<PAGE> 1
Filed with the Securities and Exchange Commission on December 29, 1997.
1933 Act Registration File No. 33-91770
1940 Act File No. 811-9038
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. _4_ [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 5 [X]
THE OLSTEIN FUNDS
(Exact Name of Registrant as Specified in Charter)
4 Manhattanville Road, Purchase, NY 10577
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (914) 701-7565
Robert A. Olstein, President Copy to:
The Olstein Funds Joseph V. Del Raso, Esq.
4 Manhattanville Road Stradley, Ronan, Stevens & Young, LLP
Purchase, NY 10577 2600 One Commerce Square
(Name and Address of Agent for Service) Philadelphia, PA 19103-7098
It is proposed that this filing will become effective
__X__ immediately upon filing pursuant to paragraph (b)
_____ on _________________ pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on _________________ pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on _________________ 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.
Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. Registrant filed the notice required by Rule 24f-2 for its fiscal year
ended August 31, 1997 on November 26, 1997.
<PAGE> 2
CROSS-REFERENCE SHEET
Pursuant to Rule 481(a)
THE OLSTEIN FUNDS
Items Required By Form N-1A
PART A - PROSPECTUS
N-1A
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Cover Page Cover Page
2. Synopsis Fund Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description of Investment Objective and Policies; Risks
Registrant and Special Considerations
5. Management of the Fund Management of the Fund
6. Capital Stock and Other Shares of Beneficial Interest; Dividends,
Securities Capital Gains Distributions and Taxes
7. Purchase of Securities Determination of Net Asset Value; How to
Being Offered Purchase Shares
8. Redemption or Repurchase How to Redeem Shares
9. Legal Proceedings Not Applicable
-i-
<PAGE> 3
CROSS-REFERENCE SHEET
Pursuant to Rule 481(a)
THE OLSTEIN FUNDS
Items Required By Form N-1A (continued)
PART B - STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Not Applicable
and History
13. Investment Objectives The Olstein Financial Alert Fund -
and Policies Investments; Portfolio Turnover;
Investment Restrictions
14. Management of the Officers and Trustees of the Trust
Registrant
15. Control Persons and Principal Control Persons and Principal Holders
Holders of Securities of Securities
16. Investment Advisory and Investment Manager; Distributors; Administrator
Other Services
17. Brokerage Allocation Allocation of Portfolio Brokerage
18. Capital Stock and Other Not Applicable
Securities
19. Purchase, Redemption and Purchase of Shares; Redemptions
Pricing of Securities
Being Offered
20. Tax Status Taxation
21. Underwriters Distributors; Distribution Plan; Purchase
of Shares
22. Calculation of Performance Performance
Data
23. Financial Statements Financial Statements
</TABLE>
-ii-
<PAGE> 4
THE OLSTEIN FINANCIAL ALERT FUND
A SERIES OF
THE OLSTEIN FUNDS
4 MANHATTANVILLE RD.
PURCHASE, NY 10577
(914) 701-7565
PROSPECTUS DATED JANUARY 1, 1998
This prospectus offers shares of The Olstein Financial Alert Fund (the
"Fund"), the first series of The Olstein Funds (the "Trust"), an open-end
diversified management investment company which was organized as a Delaware
business trust on March 31, 1995. The primary investment objective of the Fund
is to achieve long-term capital appreciation with a secondary objective of
income.
The Fund was created to provide a mutual fund format by which the public
could invest according to the value-oriented philosophy developed and utilized
over the past thirty years by Robert A. Olstein, the president of the Fund's
investment manager, Olstein & Associates, L.P. ("Olstein & Associates" or the
"Investment Manager"). This investment philosophy involves a detailed
inferential analysis of company financial statements, to alert the Investment
Manager to positive or negative factors affecting a company's future earnings
power and value of a company's stock, which may not have been recognized by the
financial markets. The philosophy was originated in the 1970s when Robert A.
Olstein co-authored the "Quality of Earnings Report" service, a financial
statement "alert" service for institutional investors.
The Fund seeks to achieve its objectives by investing primarily in equity
securities that the Investment Manager determines to be under-valued after an
intensive analysis of a company's financial statements. The Fund may also engage
in short-selling of equity securities that the Investment Manager believes are
over-valued. Consistent with the secondary objective of income, in the event
that suitable undervalued securities are not available, the Fund may invest in
fixed-income securities until such time as desirable equity securities are
identified. There can be no assurance that the Fund's investment objective will
be achieved. See "Investment Objectives and Policies" and "Risks and Special
Considerations."
Fund shares may be purchased or redeemed at any time. Purchase and
redemption prices are based on the net asset value per share next determined
following receipt and acceptance of a purchase order or redemption request.
Redemptions of shares purchased within two years may be subject to a deferred
sales charge. See "Determination of Net Asset Value," "Expenses of the Fund,"
"How to Purchase Shares" and "How to Redeem Shares."
This Prospectus sets forth information about the Fund that prospective
investors should know before investing. The Prospectus should be read carefully
and retained for future reference. More information about the Fund has been
filed with the Securities and Exchange Commission, and is contained in a
"Statement of Additional Information" dated January 1, 1998, which is available
at no charge upon written request to the Fund. The Fund's Statement of
Additional Information is incorporated herein by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
1
<PAGE> 5
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES
The primary objective of the Fund is to achieve long-term capital
appreciation with a secondary objective of income. The Fund seeks to achieve its
objectives by investing primarily in a diversified portfolio of under-valued
equity securities as determined by the Investment Manager for the Fund. The Fund
may also engage in short sales of securities that the Investment Manager
believes are over-valued. During periods in which suitable undervalued equity
securities are not available, the Fund may also invest in fixed-income
securities.
When evaluating stocks for the Fund's portfolio, the Investment Manager
emphasizes an inferential analysis of financial statements, rather than more
conventional analytical methodologies such as macro-economic analysis,
management contact or market timing techniques. The Investment Manager's stock
selection process emphasizes a company's financial conservatism and considers
the possibility of downside risk before evaluating a stock's upside potential in
its effort to achieve capital appreciation. When screening investments for the
Fund's portfolio, the Investment Manager believes that the quality of a company
is associated with its financial strength, its ability to provide excess cash
flow, the quality of its earnings and the confidence in the predictability of
the earnings based on the company's unique business fundamentals as opposed to
more conventional characteristics such as size, number of years in business,
sensitivity to economic cycles, industry categorization, or the volatility of
its stock price. The Investment Manager similarly believes that the search for
undervalued securities should not be restricted by such conventional
characteristics. As a result, the Fund will invest in securities without regard
to whether they are characterized as small-capitalization, large-capitalization,
growth stock, cyclical stock, technology stock, or otherwise. With this
approach, the Fund intends to capitalize on opportunities that develop anywhere
in the equity markets. There can be no assurance that the Fund's investment
objectives will be achieved. See "Investment Objectives and Policies."
INVESTMENT MANAGER
Olstein & Associates is the investment manager of the Fund. Robert A.
Olstein, the president of Olstein & Associates, has been engaged for the past
thirty years as a securities analyst and portfolio manager. For fifteen years
prior to the Fund's inception, Robert A. Olstein was a Senior Vice
President/Senior Portfolio Manager at Smith Barney Inc., managing private
employee benefit plans and individual client portfolios. In 1971, Mr. Olstein
co-founded the "Quality of Earnings Report" service which pioneered the concept
of using inferential financial screening techniques to analyze balance sheets
and income statements to alert portfolio managers to positive and negative
factors affecting a company's future earnings power and value of a company's
stock, which may not yet have been recognized by the financial markets.
INVESTMENT PERFORMANCE
Information about the performance record of the Fund since its inception,
as well as the performance record of Olstein & Associates' portfolio management
team for its Smith Barney Inc. separately managed accounts from December 31,
1990 through the quarter immediately preceding the commencement of the Fund's
operations is included in the section of the Prospectus called "Investment
Performance."
DISTRIBUTOR AND TRANSFER AGENT
Olstein & Associates also serves with Rodney Square Distributors, Inc.
("RSD") as co-underwriters and distributors for the Fund's shares (together,
the "Distributors"). Rodney Square Management Corporation ("Rodney Square")
is the administrator, transfer agent and dividend disbursing agent for the
Fund. Rodney Square and RSD are wholly-owned subsidiaries of Wilmington
Trust Company. See "Management of the Fund."
Selected brokers, dealers, financial institutions or other entities
("Selling Dealers") may enter into agreements which permit them to sell shares
of the Fund. Selling Dealers may be eligible to receive an up-
2
<PAGE> 6
front commission of up to 1.5%, which is financed solely by Olstein &
Associates, and is not charged to the Fund or its shareholders. In addition,
Selling Dealers may receive up to 90% of the total 12b-1 Plan fees payable by
the Fund with respect to assets in the Fund attributable to investments by
clients of such Selling Dealers. Such fees currently total 1.00%.
HOW TO PURCHASE AND REDEEM SHARES
Shares of the Fund are offered continuously by the Distributors directly
and through certain Selling Dealers, and may be purchased and redeemed at any
time. To obtain information about purchasing or redeeming shares of the Fund,
investors and dealers should contact the Fund at (800) 799-2113. Brokerage
clients of Olstein & Associates may contact Olstein & Associates directly.
The Fund does not impose front-end sales charges on purchases. Certain
redemptions of Fund shares may be subject to a contingent deferred sales charge
("CDSC") if redeemed within the first two years after purchase, and investments
are subject to 12b-1 Plan fees. The public offering price or redemption price of
shares of the Fund is the net asset value per share next determined after the
receipt and acceptance of the purchase order or redemption request. See
"Expenses of the Fund" and "How to Purchase Shares."
MINIMUM INVESTMENT
The minimum initial investment is $1,000 and subsequent investments must
total at least $100. The minimum initial investment requirement for qualified
tax sheltered retirement plans is $250 with no minimum for subsequent
investments. See "How to Purchase Shares."
INVESTMENT MANAGEMENT FEES
The Investment Manager selects investments for and supervises the assets
of the Fund in accordance with the investment objectives, policies and
restrictions of the Fund, subject to the supervision and direction of the Board
of Trustees. For its services, the Investment Manager is paid a monthly fee at
the annual rate of 1.00% of the Fund's average daily net assets. This fee is
higher than that paid by most mutual funds. See "Management of the Fund."
RISKS AND SPECIAL CONSIDERATIONS
An investment in the Fund is subject to a number of risks, including the
risk that stock prices may decline over short or even extended periods, the risk
that the Investment Manager may be incorrect in its assessment of the
appropriate valuation of a particular security resulting in an investment that
does not perform as anticipated and the risk that the market will not recognize
a security's intrinsic value for an unexpectedly long period of time.
The Fund may engage in short sales of equity securities when the
Investment Manager believes that the price of a security is over-valued and may
decline. At no time will the Fund make short sales in excess of 25% of its net
assets. Short-selling is a technique that may be considered speculative and
involves risk beyond the initial capital necessary to secure each transaction.
For defensive or hedging purposes, the Fund may seek to lower some of the risk
associated with short sales by purchasing call options on securities sold short
by the Fund, which would lock in a purchase price for the underlying security.
Short-selling by the Fund, as well as the purchase of options on securities to
hedge short positions, may be considered investments in derivative securities.
In addition, the Fund may enter into repurchase agreements which carry risks of
loss if the parties to such agreements default or enter into bankruptcy
proceedings. See "Risks and Special Considerations."
3
<PAGE> 7
FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES: The following table illustrates estimated
expenses and fees that a shareholder of the Fund will incur.
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Maximum Sales Charge Imposed on Reinvested Dividends None
Maximum Contingent Deferred Sales Charge 2.50%(1)
Redemption Fees None
Exchange Fee None
</TABLE>
ESTIMATED ANNUAL OPERATING EXPENSES: These expenses, which cover the cost of
investment management, administration, distribution, marketing and shareholder
communication, are quoted as a percentage of average daily net assets of the
Fund. The expenses are factored into the Fund's share price and are not billed
directly to shareholders.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Rule 12b-1 Fees 1.00%(2)
Other Expenses .38%
------
TOTAL OPERATING COSTS 2.38%
</TABLE>
The purpose of these tables is to assist the investor in understanding the
various expenses that an investor in the Fund will bear directly or indirectly.
The amount of "Other Expenses" is based on the fiscal year ended August 31,
1997.
(1) There is no CDSC if an investor redeems Fund shares more than two years
after such shares are purchased. Shares may be subject to a CDSC of: (i)
2.50% if shares are redeemed within one year of purchase; and (ii) 1.25% if
shares are redeemed during the second year following purchase. The CDSC may
be waived under certain circumstances. See "How To Redeem Shares."
(2) The Board of Trustees has adopted a Plan of Distribution for the Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"). A portion of the fees payable under this plan will be used
to pay distribution expenses (0.75%) and a portion will be used for
shareholder servicing costs (0.25%). Over an extended period of time, the
aggregate distribution payments made by the Fund under the plan could cause
long-term shareholders to bear distribution costs that exceed the amount of
the maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc. (the "NASD"). See "Distribution of
Shares."
The following example illustrates the expenses that an investor would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period. As noted in the
table above, redemptions of shares of the Fund are subject to a CDSC if the
shares are redeemed during the first or second year following purchase.
<TABLE>
<S> <C> <C> <C>
1 year 3 years 5 years 10 years
------ ------- ------- --------
$49 $74 $127 $272
</TABLE>
An investor would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period (and therefore no CDSC):
<TABLE>
<S> <C> <C> <C>
1 year 3 years 5 years 10 years
------ ------- ------- --------
$24 $74 $127 $272
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
4
<PAGE> 8
FINANCIAL HIGHLIGHTS
The following table includes selected per share data and other performance
information for the Fund throughout each period and is derived from the audited
financial statements of the Fund. It should be read in conjunction with the
Fund's financial statements and notes thereto, along with management's
discussion and analysis of the Fund's performance appearing in the Fund's Annual
Report to Shareholders for the year ended August 31, 1997, which is included
together with the unqualified report of independent auditors thereon as part of
the Fund's Statement of Additional Information, or may be obtained without
charge by writing or calling the Fund at the address and number listed on the
prospectus cover.
<TABLE>
<CAPTION>
For the Period
For the September 21, 1995+
Fiscal Year Ended through
August 31, 1997 August 31, 1996
<S> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD $11.21 $10.00
INVESTMENT OPERATIONS:
Net investment loss....................... (0.05) (0.07)
Net realized and unrealized gain on
investments(l)............................ 4.66 1.29
------ ------
Total from investment operations........ 4.61 1.22
------ ------
DISTRIBUTIONS:
From net realized gain on investments..... (1.03) (0.01)
------ ------
Total distributions..................... (1.03) (0.01)
------ ------
NET ASSET VALUE - END OF PERIOD ............ $14.79 $11.21
====== ======
TOTAL RETURN++.............................. 43.61% 12.22%
Ratios (to average net assets)/Supplemental
Data:
Expenses.................................. 2.38% 2.43%*
Net investment loss....................... (0.45)% (0.68)%*
Portfolio turnover rate..................... 164.92% 139.77%*
Average commission rate paid................ $0.0581 $0.0592
Net assets at end of period ($000 omitted).. $175,602 $109,005
</TABLE>
+ Commencement of Operations.
++ Total returns do not reflect any deferred sales charge. The total return for
the period September 21, 1995 through August 31, 1996, has not been
annualized.
* Annualized.
INVESTMENT PERFORMANCE
FUND PERFORMANCE
Set forth below is information about the performance of the Fund, the Lipper
Capital Appreciation Funds Index and the Standard & Poor's 500 Composite Index
(the "S&P 500") since the Fund's inception on September 21, 1995. The S&P 500 is
a capitalization weighted index of five hundred larger capitalized
5
<PAGE> 9
stocks designed to measure performance of the broad domestic securities market
through changes in the aggregate market value of five hundred stocks
representing all major industries. The Lipper Capital Appreciation Index
consists of the average return of the 30 largest capital appreciation funds.
Lipper Analytical Services, the mutual fund tracking company which computes this
Index, classifies the Fund as a capital appreciation fund.
<TABLE>
<CAPTION>
Lipper
Olstein Capital
Financial Appreciation S&P 500 Index
Period Alert Fund Funds Index Total Return
------ ---------- ----------- -------------
If no
redemption at If redemption at
end of period end of period*
------------- --------------
<S> <C> <C> <C> <C>
Total Return
(fiscal year ended 8/31/97) 43.61% 41.11% 24.95% 40.65%
Average Annual Total Return
Since Inception of Fund
(9/21/95 - 8/31/97) 27.76% 27.25% 17.17% 27.72%
Aggregate Total Return
Since Inception of Fund 61.16% 59.91% 36.17% 61.05%
</TABLE>
*These figures assume the deduction of the maximum contingent deferred sales
charge (CDSC) for redemptions at the end of each period. Shares redeemed within
one year of purchase are subject to a 2.5% CDSC and shares redeemed during the
second year following purchase are subject to a 1.25% CDSC, with no CDSC imposed
on redemptions of shares held for more than two years.
OLSTEIN & ASSOCIATES' PERFORMANCE
Set forth below is information about the performance record of the Olstein
& Associates' portfolio management team for its Smith Barney Inc. separately
managed accounts from December 31, 1990 through the quarter immediately
preceding the commencement of the Fund's operations, at which time Olstein &
Associates discontinued managing separate accounts. (1) These accounts were
managed according to the same investment objectives and philosophy, and were
subject to substantially similar investment policies and techniques as those
used by the Fund. See "Investment Objectives and Policies." The results
presented are not intended to predict or suggest the return to be experienced by
the Fund or the return that an individual investor might achieve by investing in
the Fund. The Fund's results may be different from the composite of separate
accounts shown because of, among other things, differences in fees and expenses,
and because private accounts are not subject to certain investment limitations,
diversification requirements, and other restrictions imposed by the Investment
Company Act of 1940, as amended (the "1940 Act") and the Internal Revenue Code,
as amended, which, if applicable, may have adversely affected the performance of
such accounts.
<TABLE>
<CAPTION>
Net Olstein Performance(2) Total Return S&P 500(3)
(UNAUDITED)
<S> <C> <C>
- ----------------------------------------------------------------
1991 +32.26% +30.48%
</TABLE>
6
<PAGE> 10
<TABLE>
<S> <C> <C>
1992 +12.29% +7.77%
1993 +11.63% +10.07%
1994 +4.90% +1.32%
1995 (1st six mos.) +15.09%(1) +20.25%(1)
</TABLE>
(1) As separate account investment performance was calculated on a quarterly
basis, and the Fund commenced operations in the third quarter of 1995,
comparative performance statistics are supplied for only the first six
months of 1995.
