<PAGE>
UNITED STATES File No. 33-92540
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 File No. 811-9048
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _______ [ ]
Post Effective Amendment No. 3 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No 5
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Farrell Alpha Strategies
(Exact name of Registrant as Specified in Charter)
780 Third Avenue
38th Floor
New York, New York 10017
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212) 319-3944
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Takeaki Nagashima, President
Farrell-Wako Global Investment Management, Inc.
780 Third Avenue, 38th Floor
New York, New York 10017
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(Name and Address of Agent for Service)
COPIES TO:
Monte Wetzler, Esq. Carolyn F. Mead, Esq.
Brown Raysman Millstein Felder & Steiner LLP FPS Services, Inc.
120 West Forty-Fifth Street 3200 Horizon Drive
New York, New York 10036 P.O. Box 61503
King of Prussia, Pennsylvania
19406-0903
Approximate date of proposed public offering:
It is proposed that this filing become effective: July 29, 1997
[X] immediately upon filing pursuant to Paragraph (b) of Rule 485.
[ ] on (date) , pursuant to Paragraph (b).
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[ ] 60 days after filing pursuant to paragraph (a).
[ ] on (date) pursuant to paragraph (a) of Rule 485.
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[ ] 75 days after filing pursuant to paragraph (a)(ii).
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
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If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
previously files post-effective amendment.
<TABLE>
<CAPTION>
Calculation of Registration Fee
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Title of Securities Number of Shares Proposed Maximum Proposed Maximum Amount of
Being Registered Being Registered Offering Price Aggregate Offering Registration
Per Share Price Fee
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<S> <C> <C> <C> <C>
Shares of 9.801 $7.36 $72,135.36 0
Beneficial
Interest
(without par
value)
</TABLE>
Registrant elects to calculate the maximum aggregate offering price pursuant to
Rule 24(e)-2 under the Investment Company Act of 1940, as amended. During the
fiscal year ended March 31, 1997, 4,618,074 of Registrant's shares of beneficial
interest were redeemed, of which 4,608,273 shares were used for reductions
pursuant to paragraph (c) of Rule 24(f)-2 in Registrant's Form 24f-2 Notice for
the year ended March 31, 1997. 9,801 shares is the amount of redeemed shares
used for reductions, pursuant to Rule 24e-2, of the number of shares for which
the registration fee is payable with respect to this Post-Effective Amendment.
None of the redeemed shares were used for reduction, pursuant to Rule 24e-2 in
previous post-effective amendments filed during the current fiscal year.
Pursuant to Rule 457(d) under the Securities Act of 1933, as amended, the
maximum public offering price of $7.36 per share on July 15, 1997 is the price
used as the basis for calculating the registration fee.
As filed with the U.S. Securities and Exchange TOTAL PAGES:
Commission on July 29, 1997 INDEX TO EXHIBITS, PAGE:
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<PAGE>
FARRELL ALPHA STRATEGIES
CROSS REFERENCE SHEET PURSUANT TO RULE 481a
<TABLE>
<CAPTION>
Form N-1A Item Caption in Prospectus
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Part A INFORMATION REQUIRED IN A PROSPECTUS
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<S> <C>
1. Cover Page Cover Page of Prospectus
2. Synopsis Prospectus Summary; Expense Summary
3. Condensed Financial Information *Financial Highlights
4. General Description of
Registrant Investment Objective and Policies;
Risk Factors; Prospectus Summary;
The Trust and the Fund; Investment
Limitations; Description of
Permitted Investments and Risk
Factors; General Information
5. Management of the Fund Prospectus Summary; Management of
the Fund
5A. Management's Discussion of Fund *Included in Registrant's Annual
Performance Report to Shareholders
6. Capital Stock and Other Prospectus Summary; General
Securities Information; Dividends and Taxes;
Net Asset Value
7. Purchase of Securities Being Prospectus Summary; How to Purchase
Offered Shares; Shareholder Services
8. Redemption or Repurchase Prospectus Summary; How to Redeem
Shares
9. Pending Legal Proceedings *
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
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10. Cover Page Cover Page of the Statement of
Additional Information
11. Table of Contents Table of Contents
12. General Information and History *Covered in Part A
13. Investment Objectives and Investment Policies and Techniques;
Policies Investment Restrictions; Portfolio
Transactions
14. Management of the Fund The Trust; Investment Advisory and
Other Services; Trustees and
Officers
15. Control Persons and Principal *Principal Shareholders
Holders of Securities
16. Investment Advisory and Other Investment Advisory and Other
Services Services
17. Brokerage Allocation and Other Portfolio Transactions
Practices
</TABLE>
Page 2
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Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
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(continued)
<TABLE>
<S> <C>
18. Capital Stock and Other Principal Shareholders
Securities
19. Purchase, Redemption and Purchases; Redemptions
Pricing of Securities Being
Offered
20. Tax Status Taxes
21. Underwriters Underwriter
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
Part C OTHER INFORMATION
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Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this Registration Statement.
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* Item is inapplicable at this time or answer is negative.
