribution and other expenses related to the
Distributor's role as the underwriter of the Fund's Shares.
As set forth in the Prospectus under the caption "MANAGEMENT OF THE
FUND," the administrator to the Fund is Firstar Trust Company (the
"Administrator"), 615 East Michigan Street, Milwaukee, Wisconsin 53202. The
administration agreement entered into between the Fund and the Administrator
(the "Administration Agreement") will remain in effect until terminated by
either party. The Administration Agreement may be terminated at any time,
without the payment of any penalty, by the trustees of the Fund upon the giving
of ninety (90) days' written notice to the Administrator, or by the
Administrator upon the giving of ninety (90) days' written notice to the Fund.
Under the Administration Agreement, the Administrator
is not liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the
performance of the Administration Agreement, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the
Administrator in the performance of its duties or from its reckless disregard of
its duties and obligations under the Administration Agreement. For its services,
the Administrator is entitled to receive fees, payable monthly, based on the
total annual rate of $20,000 in the event that the average net assets of the
Fund is less than $10,000,000 and increasing by $4,000 for every $2,000,000
increase in average net assets of the Fund until the Fund reaches $20,000,000 in
average net assets. At such time, the fee is .25% of the average net assets of
the Fund; such fee decreases to .2% of the average net assets when average net
assets reach $25,000,000 and decreases to .15% of the average net assets when
average net assets reach $30,000,000. At such time as the average net assets
reach $200,000,000, the fees are .06% on the first $200,000,000, .05% on the
next $300,000,000 and .03% on all net assets exceeding $500,000,000. For the
fiscal years ended October 31, 1997 and October 31, 1996, and for the period
September 1, 1995 (commencement of operations) through October 31, 1995, the
fees earned by the Administrator were $21,286, $36,538 and $5,620, respectively.
Firstar Trust Company also serves as custodian of the Fund's assets
pursuant to a Custody Agreement. Under the Custody Agreement, Firstar Trust
Company has agreed to (i) maintain a separate account in the name of the Fund,
(ii) make receipts and disbursements of money on behalf of the Fund, (iii)
collect and receive all income and other payments and distributions on account
of the Fund's portfolio investments, (iv) respond to correspondence from
shareholders, security brokers and others relating to its duties and (v) make
periodic reports to the Fund concerning the Fund's operations. Firstar Trust
Company does not exercise any supervisory function over the purchase and sale of
securities. For its services as custodian, Firstar Trust company is entitled to
receive a fee, payable quarterly, based on the annual rate of .02% of the market
value of the securities owned by the Fund (subject to a minimum
annual $3000 fee). In addition, Firstar Trust Company, as
custodian, is entitled to certain charges for securities
transactions and reimbursement for expenses. For the fiscal years ended October
31, 1997 and October 31, 1996, and for the period September 1, 1995
(commencement of operations) through October 31, 1995, the fees earned by the
custodian were $9,393, $7,440 and $533, respectively.
Firstar Trust Company also serves as transfer agent and dividend
disbursing agent for the Fund under a Shareholder Servicing Agent Agreement. As
transfer and dividend disbursing agent, Firstar Trust Company has agreed to (i)
issue and redeem shares of the Fund, (ii) make dividend and other distributions
to shareholders of the Fund, (iii) respond to correspondence by Fund
shareholders and others relating to its duties, (iv) maintain shareholder
accounts, and (v) make periodic reports to the Fund. For its transfer agency
and dividend disbursing services, Firstar Trust company is entitled to receive
fees based on the average net assets in the Fund (subject to a minimum annual
fee of $15,000). Also, Firstar Trust Company is entitled to certain other
transaction charges and reimbursement for expenses. For the fiscal years ended
October 31, 1997 and October 31, 1996 and the period September 1, 1995
(commencement of operations) through October 31, 1995, the fees earned under the
Shareholder Servicing Agreement were $28,904, $35,605, and $4,218, respectively.