(2) The results shown above represent a composite of discretionary, fee paying,
separate accounts, reflect the reinvestment of any dividends or capital
gains, and are shown after deduction of fees of 3.0%, which represents the
highest possible account management fee (including all investment
management, transaction, administrative and custodial fees) charged to such
accounts by Smith Barney Inc.
(3) The "Total Return S&P 500" reflects the reinvestment of dividends and
capital gains, but represents a "gross" return, without the deduction of any
fees.
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Fund is to achieve long-term
capital appreciation with a secondary objective of income. The Fund's primary
investment objective is a fundamental policy, which means that it may not be
changed without the approval of the holders of a majority of the Fund's
outstanding voting securities. There can be no assurance that the Fund will
achieve its objectives.
The Fund seeks to achieve its objectives by investing primarily in common
stocks of companies that are determined to be under-valued when comparing the
"private market value" as determined by the Investment Manager, with the value
of the securities as established in the public trading markets. The Fund
believes that, in order to achieve long-term capital appreciation, downside risk
should be emphasized before considering the upside potential in the stock
selection process. Accordingly, the Fund will not purchase equity securities
unless they meet the Fund's value criteria. To the extent that suitable
undervalued securities are not available, the Fund will invest its assets in
fixed-income or money market securities. In addition to purchasing under-valued
equity securities, if the Investment Manager determines that a security is
over-valued, the Fund may engage in short sales of the security.
The Fund will select equity securities based on a value-oriented
philosophy developed and employed by the Investment Manager which emphasizes the
analysis of financial statements to alert the Investment Manager to the items
that may positively or negatively affect prices of securities. This philosophy
enables the Investment Manager to identify and select companies which, in the
Manager's opinion: (i) generate more cash flow than is necessary to sustain the
operations of the business (including capital expenditures); (ii) avoid
aggressive accounting practices; (iii) demonstrate balance sheet fundamentals
consistent with the Investment Manager's philosophy of emphasizing downside risk
before upside potential; and (iv) are selling at a discount to the "private
market value" as estimated by the Investment Manager. Rather than relying on
macro-economic analysis, market timing techniques or information obtained
through management contact, the Investment Manager identifies such companies by
engaging in an intensive analysis of a company's balance sheet, income
statement, cash flow statement and related footnotes. The Investment Manager
believes that a historical and investigative analysis of information disclosed
in a company's publicly disclosed financial statements and accompanying
footnotes, shareholder reports and filings made with the U.S. Securities and
Exchange Commission (the "SEC") is the best method of assessing the capabilities
of the management of a company.
The "private market value" of a company's common stock is determined by
the Investment Manager under an inferential investigative analysis of the
company's financial statements, shareholder reports and SEC filings. Instead of
relying on conventional price/earnings ratio analysis, the Investment Manager
calculates an internal cash rate of return for each company which is then
compared to available rates of return on three to five year U.S. Treasury Notes
to calculate the company's "private market value." The Investment Manager seeks
to identify deviations between the Manager's calculation of a company's private
market value and the stock market value of securities that the Investment
Manager believes are temporarily unpopular or not being properly valued by
investors or the public trading markets. The Investment Manager believes that
such securities offer the potential for above average appreciation if and
7
<PAGE> 11
when the deviations in value are corrected by market forces. The possibility of
such appreciation may not be realized immediately, therefore the Fund's shares
should only be purchased by investors with at least a three to five year
investment time horizon. Although the Fund's primary objective is to achieve
long-term appreciation, the Fund would recognize short-term gains and losses by
trading securities in its portfolio when price fluctuations, or other
fundamental changes may lead the Investment Manager to effect sales to reduce
the potential of future portfolio valuation declines.
The Fund will invest in a diversified portfolio of equity securities of
companies chosen solely because they meet the financial characteristics
determined under the value-oriented philosophy utilized by the Investment
Manager. The Investment Manager believes that the quality of a company is
associated with its financial strength, its ability to provide excess cash flow,
the quality of earnings and the confidence in the predictability of the earnings
based on the company's unique business fundamentals as opposed to more
conventional characteristics such as size, number of years in business,
sensitivity to economic cycles, industry categorization, or the volatility of
its stock price. The Investment Manager similarly believes that the search for
undervalued securities should not be restricted by such conventional
characteristics. As a result, the Fund will invest in securities without regard
to whether the securities are characterized as small-capitalization,
large-capitalization, growth stock, cyclical stock, technology stock, or
otherwise. With this approach, the Fund intends to capitalize on opportunities
that develop anywhere in the equity markets. Securities will be sold without
regard to holding period when they reach a price objective based on a
computation of private market value or when circumstances change such that the
security no longer meets the value criteria of the Fund.
The Fund may also purchase and sell American Depository Receipts ("ADRs")
as more fully described in the Statement of Additional Information. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. The Fund
generally does not expect to invest more than 5% of its assets in ADRs.
In situations where the Investment Manager determines that a company
engages in aggressive accounting practices, is over-leveraged, or investors
appear to have unrealistic expectations of future earnings potential which
results in the company's stock being over-valued in comparison to the Investment
Manager's calculation of its private market value, the Fund may engage in short
sales of the company's stock. This process allows the Fund to realize profits if
the value of the company's stock is reduced to a level that was anticipated by
the Investment Manager. The Investment Manager considers aggressive accounting
practices to include (i) "front end" accounting methods that immediately flow
non-recurring revenues such as up-front franchise fees through the company's
income statement; (ii) capitalization of research and development, advertising,
or promotional payments which contribute materially to year to year earnings
growth; and (iii) reversing previously established reserves which result in
material increments to income. In addition, the Investment Manager seeks to
identify companies using accounting practices for shareholder reporting that are
more aggressive than the company's tax reporting practices. For example,
capitalizing marketing costs for shareholder reporting purposes, while expensing
such costs for tax reporting purposes can result in substantially increased
earnings figures reported to shareholders, which may not accurately reflect the
company's earnings potential, and therefore, its value. The Fund will not make
short sales in excess of 25% of its total net assets and the value of any
securities of any one issuer in which the Fund is short may not exceed the
lesser of 2% of the Fund's net assets or 2% of the securities of any class of
any issuer's securities. In addition, short sales will only be made in those
securities that are listed on a national exchange.
The Fund is also authorized to purchase call options on securities as a
hedging technique as more fully described in the Statement of Additional
Information. Generally, the Fund may seek to offset positions that are sold
short by the Fund. The purchase of call options gives the Fund the right, but
not the obligation, to buy (call) a security at a fixed price during a specified
period. When purchasing options in securities, the Fund pays a non-refundable
premium to the party who sells (writes) the option. Premiums paid by the Fund in
connection with option purchases will not exceed 5% of the Fund's net assets.
When engaging in short sales, the Fund may hedge a short position by purchasing
a call option to purchase the underlying security at a given price in the
future. This practice allows the Fund to protect itself in the event of an
unexpected increase in the price of a security sold short. The Fund's activities
relating to short sales and any purchase of options on securities for hedging
purposes may be considered investments in derivative
8
<PAGE> 12
securities. "Derivative" securities include instruments whose value is based
upon, or derived from, some underlying security. See "Risks and Special
Considerations."
If the Investment Manager determines that suitable undervalued equity
securities are not available, the Fund may seek income by investing a
substantial portion of its assets in other types of securities, such as
securities convertible into common stocks and common stock equivalents
(including rights and warrants), preferred stocks, debt securities issued or
guaranteed as to principal by the U.S. government, its agencies or
instrumentalities ("U.S. Government Securities"), and/or other high-quality,
short-term debt securities (commercial paper, repurchase agreements, bankers'
acceptances, certificates of deposit and other fixed-income securities
including, non-convertible and convertible bonds, debentures and notes issued by
U.S. corporations and certain bank obligations and participation). High-quality,
investment grade debt securities are those that are rated A or better by Moody's
Investors Services, Inc. ("Moody's"), or A or better by Standard & Poor's
Ratings Services ("S&P"), or that are of comparable quality. The Fund's
investment in repurchase agreements that do not mature in seven days and other
securities for which there is no readily available market for resale, or that
are subject to legal or contractual restrictions on resale, may be considered
illiquid securities under federal or state law. The Fund will restrict its
investment in illiquid securities to not more than 10% of its net assets. See
"Risks and Special Considerations." In accordance with the Fund's secondary
objective of income, the Fund may also invest in non-equity securities pending
the investment of proceeds of sales of Fund shares, or of the proceeds of
certain sales of portfolio securities, but such investments will only be
maintained for the periods during which the Manager believes that suitable
undervalued equity securities are unavailable.
The Fund will select money market securities for investment when such
securities offer a current market rate of return which the Fund considers
reasonable in relation to the risk of the investment, and the issuer can satisfy
suitable standards of credit-worthiness set by the Fund. The money market
securities in which the Fund may invest are repurchase agreements, certificates
of deposit, U.S. Government Securities, commercial paper and securities of money
market mutual funds. Other than its investments in money market mutual funds,
the Fund will not invest in other investment companies. The Fund's investments
in money market mutual funds may be made only in accordance with the limitations
imposed by the 1940 Act and the rules thereunder.
U.S. Government Securities include a variety of Treasury securities, which
differ in their interest rates, maturities and dates of issuance. Treasury bills
have a maturity of one year or less; Treasury notes have maturities of one to
ten years; Treasury bonds generally have a maturity of greater than five years.
The Fund will only acquire U.S. Government Securities which are supported by the
"full faith and credit" of the United States. Securities which are backed by the
full faith and credit of the United States include Treasury bills, Treasury
notes, Treasury bonds, and obligations of the Government National Mortgage
Association, the Farmers Home Administration, and the Export-Import Bank. The
Fund's direct investments in money market securities will generally favor
securities with shorter maturities (maturities of less than 60 days) which are
less affected by price fluctuations than are those with longer maturities.
Certificates of deposit are certificates issued against funds deposited in
a commercial bank or a savings and loan association for a definite period of
time and earning a specified return. Bankers' acceptances are negotiable drafts
or bills of exchange, normally drawn by an importer or exporter to pay for
specific merchandise, which are "accepted" by a bank, meaning, in effect, that
the bank unconditionally agrees to pay the face value of the instrument on
maturity. Investments in bank certificates of deposit and bankers' acceptances
are generally limited to domestic banks and savings and loan associations that
are members of the Federal Deposit Insurance Corporation or Federal Savings and
Loan Insurance Corporation having a net worth of at least $100 million dollars
("Domestic Banks") and domestic branches of foreign banks (limited to
institutions having total assets not less than $1 billion or its equivalent).
Investments in prime commercial paper may be made in notes, drafts, or
similar instruments payable on demand or having a maturity at the time of
issuance not exceeding nine months, exclusive of days of grace, or any renewal
thereof payable on demand or having a maturity likewise limited.
As a matter of fundamental policy, the Fund will generally not borrow
money. However, the Fund may borrow from banks (i) for temporary or emergency
purposes in an amount not exceeding 5% of the Fund's assets; or (ii) to meet
redemption requests that might otherwise require the untimely disposition of
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<PAGE> 13
portfolio securities, in an amount up to 33 1/3% of the value of the Fund's
total assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing was made. While
borrowings exceed 5% of the value of the Fund's total assets, the Fund will not
make additional investments. Interest paid on borrowings will reduce net income.
RISKS AND SPECIAL CONSIDERATIONS
RELIANCE ON MANAGEMENT/STOCK MARKET RISK
All decisions with respect to the Fund's investments will be made
exclusively by the Investment Manager and therefore the Fund's investment
success depends on the skill of the Investment Manager in evaluating, selecting
and monitoring the Fund's assets. An investment in the Fund is subject to the
risk that securities prices may decline over short, or even extended periods, or
that the investments chosen by the Investment Manager may not perform as
anticipated. In addition, a value-oriented approach to investing includes the
risks that the market will not recognize a security's intrinsic value for an
unexpectedly long time, or that the Investment Manager's perception of the
underlying value is not reflected in the market price.
SHORT-SELLING
If the Fund anticipates that the price of a security will decline, it may
sell the security short and borrow the same security from a broker or other
institution to complete the sale. The Fund may realize a profit or loss
depending upon whether the market price of a security decreases or increases
between the date of the short sale and the date on which the Fund must replace
the borrowed security. As a hedging technique, the Fund may purchase options to
buy securities sold short by the Fund. Such options would lock in a future
purchase price and protect the Fund in case of an unanticipated increase in the
price of a security sold short by the Fund. Short-selling is a technique that
may be considered speculative and involves risk beyond the initial capital
necessary to secure each transaction. In addition, the technique could result in
higher operating costs for the Fund and have adverse tax effects for the
investor. Investors should consider the risks of such investments before
investing in the Fund.
Whenever the Fund effects a short sale, it will set aside in segregated
accounts cash, U.S. Government Securities or other liquid assets equal to the
difference between (i) the market value of the securities sold short; and (ii)
any cash or U.S. Government Securities required to be deposited as collateral
with the broker in connection with the short sale (but not including the
proceeds of the short sale). Until the Fund replaces the security it borrowed to
make the short sale it must maintain daily the segregated accounts at such
levels that the amount deposited plus the amount deposited with the broker as
collateral will equal the current market value of the securities sold short. No
more than 25% of the value of the Fund's total net assets will be, when added
together, (i) deposited as collateral for the obligation to replace securities
borrowed to effect short sales; and (ii) allocated to segregated accounts in
connection with short sales.
PURCHASING OPTIONS
The success of purchasing call options for hedging purposes depends on the
Investment Manager's judgment and ability to predict the movement of stock
prices. There is generally an imperfect correlation between options and the
securities being hedged. If the Investment Manager correctly anticipates the
direction of the price of the underlying security that is the subject of the
hedge, the option will not be exercised, and any premium paid for the option may
lower the Fund's return. If an option position is no longer needed for hedging
purposes, it may be closed out by selling an option of the same series
previously purchased. There is a risk that a liquid secondary market may not
exist and the Fund may not be able to close out an option position, and
therefore would not be able to offset any portion of the premium paid for that
option. The risk that the Fund will not be able to close out an options contract
will be minimized because the Fund will only enter into options transactions on
a national exchange and for which there appears to be a liquid secondary market.
ILLIQUID SECURITIES
The Fund may invest up to 10% of its total assets in securities which may
be considered illiquid,
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<PAGE> 14
which include securities with contractual restrictions on resale, repurchase
agreements maturing in greater than seven days, and other securities which may
not be readily marketable. The relative illiquidity of some of the Fund's
securities may adversely affect the ability of the Fund to dispose of such
securities in a timely manner and at a fair price at times when it may be
necessary or advantageous for the Fund to liquidate portfolio securities.
Certain securities in which the Fund may invest are subject to legal or
contractual restrictions as to resale and therefore may be illiquid by their
terms.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements, under which the Fund
acquires a debt instrument subject to the obligation of the seller to repurchase
and the Fund to resell such debt instrument at a fixed price. The Fund will only
enter into repurchase agreements with counterparties who meet certain
creditworthiness standards and all repurchase agreements will be collateralized
in amounts equal to at least 102% of the dollar amount to be paid to the Fund
under each repurchase agreement at its maturity. Repurchase agreements involve a
risk of losses to the Fund if a seller defaults or if the value of the
collateral securing the repurchase agreement declines, and the Fund might incur
disposition costs in connection with liquidation of the collateral. In addition,
if bankruptcy proceedings are commenced with respect to the seller of the
security, collection of the collateral by the Fund may be delayed or limited or
the Fund may not be able to substantiate its interests in the underlying
securities. While management of the Fund acknowledges these risks, it is
expected that such risks can be controlled through stringent security selection
and careful monitoring procedures.
PORTFOLIO TURNOVER
The Fund intends to follow a strict "buy and sell discipline," under which
it will purchase or sell securities whenever the Fund's value criteria are met,
which may result in portfolio changes and a portfolio turnover rate higher than
that reached by many capital appreciation funds. Portfolio transactions relating
to the Fund's secondary objective of income may contribute to this portfolio
turnover rate. High portfolio turnover involves additional transaction costs
(such as brokerage commissions), which are borne by the Fund, and might involve
adverse tax effects. See "Dividends, Distributions and Taxes."
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The Board of Trustees of the Fund consists of seven individuals, four of whom
are not "interested persons" of the Fund as that term is defined in the 1940
Act. The Trustees are fiduciaries for the Fund's shareholders and are governed
by the laws of the State of Delaware in this regard. They establish policy for
the operation of the Fund and appoint the officers who conduct the daily
business of the Fund. The Statement of Additional Information contains more
information regarding the Officers and Trustees of the Fund, and following is a
list of the Trustees and a brief statement of their present positions:
Robert A. Olstein* President and Chairman of the Trust; President of
Olstein & Associates, L.P.
Erik K. Olstein* Secretary and Assistant Treasurer of the Trust; Vice
President of Sales of Olstein & Associates, L.P.
Neil C. Klarfeld* Executive Vice President, Park Tower Realty Corp.
Fred W. Lange President and Portfolio Manager of Lange Financial
Services; Board of Trustees of Wagner College
John Lohr Principal, Lockwood Financial Group Ltd.
D. Michael Murray President, Murray, Sheer & Montgomery
Lawrence K. Wein Managing Director of Global Transit Services of AT&T
* These Trustees are deemed to be "interested persons" of the Trust as that term
is defined in the 1940 Act.
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<PAGE> 15
INVESTMENT MANAGER
Olstein & Associates, L.P. (previously defined as the "Investment
Manager") serves as the investment manager for the Fund pursuant to an
investment management agreement with the Trust, on behalf of the Fund, dated
August 18, 1995 (the "Management Agreement"). Subject to the supervision of the
Trustees and officers of the Trust, the Investment Manager selects investments
and supervises the assets of the Fund, and places portfolio transactions for the
Fund. The Investment Manager is governed by the policies set forth under
"Investment Objectives and Policies." For its services, the Investment Manager
is paid an annual fee equal to 1.00% of the Fund's average daily net assets,
which is higher than that paid by most mutual funds.