Page 3
<PAGE>
[LOGO OF
THE
JAPAN
ALPHA
FUND]
FARRELL ALPHA STRATEGIES PROSPECTUS
780 Third Avenue, 38th Floor New York, New York 10017
July 29, 1997
----------------------------------------
THE JAPAN ALPHA FUND
Farrell Alpha Strategies (the "Trust") is an open-end di-versified investment
company which currently consists of a separate investment fund called The Japan
Alpha Fund (the "Fund"). The Fund is a separate series of the Trust, which is
organized as a Delaware business trust. Farrell-Wako Global Investment
Management, Inc. (the "Advisor") serves as the investment advisor of the Fund
according to its in-vestment objectives. See "Management of the Fund."
The Fund seeks to achieve long-term capital appreciation by investing in eq-
uity securities of Japanese companies. Under normal circumstances, the Fund
will invest at least 80% of its total assets in equity securities of Japanese
companies. See "Investment Objective and Policies."
Shares of the Fund are offered primarily to certain individual and institu-
tional investors. The initial minimum investment in the Fund is $1,000. Subse-
quent investments will be accepted in amounts not less than $100. See "How to
Purchase Shares." Shares of the Fund are offered at net asset value per share
without a sales charge or 12b-1 distribution fee. Redemptions of the Fund's
shares are made at net asset value per share.
The Fund is designed for long-term investors and not as a trading vehicle,
and is not intended to present a complete investment program.
This Prospectus sets forth concisely the information regarding the Fund that
an investor should know before investing in the Fund. Investors should read
this Prospectus and retain it for future reference. Additional information
about the Fund is contained in the Statement of Additional Information dated
July 29, 1997, as amended from time to time, which has been filed with the U.S.
Securities and Exchange Commission and is available upon request, without
charge, by writing to the Fund at the address above or by calling (800) 471-7174
(or (212) 319-3944 for overseas investors). The Statement of Additional
Information is incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S.
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE U.S. SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary......................................................... 3
Expense Summary............................................................ 5
Financial Highlights....................................................... 6
The Trust and the Fund..................................................... 7
Investment Objective and Policies.......................................... 7
Risk Factors............................................................... 9
Description of Permitted Investment Practices and Risk Factors............. 10
Investment Limitations..................................................... 12
Management of the Fund..................................................... 13
How to Purchase Shares..................................................... 15
How to Redeem Shares....................................................... 18
Shareholder Services....................................................... 20
Net Asset Value............................................................ 20
Dividends and Taxes........................................................ 21
Performance Information.................................................... 23
General Information........................................................ 23
</TABLE>
UNDERWRITER: ADVISOR:
FPS Broker Services, Inc. Farrell-Wako Global Investment
3200 Horizon Drive Management, Inc.
P.O. Box 61503 780 Third Avenue, 38th Floor
King of Prussia, Pennsylvania 19406-0903 New York, New York 10017
(800) 262-7751 (212) 319-3944
(610) 239-4991
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE SUCH
AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS.
2
<PAGE>
PROSPECTUS SUMMARY
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WHAT IS THE INVESTMENT OBJECTIVE? The Japan Alpha Fund (the "Fund") seeks to
achieve long-term capital appreciation. There can be no assurance that the
Fund will be able to achieve its investment objective. See "Investment Objec-
tive and Policies."
WHAT ARE THE PERMITTED INVESTMENTS? The Fund intends to invest substantially
all its assets in equity securities of Japanese companies. The Fund will seek
to achieve its investment objective through the Advisor's use of the Farrell
Alpha Investment Strategy, which is based upon the philosophy of combining
sound fundamental analysis with disciplined stock selection and systematic
portfolio construction. See "Investment Objective and Policies" and "Descrip-
tion of Permitted Investments and Risk Factors."
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUND? The investment
policies of the Fund have certain risks and considerations of which investors
should be aware. The Fund invests in securities that fluctuate in value, and
investors should expect the Fund's net asset value per share to fluctuate. In-
vesting in the equity securities of Japanese companies involves special risks
and considerations not typically associated with investing in the equity secu-
rities of U.S. companies. These may include different accounting standards,
differences in securities regulation, higher brokerage costs, currency ex-
change rate fluctuations and conversion costs, less liquidity, and less pub-
licly available information about Japanese companies and securities issued
thereby. See "Investment Objective and Policies," "Risk Factors" and "Descrip-
tion of Permitted Investments and Risk Factors."
WHO IS THE INVESTMENT ADVISOR? Farrell-Wako Global Investment Management, Inc.
(the "Advisor") serves as the investment advisor of the Fund. See "Expense
Summary" and "Management of the Fund."
WHO IS THE ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTING AGENT? FPS
Services, Inc. serves as the administrator, transfer agent and fund accounting
agent. See "Management of the Fund."
WHO IS THE UNDERWRITER/DISTRIBUTOR? FPS Broker Services, Inc. serves as
the underwriter/distributor of the Fund's shares. See "Management of the
Fund."