In addition the Fund has entered into a Fund Accounting Servicing
Agreement with Firstar Trust company pursuant to which Firstar Trust Company has
agreed to maintain the financial accounts and records of the Fund and provide
other accounting services to the Fund. For its accounting services, Firstar
Trust Company is entitled to receive fees, payable monthly, based on the total
annual rate of $22,000 for the first $20,000,000 in average net assets of the
Fund; .17% of average net assets when the Fund exceeds $20,000,000 but is less
than $25,000,000; .12% of average net assets when the Fund exceeds $25,000,000
but is less than $30,000,000; and when the Fund exceeds $30,000,000, the fees
are $27,500 for the first $40,0000,000 in average net assets of
the Fund, .01% on the next $200,000,000 of average net assets
of the Fund and .005% on all net assets exceeding $240,000,000.
Firstar Trust Company is also entitled to certain out of pocket expenses,
including pricing expenses. For the fiscal years ended October 31, 1997 and
October 31, 1996, and the period September 1, 1995 (commencement of operations)
through October 31, 1995, the fees earned under the Fund Accounting Servicing
Agreement were $26,255, $26,799 and $3,738, respectively.
DETERMINATION OF NET ASSET VALUE
As set forth in the Prospectus under the caption "Determination of Net
Asset Value," the net asset value of the Fund will be determined as of the close
of regular trading (currently 4:00 p.m. Eastern time) on each day the New York
Stock Exchange is open for trading. The Trust expects the New York Stock
Exchange to be open for trading Monday through Friday except New Year's Day,
Martin Luther King Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Additionally,
if any of the aforementioned holidays falls on a Saturday, the Fund expects that
the New York Stock Exchange will not be open for trading on the preceding Friday
and when any such holiday falls on a Sunday, the Trust expects that the New York
Stock Exchange will not be open for trading on the succeeding Monday, unless
unusual business conditions exist, such as the ending of a monthly or the yearly
accounting period. The Fund's portfolio securities for which market quotations
are readily available are valued at the most recent bid price. Notwithstanding
the above sentence, certain of the Fund's holdings of debt securities are valued
by a pricing service. The pricing service relies on one or more of the
following factors: valuations obtained from recognized dealers, information on
transactions for similar securities, general market information, and matrix
comparisons of various characteristics of debt securities, such as quality,
yield maturity.
CALCULATION OF TOTAL RETURN
Total Return with respect to the Fund's Class A and Class B shares is
a measure of the change in value of an investment in a class of shares of the
Fund over the period covered (in the case of Class A shares, giving effect to
the maximum initial sales charge), which assumes any dividends or capital gains
distributions are reinvested in that class of the Fund's shares immediately
rather than paid to the investor in cash. The formula for Total Return used
herein includes four steps: (1) adding to the total number of shares purchased
by a hypothetical $1,000 investment in the class (deducting in the case of Class
A shares of the maximum applicable initial sales charge) all additional shares
which would have been purchased if all dividends and distributions paid or
distributed during the period had been immediately reinvested; (2) calculating
the value of the hypothetical initial investment of $1,000 as of the end of the
period by multiplying the total number of shares in the class owned at the end
of the period by the net asset value per share of the class on the last trading
day of the period; (3) assuming redemption at the end of the period (deducting
any applicable contingent deferred sales charge); and (4) dividing this account
value for the hypothetical investor by the initial $1,000 investment and
annualizing the result for the periods of less than one year. Specifically, the
Total Return formula is as follows:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one, five, or ten-year
period at the end of the one, five, or ten-year
period (or fractional portion thereof).
The manner in which Total Return of the Class A and Class B shares
will be calculated for public use is described above.
The total return for the one year ended October 31, 1997 was 9.17% and
8.95% for Class A and Class B Shares, respectively. The total return for the
one year ended October 31, 1996 was 5.51% and 5.10% for Class A and Class B
Shares respectively. The total return for the period September 1, 1995
(commencement of operations) through October 31, 1995, was -5.10% and -4.70% for
Class A and Class B Shares, respectively.