Robert A. Olstein is the president of the Investment Manager and is
principally responsible for the management of the Fund's portfolio of
securities. Mr. Olstein has been engaged in various aspects of securities
research and portfolio management for both institutional and retail clients
since 1968. In 1971, he co-founded the "Quality of Earnings Report" service,
which pioneered the concept of using inferential financial screening techniques
to analyze balance sheets and income statements to alert institutional portfolio
managers to positive or negative factors affecting a company's future earnings
power and value of a company's stock. Prior to forming the Investment Manager,
Mr. Olstein managed portfolios for individuals, corporations and employee
benefit plans at Smith Barney Inc. ("Smith Barney") and its predecessor
companies between 1981 and 1995. Mr. Olstein was a Senior Vice President/Senior
Portfolio Manager at Smith Barney where he managed approximately $158 million of
individual and employee benefit accounts, $73 million of which were managed
under the auspices of the Smith Barney Equity Portfolio Management Program. Mr.
Olstein is a senior member of the New York Society of Securities Analysts and a
fellow of the Financial Analysts Federation. He is a past recipient of the
Graham & Dodd and Gerald M. Loeb Research Awards, has testified before the
Senate Banking Committee on bank accounting, and has been quoted in and is the
author of numerous articles on corporate reporting and disclosure practices.
Olstein & Associates is a New York limited partnership established in June
of 1994, with offices located at 4 Manhattanville Road, Purchase, New York
10577. The corporate general partner of the Investment Manager is Olstein, Inc.,
which was formed for the primary purpose of acting as the Investment Manager's
general partner, and whose sole shareholder, officer and director is Robert A.
Olstein.
Pursuant to the Management Agreement with the Trust for the Fund, the
Investment Manager will also provide, on a reimbursable basis, administrative
and clerical services, office space and other facilities for the Fund, and keep
certain books and records for the Fund to the extent that such services are not
provided by the Administrator or other persons. To date, the Investment Manager
has chosen not to accrue or seek reimbursement for such expenses from the Fund.
The Investment Manager is responsible for selecting brokers and dealers to
execute portfolio transactions for the Fund. The Investment Manager, which is
itself a broker-dealer registered under the Securities Exchange Act of 1934 and
a member of the NASD, may place Fund securities transactions through itself or
other Fund affiliates, and the Investment Manager and the Fund's officers may
consider sales of the Fund's shares when allocating brokerage, in either case
subject to the policy of obtaining best price and execution on such
transactions. Any portfolio transactions which are effected by brokers or
dealers who are considered to be affiliated persons of the Fund will be subject
to SEC Rules designed to ensure that the commissions for such transactions are
fair to the Fund's shareholders. See "Allocation of Portfolio Brokerage" in the
Fund's Statement of Additional Information.
DISTRIBUTION OF SHARES
Rodney Square Distributors, Inc. ("RSD"), a wholly owned subsidiary of
Wilmington Trust Company, and Olstein & Associates (together the "Distributors")
have entered into a distribution and underwriting agreement with the Trust, on
behalf of the Fund (the "Distribution Agreement") dated August 18, 1995, under
which the Distributors will act as co-underwriters to engage in activities
designed to assist the Fund in securing purchasers for its shares. The fee for
RSD's services as co-underwriter is borne solely by Olstein & Associates, and
Olstein & Associates will receive compensation for its services under the 12b-1
Plan described below. Either directly or through affiliates, the Distributors
will provide services under the
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<PAGE> 16
Distribution Agreement including the direct sale of the Fund's shares, further
underwriting, coordination and approval of selling dealers, investor support
services, administrative services and 12b-1 Plan administration.
The Fund has adopted a Shareholder Servicing and Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plan"). The total amount
which the Fund will pay under the 12b-1 Plan is 1.00% per annum of the Fund's
average daily net assets payable on a monthly basis. Seventy-five percent of the
total fee is a distribution fee that can be used to compensate the Distributors
or others for distribution activities, including but not limited to, the
preparation, printing and distribution of prospectuses, sales materials,
reports, advertising and other distribution-related materials, as well as
payments to Selling Dealers with respect to the sales of Fund shares. The
remaining twenty-five percent is a shareholder servicing fee used to compensate
the Distributors, Selling Dealers or others for ongoing servicing and
maintenance of shareholder accounts with the Fund. Such shareholder servicing
activities include responding to inquiries of shareholders of the Fund regarding
their ownership of shares of the Fund or providing other similar services not
otherwise required to be provided by the Investment Manager or the
Administrator. Payments under the 12b-1 Plan are not tied exclusively to
distribution or shareholder servicing expenses actually incurred by the
Distributors or others, and the payments may exceed the amount of expenses
actually incurred.
To promote the sale of the Fund's shares, Olstein & Associates may enter
into agreements with Selling Dealers under which the Selling Dealers may be
compensated for their distribution and shareholder servicing activities. It is
presently contemplated that certain Selling Dealer agreements, subject to
Olstein & Associates' discretion, will provide for Olstein & Associates to pay
the Selling Dealer, from its own resources, an up-front commission of up to 1.5%
of the amount invested. No portion of such up-front commissions will be borne by
the Fund or its shareholders. While Olstein & Associates has advised the Fund it
hopes to recover such up-front commissions payments by receipt of 12b-1 fees
paid by the Fund, the Fund is not legally obligated to repay such excess amounts
or to continue the 12b-1 Plan for such purpose. The Selling Dealer Agreements
which provide for a 1.5% up-front commission will also provide for Selling
Dealers to receive up to 90% of the total 12b-1 fees attributable to the amount
originally invested that remains invested in the Fund during the second through
fifth years at current market value. In subsequent years, the Selling Dealers
will receive up to 75% of the total 12b-1 fees for assets that remain invested
in the Fund at current market values. In the event that a Selling Dealer
Agreement does not provide for an up-front commission payment by Olstein &
Associates to the Selling Dealer, the Selling Dealer may be paid up to 90% of
the total 12b-1 fee beginning in the first year. The 12b-1 fees payable to
Selling Dealers will consist in part of a shareholder servicing fee and, in
part, a distribution fee.
If investors elect to redeem their shares of the Fund within the first two
years of purchase, thereby incurring a CDSC, the CDSC will be paid to Olstein &
Associates. Any CDSC payments received by Olstein Associates will not reduce the
payments Olstein & Associates may receive under the 12b-1 Plan during a
particular year. By receiving the CDSC upon early redemptions, Olstein &
Associates will recapture some of the up-front commissions it may have paid to
Selling Dealers when the original purchase was made, as opposed to receiving
ongoing fees under the 12b-1 Plan with respect to those assets if the
shareholder had retained the investment in the Fund.
RSD is located at 1100 North Market Street, Wilmington, Delaware 19890 and
is an affiliate of Wilmington Trust Company ("WTC"), the Fund's custodian bank
for its securities and cash. Banking laws limit deposit-taking institutions and
certain of their affiliates from underwriting or distributing securities. RSD
believes that it may perform the services contemplated under the co-underwriting
agreement without violation of applicable banking laws or regulations. If RSD
were prohibited from performing these services, it is expected that RSD would
resign as co-underwriter. It is not expected that shareholders would suffer any
adverse financial consequences as a result of such an occurrence, as the
Investment Manager would continue to serve as the Distributor of the Fund's
shares, and the Fund and the Board of Trustees would consider whether to enter
into any additional agreements with other parties.
ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTING/PRICING AGENT
Rodney Square Management Corporation ("Rodney Square") serves as the
Fund's Administrator
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<PAGE> 17
pursuant to an Administration Services Agreement with the Trust dated August 18,
1995. As Administrator, Rodney Square supplies office facilities, non-investment
related statistical and research data, stationary and office supplies, executive
and administrative services, internal auditing budgeting and financial reporting
services. Rodney Square also prepares and maintains information for meetings of
the Board of Trustees, assists in the preparation of reports to shareholders,
prepares proxy statements, updates and supervises the preparation of
prospectuses and makes filings with the SEC and state securities authorities.
Rodney Square also monitors the Fund's compliance with federal and state
securities laws, and assists the Fund's Distributors in the review of
advertising literature, and the submission of such advertising to the NASD for
review and approval in accordance with NASD rules. For its services as
Administrator, Rodney Square receives a monthly fee from the Fund, based on the
Fund's average daily net assets, at annual rates of 0.15% on the first $50
million of assets (subject to a minimum annual fee of $50,000), 0.10% on the
next $50 million of assets, 0.07% on the next $100 million in assets and 0.05%
on assets in excess of $200 million. Rodney Square also receives reimbursement
from the Fund for out-of-pocket expenses.
Rodney Square also serves as the Fund's transfer agent pursuant to a
Transfer Agency Agreement with the Trust dated August 18, 1995. As transfer
agent, Rodney Square maintains the records of each shareholder's account,
answers shareholder inquiries concerning accounts, processes purchases and
redemptions of the Fund's shares in association with the Distributors, acts as
dividend and distribution disbursing agent, and performs other shareholder
service functions. Rodney Square will also administer the payment of any
up-front commission payments paid by Olstein & Associates and ongoing 12b-1 fees
paid by the Fund to Selling Dealers and assist the Distributors in the
preparation of the quarterly 12b-1 reports to the Board of Trustees. See
"Distribution of Shares." Shareholder inquiries should be directed to the Fund
at (800) 799-2113.
Rodney Square also performs certain accounting and pricing services for
the Fund, including the daily calculation of the Fund's net asset value. These
services are provided pursuant to an Accounting Services Agreement with the
Trust dated August 18, 1995.
Rodney Square has entered into an agreement to assign to PFPC Inc. all of
its service agreements, including the Administration Services Agreement, the
Transfer Agency Agreement and Accounting Services Agreement with the Trust.
Olstein & Associates has entered into a conversion agreement with Firstar Trust
Company ("Firstar") which contemplates the appointment of Firstar as successor
Administrator, Transfer Agent and Fund Accounting/Pricing Agent to the Trust.
However, the appointment of Firstar is subject to review and approval by the
Trust's Board of Trustees. In any event, PFPC Inc. is in a position to provide
the services currently being provided to the Fund by Rodney Square. Once the
Trust's Board of Trustees has appointed the successor Administrator, Transfer
Agent and Fund Accounting/Pricing Agent, this Prospectus will be amended to
reflect the change.
CUSTODIAN
The custodian for the securities and cash of the Fund is Wilmington
Trust Company, Rodney Square North, 1100 N. Market Street, Wilmington, DE
19890-0001.
EXPENSES
In addition to the expenses indicated above, the Fund is responsible for
the payment of its expenses, other than those borne by the Investment Manager
and such expenses may include, but are not limited to: (i) general management
fees; (ii) the charges and expenses of the Fund's legal counsel and independent
auditors; (iii) brokers' commissions, mark-ups and mark-downs and any issue or
transfer taxes chargeable to the Fund in connection with its securities
transactions; (iv) all taxes and corporate fees payable by the Fund to
governmental agencies; (v) the fees of any trade association of which the Fund
is a member; (vi) the cost of certificates, if any, representing shares of the
Fund; (vii) amortization and reimbursements of the organization expenses of the
Fund and the fees and expenses involved in registering and maintaining
registration of the Fund and its shares with the SEC, and the preparation and
printing of the Fund's registration statements and prospectuses for such
purposes; (viii) allocable communications expenses with respect to investor
services and all expenses of shareholders and directors meetings and of
preparing, printing and mailing prospectuses and reports to shareholders; (ix)
certain rent or office expenses not assumed by others, (x) premiums for fidelity
bond and liability insurance covering trustees and officers
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<PAGE> 18
of the Trust; (xi) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Fund's
business; and (xii) compensation for employees of the Trust.
SHARES OF BENEFICIAL INTEREST
The beneficial interest of the Trust is divided into an unlimited number
of shares ("Shares"), with a par value of $.001 each and the Shares are issued
in a single series, which is the Fund. Each Share has equal dividend, voting,
liquidation and redemption rights. There are no conversion or preemptive rights.
Shares, when issued, will be fully paid and nonassessable. Fractional shares
have proportional voting rights. Shares of the Fund do not have cumulative
voting rights, which means that the holders of more than 50% of the shares
voting for the election of trustees can elect all of the trustees if they choose
to do so and, in such event, the holders of the remaining shares will not be
able to elect any person to the Board of Trustees. Shares will be maintained in
open accounts on the books of the Transfer Agent, and certificates for shares
will generally not be issued.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
The Fund intends to declare and pay annual dividends to its shareholders
of substantially all of its net investment income, if any, earned during the
year from its investments, and the Fund will distribute net realized capital
gains, if any, once with respect to each year. Expenses of the Fund, including
investment management and 12b-1 fees, are accrued daily. Reinvestments of
dividends and distributions in additional shares of the Fund will be made at the
net asset value determined on the date of the dividend or distribution unless
the shareholder has elected in writing to receive dividends or distributions in
cash. An election may be changed by notifying the Fund in writing thirty days
prior to the record date. Shareholders may call the Fund at (800) 799-2113 for
more information.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, such shareholder's
distribution option will automatically be converted to having all dividend and
other distributions reinvested in additional shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
On August 5, 1997, President Clinton signed into law the Taxpayer Relief
Act of 1997 (the "1997 Act"). This new law makes sweeping changes in the
Internal Revenue Code. Because many of these changes are complex, and only
indirectly affect the Fund and its distributions to you, they are discussed in
the SAI.
The Fund intends to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code as of 1986, as amended (the
"Code"). As such, the Fund will not be subject to federal income tax, or to any
excise tax, to the extent its earnings are distributed and by meeting certain
other requirements relating to the sources of its income and diversification of
its assets as provided in the Code. Dividends from net investment income or net
short-term capital gains will be taxable to shareholders as ordinary income,
whether received in cash or in additional shares. For corporate investors,
dividends from net investment income will generally qualify in part for the 70%
corporate dividends received deduction, subject to certain holding period and
debt financing restrictions. The portion of the dividends so qualified depends
on the aggregate qualifying dividend income received by the Fund from domestic
(U.S.) sources.
Distributions paid by the Fund from net long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Fund. The 1997 Act creates a category
of long-term capital gain for individuals that will be taxed at new lower tax
rates. For investors who are in the 28% or higher federal income tax brackets,
these gains will be taxed at a maximum of 20%. For investors who are in the 15%
federal income tax bracket, these gains will be taxed at a maximum of 10%.
Capital gain distributions will qualify for these new maximum tax rates,
depending on when the Fund's securities were sold and how long they were held by
the Fund before they were sold. Investors who want more information on holding
periods and other qualifying rules relating to these new rates should review the
15
<PAGE> 19
expanded discussion in the SAI, or should contact their personal tax advisors.
The Fund does not seek to realize any particular amount of capital gains during
a year; rather, realized gains are a by-product of Fund management activities.
Consequently, capital gains distributions may be expected to vary considerably
from year to year. Also, for those investors subject to tax, if purchases of
shares in the Fund are made shortly before the record date for a dividend or
capital gains distribution, a portion of the investment will be returned as a
taxable distribution.
Dividends which are declared in October, November or December to
shareholders of record in such a month, but which, for operational reasons, may
not be paid to the shareholder until the following January, will be treated for
tax purposes as if paid by the Fund and received by the shareholder on December
31 of the calendar year in which they are declared.
The redemption of shares of the Fund is treated as a sale and therefore is
a taxable event and may result in a capital gain or loss to shareholders subject
to tax. Capital gain or loss may be realized from an ordinary redemption of
shares or an exchange of shares between two mutual funds (or two portfolios of a
mutual fund). Any loss incurred on a sale or exchange of the Fund's shares, held
for six months or less, will be treated as a long-term capital loss to the
extent of capital gain dividends received with respect to such shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. Government Securities may be exempt from
state personal income taxes. Each year, the Fund will mail information on the
tax status of the Fund's dividends and distributions to shareholders. Of course,
shareholders who are not subject to tax on their income would not be required to
pay tax on amounts distributed to them by the Fund. The Fund is required to
withhold 31% of taxable dividends, capital gains distributions, and redemptions
paid to shareholders who have not complied with IRS taxpayer identification
regulations. Shareholders may avoid this withholding requirement by certifying
on the Shareholder Application the proper Taxpayer Identification Number and by
certifying that they are not subject to backup withholding.
The tax discussion set forth above is included for general information
only. Prospective investors should consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in the Fund.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share ("net asset value") is determined by
the Fund as of the close of regular trading on each day that the NYSE is open
for unrestricted trading from Monday through Friday (generally 4:00 p.m.,
Eastern time). The net asset value is determined by the Fund by dividing the
value of the Fund's securities, plus any cash and other assets, less all
liabilities, by the number of shares outstanding. Expenses and fees of the Fund,
including management, distribution and shareholder servicing fees, are accrued
daily and taken into account for the purpose of determining the net asset value.
Fund securities listed or traded on a securities exchange for which
representative market quotations are available will be valued at the last quoted
sales price on the security's principal exchange on that day. Listed securities
not traded on an exchange that day, and other securities which are not traded in
the over-the-counter market on any given day will be valued at the mean between
the last bid and ask price in the market on that day, if any. Securities for
which market quotations are not readily available or not deemed representative
of actual market values and all other assets will be valued at their respective
fair market value as determined in good faith by, or under procedures
established by, the Board of Trustees. In determining fair value, the Trustees
may employ an independent pricing service.
Short-term investments with less than sixty days remaining to maturity
when acquired by the Fund will be valued on an amortized cost basis by the Fund,
excluding unrealized gains or losses thereon from the valuation. This is
accomplished by valuing the security at cost and then assuming a constant
amortization to maturity of any premium or discount. If the Fund acquires a
short-term security with more than sixty days remaining to its maturity, it will
be valued at current market value until the 60th day prior to maturity, and will
then be valued on an amortized cost basis based upon the value on such date
unless the Trustees determine during such 60 day period that this amortized cost
value does not represent fair market value.
16
<PAGE> 20
HOW TO PURCHASE SHARES
Shares of the Fund are offered on a continuous basis by the Distributors
and through Selling Dealers who have entered into Selling Dealer Agreements with
the Distributors. Brokerage clients of Olstein & Associates who maintain private
brokerage accounts with Olstein & Associates, may contact Olstein & Associates
directly. Selling Dealers may receive compensation for their marketing and
shareholder servicing activities in the form of up-front commission payments
funded by Olstein & Associates from its own resources, and/or by receiving a
portion of the 12b-1 fees payable by the Fund under the 12b-1 Plan. See
"Distribution of Shares."
Shares are sold to investors at the net asset value next determined after
receipt and acceptance of an investor's purchase order in proper form as
described below. Shares of the Fund are subject to annual 12b-1 Plan expenses
and, if shares are redeemed within two years of purchase, may be subject to a
CDSC. See "Expenses of the Fund" and "How to Redeem Shares." The Fund reserves
the right to reject any purchase order and to suspend the offering of shares of
the Fund. The minimum initial investment is $1,000, and subsequent investments
must total at least $100. The minimum initial investment requirement for
qualified tax sheltered retirement plans is $250 with no minimum for subsequent
investments. The Fund reserves the right to vary the initial investment minimum
and minimums for additional investments at any time.