IS THERE A SALES LOAD? No. Shares of the Fund are offered on a no-load basis.
See "How to Purchase Shares."
IS THERE A MINIMUM INVESTMENT? The Fund has a minimum initial investment of
$1,000 ($500 for IRA and SEP accounts) and $100 for subsequent investments.
HOW DO I PURCHASE SHARES? Shares of the Fund are offered continuously at the
current net asset value per share next determined after receipt of a purchase
order in proper form by the transfer agent. See "How to Purchase Shares."
HOW DO I REDEEM SHARES? Shares of the Fund may be redeemed at the current net
asset value per share next determined after receipt by the transfer agent of a
redemption request in proper form. Signature guarantees may be required for
certain redemption requests. See "How to Redeem Shares."
3
<PAGE>
HOW ARE DISTRIBUTIONS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is distributed in the form of annual
dividends. If any capital gains are realized, substantially all of them will
be distributed by the Fund at least annually. Distributions are paid in addi-
tional shares unless the shareholder elects to take the payment in cash. See
"Dividends and Taxes."
4
<PAGE>
EXPENSE SUMMARY
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THE JAPAN ALPHA FUND
SHAREHOLDER TRANSACTION EXPENSES:
<TABLE>
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<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price).......................................................... None
Deferred Sales Charge (as a percentage of original purchase price)........ None
Redemption Fees (as a percentage of amount redeemed)(1)................... None
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</TABLE>
(1) If you want to redeem shares by wire transfer, the Fund's transfer agent
charges a fee (currently $9.00) for redemptions made by wire to domestic
banks. Wires to foreign or overseas banks may be charged at higher rates.
Purchases and redemptions may also be made through broker-dealers and oth-
ers who may charge a commission or other transaction fee for their
services.
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
<TABLE>
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<S> <C>
Advisory Fees (after fee waivers)(2)...................................... 0.00%
12b-1 Fees................................................................ None
Other Expenses............................................................ 2.25%
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Total Operating Expenses (after fee waivers)(2)........................... 2.25%
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</TABLE>
(2) The Advisor has, on a voluntary basis, agreed to waive all or a portion of
its fees and to reimburse certain expenses so that the Fund's total oper-
ating expenses will not exceed 2.25% of the Fund's average daily net as-
sets. The Advisor reserves the right to terminate this waiver or any reim-
bursement at any time, in its sole discretion. Absent such waivers, advi-
sory fees for the Fund would be 0.98% and total operating expenses for the
fiscal year ended March 31, 1997 would have been 7.97%.
EXAMPLE
<TABLE>
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<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Based on the level of expenses listed above,
the total expenses relating to an investment
of $1,000 would be as follows, assuming a 5%
annual return and redemption at the end of
each time period. $23 $70 $120 $258
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</TABLE>
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FU-
TURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of the expense tables and example is to assist the investor in under-
standing the various costs and expenses that may be directly or indirectly
borne by shareholders of the Fund. Additional information may be found under
"Management of the Fund." See "How to Purchase Shares" and "How to Redeem
Shares."
5
<PAGE>
FINANCIAL HIGHLIGHTS
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JAPAN ALPHA FUND
The following financial highlights for the periods presented were derived from
the Fund's financial statements dated March 31, 1997, which were audited by
Coopers & Lybrand L.L.P., independent accountants, and whose unqualified report
thereon is incorporated by reference into the Statement of Additional
Information. The Fund's Statement of Additional Information is in-corporated by
reference into this Prospectus and may be obtained without charge by writing the
Fund or calling (800) 471-7174 (or (212) 319-3944 for overseas investors). The
table below sets forth financial data for one share of capital stock outstanding
throughout the periods presented.
<TABLE>
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<CAPTION>
FOR THE FOR THE PERIOD
YEAR ENDED APRIL 18, 1995*
MARCH 31, THROUGH
1997 MARCH 31, 1996
- - -------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period........................... $ 9.31 $10.00
- - -------------------------------------------------------------------------------------------------
Loss from investment operations:
Net investment income (loss)................................... 0.01 (0.12)(1)
Net realized and unrealized loss on investments and foreign
currency related transactions................................. (2.62) (0.57)(1)
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Total loss from investment operations.......................... (2.61) (0.69)
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Less distributions from realized gains......................... (0.01) 0.00
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Net asset value, end of period................................. $ 6.69 $ 9.31
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Total return................................................... (28.10)% (6.90)%
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Ratios/Supplemental Data
Net assets, end of period (in 000s).......................... $ 3,458 $ 153
Ratio of expenses to average net assets:
Before expense reimbursement and waiver.................... 7.97 % 8.54 %(2)
After expense reimbursement and waiver..................... 2.25 % 2.25 %(2)
Ratio of net investment income to average net assets:
Before expense reimbursement and waiver.................... (6.99)% (7.67)%(2)
After expense reimbursement and waiver..................... (1.27)% (1.38)%(2)
Portfolio turnover rate...................................... 115.07 % 122.71 %
Average commission rate...................................... $0.0608 $0.0658
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</TABLE>
* Commencement of operations
(1) Calculated using the average shares method
(2) Annualized
6
<PAGE>
THE TRUST AND THE FUND
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Farrell Alpha Strategies (the "Trust") is an open-end management company orga-
nized as a business trust under the laws of the State of Delaware. The Trust
is organized to offer separate series of shares and is currently comprised of
one series, The Japan Alpha Fund (the "Fund").