Performance information is computed separately for the Fund's Class A
and Class B shares. The Fund may from time to time include the total return of
its Class A and Class B shares in advertisements or in information furnished to
represent or prospective shareholders. The Fund may from time to time include
in advertisements the total return of each class and the ranking of those
performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services as having the same investment
objectives.
Information provided to any newspaper or similar listing of the Fund's
net asset values and public offering prices will separately present the Class A
and Class B shares.
The Total Return of each class may also be used to compare the
performance of the Funds' Class A and Class B shares against certain widely
acknowledged standards or indices for stock and bond market performance against
the cost of living (inflation) index, and against hypothetical results based on
a fixed rate of return.
The Standard & Poor's composite Index of 500 stocks
(the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common stocks
of a few companies listed on the American Stock Exchange or traded over-the-
counter are included. The 500 companies represented include 385 industrial, 15
transportation, 45 utilities and 55 financial services concerns. The S&P 500
represents about 77% of the market value of all issues traded on the New York
Stock Exchange.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market value-
weighted and unmanaged index showing the changes in the aggregate market value
of approximately 3,500 stocks relative to the base measure of 100.00 on February
5, 1971. The NASDAQ Index is composed entirely of common stocks of companies
traded over-the-counter and often through the National Association of Securities
Dealers Automated Quotations ("NASDAQ") system. Only those over-the-counter
stocks have only one market maker or traded on exchanges are excluded.
The Russell 2000 Small Stock Index is an unmanaged index of the 2000
smallest securities in the Russell 3000 Index, representing approximately 7% of
the Russell 3000 Index. The Russell 3000 Index represents approximately 98% of
the U.S. equity market by capitalization.
From time to time, articles or reports about the Fund concerning
performance, rankings and other characteristics of the Fund may appear in
national publications and services including, but not limited to, the Wall
Street Journal, Forbes, Fortune, Money Magazine, Morningstar's Mutual Fund
Values, CDA Investment Technologies and The Donoghue Organization. In
particular, some or all of these publications may publish their own rankings or
performance reviews of mutual funds, including the Fund. References to or
reprints of such articles may be used in the Fund's promotional
literature. References to articles regarding personnel of the
Advisor who has portfolio management responsibility may also be
used in the Fund's promotional literature.
From time to time, the Fund may use, in its advertisements or
information furnished to present or prospective shareholders, data concerning
the performance and ranking of certain countries' stock markets, including
performance and ranking data based on annualized returns over one, three, five
and ten-year periods.
From time to time, the Fund may set forth in its advertisements and
other materials information about the growth of a certain dollar amount
invested in the Fund over a specified period of time and may use charts and
graphs to display that growth.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Fund are made by the
Advisor subject to review by the Fund's trustees. In placing purchase and sale
orders for portfolio securities for the Fund, it is the policy of the Advisor to
seek the best execution of orders at the most favorable price in light of the
overall quality of brokerage and research services provided, as described in
this and the following paragraph. In selecting brokers to effect portfolio
transactions, the determination of what is expected to result in best execution
at the most favorable price involves a number of largely judgmental
considerations. Among these are the Advisor's evaluation of the broker's
efficiency in executing and clearing transactions, block trading capability
(including the broker's willingness to position securities) and the broker's
financial strength and stability. The most favorable price to the Fund means
the best net price without regard to the mix between purchase or sale price and
commission, if any. Over-the-counter securities are generally
purchased and sold directly with principal market makers who
retain the difference in their cost in the security and its
selling price. In some instances, the Advisor feels that better prices are
available from non-principal market makers who are paid commissions directly.