At the discretion of the Fund, investors may be permitted to purchase Fund
shares by transferring securities to the Fund that: (i) meet the Fund's
investment objective and policies; (ii) are acquired by the Fund for investment
and not for retail purposes; (iii) are liquid securities which are not
restricted as to transfer either by law or liquidity of market; (iv) have a
value which is readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on the American Stock Exchange, the NYSE,
or NASDAQ; and (v) at the discretion of the Fund, the value of any such security
(except U.S. Government securities) being exchanged together with other
securities of the same issuer owned by the Fund will not exceed 5% of the net
assets of the Fund immediately after the transactions.
Securities transferred to the Fund will be valued in accordance with the
same procedures used to determine the Fund's net asset value. All dividends,
interests, subscription, or other rights pertaining to such securities shall
become the property of the Fund and must be delivered to the Fund by the
investor upon receipt from the issuer. Investors who are permitted to transfer
such securities will be required to recognize all gains or losses on such
transfers, and pay taxes thereon, if applicable, measured by the difference
between the fair market value of the securities and the investors' bases
therein.
Purchase orders for shares of the Fund which are received by Rodney Square
and accepted by the Distributors prior to the close of regular trading hours on
the NYSE on any day that the Fund calculates its net asset value, are priced
according to the net asset value determined on that day. Purchase orders for
shares of the Fund received after the close of the NYSE on a particular day are
priced as of the time the net asset value per share is next determined.
Purchases may be made in one of the following ways:
PURCHASES BY MAIL
Investors may purchase shares by sending a check drawn on a U.S. bank
payable to The Olstein Financial Alert Fund along with a completed Shareholder
Application, to The Olstein Financial Alert Fund, c/o Rodney Square Management
Corporation, P.O. Box 8987, Wilmington, DE 19899-9752. A purchase order sent by
overnight mail should be sent to The Olstein Financial Alert Fund, c/o Rodney
Square Management Corporation, Rodney Square North, 1105 North Market Street,
3rd Floor, Wilmington, DE 19890-0001. If a subsequent investment is being made,
the check should also indicate the investor's Fund account number.
PURCHASES BY WIRE
To order shares for purchase by wiring federal funds, the transfer agent
must first be notified by calling (800) 799-2113 to request an account number
and furnish the Fund with a tax identification number. Following notification to
the Fund, federal funds and registration instructions should be wired through
the
17
<PAGE> 21
Federal Reserve System to:
RODNEY SQUARE MANAGEMENT CORPORATION
C/O WILMINGTON TRUST COMPANY, WILMINGTON DELAWARE
ABA #0311 0009 2
ATTENTION: THE OLSTEIN FINANCIAL ALERT FUND
DDA # 2670-9431
[FURTHER CREDIT SHAREHOLDER NAME AND ACCOUNT NUMBER]
For initial purchases by wire, a completed application with signature(s)
of investor(s) must be filed with the transfer agent at the address stated above
under "Purchases by Mail." Investors should be aware that some banks may impose
a wire service fee.
AUTOMATIC INVESTMENT PLAN
Shares of the Fund may be purchased through an Automatic Investment Plan.
The Plan provides a convenient method by which investors may have monies
deducted directly from their checking, savings or bank money market accounts for
investment in the Fund on a monthly, bi-monthly, quarterly, semi-annual or
annual basis. The minimum investment pursuant to this Plan is $100 per month
(subsequent to the $1000 initial investment). The account designated will be
debited in the specified amount, on or about the 20th of the month, and Fund
shares will be purchased. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. The Fund may alter,
modify or terminate this Plan at any time. For information about participating
in the Automatic Investment Plan, call the Fund at (800) 799-2113.
HOW TO REDEEM SHARES
Shareholders may redeem their shares of the Fund on any business day that
the Fund calculates its net asset value. See "Determination of Net Asset Value."
Redemption requests are generally made to the Fund's transfer agent (see below),
however, brokerage clients of Olstein & Associates who maintain private
brokerage accounts with Olstein & Associates may contact Olstein & Associates
directly. Redemptions will be effected at the net asset value per share next
determined after the receipt by the transfer agent of a redemption request
meeting the requirements described below, subject to any applicable CDSC. The
Fund normally sends redemption proceeds on the next business day, but in any
event redemption proceeds are sent within seven calendar days of receipt of a
redemption request in proper form, or sooner if required under applicable law.
Payment may also be made by wire directly to any bank previously designated by
the shareholder in a shareholder account application. The Fund's custodian or
the shareholder's bank may impose a fee for wire service. The Fund will honor
redemption requests of shareholders who recently purchased shares by check, but
will not mail the proceeds attributable to such purchase until it is reasonably
satisfied that the purchase check has cleared, which may take up to ten days
from the purchase date, at which time the redemption proceeds will be sent to
the shareholder. Purchases made with a check that does not clear, will be
canceled and the investor will be responsible for any losses or fees incurred in
that transaction.
Except as noted below, redemption requests received in proper form by the
Fund prior to the close of regular trading hours on the NYSE on any business day
that the Fund calculates its per share net asset value are effective that day.
Redemption requests received after the close of the NYSE are effective as of the
time the net asset value per share is next determined.
If a shareholder submits a redemption request for a specific dollar
amount, and the redemption request is subject to a CDSC, the Fund will redeem
that number of shares necessary to deduct the applicable CDSC and tender to the
shareholder the requested amount to the extent shares are still held in the
account. Shares purchased on or after November 18, 1996 which are sold within
the first two years of their purchase will be assessed the applicable CDSC on
the original purchase price of such shares. Shares purchased prior to November
18, 1996 which are sold within the first two years of their purchase will be
assessed the applicable CDSC on the lesser of the then-current net asset value
or the original purchase price of such shares. If a shareholder decides to
repurchase the same amount of shares within 90 days of a redemption
18
<PAGE> 22
which was subject to a CDSC, the shareholder will receive an amount of shares
equal to the repurchase plus the number of shares necessary to reimburse the
amount of the CDSC. The following table sets forth the rates of the CDSC for the
shares of the Fund:
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
(as a percentage
Year After of Dollar Amount
Purchase Made Subject to Charge)
------------- ------------------
<S> <C>
Up to 1 year 2.50%
Up to 2 years 1.25%
After 2 full years None
</TABLE>
Redemptions by clients of Olstein & Associates who maintain private
brokerage accounts at the time of purchase will not be subject to the CDSC
described in this Prospectus. In addition, purchases by participants in 401(k)
or 403(b) plans for which the Fund is listed as an investment option and Olstein
& Associates is listed as broker of record, shall not be subject to any CDSC.
The Fund will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion of the Investment
Manager or the Board of Trustees, result in the necessity of the Fund selling
assets under disadvantageous conditions and to the detriment of the remaining
shareholders of the Fund. Pursuant to the Fund's Agreement and Declaration of
Trust, payment for shares redeemed may be made either in cash or in kind, or
partly in cash and partly in kind. However, the Fund has elected, pursuant to
Rule 18f-1 under the 1940 Act, to redeem its shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Fund, during any 90 day
period for any one shareholder. Payments in excess of this limit will also be
made wholly in cash unless the Board of Trustees believes that economic
conditions exist which would make such a practice detrimental to the best
interests of the Fund. Any portfolio securities paid or distributed in kind
would be valued as described under "Net Asset Value." In the event that an
in-kind distribution is made, a shareholder may incur additional expenses, such
as the payment of brokerage commissions, on the sale or other disposition of the
securities received from the Fund. In-kind payments need not constitute a cross
section of the Fund's portfolio. Where a shareholder receives a redemption of
all or a part of their investment, and where the Fund completes such redemption
in kind, the Fund will not recognize gain or loss for federal tax purposes, on
the securities used to complete the redemption but the shareholder will
recognize gain or loss equal to the difference between the fair market value of
the securities received and the shareholder's basis in the Fund shares redeemed.
Shares may be redeemed in one of the following ways:
REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption to
the transfer agent at The Olstein Financial Alert Fund, c/o Rodney Square
Management Corporation, P.O. Box 8987, Wilmington, Delaware 19899-9752. A
redemption order sent by over-night mail should be sent to The Olstein Financial
Alert Fund, c/o Rodney Square Management Corporation, 1105 N Market Street, 3rd
Floor, Wilmington, Delaware 19890-0001.
A written redemption request to the transfer agent must: (i) identify the
shareholder's account number; (ii) state the number of shares or dollar amounts
to be redeemed; and (iii) the name of the persons in whose name the account is
registered. Each registered owner must sign the redemption request exactly as
the shares in the account as registered. A signature may be guaranteed by an
eligible institution acceptable to the Fund's transfer agent, such as a bank,
broker, dealer, municipal security's dealer, government security's dealer,
credit union, national securities exchange, registered securities association,
clearing agency, or savings association. A redemption request for amounts above
$25,000, or redemption requests for which proceeds are to be mailed somewhere
other than the address of record, must be accompanied by signature guarantees.
Signatures must be guaranteed by an "eligible guarantor institution" as defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing
19
<PAGE> 23
agencies and savings associations. Broker-dealers guaranteeing signatures must
be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees.
Signature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program. The transfer agent may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees and guardians.
A redemption request will not be deemed to be properly received until the
transfer agent receives all required documents in proper form. Questions with
respect to the proper form for redemption requests should be directed to the
transfer agent at (800) 799-2113.
REDEMPTION BY TELEPHONE
Shareholders who have so indicated on the application, or have
subsequently arranged in writing to do so, may redeem shares in any amount up to
$50,000 by instructing the transfer agent by telephone at (800) 799-2113.
Redemption requests for amounts exceeding $50,000 must be made in writing. In
order to arrange for redemption by wire or telephone after an account has been
opened, or to change the bank or account designated to receive redemption
proceeds, a written request must be sent to the transfer agent at the address
listed above. A signature guarantee is required of all shareholders in order to
qualify for or to change telephone redemption privileges. The application
contains appropriate information and instructions and a form on which to make
the signature guarantee.
Neither the Fund nor any of its service contractors will be liable for any
loss or expense in acting upon any telephone instructions that are reasonably
believed to be genuine. In attempting to confirm that telephone instructions are
genuine, the Fund will use such procedures as are considered reasonable,
including requesting a shareholder to correctly state his or her Fund account
number, the name in which his or her account is registered, his or her banking
institution, bank account number and the name in which his or her bank account
is registered. To the extent that the Fund fails to use reasonable procedures to
verify the genuineness of telephone instructions, it and/or its service
contractors may be liable for any such instructions that prove to be fraudulent
or unauthorized.
During times of drastic economic or market changes, the telephone
redemption privilege may be difficult to implement. In the event that you are
unable to reach Rodney Square by telephone, you may make a redemption request by
mail. The Fund and Rodney Square each reserve the right to refuse a wire or
telephone redemption if it is believed advisable to do so. Procedures for
redeeming Fund shares by wire or telephone may be modified or terminated at any
time by the Fund.
The Fund also reserves the right to involuntarily redeem an investor's
account where the account is worth less than the minimum initial investment
required when the account is established, presently $1,000. The shares will not
be involuntarily redeemed solely due to market fluctuations and the effect such
fluctuations may have on an investor's account balance. (Any redemption of
shares from an inactive account established with a minimum investment may reduce
the account below the minimum initial investment, and could subject the account
to redemption initiated by the Fund.) The Fund will advise the shareholder of
such intention in writing at least sixty (60) days prior to effecting such
redemption, during which time the shareholder may purchase additional shares in
any amount necessary to bring the account back to the minimum.
If the Trustees determine that it would be detrimental to the best
interest of the remaining shareholders of the Fund to make payment in cash, the
Fund may pay the redemption price in whole or in part by distribution in kind of
readily marketable securities, from the Fund, within certain limits prescribed
by the SEC. Such securities will be valued on the basis of the procedures used
to determine the net asset value at the time of the redemption. If shares are
redeemed in kind, the redeeming shareholder will incur brokerage costs in
converting the assets into cash.
SYSTEMATIC WITHDRAWAL PLAN.
Shareholders who own shares with a value of $10,000 or more may
participate in the Systematic Withdrawal Plan. Under the Plan, shareholders may
automatically redeem a portion of their Fund shares monthly, bimonthly,
quarterly, semiannually or annually. The minimum withdrawal available is $100.
The redemption of Fund shares will be effected at their net asset value at the
close of the NYSE on or about the
20
<PAGE> 24
25th day of the month at the frequency selected by the shareholder. If you
expect to purchase additional Fund shares, it may not be to your advantage to
participate in the Systematic Withdrawal Plan because contemporary purchases and
redemption may result in adverse tax consequences. For further details about
this service, see the Application or call the transfer agent at (800) 799-2113.
RETIREMENT PLANS
Shares of the Fund are available for use in all types of tax-deferred
retirement plans such as IRA's, employer-sponsored defined contribution plans
(including 401(k) plans) and tax-sheltered custodial accounts described in
Section 403(b)(7) of the Internal Revenue Code. Qualified investors benefit from
the tax-free compounding of income dividends and capital gains distributions.
Application forms and brochures describing investments in the Fund for
retirement plans can be obtained from the Fund by calling the Fund at (800)
799-2113. The following is a description of the types of retirement plans for
which the Fund's shares may be used for investment:
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAs")
Individuals, who are not active participants (and, when a joint return is
filed, who do not have a spouse who is an active participant) in an employer
maintained retirement plan are eligible to contribute on a deductible basis to
an IRA account. The IRA deduction is also retained for individual taxpayers and
married couples with adjusted gross incomes not in excess of certain specified
limits. All individuals who have earned income may make nondeductible IRA
contributions to the extent that they are not eligible for a deductible
contribution. Income earned by an IRA account will continue to be tax deferred.
A special IRA program is available for employers under which the employers may
establish IRA accounts for their employees in lieu of establishing tax qualified
retirement plans. Known as SEP-IRA's (Simplified Employee Pension-IRA), they
free the employer of many of the recordkeeping requirements of establishing and
maintaining a tax qualified retirement plan trust.
If you are entitled to receive a distribution from a qualified retirement
plan, you may rollover all or part of that distribution into the Fund's IRA.
Your rollover contribution is not subject to the limits on annual IRA
contributions. You can continue to defer Federal income taxes on your
contribution and on any income that is earned on that contribution.
WTC makes available its services as an IRA Custodian for each shareholder
account that is established as an IRA. For these services, WTC receives an
annual fee of $10.00 per account, which fee is paid directly to WTC by the IRA
shareholder. If the fee is not paid by the date due, shares of the Fund owned by
the shareholder in the IRA account will be redeemed automatically for purposes
of making the payment.
The 1997 Act also creates several new or expanded Individual Retirement
Accounts which will be available to the Fund's investors beginning on January 1,
1998.
The 1997 Act creates a new "Roth IRA" which will permit tax free
distributions of account balances if the assets have been invested for five
years or more, and the distributions meet certain qualifying restrictions.
Investors filing as single taxpayers who have adjusted gross incomes ("AGI") of
$95,000 or more, and investors filing as joint taxpayers with adjusted gross
incomes of $150,000 or more may find their participation in this IRA to be
restricted.
The 1997 Act also creates a new education IRA to help parents fund their
children's post-secondary school education. Parents or others may contribute up
to $500 annually to an education IRA on behalf of any child under age 18. This
IRA is subject to the same AGI limits as the Roth IRA above, and there are other
contribution restrictions that may apply. The education IRA earnings accumulate
tax free, and assets that have accumulated in the IRA may be distributed tax
free when used to pay qualified higher education expenses.
Both new IRAs are subject to special rules and conditions that must be
reviewed by the investor when opening a new account.
21
<PAGE> 25
401(k) PLANS AND OTHER DEFINED CONTRIBUTION PLANS
The Fund's shares may be used for investment in defined contribution plans
by both self-employed individuals (sole proprietorships and partnerships) and
corporations who wish to use shares of the Fund as a funding medium for a
retirement plan qualified under the Internal Revenue Code. Such plans typically
allow investors to make annual deductible contributions, which may be matched by
their employers up to certain percentages based on the investor's
pre-contribution earned income.
403(b)(7) RETIREMENT PLANS
The Fund's shares are also available for use by schools, hospitals, and
certain other tax-exempt organizations or associations who wish to use shares of
the Fund as a funding medium for a retirement plan for their employees.
Contributions are made to the 403(b)(7) Plan as a reduction to the employee's
regular compensation. Such contributions, to the extent they do not exceed
applicable limitations (including a generally applicable limitation of $9,500
per year), are excludable from the gross income of the employee for Federal
Income tax purposes.
PERFORMANCE
Total return data may from time to time be included in advertisements
about the Fund. The Fund's total return may be calculated on an annualized and
aggregate basis for various periods (which periods will be stated in the
advertisement). Average annual return reflects the average percentage change per
year in value of an investment in the Fund. Aggregate total return reflects the
total percentage change over the stated period.
To help investors better evaluate how an investment in the Fund might
satisfy their investment objective, advertisements regarding the Fund may
compare the Fund's investment performance to appropriate market indexes such as
the Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's 400
MidCap Index or the unweighted Value Line Index, which is composed of over 1,600
stocks in the Value Line Investment survey. The Fund may also compare its
investment performance to appropriate mutual fund indexes; and the Fund may
advertise its ranking compared to other similar mutual funds as reported by
industry analysts such as Lipper Analytical Services, Inc.
All data will be based on the Fund's past investment results and does not
predict future performance. Investment performance, which will vary, is based on
many factors, including market conditions, the composition of the investments in
the Fund, and the Fund's operating expenses. Investment performance also often
reflects the risk associated with the Fund's investment objective and policies.
These factors should be considered when comparing the Fund to other mutual funds
and other investment vehicles.
22
<PAGE> 26
[Outside cover -- divided into two sections]
INVESTMENT MANAGER THE
------------------ [OLSTEIN LOGO]
Olstein & Associates, L.P. FUNDS
4 Manhattanville Road
Purchase, New York 10577
DISTRIBUTORS
------------
Rodney Square Distributors, Inc.
(Subsidiary of Wilmington Trust Company)
1100 N. Market Street
Wilmington, Delaware 19890-0001
Olstein & Associates, L.P.