INVESTMENT OBJECTIVE AND POLICIES
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- - -------------------------------------------------------------------------------
The Fund's investment objective is to achieve long-term capital appreciation
by investing in equity securities of Japanese companies. However, there can be
no assurance that the Fund will be able to achieve its investment objective.
The investment objective of the Fund is fundamental and may not be changed
without a vote of the holders of the majority of the voting securities of the
Fund. Unless otherwise stated in this Prospectus, the Fund's investment poli-
cies are not fundamental and may be changed without shareholder approval.
While a non-fundamental policy or restriction may be changed by the Trustees
of the Trust without shareholder approval, the Fund intends to notify share-
holders before making any material change in such policy or restriction. Addi-
tional investment policies and restrictions are described in the Statement of
Additional Information.
The Fund intends to invest as fully as practicable in equity securities of
Japanese companies, and under normal circumstances will be at least 80% in-
vested in such securities. These include securities of companies which (i) are
organized under the laws of Japan, (ii) regardless of where organized, derive
at least 50% of their revenues or profits from goods produced or sold, invest-
ments made, or services performed or have at least 50% of their assets located
in Japan, or (iii) have the primary trading market for their securities in Ja-
pan. Equity securities are comprised of common and preferred stock, debt secu-
rities convertible into common stock (sometimes referred to as "convertible
debentures"), common stock purchase warrants, restricted securities and Ameri-
can Depository Receipts.
The Fund will seek to achieve its investment objective through the Advisor's
use of the Farrell Alpha Investment Strategy, which is based on the philosophy
of combining sound fundamental analysis with disciplined stock selection and
systematic portfolio construction. Using a large body of current market and
fundamental data, over 3,000 equity securities listed in the United States and
700 equity securities listed in Japan are systematically valued and rated by
applying the Advisor's proprietary series of up to 25 statistical and quanti-
tative techniques that have been developed and refined in the United States
throughout the past 20 years and applied to Japanese equity securities in re-
cent years. The equity securities evaluated by the Advisor are examined from a
variety of perspectives, such as long-term fundamental securities analysis
technique, short-term fundamental securities analysis technique, trading pat-
terns, economic conditions and the judgment of outside analysts. The result of
this rigorous process is the Advisor's rating of the relative attractiveness
of each equity security, called the "alpha" rating. Equity securities with the
highest alpha ratings become candidates for investment by the Fund. The con-
verse is true for those with low alpha ratings.
7
<PAGE>
The Nikkei Stock Average and the Morgan Stanley Capital International Japan
Index (the "MSCI Japan Index") have been selected as the standards or bench-
marks against which the Fund's performance will be compared. The Nikkei Stock
Average is an index of 225 leading stocks traded on the Tokyo Stock Exchange.
It is composed of representative blue chip companies (termed first-section
companies in Japan) and is a price-weighted index. This means that the move-
ment of each stock, in Japanese yen or U.S. dollars, respectively, is weighted
equally regardless of its market capitalization. The Nikkei Stock Average, in-
formally called the Nikkei Index and often still referred to as the Nikkei
Dow, is published by the Nihon Keizai Shimbun (Japan Economic Journal) and is
the most widely quoted Japanese stock index. The MSCI Japan Index is a widely
followed measure of Japan's equity market performance, and is a market capi-
talization weighted index that represents approximately 60% of Japan's equity
market capitalization, designed to replicate the industry composition of the
local market. Only companies domiciled in Japan which are subject to restric-
tive float or cross ownership are included in the MSCI Japan Index.
The Fund may invest a portion of its assets in cash and money market instru-
ments in order to maintain liquidity or if the Advisor determines that securi-
ties meeting the Fund's investment objective and policies are not readily
available for purchase. For temporary defensive purposes, when the Advisor de-
termines that market conditions warrant, the Fund may invest up to 100% of its
assets in cash and money market instruments. Money market instruments consist
of securities issued or guaranteed by the U.S. government, its agencies or in-
strumentalities; short-term, yen-denominated securities or obligations of the
Japanese government; certificates of deposit, time deposits and bankers' ac-
ceptances issued by banks or savings and loan associations, including banks
organized or operating in Japan, having net assets of at least $500 million as
stated on their most recently published financial statements; commercial paper
rated in one of the two highest rating categories by at least one nationally
recognized statistical rating organization; investment-grade obligations of
companies incorporated in and having principal business activities in Japan;
repurchase agreements involving such securities; and, to the extent permitted
by applicable law and the Fund's investment restrictions, shares of other in-
vestment companies investing solely in money market securities. To the extent
that the Fund is invested in temporary defensive instruments, it will not be
pursuing its investment objective. See "Description of Permitted Investments
and Risk Factors" and the Statement of Additional Information.