The Advisor may allocate portfolio brokerage on the basis of whether the broker
has sold or is currently selling Shares of the Fund and may also allocate
portfolio brokerage to the Distributor, but, in each case, only if the Advisor
reasonably believes the commissions and transaction quality are comparable to
that available from other qualified brokers. Under the Investment Company Act
of 1940, the Distributor is prohibited from dealing with the Fund as a principal
in the purchase and sale of securities. Since transactions in the over-the-
counter securities market generally involve transactions with dealers acting as
principal for their own account, the Distributor may not serve as the Fund's
dealer in connection with such transactions. All allocations of portfolio
brokerage to the Distributor, if any, will be conducted in compliance with
procedures adopted in accordance with Rule 17e-1 under the Investment Company
Act of 1940. The Distributor, when acting as a broker for the Fund in any of
its portfolio transactions executed on a securities exchange of which the
Distributor is a member, will act in accordance with the requirements of Section
11(a) of the Securities Exchange Act of 1934 and the rules of such exchanges.
In allocating brokerage business for the Fund, the Advisor also takes
into consideration the research, analytical, statistical and other information
and services provided by the broker, such as general economic reports and
information, reports or analyses of particular companies or industry groups,
market timing and technical information, and the availability of the brokerage
firm's analysts for consultation. While the Advisor believes these services
have substantial value, they are considered supplemental to the Advisor's own
efforts in the performance of its duties under the Advisory Agreement. Other
clients of the Advisor may indirectly benefit from the availability of these
services to the Advisor, and the Fund may indirectly benefit from services
available to the Advisor as a result of transactions for other
clients. The Advisory Agreement provides that the Advisor may
cause the Fund to pay a broker which provides brokerage and
research services to the Advisor a commission for effecting a securities
transaction in excess of the amount another broker would have charged for
effecting the transaction, if the Advisor determines in good faith that such
amount of commission is reasonable in relation to the value of brokerage and
research services provided by the executing broker viewed in terms of either the
particular transaction or the Advisor's overall responsibilities with respect to
the Fund and the other accounts as to which he exercises investment discretion.
Pursuant to conditions set forth in rules of the Securities and
Exchange Commission, the Fund may purchase securities from an underwriting
syndicate of which the principal underwriter of the Fund or its affiliates are
members (but not from the principal underwriter itself). Such conditions relate
to the price and amount of the securities purchased, the commission or spread
paid, and the quality of the issuer. The rules further require that such
purchases take place in accordance with procedures adopted and reviewed
periodically by the Trustees, particularly those trustees who are not
"interested persons" of the Fund. Investments by other clients of the
Distributor and the Adviser may limit the ability of the Fund to purchase
securities from such a syndicate.
For the fiscal years ended October 31, 1997 and October 31, 1996, and
the period September 1, 1995 (commencement of operations) through October 31,
1995, respectively, the Fund paid brokerage commissions of $29,721 on total
transactions of $8,839,795, $21,288 on total transactions of $5,619,286, and
$1,532 on total transactions of $545,152. During the same periods, $1,375, $700
and $0 of the total brokerage commissions represent brokerage commissions paid
to Rodman & Renshaw, Inc., the Fund's distributor during such period.
Some of the brokers to whom commissions were paid provided
research services to the Advisor.
TAXES
As set forth in the Prospectus under the caption
"DIVIDENDS, DISTRIBUTIONS AND TAXES, the Fund intends to qualify annually for
and elect tax treatment applicable to a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Sixty percent of any gain or loss realized by the Fund: (I) from net premiums
from expired listed options and from closing purchase transactions; and (ii)
with respect to listed options upon the exercise thereof, generally will
constitute long-term capital gains or losses and the balance will be short-term
gains or losses. Distributions of long-term capital gains, if designated as
such by the Fund, are taxable to shareholders as long-term capital gain,
regardless of how long a shareholder has held shares. Dividends from the Fund's
net investment income and distributions from the Fund's net realized short-term
capital gains are taxable to shareholders as ordinary income, whether received
in cash or in additional Fund shares. The 70% dividends-received deduction for
corporations will apply to such dividends and distributions, subject to
proportionate reductions if the aggregate dividends received by the Fund from
domestic corporations in any year are less than 100% of the Fund's gross income.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute specified percentages of their
ordinary taxable income and capital gain net income. The Fund intends to make
sufficient distributions of ordinary taxable income and any capital gain net
income with respect to each calendar year to avoid liability for this excise
tax.