4 Manhattanville Road
Purchase, New York 10577
THE
SHAREHOLDER SERVICES [OLSTEIN LOGO]
-------------------- FINANCIAL
Rodney Square Distributors, Inc. ALERT
(Subsidiary of Wilmington Trust Company) FUND
1100 N. Market Street
Wilmington, Delaware 19890-0001
CUSTODIAN
---------
Wilmington Trust Company
1100 N. Market Street
Wilmington, Delaware 19890-0001
LEGAL COUNSEL
-------------
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
INDEPENDENT AUDITORS PROSPECTUS
-------------------- JANUARY 1, 1998
Ernst & Young LLP
One North Charles Street
Baltimore, MD 21201
OS01 1/98
<PAGE> 27
TABLE OF CONTENTS
SUMMARY.................................................... 3
Investment Objectives.................................... 3
Investment Manager....................................... 3
Investment Performance................................... 3
Distributor and Transfer Agent........................... 3
How to Purchase and Redeem Shares........................ 4
Minimum Investment....................................... 4
Management Fees.......................................... 4
Risks and Special Considerations......................... 4
FUND EXPENSES.............................................. 5
FINANCIAL HIGHLIGHTS....................................... 6
INVESTMENT PERFORMANCE..................................... 7
Fund Performance......................................... 7
Olstein and Associate's Performance...................... 7
INVESTMENT OBJECTIVE AND POLICIES.......................... 8
RISKS AND SPECIAL CONSIDERATIONS........................... 11
Management/Stock Market Risk............................. 11
Short-Selling............................................ 11
Purchasing Options....................................... 12
Illiquid Securities...................................... 12
Repurchase Agreements.................................... 12
Portfolio Turnover....................................... 12
MANAGEMENT OF THE FUND..................................... 13
Board of Trustees........................................ 13
Investment Manager....................................... 13
Distribution of Shares................................... 14
Administrator, Transfer Agent and Fund Accounting/
Pricing Agent.......................................... 15
Custodian................................................ 16
Expenses................................................. 16
SHARES OF BENEFICIAL INTEREST.............................. 17
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES........... 17
DETERMINATION OF NET ASSET VALUE........................... 18
HOW TO PURCHASE SHARES..................................... 19
Purchases by Mail........................................ 20
Purchases by Wire........................................ 20
Automatic Investment Plan................................ 20
HOW TO REDEEM SHARES....................................... 20
Redemption by Mail....................................... 22
Redemption by Telephone.................................. 22
Systematic Withdrawal Plans.............................. 23
RETIREMENT PLANS........................................... 23
Individual Retirement Accounts ("IRAs").................. 23
401(k) Plans and other Defined Contribution Plans........ 24
403(b)(7) Retirement Plans............................... 24
PERFORMANCE................................................ 24
<PAGE> 28
THE OLSTEIN FUNDS
THE OLSTEIN FINANCIAL ALERT FUND
- ------------------------------------------------------------------------------
SHAREHOLDER APPLICATION
- ------------------------------------------------------------------------------
Send Completed Application to:
THE OLSTEIN FINANCIAL ALERT FUND
C/O RODNEY SQUARE MANAGEMENT CORPORATION
P.O. BOX 8987
WILMINGTON, DE 19899-9752
- ------------------------------------------------------------------------------
1. ACCOUNT REGISTRATION - PLEASE PRINT
__ INDIVIDUAL OR JOINT ACCOUNT
- ------------------------------------------------------------------------------
First name Middle initial Last name Social security number (SSN)
- ------------------------------------------------------------------------------
Joint owner(s) (Joint ownership means "joint tenants with rights of
survivorship" unless otherwise specified.)
- ------------------------------------------------------------------------------
__ GIFT/TRANSFER TO A MINOR
- ------------------------------------------------------------------------------
Name of custodian (one only) Serving as Custodian for Minor's name (one only)
- -------------------------------------------------
State (minor's or custodian's state of residence)
- -------------------------------------------------
Uniform Gift/Transfer to Minors Act
- -------------------------------------------------
Minor's social security number
__ TRUST, CORPORATION, PARTNERSHIP OR OTHER ENTITY
- -------------------------------------------------
If corporation, resolution required from Board of Directors
- -------------------------------------------------
Taxpayer identification number (TIN)
- -------------------------------------------------
Name of each trustee (if any)
- -------------------------------------------------
Date of trust document (must be completed for trust registration)
- ------------------------------------------------------------------------------
2. ADDRESS
- ------------------------------------------------------------------------------
Street Address Daytime Phone (including Area Code)
(P.O. Box acceptable if street address is given)
- ------------------------------------------------------------------------------
City State Zip code Evening Phone (including Area Code)
I am a citizen of: __ U.S. __ __________________________________________
- ------------------------------------------------------------------------------
3. INITIAL INVESTMENT - MINIMUM $1,000
Enclosed is a check payable to The Olstein Financial Alert Fund for $_________
__ By Federal Funds wire:
- ------------------------------------------------------------------------------
Name of Bank Wire Amount ($) Wire Date
- ------------------------------------------------------------------------------
4. AUTOMATIC INVESTMENT PLAN
For information regarding the AUTOMATIC INVESTMENT PLAN see "Automatic
Investment Plan" (page 18) of the prospectus.
__ Check if you would like the Automatic Investment Plan application sent to
you.
- ------------------------------------------------------------------------------
5. DISTRIBUTIONS
All dividends and distributions will be automatically reinvested in additional
shares at net asset value unless otherwise indicated by checking the appropriate
box(es) under Optional Shareholder Privileges - Reinvestment
1
<PAGE> 29
Options (Section 7 B).
- ------------------------------------------------------------------------------
6. SIGNATURE AND TAX CERTIFICATIONS
I have received and read the Prospectus for The Olstein Financial Alert Fund and
agree to its terms; I am of legal age. I understand that investment in these
shares involves investment risks, including possible loss of principal. If a
corporate customer, I certify that appropriate corporate resolutions authorizing
investment in The Olstein Financial Alert Fund have been duly adopted.
I certify under penalties of perjury that the Social Security number or taxpayer
identification number shown above is correct. Unless the box below is checked, I
certify under penalties of perjury that I am not subject to backup withholding
because the Internal Revenue Service (a) has not notified me that I am as a
result of failure to report all interest or dividends, or (b) has notified me
that I am no longer subject to backup withholding. The certifications in this
paragraph are required from all nonexempt persons to prevent backup withholding
of 31% of all taxable distributions and gross redemption proceeds under the
federal income tax law.
__ Check here if you are subject to backup withholding.
- ------------------------------------------------------------------------------
Signature Date
- ------------------------------------------------------------------------------
Signature Date
Check one: __ Owner __ Trustee __ Custodian __ Other________
- ------------------------------------------------------------------------------
7. OPTIONAL SHAREHOLDER PRIVILEGES
A. TELEPHONE REDEMPTION AUTHORIZATION
I/We hereby authorize the use of cash transfers to effect redemptions of shares
from my/our account according to telephone instructions from any one of the
authorized signers listed in Section 7 C and to send the proceeds to (CHECK ONE
OR MORE OF THE FOLLOWING):
__ My address of record as indicated in Section 2 (must be $50,000 or less and
address must be established for a minimum of 60 days)
__ My bank as designated below
__ Wire proceeds to my bank via the Federal Funds Wire System (minimum
$1,000) as designated below
__ All of the above
- ------------------------------------------------------------------------------
Bank Name Bank Routing Transit #
- ------------------------------------------------------------------------------
Bank Account # (Checking/Savings) Account Holder
- ------------------------------------------------------------------------------
Bank Address: Street City State Zip
PLEASE ATTACH A VOIDED CHECK OF THE BANK ACCOUNT DESIGNATED ABOVE.
- ------------------------------------------------------------------
Telephone redemption by wire can be used only with financial institutions that
are participants in the Federal Reserve Bank Wire System. If the financial
institution you designate is not a Federal Reserve participant, telephone
redemption proceeds will be mailed to the named financial institution. In either
case, it may take a day or two, upon receipt for your financial institution to
credit your bank account with the proceeds, depending on its internal crediting
procedures.
- ------------------------------------------------------------------------------
B. OTHER REINVESTMENT OPTIONS - CHECK ONLY IF APPLICABLE
__ Do NOT reinvest my dividends __ Do NOT reinvest my capital gains
- ------------------------------------------------------------------------------
C. AUTHORIZATIONS
By electing the telephone redemption option, I appoint Rodney Square Management
Corporation ("RSMC"), my agent to redeem shares of any series of The Olstein
Funds when so instructed by telephone. This power will continue if I am disabled
or incapacitated. I understand that a request for telephone redemption may be
made by anyone, but the proceeds will be sent only to the account address of
record or to the bank listed above. Redemption requests for proceeds in excess
of $50,000 must be made in writing. By signing below, I agree on behalf of
myself, my assigns, and successors, not to hold RSMC and any of its affiliates,
or any series of The Olstein Funds responsible for acting under the powers I
have given RSMC. I also agree that all account and registration information I
have given will remain the same unless I instruct RSMC otherwise in a written
form, including a signature guarantee. If I want to terminate this agreement, I
will give RSMC at least ten days notice in writing. If RSMC or The Olstein Funds
want to terminate this agreement, they will give me at least ten days notice in
writing.
2
<PAGE> 30
ALL OWNERS ON THE ACCOUNT MUST SIGN BELOW AND OBTAIN SIGNATURE GUARANTEE(S).
- ------------------------------------------------------------------------------
Signature of Individual Owner Signature of Joint Owner
- ------------------------------------------------------------------------------
Signature of Corporate Officer, Trustee or Other - PLEASE INCLUDE TITLE
You must have your signature(s) guaranteed by an eligible institution acceptable
to the Fund's transfer agent, such as a bank, broker/dealer, government
securities dealer, credit union, national securities exchange, registered
securities association, clearing agency or savings association. A Notary Public
is not an acceptable guarantor.
SIGNATURE GUARANTEE(S) (stamp)
8. BROKER/DEALER USE ONLY - PLEASE PRINT
We hereby submit this application for the purchase of shares of the Fund
indicated in accordance with the terms of our selling agreement with Olstein &
Associates L.P., and with the prospectus for the Fund.
- ------------------------------------------------------------------------------
Broker/Dealer Name
- ------------------------------------------------------------------------------
Main Office Address
- ------------------------------------------------------------------------------
Branch # Rep# Representative Name
- ------------------------------------------------------------------------------
Branch Address Telephone Number (Including Area Code)
- ------------------------------------------------------------------------------
Authorized Signature, Securities Dealer Title
- ------------------------------------------------------------------------------
ACCEPTED: By Date
3
<PAGE> 31
THE OLSTEIN FINANCIAL ALERT FUND
a series of THE OLSTEIN FUNDS
4 Manhattanville Road
Purchase, NY 10577
(914) 701-7565
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY, 1 1998
The Olstein Funds (the "Trust") is an open-end management investment
company that currently offers one series of shares called The Olstein Financial
Alert Fund (the "Fund"). The Fund maintains a diversified portfolio of
investments selected in accordance with its investment objective and policies.
Information about the Fund is included in a prospectus dated January, 1
1998 which may be obtained without charge from the Fund by writing to the
addresses or calling the telephone numbers listed below. No investment in shares
of the Fund should be made without first reading the prospectus.
<TABLE>
<CAPTION>
INVESTMENT MANAGER
AND CO-DISTRIBUTOR CO-DISTRIBUTOR
------------------ --------------
<S> <C>
Olstein & Associates, L.P. Rodney Square Distributors, Inc.
4 Manhattanville Road (subsidiary of Wilmington Trust Company)
Purchase, NY 10577 1100 N. Market Street
(914) 701-7565 Wilmington, DE 19890-0001
(800) 799-2113
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE FUND'S PROSPECTUS DATED JANUARY, 1 1998. RETAIN THIS
STATEMENT OF ADDITIONAL INFORMATION FOR FUTURE REFERENCE.
1
<PAGE> 32
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE OLSTEIN FINANCIAL ALERT FUND-INVESTMENTS.......................................................................3
PORTFOLIO TURNOVER.................................................................................................5
INVESTMENT RESTRICTIONS............................................................................................5
INVESTMENT MANAGER.................................................................................................7
DISTRIBUTORS.......................................................................................................8
ADMINISTRATOR .....................................................................................................9
ALLOCATION OF PORTFOLIO BROKERAGE.................................................................................10
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...............................................................11
PURCHASE OF SHARES................................................................................................12
REDEMPTIONS.......................................................................................................12
OFFICERS AND TRUSTEES OF THE FUND.................................................................................13
TAXATION..........................................................................................................16
GENERAL INFORMATION...............................................................................................17
PERFORMANCE.......................................................................................................18
FINANCIAL STATEMENTS..............................................................................................19
</TABLE>
2
<PAGE> 33
THE OLSTEIN FINANCIAL ALERT FUND - INVESTMENTS
The Fund seeks to achieve its objectives by making investments selected
in accordance with its investment restrictions and policies. This Statement of
Additional Information contains further information concerning the techniques
and operations of the Fund, the securities in which it will invest, and the
policies it will follow.
COMMON STOCK
Common stock is defined as shares of a corporation that entitle the
holder to a pro rata share of the profits of the corporation, if any, without a
preference over any other shareholder or class of shareholders, including
holders of the corporation's preferred stock and other senior equity. Common
stock usually carries with it the right to vote and frequently an exclusive
right to do so. Holders of common stock also have the right to participate in
the remaining assets of the corporation after all other claims are paid,
including those of debt securities and preferred stock.
PREFERRED STOCK
Generally, preferred stock receives dividends prior to distributions on
common stock and usually has a priority of claim over common stockholders if the
issuer of the stock is liquidated. Unlike common stock, preferred stock does not
usually have voting rights; preferred stock, in some instances, is convertible
into common stock. In order to be payable, dividends on preferred stock must be
declared by the issuer's board of directors. Dividends on the typical preferred
stock are cumulative, causing dividends to accrue even if not declared by the
board of directors. There is, however, no assurance that dividends will be
declared by the boards of directors of issuers of the preferred stocks in which
the Fund invests.
CONVERTIBLE SECURITIES
Traditional convertible securities include corporate bonds, notes and
preferred stocks that may be converted into or exchanged for common stock, and
other securities that also provide an opportunity for equity participation.
These securities are generally convertible either at a stated price or a stated
rate (that is, for a specific number of shares of common stock or other
security). As with other fixed income securities, the price of a convertible
security to some extent varies inversely with interest rates. While providing a
fixed-income stream (generally higher in yield than the income derivable from a
common stock but lower than that afforded by a non-convertible debt security), a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the price of a convertible security tends to rise as a reflection of
the value of the underlying common stock. To obtain such a higher yield, the
Fund may be required to pay for a convertible security an amount in excess of
the value of the underlying common stock. Common stock acquired by the Fund upon
conversion of a convertible security will generally be held for so long as the
Investment Manager
3
<PAGE> 34
anticipates such stock will provide the Fund with opportunities which are
consistent with the Fund's investment objectives and policies.
WARRANTS
The Fund may invest in warrants, in addition to warrants acquired in
units or attached to securities. A warrant is an instrument issued by a
corporation which gives the holder the right to subscribe to a specified amount
of the issuer's capital stock at a set price for a specified period of time.
OPTIONS
The Fund will only purchase options for hedging purposes and not for
speculation. In this regard, the Fund will only purchase call options on
securities which are sold short by the Fund. Purchasing call options allows the
Fund to hedge against an increase in the price of securities that are sold short
by the Fund, by locking in a future purchase price. Such options on securities
will generally be held no longer than the Fund maintains a short position in the
underlying security. Call options on securities give the Fund the right, but not
the obligation, to buy (call) a security at a fixed price during a specified
period. When purchasing call options, the Fund pays a non-refundable premium to
the party who sells (writes) the option. Following the purchase of a call
option, the Fund may liquidate its position by entering into a closing
transaction in which the Fund sells an option of the same series as previously
purchased.
AMERICAN DEPOSITORY RECEIPTS
The Fund may make foreign investments through the purchase and sale of
sponsored or unsponsored American Depository Receipts ("ADRs"). ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. Generally,
ADRs in registered form are designed for use in the U.S. securities markets.
The Fund may purchase ADRs whether they are "sponsored" or "unsponsored."
"Sponsored" ADRs are issued jointly by the issuer of the underlying security and
a depository, whereas "unsponsored" ADRs are issued without participation of the
issuer of the deposited security. Holders of unsponsored ADRs generally bear all
the costs of such facilities and the depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Therefore, there may not be a correlation between information concerning the
issuer of the security and the market value of an unsponsored ADR. ADRs may
result in a withholding tax by the foreign country of source which will have the
effect of reducing the income distributable to shareholders.
Investments in ADRs may involve greater risks than investments in
domestic securities. Foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards comparable to those of
U.S. public companies and there is generally less information available to the
public about non-U.S. companies. In addition, foreign investments may include
risks related to legal, political and or diplomatic actions of foreign
governments, such as imposition of withholding taxes on interest and dividend
income payable on the securities held, possible seizure or
4
<PAGE> 35
nationalization of foreign deposits, establishment of exchange controls as the
adoption of other foreign governmental restrictions which might adversely affect
to value of foreign issuer's stock. The Fund generally does not expect to invest
more than 5% of its assets in ADRs.
REPURCHASE AGREEMENTS
Under a repurchase agreement the Fund acquires a debt instrument
subject to the obligation of the seller to repurchase and the Fund to resell
such debt instrument at a fixed price. The Fund will enter into repurchase
agreements only with banks that are members of the Federal Reserve System, or
securities dealers who are members of a national securities exchange or are
market makers in government securities and report to the Market Reports Division
of the Federal Reserve Bank of New York and, in either case, only where the debt
instrument collateralizing the repurchase agreement is a U.S. Treasury or agency
obligation supported by the full faith and credit of the United States. A
repurchase agreement may also be viewed as the loan of money by the Fund to the
seller. The resale price specified is normally in excess of the purchase price,
reflecting an agreed upon interest rate. The rate is effective for the period of
time the Fund is invested in the agreement and may not be related to the coupon
rate on the underlying security. The term of these repurchase agreements will
usually be short (from overnight to one week), and at no time will the Fund
invest in repurchase agreements of more than sixty days. The securities which
are collateral for the repurchase agreements, however, may have maturity dates
in excess of sixty days from the effective date of the repurchase agreement. The
Fund will always receive, as collateral, securities whose market value,
including accrued interest, will at least equal 102% of the dollar amount to be
paid to the Fund under each agreement at its maturity, and the Fund will make
payment for such securities only upon physical delivery or evidence of book
entry transfer to the account of the Custodian. If the seller defaults, the Fund
might incur a loss if the value of the collateral securing the repurchase
agreement declines, and might incur disposition costs in connection with
liquidation of the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, collection of the
collateral by the Fund may be delayed or limited. The Fund also may not be able
to substantiate its interests in the underlying securities. While management of
the Fund acknowledges these risks, it is expected that such risks can be
controlled through stringent security selection and careful monitoring
procedures. The Fund may not enter into a repurchase agreement with more than
seven days to maturity if, as a result, more than 10% of the market value of the
Fund's net assets would be invested in such repurchase agreements. For purposes
of the diversification test for qualification as a regulated investment company
under the Internal Revenue Code, repurchase agreements are not counted as cash,
cash items or receivables, but rather as securities issued by the counter-party
to the Repurchase Agreements.