As a result of the Fund's investment policies, its portfolio turnover rate may
exceed 100%. High portfolio turnover rates (over 100%) may involve correspond-
ingly greater brokerage commissions and other transaction costs, which will be
borne directly by the Fund and ultimately by the Fund's shareholders. In addi-
tion, high portfolio turnover may result in increased short-term capital
gains, which when distributed to shareholders, are treated as ordinary income.
For a further discussion of the Fund's permitted investments, see "Description
of Permitted Investments and Risk Factors" and the Statement of Additional In-
formation.
8
<PAGE>
RISK FACTORS
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- - -------------------------------------------------------------------------------
Investments in securities of Japanese issuers may be subject to certain risks
not typically associated with securities of U.S. issuers. Because of its em-
phasis on Japan, the Fund should be considered as a vehicle for diversifica-
tion of investments and not as a balanced investment program. See "Description
of Permitted Investments and Risk Factors."
JAPAN'S ECONOMY
Japan's economy has typically exhibited low inflation and low interest rates.
There can be no assurance that low inflation and low interest rates will con-
tinue, and it is likely that a reversal of such factors would adversely affect
the Japanese economy. Moreover, the Japanese economy may differ, favorably or
unfavorably, from the U.S. economy in such respects as growth of gross na-
tional product, rate of inflation, capital reinvestment, resources, self-suf-
ficiency and balance of payments position.
TRADE ISSUES
Because of the concentration of Japanese exports in highly visible products
such as automobiles, machine tools and semiconductors, and the large trade
surpluses ensuing therefrom, Japan is in a difficult phase in its relation
with its trading partners, particularly the United States where the trade im-
balance is the greatest. Retaliatory action taken by such trading partners
could affect the ability of Japanese companies to export goods to these coun-
tries, which could decrease the value of the securities in the Fund.
CURRENCY FACTORS
Because the Fund invests primarily in securities denominated in yen, changes
in exchange rates between the U.S. dollar and the Japanese yen affect the U.S.
dollar value of the Fund's assets. Such rate of exchange is determined by
forces of supply and demand on the foreign exchange markets. These forces are
in turn affected by the international balance of payments and other economic,
political and financial conditions, government intervention, speculation and
other factors. The Fund's net asset value will be reported, and distributions
from the Fund will be made, in U.S. dollars. Therefore, the Fund's reported
net asset value and distributions will be adversely affected by depreciation
of the Japanese yen relative to the U.S. dollar. Over a long period of years,
the Japanese yen has generally appreciated in relation to the dollar, adding
to the return of dollars invested through the Fund. A decline in the value of
the Japanese yen would adversely affect the value of the Fund in dollar terms.
THE JAPANESE STOCK MARKET
Like other stock markets, the Japanese stock market can be volatile. A decline
in the market may have an adverse effect on the availability of credit and on
the value of the substantial stock holdings of Japanese companies in particu-
lar, Japanese banks, insurance companies and other financial institutions. A
decline in the market may also contribute to weakness in Japan's economy. The
common stock of many Japanese companies continue to trade at high price-earn-
ings ratios even after the recent market decline. Trading of equity securities
in the Japanese over-the-counter market is conducted by securities firms, and
not on a recognized stock exchange.
9
<PAGE>
Consequently, securities traded in the Japanese over-the-counter market may,
from time to time, and especially in falling markets, become illiquid and ex-
perience short-term price volatility and wide spreads between bid and offer
prices.
INVESTMENTS IN JAPANESE EQUITY SECURITIES
Japanese equity securities have historically exhibited a high price-to-earn-
ings ratio relative to securities traded in the U.S. securities markets, al-
though recently the disparity between average price-to-earnings ratios of Jap-
anese and U.S. securities has lessened. Differences in accounting methods make
it difficult to compare the earnings of Japanese companies with those of com-
panies in other countries, especially the United States. However, reported net
income in Japan is generally believed to be understated relative to U.S. ac-
counting standards and this is one reason why price-earnings ratios of the
stocks of Japanese companies tend to be higher than those for U.S. stocks. In
addition, Japanese companies have tended historically to have higher growth
rates than U.S. companies, and Japanese interest rates have generally been
lower than in the United States, both of which factors tend to result in lower
discount rates and higher price-earnings ratios in Japan than in the United
States.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
The following is a description of permitted investments for the Fund, and the
associated risk factors:
American Depository Receipts ("ADRs")--ADRs are securities, typically is-
sued by a U.S. financial institution (a "depository"), that evidence owner-
ship interests in a security or a pool of securities issued by a foreign
issuer and deposited with the depository. ADRs may be available through
"sponsored" or "unsponsored" facilities. A sponsored facility is estab-
lished jointly by the issuer of the security underlying the receipt and a
depository; whereas, an unsponsored facility may be established by a depos-
itory without participation by the issuer of the underlying security. Hold-
ers of the unsponsored depository receipts generally bear all the costs of
the unsponsored facility. The depository of an unsponsored facility fre-
quently is under no obligation to distribute shareholder communications re-
ceived from the issuer of the deposited security or to pass through, to the
holders of the receipts, voting rights with respect to the deposited secu-
rities.