If for any taxable year the Fund does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders).
Any dividend or capital gains distribution paid
shortly after a purchase of Fund shares will have the effect of
reducing the per share net asset value of such shares by the
amount of the dividend or distribution. Furthermore, if the net asset value of
the Fund shares immediately after a dividend or distribution is less than the
cost of such shares to the shareholder, the dividend or distribution will be
taxable to the shareholder even though it results in a return of capital to him.
The Fund may be required to withhold Federal income tax at a rate of
31% ("backup withholding") from dividend payments and redemption proceeds if a
shareholder fails to furnish the Fund with his social security or other tax
identification number and certify under penalty of perjury that such number is
correct and that he is not subject to backup withholding due to the under
reporting of income. The certification form is included as part of the share
purchase application and should be completed when the account is opened.
SHAREHOLDER MEETINGS
It is contemplated that the Fund will not hold an annual meeting of
shareholders in any year in which the election of trustees is not required to be
acted on by shareholders under the Investment Company Act of 1940. The Fund's
Trust Instrument and Bylaws also contain procedures for the removal of trustees
by the Fund's shareholders. At any meeting of shareholders, duly called and at
which a quorum is present, the shareholders may, by the affirmative vote of the
holders of at least two-thirds (2/3) of the outstanding shares, remove any
trustee or trustees.
Upon the written request of the holders of shares entitled to not less
than ten percent (10%) of all the votes entitled to be cast at such meeting, the
Secretary of the Fund shall promptly call a special meeting of shareholders for
the purpose of voting upon the question of removal of any trustee. Whenever ten
or more shareholders of record who have been such for at least six months
preceding the date of application, and who hold in the
aggregate either shares having a net asset value of at least
$25,000 or at least one percent (1%) of the total outstanding
shares, whichever is less, shall apply to the Fund's Secretary in writing,
stating that they wish to communicate with other shareholders with a view to
obtaining signatures to a request for a meeting as described above and
accompanied by a form of communication and request which they wish to transmit,
the Secretary shall within five business days after such application either: (1)
afford to such applicants access to a list of the names and addresses of all
shareholders as recorded on the books of the Fund; or (2) inform such applicants
as to the approximate number of shareholders of record and the approximate cost
of mailing to them the proposed communication and form of request.
If the Secretary elects to follow the course specified in clause (2)
of the last sentence of the preceding paragraph, the Secretary, upon the written
request of such applicants, accompanied by a tender of the material to be mailed
and of the reasonable expenses of mailing, shall, with reasonable promptness,
mail such material to all shareholders of record at their addresses as recorded
on the books unless within five business days after such tender the Secretary
shall mail to such applicants and file with the Securities and Exchange
Commission, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the trustees to the effect that in
their opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion.
After opportunity for hearing upon the objections specified in the
written statement so filed, the Securities and Exchange Commission may, and if
demanded by the trustees or by such applicants shall, enter an order either
sustaining one or more of such objections or refusing to sustain any of them.
If the Securities and Exchange Commission shall enter an order refusing to
sustain any of such objections, or if, after the entry of an
order sustaining one or more of such objections, the Securities
and Exchange Commission shall find, after notice and
opportunity for hearing, that all objections so sustained have been met, and
shall enter an order so declaring, the Secretary shall mail copies of such
material to all shareholders with reasonable promptness after the entry of such
order and the renewal of such tender.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick, 777 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, currently serves as the independent accountants for the Fund. KPMG Peat
Marwick conducts an annual audit of the Fund, assists in the preparation of the
Fund's federal and state tax returns and consults with the Fund as to matters of
accounting and Federal and State income taxation.
FINANCIAL STATEMENTS
The following financial statements are incorporated by reference to
the Jefferson Growth and Income Fund Annual Report dated October 31, 1997 (File
No. 811-8958), as filed with the Securities and Exchange Commission on December
30, 1997:
The Jefferson Fund Group Trust
Statement of Assets and Liabilities
Schedule of Investments
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