PORTFOLIO TURNOVER
Although the primary objective of the Fund is to achieve long term
capital appreciation, the Fund may sell securities to recognize gains or avoid
potential for loss (without regard to the time it has been held). The Fund
intends to follow a strict "buy and sell discipline," under which it will
purchase or sell securities whenever the Fund's value criteria are met, which
may result in portfolio changes and a portfolio turnover rate higher than that
reached by many capital appreciation funds. The annualized portfolio turnover
rate during the fiscal year ended August 31, 1997 was 164.92%
5
<PAGE> 36
and during the period September 21, 1995 (commencement of operations) through
August 31, 1996 was 139.77%. These rates are higher than many other mutual
funds. High portfolio turnover involves additional transaction costs (such as
brokerage commissions) which are borne by the Fund, or adverse tax effects. See
"Dividends, Capital Gains Distributions and Taxes" in the prospectus.
INVESTMENT RESTRICTIONS
The Fund has adopted the Investment Restrictions set forth below in
addition to those discussed in the prospectus. Some of these restrictions are
fundamental policies of the Fund, and cannot be changed without the approval of
a majority of the outstanding voting securities. As provided in the Investment
Company Act of 1940 (the "1940 Act") a "vote of a majority of the outstanding
voting securities" means the affirmative vote of the lesser of (i) more than 50%
of the outstanding shares, or (ii) 67% or more of the shares present at a
meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
As a matter of fundamental policy, the Fund will not:
(a) as to 75% of the Fund's total assets, invest more than 5% of its
total assets in the securities of any one issuer (this limitation does not apply
to cash and cash items, or obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities, or securities of other investment
companies);
(b) purchase more than 10% of the voting securities, or more than 10%
of any class of securities, of any one issuer; for purposes of this restriction,
all outstanding fixed income securities of an issuer are considered as one
class;
(c) make short sales of securities in excess of 25% of the Fund's total
assets or purchase securities on margin except for such short-term credits as
are necessary for the clearance of transactions;
(d) purchase or sell commodities or commodity contracts;
(e) make loans of money or securities, except (i) by the purchase of
fixed income obligations in which the Fund may invest consistent with its
investment objective and policies; or (ii) by investment in repurchase
agreements (see "Investment Objectives and Policies");
(f) borrow money, except the Fund may borrow from banks (i) for
temporary or emergency purposes not in excess of 5% of the Fund's net assets, or
(ii) to meet redemption requests that might otherwise require the untimely
disposition of portfolio securities, in an amount up to 33 1/3 of the value of
the Fund's net assets at the time the borrowing was made;
(g) pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount up to 33 1/3% of the value of its net assets, but only to
secure borrowings authorized in the preceding restriction; this restriction does
not limit the authority of the Fund to maintain accounts for short sales of
securities;
6
<PAGE> 37
(h) purchase the securities of any issuer, if, as a result, more than
10% of the value of a Fund's net assets would be invested in securities that are
subject to legal or contractual restrictions on resale ("restricted
securities"), in any combination of securities for which there are no readily
available market quotations, or in repurchase agreements maturing in more than
seven days;
(i) engage in the underwriting of securities except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing of a
portfolio security;
(j) purchase or sell real estate or interests therein, although it may
purchase securities of issuers which engage in real estate operations and may
purchase and sell securities which are secured by interests in real estate;
therefore, the Fund may invest in publicly-held real estate investment trusts or
marketable securities of companies which may represent indirect interests in
real estate such as real estate limited partnerships which are listed on a
national exchange, however, the Fund will not invest more than 10% of its assets
in any one or more real estate investment trusts; and
(k) invest more than 25% of the value of the Fund's total assets in one
particular industry, except for temporary defensive purposes; for purposes of
this limitation, utility companies will be divided according to their services
(e.g. gas, electric, water and telephone) and each will be considered a separate
industry; this restriction does not apply to investments in U.S. Government
securities, and investments in certificates of deposit and bankers' acceptances
are not considered to the investments in the banking industry.
Non-fundamental policies may be changed by the Board of Trustees,
without shareholder approval. As a matter of non-fundamental policy, the Fund
will not:
(a) purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which invest in or sponsor such programs;
(b) invest for the purpose of exercising control or management of
another company;
(c) invest in securities of any open-end investment company, except in
connection with a merger, reorganization or acquisition of assets and except
that the Fund may purchase securities of money market mutual funds, but such
investments in money market mutual funds may be made only in accordance with the
limitations imposed by the 1940 Act and the rules thereunder, as amended; and
(d) invest more than 5% of its total assets in securities of companies
having a record, together with predecessors, of less than three years of
continuous operation; this limitation shall not apply to U.S. Government
securities.
So long as percentage restrictions are observed by the Fund at the time
it purchases any security, changes in values of particular Fund assets or the
assets of the Fund as a whole will not cause a violation of any of the foregoing
fundamental or non-fundamental restrictions.
7
<PAGE> 38
INVESTMENT MANAGER
The Trust on behalf of the Fund has entered into an investment
management agreement with Olstein & Associates, L.P. (the "Investment Manager"),
effective as of August 18, 1995 (the "Investment Management Agreement"), for the
provision of investment advisory services, subject to the supervision and
direction of the Trust's Board of Trustees. Pursuant to the Investment
Management Agreement, the Fund is obligated to pay the Investment Manager a
monthly fee equal to an annual rate of 1% of the Fund's average daily net
assets. This fee is higher than that normally charged by funds with similar
investment objectives. The advisory fee payable to the Investment Manager in
connection with the services provided to the Fund for the fiscal year ended
August 31, 1997, and the period September 21, 1995 (commencement of operations)
through August 31, 1996 amounted to $1,375,148 and $887,728, respectively.
The Investment Management Agreement is subject to annual renewal, and
will be renewed each year only so long as such renewal and continuance are
specifically approved at least annually by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund, and only if the terms
of the renewal thereof have been approved by the vote of a majority of the
Trustees of the Fund who are not parties thereto or interested persons of any
such party (the "Independent Trustees"), cast in person at a meeting called for
the purpose of voting on such approval. The Agreement will terminate
automatically in the event of its assignment.
The Investment Manager is organized as a New York limited partnership
and is controlled and operated by its general partner, Olstein, Inc., a New York
corporation which is wholly-owned by Robert A. Olstein. The Investment Manager
has twenty limited partners, who will receive a portion of the income derived
from the advisory fee received by Olstein & Associates, L.P. ("Olstein &
Associates"). In addition, some of the limited partners are brokers or dealers
who may receive up-front commissions from Olstein & Associates for sales of Fund
shares, distribution fees for ongoing marketing of Fund shares under a Plan of
Distribution adopted pursuant to Rule 12b-1 under the 1940 Act (the "12b-1
Plan"), or compensation as broker-dealer employees of companies who execute
portfolio transactions for the Fund.
DISTRIBUTORS
Rodney Square Distributors, Inc., a wholly owned subsidiary of
Wilmington Trust Company ("RSD"), and Olstein & Associates act as distributors
of the Fund's shares under a distribution agreement (the "Distribution
Agreement") approved by the Board of Trustees of the Trust on behalf of the
Fund. RSD and Olstein & Associates (together the "Distributors") will assist in
the sale and distribution of the Fund's shares as well as assisting with the
servicing of shareholder accounts.
Olstein & Associates has sole authority to enter into agreements with
Selling Dealers, and is responsible for the payment of any up-front commissions
and 12b-1 fees payable to Selling Dealers under selling dealer agreements. RSD
is responsible for evaluating and recommending prospective selling dealers,
maintaining its broker-dealer registration in all 50 states, and assisting
Rodney Square Management Corporation ("Rodney Square") and Olstein & Associates
in the preparation of reports relating to payments made under the 12b-1 plan.
The Distribution Agreement also provides that the
8
<PAGE> 39
Distributors, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of their duties or by reason of reckless disregard
of their obligations and duties under the agreement, will not be liable to the
Trust or its shareholders for losses arising in connection with the sale of Fund
shares.
The Distribution Agreement became effective as of August 18, 1995, and
is subject to renewal on an annual basis. The Agreement will be renewed each
year if its continuance is approved at least annually by a majority of the
Trustees, including a majority of the Independent Trustees or, by a vote of a
majority of the outstanding voting securities of the Fund. The Distribution
Agreement terminates automatically in the event of its assignment. The
Distribution Agreement is also terminable without payment of a penalty (i) as to
the Distributors, either together or individually, by the Fund (by vote of a
majority of the Independent Trustees or by a vote of the outstanding voting
securities of the Fund) on not less than sixty (60) days' written notice to the
affected party; or (ii) as to RSD, by Olstein & Associates upon sixty (60) days'
written notice to RSD and the Fund; or (iii) as to either Distributor's own
participation, by such Distributor upon sixty (60) days' written notice to the
affected parties.
DISTRIBUTION PLAN
As noted in the Fund's prospectus, the Fund has adopted a plan pursuant
to Rule 12b-1 under the 1940 Act (the "Plan") whereby the Fund will pay 1.00%
per annum of its average daily net assets to compensate the Distributors or
other persons for expenses incurred in connection with the distribution of the
Fund's shares and the servicing of shareholder accounts. The fees are paid on a
monthly basis, based on the Fund's average daily net assets. Included within the
1.00% payable under the Plan is a 0.75% fee that may be paid to persons as
compensation for time spent and expenses incurred in the distribution and
promotion of the Fund's shares, including but not limited to, sales calls and
presentations to potential shareholders, the printing of prospectuses and
reports used for sales purposes, expenses of preparation and printing of sales
literature and related expenses, advertisements, and other distribution-related
expenses as well as any distribution or service fees paid to securities dealers
or others who have executed a dealer agreement with the Distributor. In
addition, the Plan includes a payment of 0.25% per annum of average daily net
assets of the Fund for shareholder servicing costs. Any expense of distribution
in excess of 1.00% per annum will be borne by the Investment Manager without any
reimbursement or payment by the Fund.
The Plan has been approved by the Trust's Board of Trustees, including
all of the Independent Trustees as defined in the 1940 Act. The Board of
Trustees has determined that a consistent cash flow resulting from the sale of
new shares is necessary and appropriate to meet redemptions and to take
advantage of buying opportunities without having to make unwarranted
liquidations of portfolio securities. The Board therefore believes that it will
likely benefit the Fund to have monies available for the direct distribution
activities of the Distributors in promoting the sale of the Fund's shares, and
to avoid any uncertainties as to whether other payments by the Fund constitute
distribution expenses on behalf of the Fund. The Board of Trustees, including
the Independent Trustees, has concluded that in the exercise of their reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders. The Plan
must be renewed annually by the Board of Trustees, including a majority of the
Independent Trustees who have no direct or indirect financial interest in the
operation of the Plan, cast in person at a meeting called for
9
<PAGE> 40
that purpose. It is also required that the selection and nomination of such
Trustees be done by the Independent Trustees.
The Plan and any related agreement may not be amended to increase
materially the amounts to be spent for distribution expenses without approval by
a majority of the Fund's outstanding shares, and all material amendments to the
Plan or any related agreements shall be approved by a vote of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on any
such amendment.
The Distributors are required to report in writing to the Board of
Trustees, at least quarterly, on the amounts and purpose of any payment made
under the Plan, as well as to furnish the Board with such other information as
may reasonably be requested in order to enable the Board to make an informed
determination of whether the Plan should be continued.
During the fiscal year ended August 31, 1997 and the period September
21, 1995 (commencement of operations) through August 31, 1996, the Fund paid a
total of $1,375,148 and $887,728, respectively, under the Plan for expenses
incurred in connection with the distribution of the Fund's shares and the
servicing of shareholder accounts. During the fiscal year ended August 31, 1997,
Olstein & Associates retained $6,745 of the fees paid pursuant to the Plan and
paid the balance to financial institutions or other entities ("Selling
Dealers").
ADMINISTRATOR
Rodney Square Management Corporation, 1100 North Market Street,
Wilmington, DE 19890-0001, provides certain administrative services to the Fund
pursuant to an Administrative Services Agreement.
Under the Administrative Services Agreement, the administrator: (1)
coordinates with the Custodian and monitors the custodial, transfer agency and
accounting services provided to the Fund; (2) coordinates with and monitors any
other third parties furnishing services to the Fund; (3) provides the Fund with
necessary office space, telephones and other communications facilities and
personnel competent to perform administrative and clerical functions; (4)
maintains such books and records of the Fund as may be required by applicable
federal or state law and supervises the maintenance of such books and records if
maintained by third parties; (5) prepares or supervises the preparation by third
parties of all federal, state and local tax returns and reports of the Fund
required by applicable law; (6) prepares and, after approval by the Fund, files
and arranges for the distribution of proxy materials and periodic reports to
shareholders of the Fund as required by applicable law; (7) prepares and after
approval by the Fund, arranges for the filing of such registration statements
and other documents with the Securities and Exchange Commission (the "SEC") and
other federal and state regulatory authorities as may be required by applicable
law; (8) reviews and submits to the officers of the Trust for their approval
invoices or other requests for payment of the Fund's expenses and instructs the
Custodian to issue checks in payment thereof; (9) assists the Fund in the
preparation of documents and information needed for meetings of the Board of
Trustees and prepares the minutes of Board meetings; (10) monitors the Fund's
compliance with applicable state securities laws; (11) assists the Distributors
with the review of advertising literature and the submission of such advertising
literature to the National Association of Securities Dealers (the "NASD") for
review and approval under applicable NASD rules;
10
<PAGE> 41
(12) assists the Distributors with the preparation of quarterly reports to the
Board of Trustees relating to the distribution plan adopted by the Fund pursuant
to Rule 12b-1; and (13) takes such other action with respect to the Fund as may
be necessary in the opinion of the Administrator to perform its duties under the
agreement.
Rodney Square has entered into an agreement to assign to PFPC Inc. all
of its service agreements, including the Administration Services Agreement, the
Transfer Agency Agreement and Accounting Services Agreement with the Trust.
Olstein & Associates has entered into a conversion agreement with Firstar Trust
Company ("Firstar") which contemplates the appointment of Firstar as successor
Administrator, Transfer Agent and Fund Accounting/Pricing Agent to the Trust.
However, the appointment of Firstar is subject to review and approval by the
Trust's Board of Trustees. In any event, PFPC Inc. is in a position to provide
the services currently being provided to the Fund by Rodney Square. Once the
Trust's Board of Trustees has appointed the successor Administrator, Transfer
Agent and Fund Accounting/Pricing Agent, this Prospectus will be amended to
reflect the change.
ALLOCATION OF PORTFOLIO BROKERAGE
The Fund's portfolio securities transactions are placed by the
Investment Manager. The objective of the Fund is to obtain the best available
prices in its portfolio transactions, taking into account the costs, promptness
of executions and other qualitative considerations. There is no pre-existing
commitment to place orders with any broker, dealer or member of an exchange. The
Investment Manager evaluates a wide range of criteria in seeking the most
favorable price and market for the execution of transactions, including the
broker's commission rate, execution capability, positioning and distribution
capabilities, information in regard to the availability of securities, trading
patterns, statistical or factual information, opinions pertaining to trading
strategy, back office efficiency, ability to handle difficult trades, financial
stability, and prior performance in serving the Investment Manager and its
clients. In transactions on equity securities and U.S. Government securities
executed in the over-the-counter market, purchases and sales are transacted
directly with principal market-makers except in those circumstances where, in
the opinion of the Investment Manager, better prices and executions are
available elsewhere.
The Investment Manager, when effecting purchases and sales of portfolio
securities for the account of the Fund, will seek execution of trades either (i)
at the most favorable and competitive rate of commission charged by any broker,
dealer or member of an exchange, or (ii) at a higher rate of commission charges,
if reasonable, in relation to brokerage and research services provided to the
Fund or the Investment Manager by such member, broker, or dealer. Such services
may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale,
statistical or factual information, or opinions pertaining to investments. The
Investment Manager may use research and services provided to it by brokers and
dealers in servicing all its clients, including the Fund, and not all such
services will be used by the Investment Manager in connection with the Fund.
Brokerage may also be allocated to dealers in consideration of the Fund's share
distribution but only when execution and price are comparable to that offered by
other brokers. During the fiscal year ended August 31, 1997, the Fund paid
$571,532 in brokerage commissions.
11
<PAGE> 42
During the period September 21, 1995 (commencement of operations) through August
31, 1996, the Fund paid $421,109 in brokerage commissions.
The Investment Manager, which is a member of the NASD and a
broker-dealer registered under the Securities Exchange Act of 1934, and certain
other Fund affiliates, may act as brokers to execute transactions for the Fund
subject to procedures set forth in Rule 17e-1 under the 1940 Act designed to
ensure the fairness of such transactions, which include making quarterly reports
to the Board of Trustees regarding such brokerage transactions. As a result, in
order for such persons to effect any portfolio transactions for the Fund on an
exchange, the commissions, fees or other remuneration received must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow the Investment Manager or other affiliated
brokers to receive no more than the remuneration which would be expected to be
received by an unaffiliated broker in an arm's-length transaction of a like size
and nature.
The following table shows the amounts of brokerage commissions paid by
the Fund to affiliated broker-dealers during the two most recently completed
fiscal periods. The table also indicates the identity of such brokers and the
reasons for their affiliation, as well as the percentage of the Fund's total
dollar amount of commission -- based transactions, and the percentage of the
Fund's total commissions paid, during the Fund's most recently completed fiscal
year.