Bankers' Acceptances--Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by a commercial bank or trust company. Bank-
ers' acceptances are used by manufacturers and exporters to finance the
shipment and storage of goods. Maturities are generally six months or less.
Certificates of Deposit--Certificates of deposit are interest bearing in-
struments with a specific maturity. They are issued by banks and savings
and loan institutions in exchange for the deposit of funds and normally can
be traded in the secondary market prior to maturity. Certificates of de-
posit with penalties for early withdrawal will be considered illiquid.
Commercial Paper--Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, corporations and other enti-
ties. Maturities on these issues vary from a few to 270 days.
10
<PAGE>
Convertible Securities--Convertible securities are corporate securities
that are exchangeable for a set number of another security at a prestated
price. Convertible securities typically have characteristics similar to
both fixed income and equity securities. Because of the conversion feature,
the market value of a convertible security tends to move with the market
value of the underlying stock. The value of a convertible security is also
affected by prevailing interest rates, the credit quality of the issuer,
and any call provisions.
Equity Securities--Investments in common stocks are subject to market risks
which may cause their prices to fluctuate over time. Changes in the value
of portfolio securities will not necessarily affect cash income derived
from these securities but will affect the Fund's net asset value.
Fixed Income Securities--Fixed income securities are debt obligations is-
sued by corporations and other borrowers. The market value of fixed income
investments will change in response to interest rate changes and other fac-
tors. During periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during periods of ris-
ing interest rates, the values of such securities generally decline. More-
over, while securities with longer maturities tend to produce higher
yields, the prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in interest rates.
Changes by recognized agencies in the rating of any fixed income security
and in the ability of an issuer to make payments of interest and principal
will also affect the value of these investments. Changes in the value of
portfolio securities will not affect cash income derived from these securi-
ties but will affect the Fund's net asset value.
Repurchase Agreements--Repurchase agreements are agreements by which the
Fund obtains a security and simultaneously commits to return the security
to the seller at an agreed upon price on an agreed upon date within a num-
ber of days from the date of purchase. The custodian will hold the security
as collateral for the repurchase agreement. The Fund bears a risk of loss
in the event the other party defaults on its obligations and the Fund is
delayed or prevented from exercising its right to dispose of the collater-
al, or if the Fund realizes a loss on the sale of the collateral. The Fund
will enter into repurchase agreements only with financial institutions
deemed to present minimal risk of bankruptcy during the term of the agree-
ment based on established guidelines. Repurchase agreements are considered
loans under the Act.
Restricted Securities--Restricted securities are securities that may not be
sold to the public without registration under the Securities Act of 1933,
as amended, absent an exemption from registration.
Securities of Foreign Issuers--There are certain risks connected with in-
vesting in foreign securities. These include risks of adverse political and
economic developments (including possible governmental seizure or national-
ization of assets), the possible imposition of exchange controls or other
governmental restrictions, less uniformity in accounting and reporting re-
quirements, the possibility that there will be less information regarding
such securities and their issuers available to the public, the difficulty
of obtaining or enforcing court judgments abroad, restrictions on foreign
investments in other jurisdictions, difficulties in effecting repatriation
of capital invested abroad, and difficulties in transaction settlements and
the effect of delay on shareholder equity. Foreign securities may be sub-
ject to foreign taxes, and may be less marketable than comparable U.S. se-
curities. The value of the Fund's investments denominated in foreign cur-
rencies will depend on the relative strengths of those currencies and the
U.S. dollar, and the Fund may be affected favorably or unfavorably by
changes in the exchange rates or exchange control regulations between for-
eign
11
<PAGE>
[LOGO OF
THE
JAPAN
ALPHA
FUND]
ACCOUNT APPLICATION FORM
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
A. INITIAL INVESTMENT
INDICATE AMOUNT OF INVESTMENT:
The minimum initial investment is $1,000 and subsequent purchases must be at
least $100.
The minimum may be waived at the Distributor's discretion.
The Japan Alpha Fund $ ___ [_] Enclosed is my check (payable to The
Total $ ________ Japan Alpha Fund)
[_] Bank wire sent (Instructions to be
provided upon establishment of account.)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
B. REGISTRATION (Please print)
(Complete one)
[_]INDIVIDUAL (USE LINE 1) [_] JOINT ACCOUNT (USE LINES 1 & 2)
[_]GIFT/TRANSFER TO MINOR [_] CORPORATIONS, PARTNERSHIPS,
(USE LINES 3, 4, & 5) TRUSTS AND OTHERS (USE LINES 6 & 7)
-------------------------------------------------------------------------------
1. Individual
First name Initial Last name
----------------------------------------------------------------
Social Security number U.S. Citizen? [_] Yes [_] No
------------------------------------------------------------------------------
2. Joint Tenant
First name Initial Last name
----------------------------------------------------------------
Social Security number U.S. Citizen? [_] Yes [_] No
----------------------------------------------------------------
Check one: [_] Joint Tenancy (Rights of Survivorship)
[_] Tenants in Common
------------------------------------------------------------------------------
3. Uniform Gift/
Transfer to Minor
Custodian's name
is the custodian for
----------------------------------------------------------------
4. Minor's Name
Minor's name
under the
----------------------------------------------------------------
5. State
Name of State
Uniform Gift/Transfer
to Minors Act
----------------------------------------------------------------
Minor's Social Security number
------------------------------------------------------------------------------
6. Corporations,
Partnerships,
Trusts, and Others
Corporation or Entity name Please attach a copy of a
Corporate Resolution.
----------------------------------------------------------------
Tax ID number
----------------------------------------------------------------
7. Type of [_] Corporation[_] Partnership[_] Trust[_] Retirement
[_] IRA (Complete attached IRA application)
[_] Other
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Street or P.O. Box City State Zip Code
C. MAILING
ADDRESS
---------------------------------------------------------------
Home Telephone County of residence Daytime Telephone
-------------------------------------------------------------------------------
Street or P.O. Box City State Zip Code
Duplicate
Confirmation/ --------------------------------------------------------------
Statement sent Home Telephone Daytime Telephone
to:
--------------------------------------------------------------
[_] Please check here if this is a modification to an existing account.
Existing account number: _______________________________________________________
<PAGE>
D. DIVIDEND OPTION
Check one only, if none are checked all dividend income and capital gains, if
any, will be reinvested.
[_]All dividend income and capital gains, reinvested
[_]All dividend income and capital gains paid by check.
[_]Dividend income paid by check and capital gains reinvested.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
E. TELEPHONE PRIVILEGE
Proceeds of telephone redemption requests are paid by check and mailed to the
address of record or wired to your bank account.
I (we) authorize FPS Services to act upon instructions received by
telephone from me (us) to redeem shares. Neither the Fund nor FPS
Services will be liable for properly acting upon telephone instructions
believed to be genuine. Please attach a voided personal check and complete
below.
Bank Name Branch Office (if applicable)
----------------------------------------------------------------
Bank Address City State Zip Code
----------------------------------------------------------------
Bank Wire Routing Number Bank Account Number
----------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
F. CUSTOMER AGREEMENT
1. I (We) have full right, power, authority and legal capacity, and am (are) of
legal age in my (our) state of residence to purchase shares of the Fund. I (We)
affirm that I (we) have received and read the current prospectus of the Fund
and agree to its terms. I (We) understand the investment objective and
program, and have determined that the Fund is a suitable investment, based upon
my (our) investment needs and financial situation. I (We) agree that FPS
Services or any of their affiliate officers, directors or employees will not be
liable for any loss, expense or cost for acting upon any instructions or
inquiries believed genuine.
2. I (We) understand and acknowledge that a return on the selected fund(s) is
not guaranteed.
3. This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
G. SIGNATURES
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION. UNDER THE PENALTIES OF PERJURY, I
(WE) CERTIFY THE FOLLOWING:
1. I (WE) CERTIFY THAT THE NUMBER SHOWN ON THIS FORM IS MY (OUR) CORRECT TAX
IDENTIFICATION NUMBER.
2. I (WE) AM NOT (ARE NOT) SUBJECT TO BACK-UP WITHHOLDING AS A RESULT OF A
FAILURE TO REPORT ALL INTEREST AND DIVIDENDS, OR THE INTERNAL REVENUE SERVICE
HAS NOTIFIED ME (US) THAT I (WE) AM (ARE) NO LONGER SUBJECT TO BACK-UP
WITHHOLDING.
- - --------------------------------------------------------------------------------
"THE INTERNAL Signature [_] Owner [_] Custodian [_] Trustee Date
REVENUE SERVICE
DOES NOT REQUIRE -------------------------------------------------------------
YOUR CONSENT TO Signature Joint Owner (if applicable) Date
ANY PROVISION OF
THIS DOCUMENT -------------------------------------------------------------
OTHER THAN THE
CERTIFICATIONS
REQUIRED TO
AVOID BACKUP
WITHHOLDING".
[_] Check box if you have been notified by the IRS that you are subject to
back-up withholding.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Mail completed application forms to:
THE JAPAN ALPHA FUND
3200 HORIZON DRIVE
P.O. BOX 61503
KING OF PRUSSIA, PA 19406-0903
For assistance call: (800) 471-7174
For non-U.S. investors call: (212) 319-3944
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Dealer Name _________________________ Branch # and Location ________________
Name of Representative ______________ Rep # ________________________________
Authorized Signature of Dealer _________________________________________________
<PAGE>
currencies and the U.S. dollar. Changes in foreign currency exchange rates
also may affect the value of dividends and interest earned, gains and
losses realized on the sale of securities and net investment income and
gains, if any, to be distributed to shareholders by the Fund.