<TABLE>
<CAPTION>
Percentage of Reason
Brokerage Percentage of Fund's Total for
Commissions Fund's Total Commission Affiliation
Paid Commissions based -----------
FYE FYE for Transactions for
Broker-Dealer 8/31/97 8/31/96* FYE 8/31/97 FYE 8/31/96
------------- ------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Albert Freid Co. $33,354 $30,185 5.84% 7.17% Ltd. Ptnr. of
Investment
Manager
Bear, Stearns Securities Employee's
Corp. $52,049 $27,940 9.11% 6.63% spouse is
Limited
Partner of
Investment
Manager
Olstein & Associates, L.P. $143,538 $ 9,861 25.11% 2.34% Manager
and Co-
Underwriter
of Fund
Brean Murray Foster
Securities(1) -0- $ 6,072 1.44%
</TABLE>
*Since commencement of operations on 9/21/95.
(1) Former Limited Partner of the Investment Manager.
12
<PAGE> 43
The Investment Manager may from time to time provide investment
management services to individuals and other institutional clients, including
corporate pension plans, profit-sharing and other employee benefit trusts, and
other investment pools. There may be occasions on which other investment
advisory clients advised by the Investment Manager may also invest in the same
securities as the Fund. When these clients buy or sell the same securities at
substantially the same time, the Investment Manager may average the transactions
as to price and allocate the amount of available investments in a manner which
it believes to be equitable to each client, including the Fund.
On the other hand, to the extent permitted by law, the Investment Manager may
aggregate the securities to be sold or purchased for the Fund with those to be
sold or purchased for other clients managed by it in order to obtain lower
brokerage commissions, if any.
The Investment Manager is responsible for making the Fund's portfolio
decisions subject to the limitations described in the prospectus. The Board of
Trustees may however impose limitations on the allocation of portfolio
brokerage.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 15, 1997 the following shareholders were known to own of
record more than 5% of the outstanding shares of the Fund:
<TABLE>
<CAPTION>
Name and Address Percentage Ownership
---------------- --------------------
<S> <C>
The Lupa Family Trust 9.20%
ATTN Gary Gladstein
c/o Soros Fund Management
888 Seventh Ave, 33rd Floor
New York, NY 10106
</TABLE>
PURCHASE OF SHARES
The shares of the Fund are continuously offered by the Distributors.
Orders will not be considered complete until receipt by Rodney Square and
acceptance by the Distributors of a completed account application form, and
receipt of payment for the shares purchased. Once the completed account
application and payment are received, orders will be confirmed at the next
determined net asset value (based upon valuation procedures described in the
prospectus) as of the close of business of the business day on which the
completed order is received. Completed orders received by the Fund after the
close of the business day will be confirmed at the next day's price.
13
<PAGE> 44
REDEMPTIONS
Under normal circumstances investors may redeem shares at any time,
subject to any applicable contingent deferred sales charge ("CDSC"). Telephone
redemption privileges are available, upon written request, for amounts up to
$50,000. The redemption price will be based upon the net asset value per share
next determined after receipt of the redemption request, less the amount of any
applicable CDSC, provided the redemption has been submitted in the manner
described in the prospectus. The redemption price may be more or less than your
cost, depending upon the net asset value per share at the time of redemption.
Payment for shares tendered for redemption is generally made by check
within seven days after tender in proper form, or earlier if required under
applicable law, except that the Fund reserves the right to suspend the right of
redemption, or to postpone the date of payment upon redemption beyond seven
days, (i) for any period during which the New York Stock Exchange (the "NYSE")
is closed, or trading on the NYSE is restricted by the SEC, (ii) for any period
during which an emergency exists as determined by the SEC as a result of which
disposal of securities owned by the Fund is not reasonably predictable or it is
not reasonably practicable for the Fund to fairly determine the value of its net
assets, or (iii) for such other periods as the SEC may by order permit for the
protection of shareholders of the Fund.
Pursuant to the Fund's Agreement and Declaration of Trust, payment for
shares redeemed may be made either in cash or in-kind, or partly in cash and
partly in-kind. However, the Fund has elected, pursuant to Rule 18f-1 under the
1940 Act, to redeem its shares solely in cash up to the lesser of $250,000 or 1%
of the net assets of the Fund, during any 90-day period for any one shareholder.
Payments in excess of this limit will also be made wholly in cash unless the
Board of Trustees believes that economic conditions exist which would make such
a practice detrimental to the best interests of the Fund. Any portfolio
securities paid or distributed in-kind would be valued as described under "Net
Asset Value." In the event that an in-kind distribution is made, a shareholder
may incur additional expenses, such as the payment of brokerage commissions, on
the sale or other disposition of the securities received from the Fund. In-kind
payments need not constitute a cross-section of the Fund's portfolio. Where a
shareholder has requested redemption of all or a part of the shareholder's
investment, and where the Fund completes such redemption in-kind, the Fund will
not recognize gain or loss for federal tax purposes, on the securities used to
complete the redemption but the shareholder will recognize gain or loss equal to
the difference between the fair market value of the securities received and the
shareholder's basis in the Fund shares redeemed.
14
<PAGE> 45
OFFICERS AND TRUSTEES OF THE FUND
The Trustees and principal executive officers and their principal
occupations for the past five years are listed below.
<TABLE>
<CAPTION>
Position and Office Principal Occupation
Name and Address Age with the Trust during the Past Five Years
---------------- --- -------------- --------------------------
<S> <C> <C> <C>
Robert A. Olstein* 56 Chairman and President President, Olstein &
4 Manhattanville Road Associates, L.P., since
Purchase, NY 10577 1994; President, Olstein,
Inc. since June, 1994;
Senior Vice
President/Senior
Portfolio Manager,
Smith Barney Inc. from
1982 until 1994.
Neil C. Klarfeld* 52 Trustee Executive Vice
499 Park Avenue President, Park Tower
New York, NY 10022 Realty Corp., since
1979.
Fred W. Lange 64 Trustee President and Portfolio
199 Stanley Avenue Manager, Lange Staten
Island, NY 10301 Financial Services since
1972; Member of the
Board of Trustees of
Wagner College.
John Lohr 52 Trustee Principal, Lockwood
10 Valley Stream Parkway Financial Group Ltd.,
Malvern, PA 19355 since January 1996;
Attorney, sole
practitioner, from 1995
until 1996; Senior Vice
President, Smith Barney
Inc., from 1987 until
1995.
D. Michael Murray 57 Trustee President, Murray,
2715 M Street, NW, #300 Sheer & Montgomery,
Washington, DC 20007 since 1968.
Lawrence K. Wein 55 Trustee Managing Director of
55 Corporate Park Drive Global Transit Services,
Room 23D50 AT&T, Inc., since
Bridgewater, NJ 08807 1990.
</TABLE>
15
<PAGE> 46
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Erik K. Olstein* 30 Trustee, Secretary Vice President of Sales,
4 Manhattanville Road Assistant Treasurer and Olstein & Associates,
Purchase, NY 10577 Chief Compliance L.P. since 1994; Client
Officer Liaison, Smith Barney
Inc. from 1994 until
1995; Assistant OTC
Trader, Lehman
Brothers Inc. from 1993
until 1994; Officer and
Pilot, U.S. Navy from
1990 until 1993.
Michael Luper 29 Chief Accounting Vice President, Olstein
4 Manhattanville Road Officer and Treasurer & Associates, L.P. since
Purchase, NY 10577 1994; Client Liaison,
Smith Barney Inc. from
1994 until 1995; Auditor
(CPA), J. H. Cohn &
Company from 1991
until 1994.
Molly Graham 42 Assistant Secretary Fund Administration
1100 Nort Market Street Supervisor, Rodney
Wilmington, DE 19890 Square Management
Corporation since 1993;
Legal Assistant, Clark,
Ladner, Fortenbaugh &
Young from 1991 until
1993.
John J. Kelley 38 Assistant Treasurer Vice President, Rodney
1100 North Market Street Square Management
Wilmington, DE 19890 Corporation since 1995;
Assistant Vice President,
Rodney Square Management
Corp. from 1989 until 1995.
</TABLE>
- --------
* Trustees who are "interested persons" as defined in the Investment Company
Act of 1940.
16
<PAGE> 47
The officers conduct and supervise the daily business operations of the
Trust, while the Trustees, in addition to the functions set forth under
"Investment Manager," and "Distribution of Shares" review such actions and
decide on general policy. Compensation to officers and Trustees of the Trust who
are affiliated with the Investment Manager is paid by the Investment Manager and
not by the Trust. Information relating to the compensation to be paid to the
Trustees of the Trust is set forth below:
<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM
TRUST AND FUND COMPLEX
NAME AND POSITION PAID TO TRUSTEES
----------------- ----------------
<S> <C>
Robert A. Olstein*
Chairman and President None
Erik K. Olstein*
Trustee, Secretary and Assistant Treasurer None
Neil C. Klarfeld*
Trustee None
Fred W. Lange
Trustee $4,500
John Lohr
Trustee $4,500
D. Michael Murray
Trustee $4,500
Lawrence K. Wein
Trustee $4,500
</TABLE>
The interested Trustees of the Trust receive no compensation for their
service as Trustees. For their service as Trustees, the Independent Trustees
receive a $2,500 annual fee and $500 per meeting attended, as well as
reimbursement for expenses incurred in connection with attendance at such
meetings.
TAXATION
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). In order to qualify as a regulated
- --------
* Trustees who are "interested persons" as defined in the Investment Company
Act of 1940.
17
<PAGE> 48
investment company for federal income tax purposes, the Fund must meet certain
specific requirements, including:
(i) The Fund must maintain a diversified portfolio of securities,
wherein no security (other than U.S. Government securities and securities of
other regulated investment companies) can exceed 25% of the Fund's total assets,
and, with respect to 50% of the Fund's total assets, no investment (other than
cash and cash items, U.S. Government securities and securities of other
regulated investment companies) can exceed 5% of the Fund's total assets;
(ii) The Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) The Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income each fiscal year;
and
(iv) The Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets that
have been held by the Fund for less than three months ("short-short income").
The 1997 Act repealed the 30% short-short income test for tax years of regulated
investment companies beginning after August 5, 1997; however, this rule may have
continuing effect in some states for purposes of classifying the Fund as a
regulated investment company under state law.
To the extent the Fund qualifies for treatment as a regulated
investment company, it will not be subject to federal income tax on income and
net capital gains paid to shareholders in the form of dividends or capital gains
distributions.
The Code requires the Fund to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the twelve month period ending October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to the Fund)
to you by December 31 of each year in order to avoid federal excise taxes. The
Fund intends as a matter of policy to declare and pay sufficient dividends
annually to avoid excise tax but does not guarantee and can give no assurances
that its distributions will be sufficient to eliminate all such taxes.
Distributions declared by the Fund during October, November or December to
shareholders of record during such month and paid by January 31 of the following
year will be taxable to shareholders in the calendar year in which they are
declared, rather than the calendar year in which they are received.
Shareholders will be subject to federal income taxes on distributions
made by the Fund whether received in cash or additional shares of the Fund.
Distributions of net investment income and net short-term capital gains, if any,
will be taxable to shareholders as ordinary income. Distributions of net
long-term capital gains, if any, will be taxable to shareholders as long-term
capital gains, without regard to how long a shareholder has held shares of the
Fund. A loss on the sale of shares held for six months or less will be treated
as a long-term capital loss to the extent of any long-term capital gain dividend
paid to the shareholder with respect to such shares.
18
<PAGE> 49
Under the 1997 Act, the Fund may designate its capital gain
distributions to you according to the following categories of holding periods:
"Pre-Act long-term capital gains": securities sold by the Fund before
May 7, 1997, that were held for more than 12 months. These gains will be taxable
to individual investors at a maximum rate of 28%.
"Mid-term capital gains" or "28 percent rate gain": securities sold by
the Fund after July 28, 1997 that were held more than one year but not more than
18 months. These gains will be taxable to individual investors at a maximum rate
of 28%.
"1997 Act long-term capital gains" or "20 percent rate gain":
securities sold by the Fund between May 7, 1997 and July 28, 1997 that were held
for more than 12 months, and securities sold by the Fund after July 28, 1997
that were held for more than 18 months. These gains will be taxable to
individual investors at a maximum rate of 20% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 10% for investors in the
15% federal income tax bracket.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
5-year gains are net gains on securities held for more than 5 years which are
purchased after December 31, 2000. For individuals who are subject to tax at
higher rate brackets, qualified 5-year gains are net gains on securities which
are purchased after December 31, 2000 and are held for more than 5 years.
Taxpayers subject to tax at the higher rate brackets may also make an election
for shares held on January 1, 2001 to recognize gain on their shares in order to
qualify such shares as qualified 5-year property. These gains will be taxable to
individual investors at a maximum rate of 18% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 18% for investors in the
15% federal income tax bracket.
Dividends eligible for designation under the dividends received
deduction and paid by the Fund may qualify in part for the 70% dividends
received deduction for corporations provided, however, that those shares have
been held for at least 45 days. Under the 1997 Act, the amount that the Fund may
designate as eligible for the dividends-received deduction will be reduced or
eliminated if the shares on which the dividends earned by the Fund were
debt-financed or held by the Fund for less than a 46-day period during a 90-day
period beginning 45 days before the ex-dividend date and ending 45 days after
the ex-dividend date. Similarly, if your Fund shares are debt-financed or held
by you for less than a 46-day period during a 90-day period beginning 45 days
before the ex-dividend date and ending 45 days after the ex-dividend date, then
the dividend-received deduction for Fund dividends on your shares may also be
reduced or eliminated. Even if designated as dividends eligible for the dividend
received deduction, all dividends (including any deducted portion) must be
included in your alternative minimum taxable income calculation.
The Fund will notify shareholders each year of the amount of dividends
and distributions, including the amount of any distribution of long-term capital
gains, and the portion of its dividends which may qualify for the 70% deduction.
19
<PAGE> 50
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Fund must recognize gain (but not loss) on any constructive
sale of an appreciated financial position in stock, a partnership interest or
certain debt instruments. The Fund will generally be treated as making a
constructive sale when it: 1) enters into a short sale on the same property, 2)
enters into an offsetting notional principal contract, or 3) enters into a
futures or forward contract to deliver the same or substantially similar
property. Other transactions (including certain financial instruments called
collars) will be treated as constructive sales as provided in Treasury
regulations to be published. There are also certain exceptions that apply for
transactions that are closed before the end of the 30th day after the close of
the taxable year.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative action at any time, and retroactively. Dividends and
distributions also may be subject to state and local taxes. Shareholders are
urged to consult their tax advisers regarding specific questions as to federal,
state and local taxes.
GENERAL INFORMATION
AUDITS AND REPORTS
The financial statements of the Fund are audited each year by Ernst &
Young LLP of Philadelphia, Pennsylvania, independent auditors. Shareholders
receive semi-annual and annual reports of the Fund including the annual audited
financial statements and a list of securities owned.
CODE OF ETHICS
The Fund has adopted a Code of Ethics for certain access persons of the
Trust, which includes its Trustees and certain officers and employees of the
Trust and the Investment Manager. The Code of Ethics is designed to ensure that
Fund insiders act in the interest of the Fund and its shareholders with respect
to any personal trading of securities. Under the Code of Ethics, access persons
are prohibited from knowingly buying or selling securities which are being
purchased, sold or considered for purchase or sale by the Fund. The Code of
Ethics contains even more stringent investment restrictions and prohibitions for
insiders who participate in the Fund's investment decisions. The Code of Ethics
also contains certain reporting requirements and securities trading clearance
procedures.
PERFORMANCE
Total return may be quoted in advertisements, shareholder reports or
other communications to shareholders. Total return is the total of all income
and capital gains paid to shareholders, assuming reinvestment of all
distributions, plus (or minus) the change in the value of the original
investment, expressed as a percentage of the purchase price. Occasionally, the
Fund may include its distribution rate in advertisements. The distribution rate
is the amount of distributions per share made by the Fund over a 12-month period
divided by the current maximum offering price.
20
<PAGE> 51
SEC rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation furnished by
the Fund be accompanied by certain standardized performance information computed
as required by the SEC. Total return quotations used by the Fund are based on
the standardized methods of computing performance mandated by the SEC. An
explanation of those and other methods used by the Fund to compute or express
performance follows.
As the following formula indicates, the average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period less any fees charged to all shareholder accounts and
annualizing the result. The calculation assumes the maximum sales load is
deducted from the initial $1,000 purchase order and that all dividends and
distributions are reinvested at the public offering price on the reinvestment
dates during the period. The quotation assumes the account was completely
redeemed at the end of each one, five or ten-year periods and assumes the
deduction of all applicable charges and fees. According to the SEC formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one, five or ten-year periods, determined at
the end of the one, five or ten-year periods (or a fractional
portion thereof).
The Fund's average annual return for the fiscal year ended August 31,
1997, without the CDSC applied, was 43.61%. The return with the CDSC applied was
41.11%. The Fund's average annual total return and aggregate total return for
the period from September 21, 1995 (commencement of operations) through August
31, 1997 were 27.76% and 61.16% respectively. With the CDSC applied, the average
annual total return and aggregate total return for the same period were 27.25%
and 59.91%, respectively.
Regardless of the method used, past performance is not necessarily
indicative of future results, but is an indication of the return to shareholders
only for the limited historical period used.
COMPARISONS AND ADVERTISEMENTS
To help investors better evaluate how an investment in a Fund might
satisfy their investment objective; advertisements, sales literature and other
shareholder communications regarding a Fund may discuss yield or total return
for such Fund as reported by various financial publications. Advertisements,
sales literature and shareholder communications may also compare yield or total
return
21
<PAGE> 52
to yield or total return as reported by other investments, indices, and
averages. The following publications, indices, and averages may be used:
<TABLE>
<CAPTION>
<S> <C>
Barron's Personal Investor
Business Week Personal Investing News
CDA Investment Technologies, Inc. Russell 2000 Index
Kiplinger's Personal Finance Russell 2000 Value and Growth Indexes
Consumer Digest S&P 500 Composite Stock Price Index
Financial World S&P SmallCap 600 Index
Forbes S&P MidCap 400 Index
Fortune S&P/Barra Growth & Value Indexes
Investment Company Data, Inc. Success
Investor's Daily The New York Times
Lipper Mutual Fund Performance Analysis U.S. News and World Report
Lipper Mutual Fund Indices USA Today
Money Wall Street Journal
Morningstar, Inc. Wiesenberger Investment Companies Services
Mutual Fund Values Wilshire Medium & Small Cap Indexes
Nasdaq Indexes
</TABLE>
A Fund may also from time to time along with performance advertisements, present
its investments, as of a current date, in the form of the "Schedule of
Investments" included in the Semi-Annual and Annual Reports to the shareholders
of the Trust.
FINANCIAL STATEMENTS
The financial statements and financial highlights of the Fund for its
fiscal year ended August 31, 1997 which appear in the Fund's Annual Report to
Shareholders and the report thereon by Ernst & Young LLP, the Fund's independent
auditors, also appearing therein, are incorporated by reference into this
Statement of Additional Information. The Annual Report may be obtained, without
charge, by writing or calling the Fund's Distributor at the address or number
listed on the cover page of this Statement of Additional Information.
22
<PAGE> 53
THE OLSTEIN FUNDS
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS:
(a) Financial Statements
See "Financial Statements" in Part B of this
Registration Statement which were previously filed
with the Securities and Exchange Commission via EDGAR
with the Fund's Annual Report on October 30, 1997 and
incorporated herein by reference.
(b) Exhibits:
(1) Agreement and Declaration of Trust.*
(2) By-laws.*
(3) Voting Trust Agreement: Not Applicable.
(4) Specimen copy of each security to be issued by
the registrant. Not Applicable.
(5) Investment Management Agreement between
Registrant and Olstein & Associates, L.P. dated
August 18, 1995.*
(6) (a) Distribution Agreement between the Registrant
and the Distributors (Rodney Square Distributors,
Inc. and Olstein & Associates, L.P.) dated August 18,
1995.*
(b) Mutual Fund Dealer Agreement between Olstein
& Associates, L.P. and Smith Barney Inc. dated
September 21, 1995.*
(c) Form of Selling Dealer Agreement between
Olstein & Associates, L.P. and Selected Dealers.*
(d) Selling Dealer Agreement between Olstein &
Associates, L.P. and Bear, Stearns Securities
Corp. dated November 30, 1995.*
(7) Bonus, Profit Sharing and Pension Contracts: Not
Applicable.
(8) Custody Agreements:
(a) Custody Agreement between the Registrant and
Wilmington Trust Company dated August 18, 1995. *
(b) Special Custody Account Agreement between the
Registrant, Wilmington Trust Company and Bear,
Stearns Securities Corp. dated August 18, 1995.*
<PAGE> 54
(9) Other Material Contracts:
(a) Administration Agreement between the
Registrant and Rodney Square Management
Corporation dated August 18, 1995.*
(b) Accounting Services Agreement between the
Registrant and Rodney Square Management
Corporation dated August 18, 1995.*
(c) Transfer Agency Agreement between the
Registrant and Rodney Square Management
Corporation dated August 18, 1995.*
(10) Opinion and Consent of Counsel as to the
Legality of the Securities to be Issued. Not
Applicable.
(11) Consent of Independent Auditors.
(12) All Financial Statements Omitted from Item 23.
Not Applicable.
(13) Letter of Understanding Relating to Initial
Capital.*
(14) Model Plans. Not Applicable.
(15) Plan of Distribution Pursuant to Rule 12b-1
under the Investment Company Act of 1940 for The
Olstein Financial Alert Fund effective as of August
18, 1995.*
(16) Schedule for Computation of Performance
Quotations.
(17) Financial Data Schedule.**
(18) Plan Pursuant to Rule 18f-3. Not Applicable.
(19) Trustees Power of Attorney.*
* Previously filed with the Securities and Exchange Commission with
Post-Effective Amendment No. 1 on Form N1-A on March 29, 1996 and incorporated
herein by reference.
** Previously filed with the Securities and Exchange Commission with the Funds'
Form NSAR-B on October 30, 1997 and incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED OR UNDER COMMON CONTROL WITH THE
REGISTRANT:
NONE.
-2-
<PAGE> 55
ITEM 26. NUMBER OF HOLDERS OF SECURITIES:
The number of record holders of securities of the
Registrant as of October 31, 1997 is as follows:
<TABLE>
<CAPTION>
(1) (2)
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
The Olstein Financial Alert Fund 2001
</TABLE>
ITEM 27. INDEMNIFICATION:
Under the terms of the Delaware Business Trust Act and the
Registrant's Agreement and Declaration of Trust and By-Laws, no officer or
trustee of the Fund shall have any liability to the Fund or its shareholders for
damages, except to the extent such limitation of liability is precluded by
Delaware law, the Agreement and Declaration of Trust, or the By-Laws.
Subject to the standards and restrictions set forth in the
Fund's Agreement and Declaration of Trust, the Delaware Business Trust Act,
Section 3817, permits a business trust to indemnify any trustee, beneficial
owner, or other person from and against any claims and demands whatsoever.
Section 3803 protects a Trustee, when acting in such capacity, from liability to
any person other than the business trust or beneficial owner for any act,
omission, or obligation of the business trust or any trustee thereof, except as
otherwise provided in the Agreement and Declaration of Trust.
The Agreement and Declaration of Trust provides that the
Trustees shall not be liable for any neglect or wrong-doing of any officer,
agent, employee, manager or underwriter of the Fund, nor shall any Trustee be
responsible for the act or omission of any other Trustee. Subject to the
provisions of the By-Laws, the Fund may indemnify to the fullest extent each
Trustee and officer of the Fund acting in such capacity, except that no
provision in the Agreement and Declaration of Trust shall be effective to
protect or purport to protect and indemnify any Trustee or officer of the Fund
from or against any liability to the Fund or any shareholder to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
The By-Laws provide indemnification for each Trustee and
officer who is a party or is threatened to be made a party to any proceeding, by
reason of service in such capacity, to the fullest extent, if it is determined
that the Trustee or officer acted in good faith and reasonably believed: (a) in
the case of conduct in his official capacity as an agent of the Fund, that his
conduct was in the Fund's best interests and (b) in all other cases, that his
conduct was at least not opposed to the Fund's best interests and (c) in the
case of a criminal proceeding, that he had no reasonable cause to believe the
conduct of that person was unlawful. However, there shall be no indemnification
for any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the Trustee's or officer's office. Further, no indemnification shall be made:
(a) In respect of any proceeding as to which any Trustee
or officer of the Fund shall have been adjudged to be
liable on the basis that personal benefit was
improperly received by him, whether or not the
benefit resulted from an action taken in the person's
official capacity; or
(b) In respect of any proceeding as to which any Trustee
or officer of the Fund shall have been adjudged to be
liable in the performance of that person's duty to
the
-3-
<PAGE> 56
Fund, unless and only to the extent that the court in
which that action was brought shall determine upon
application that in view of all the relevant
circumstances of the case, that person is fairly and
reasonably entitled to indemnity for the expenses
which the court shall determine; however, in such
case, indemnification with respect to any proceeding
by or in the right of the Fund or in which liability
shall have been adjudged by reason of the disabling
conduct set forth in the preceding paragraph shall be
limited to expenses; or
(c) Of amounts paid in settling or otherwise disposing of
a proceeding, with or without court approval, or of
expenses incurred in defending a proceeding which is
settled or otherwise disposed of without court
approval, unless the required court approval set
forth in the By-Laws is obtained.
In any event, the Fund shall indemnify each officer and
Trustee against reasonable expenses incurred in connection with the successful
defense of any proceeding to which each such officer or Trustee is a party by
reason of service in such capacity, provided that the Board of Trustees,
including a majority who are disinterested, non-party trustees, also determines
that such officer or Trustee was not liable by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of his or her duties of
office. The Fund shall advance to each officer and Trustee who is made a party
to a proceeding by reason of service in such capacity the expenses incurred by
such person in connection therewith, if (a) the officer or Trustee affirms in
writing that his good faith belief that he has met the standard of conduct
necessary for indemnification, and gives a written undertaking to repay the
amount of advance if it is ultimately determined that he has not met those
requirements, and (b) a determination that the facts then known to those making
the determination would not preclude indemnification.
The Trustees and officers of the Fund are entitled and
empowered under the Declaration of Trust and By-Laws, to the fullest extent
permitted by law, to purchase errors and omissions liability insurance with
assets of the Fund, whether or not the Fund would have the power to indemnify
him against such liability under the Declaration of Trust or By-Laws.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Trustees, officers, the underwriter
or control persons of the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in that
Act and is, therefore, unenforceable. See also Item 32.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT MANAGER:
In addition to acting as the investment manager and
co-underwriter for the Fund, Olstein & Associates, L.P. provides brokerage
services and related investment advice to institutional and individual
investors.
-4-
<PAGE> 57
ITEM 29. PRINCIPAL UNDERWRITERS:
(a) (i) Rodney Square Distributors, Inc. ("RSD"),
the co-underwriter and co-distributor for
the Registrant's securities, currently acts
as principal underwriter for the following
entities:
The Rodney Square Fund
The Rodney Square Multi-Manager Fund
The Rodney Square Tax-Exempt Fund
The Rodney Square Strategic Fixed-Income
Fund
Brazos Mutual Funds
Heitman Real Estate Fund- Heitman/PRA
Institutional Class
Kalmar Pooled Investment Trust
Kiewit Mutual Fund
The Mallard Fund, Inc.
1838 Investment Advisors Funds
The Homestate Group
(ii) Olstein & Associates, L.P. ("Olstein"), the
co-underwriter for the Registrant's
securities, does not act as principal
underwriter for any other investment
companies, but acts as the investment
adviser for the Fund.
(b) The tables below set forth certain information as to
the Distributors' Directors, Officers, Partners and
Control Persons:
(i) RSD Table
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER THE REGISTRANT
- ---------------- ----------- --------------
<S> <C> <C>
Jeffrey O. Stroble President, Secretary None
1105 North Market St. Treasurer & Director
Wilmington, DE 19890
Martin L. Klopping Director None
1100 North Market St.
Wilmington, DE 19890
Cornelius G. Curran Vice President None
1105 North Market St.
Wilmington, DE 19890
</TABLE>
(ii) Olstein, Inc. is the General Partner of
Olstein. The following is a list of the
individuals who hold positions either with
Olstein, Inc. or are limited partners of
Olstein.
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER THE REGISTRANT
- ---------------- ----------- --------------
<S> <C> <C>
Robert A. Olstein President of Chairman and
4 Manhattanville Road Olstein, Inc.; President
</TABLE>
-5-
<PAGE> 58
<TABLE>
<CAPTION>
<S> <C> <C>
Purchase, New York 10577 Limited Partner
of Olstein
POSITIONS AND POSITIONS AND
NAME AND OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER THE REGISTRANT
- ---------------- ----------- --------------
Erik K. Olstein Olstein, Inc., Trustee,
4 Manhattanville Road Vice President- Secretary and Assistant Treasurer
Purchase, New York 10577 Sales
Michael Luper Olstein, Inc., Chief Accounting Officer
4 Manhattanville Road Vice President- and Treasurer
Purchase, New York 10577 Finance
Olstein, Inc. General Partner None
4 Manhattanville Road
Purchase, New York 10577
Cash Asmussen Limited Partner None
P.O. Box 1861
Laredo, TX 78044-1861
Nick Awad Limited Partner None
144 East 44th Street
New York, NY 10017
Dr. Lewis Bobroff Limited Partner None
4 Catherine Court
Suffern, NY 10901-3104
Harry & Roberta Boltin Limited Partner None
6 Laveta Place
Nyack, NY 10960-1604
James Calabrese Limited Partner None
13 Hendrie Lane
Riverside, CT 06878-1810
Catherine Corless Limited Partner None
44 Halley Drive
Pomona, NY 10970-2003
Patrick Donaghy Limited Partner None
15 East 26th Street
New York, NY 10010-1501
Anita Fleishman Limited Partner None
11 West 69th Street
New York, NY 10023
Albert Fried & Co. Limited Partner None
40 Exchange Place
New York, NY 10005-2701
</TABLE>
-6-
<PAGE> 59
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER THE REGISTRANT
- ---------------- ----------- --------------
<S> <C> <C>
Neil Klarfeld Limited Partner Trustee
29 Tamarack Lane
Pomona, NY 10970-2006
Dr. David Langerman Limited Partner None
2 Perth Court
West Nyack, NY 10994-1307
Douglas & Diane LeGrande Limited Partner None
97 Birch Hill Road
Weston, CT 06883-1735
Rochelle Nechin Limited Partner None
128 Prospect Avenue
Douglaston, NY 11363-1338
Joan Olstein Limited Partner None
115-7 Hilltop Road
Kinnelon, NJ 07405
Judith Pomerantz Limited Partner None
2 White Pine Drive
Sterlington, NY 10974
Marilyn Portnoy Limited Partner None
7 White Birch Drive
Pomona, NY 10970-3403
Dr. Gary Roebuck Limited Partner None
43 Halley Drive
Pomona, NY 10970-2001
Marie Romano Limited Partner None
447 Windham Court North
Wyckoff, NJ 07481-3472
John Vazzana Limited Partner None
40 Exchange Place
New York, NY 10005-2701
Edwin & Harilyn Zimmerman Limited Partner None
13652 Rivoli Drive
Palm Beach Gardens, FL 33410
</TABLE>
(c) Not applicable.
-7-
<PAGE> 60
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS:
Each account, book or other document required to be
maintained by Section 31(a) of the Investment Company Act of
1940 (the "1940 Act") and Rules (17 CFR 270-31a-1 to 31a-3)
promulgated thereunder, is maintained by the Registrant at 4
Manhattanville Road, Purchase, NY 10577, except for those
maintained by the Registrant's custodian Wilmington Trust
Company, 1100 North Market Street, Wilmington, DE 19890 and
the Registrant's Administrator, Transfer, Redemption, Dividend
Disbursing and Accounting Agent, Rodney Square Management
Corporation, Rodney Square North, 1100 North Market Street,
Wilmington, DE 19890.
ITEM 31. MANAGEMENT SERVICES:
There are no management related service contracts not
discussed in Part A or Part B.
ITEM 32. UNDERTAKINGS
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish
each person to whom a prospectus is
delivered with a copy of the Registrant's
latest annual report for the fiscal year
ended August 31, upon request and without
charge.
(d) Registrant hereby undertakes, if requested
to do so by the holders of at least 10% of
the Registrant's outstanding shares, to
call a meeting of shareholders for the
purpose of voting upon the question of
removal of a trustee or trustees and to
assist in communication with other
shareholders, as directed by Section 16(c)
of the 1940 Act.
-8-
<PAGE> 61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and the Investment Company Act of 1940
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Purchase, and State of New
York, on the 22nd of December, 1997.
THE OLSTEIN FUNDS
By: /s/ Robert A. Olstein
--------------------------------------
Robert A. Olstein,
Chairman and President
Pursuant to the requirement of the Securities Act of 1933, this Registration
Statement has been signed below on by the following persons in the capacities
and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert A. Olstein Chairman and December 22, 1997
- ----------------------------- President
Robert A. Olstein
/s/ Erik K. Olstein Trustee and December 22, 1997
- ----------------------------- Secretary
Erik K. Olstein
/s/ Michael Luper Chief Accounting December 22, 1997
- ----------------------------- Officer and Treasurer
Michael Luper
- ----------------------------- Trustee December 22, 1997
Neil C. Klarfeld*
- ----------------------------- Trustee December 22, 1997
Fred W. Lange*
- ----------------------------- Trustee December 22, 1997
John Lohr*
- ----------------------------- Trustee December 22, 1997
D. Michael Murray*
- ----------------------------- Trustee December 22, 1997
Lawrence K. Wein*
</TABLE>
* By: /s/ Robert A. Olstein
---------------------------------------
Robert A. Olstein, Attorney-in-Fact
(Pursuant to Power of Attorney filed herewith)
<PAGE> 62
THE OLSTEIN FUNDS
EXHIBIT INDEX
Exhibit 11 Consent of Ernst & Young LLP, independent auditors
for Registrant
Exhibit 16 Schedule for Computation of Performance Quotations
-i-
<PAGE> 1
EXHIBIT 11
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "General Information" and "Financial
Statements" in the Statement of Additional Information and to the incorporation
by reference in this Post-Effective Amendment Number 4 to Registration
Statement Number 33-91770 (Form N-1A) of our report dated September 26, 1997,
on the financial statements and financial highlights of The Olstein Financial
Alert Fund (the "Fund") for the fiscal year ended August 31, 1997, included in
the Fund's Annual Report.
Philadelphia, Pennsylvania
December 26, 1997
<PAGE> 1
Exhibit 16
FUND NAME: OLSTEIN FINANCIAL ALERT FUND
(NON-STANDARDIZED RETURNS)
<TABLE>
<CAPTION>
1 YR INCEPTION
---- ---------
<S> <C> <C>
# YEARS IN PERIOD 1.00 1.947945
CUMULATIVE TOTAL RETURN
(Excluding CDSC) 43.61% 61.16%
CUMULATIVE TOTAL RETURN
(After Deducting CDSC) 41.11% 59.91%
AVERAGE ANNUAL TOTAL RETURN 43.61% 27.76%
MAXIMUM CDSC 2.50% 1.25%
</TABLE>
FOR THE ONE YEAR PERIOD ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
- ----------------------- ---------------------------
<S> <C>
(ERV/P) - 1 = T (ERV/P)1/N -1 =T
($1,436.12/1,000) -1 = T ($1,436.12/1,000) -1 = T
.4361 = T .4361 = T
43.61% = T 43.61% = T
</TABLE>
INCEPTION THROUGH AUGUST 31, 1997
<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
(Excluding Maximum CDSC)
- ------------------------
<S> <C>
(ERV/P) -1 = T (ERV/P)1/N -1 =T
($1,611.64/1,000) -1 = T ($1,611.64/1,000)1/1.947945 -1 = T
.6116 = T .2776 = T
61.16% = T 27.76% = T
</TABLE>
Cumulative Total Return (After Deducting Maximum CDSC)
- ------------------------------------------------------
(ERV/P) -1 = T
($1,599.14/1,000) -1 = T
.5991 = T
59.91% = T
<PAGE> 2
Exhibit 16
FUND NAME: OLSTEIN FINANCIAL ALERT FUND
(STANDARDIZED RETURNS)
<TABLE>
<CAPTION>
1 YR INCEPTION
---- ---------
<S> <C> <C>
# YEARS IN PERIOD 1.00 1.947945
AVERAGE ANNUAL TOTAL RETURN 41.11% 27.25%
MAXIMUM CDSC 2.50% 1.25%
</TABLE>
FOR THE ONE YEAR PERIOD ENDED AUGUST 31, 1997
Average Annual Total Return
- ---------------------------
(ERV/P)1/N -1 =T
($1,411.12/1,000)1 -1 = T
.4111 = T
41.11% = T
INCEPTION THROUGH AUGUST 31, 1997
Average Annual Total Return
- ---------------------------
(ERV/P)1/N -1 =T
($1,599.14/1,000) 1/1.947945 -1 = T
.2725 = T
27.25% = T