U.S. Government Securities--U.S. government securities include obligations
issued by agencies or instrumentalities of the U.S. government including,
among others, Export Import Bank of the United States, Farmers Home Admin-
istration, Federal Farm Credit System, Federal Housing Administration, Mar-
itime Administration, Small Business Administration, and The Tennessee Val-
ley Authority. Obligations of instrumentalities of the U.S. government in-
clude securities issued by, among others, Federal Home Loan Banks, Federal
Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal
Land Banks, Federal National Mortgage Association and the U.S. Postal Serv-
ice. Some of these securities are supported by the full faith and credit of
the U.S. Treasury (e.g., Government National Mortgage Association), others
are supported by the right of the issuer to borrow from the Treasury (e.g.,
Federal Farm Credit Bank) and still others are supported only by the credit
of the instrumentality (e.g., Federal National Mortgage Association). Guar-
antees of principal by agencies or instrumentalities of the U.S. government
may be a guarantee of payment at the maturity of the obligation so that in
the event of a default prior to maturity there might not be a market and
thus no means of realizing on the obligation prior to maturity. Guarantees
as to the timely payment principal and interest do not extend to the value
or yield of these securities nor to the value of the Fund's shares.
Variable and Floating Rate Instruments--Certain obligations may carry vari-
able or floating rates of interest, and may involve a conditional or uncon-
ditional demand feature. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market rates or indi-
ces. The interest rates on these securities may be reset daily, weekly,
quarterly or some other reset period, and may have a floor or ceiling on
interest rate changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing market interest rates.
A demand instrument with a demand notice exceeding seven days may be con-
sidered illiquid if there is no secondary market for such security.
Warrants--Warrants are instruments that give holders the right, but not the
obligation, to buy shares of a company at a given price during a specified
period.
INVESTMENT LIMITATIONS
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
The investment objective and the investment limitations set forth here and in
the Statement of Additional Information are fundamental policies of the Fund.
Fundamental policies cannot be changed without the consent of the holders of a
majority of the Fund's outstanding shares. The Fund may not: (1) purchase se-
curities of any one issuer (except securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities and repurchase agreements in-
volving such securities if, as a result, not more than 5% of the total assets
of the Fund would be invested in the securities of such issuer (This restric-
tion applies to 75% of the Fund's total assets); (2) purchase any securities
which would cause 25% or more of the total assets of the Fund to be invested
in the securities of one or more issuers that conduct their principal business
activities in the same industry, provided that this limitation does not apply
to investments in the obligations issued or guaranteed by the U.S. government
12
<PAGE>
or its agencies and instrumentalities and repurchase agreements involving such
securities (For purposes of this limitation, (a) utility companies will be di-
vided according to their services, for example, gas, gas transmission, elec-
tric and telephone will each be considered a separate industry and (b) finan-
cial service companies will be classified according to the end users of their
services, for example, automobile finance, bank finance and diversified fi-
nance will each be considered a separate industry); (3) make loans, except
that the Fund may purchase or hold debt instruments in accordance with its in-
vestment objective and policies; and (4) borrow money, except for temporary or
emergency purposes and then only in an amount not exceeding one-third of the
value of its total assets at the time of such borrowing.
The foregoing percentages will apply at the time of the purchase of a securi-
ty, except for the percentage limitation specified in paragraph (4) above,
which will apply at all times.
MANAGEMENT OF THE FUND
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
THE BOARD OF TRUSTEES
The Trust has a Board of Trustees that establishes the Trust's policies and
supervises and reviews the management of the Trust. The day-to-day operations
of the Fund are administered by the officers of the Trust and by the Advisor
pursuant to the terms of the Investment Advisory Agreement with the Fund. The
Trustees review the various services provided by the Advisor to ensure that
the Fund's general investment policies and programs are being properly carried
out and that administrative services are being provided to the Fund in a sat-
isfactory manner. Information pertaining to the Trustees and executive offi-
cers is set forth in the Statement of Additional Information.
THE INVESTMENT ADVISOR
Farrell-Wako Global Investment Management, Inc. (the "Advisor") serves as the
Fund's investment advisor and manager, and is an investment advisor registered
as such under the Investment Advisers Act of 1940, as amended. The Advisor was
incorporated in Delaware and is a wholly-owned indirect subsidiary of Wako Se-
curities Co., Ltd. ("Wako Securities"), a leading securities firm organized
under the laws of Japan. The Advisor has had more than four years experience
providing management services for a Japanese equity fund that is not an in-
vestment company registered in the United States. As of July 1, 1997, total
assets under management by the Advisor were approximately $323 million, in-
cluding $125 million in equity securities of Japanese issuers managed using
the Farrell Alpha Investment Strategy utilized by the Fund. The principal
business address of the Advisor is 780 Third Avenue, 38th Floor, New York, New
York 10017.
Founded in 1947, Wako Securities is headquartered in Tokyo and has 64 branch
offices in Japan and 9 overseas offices. It is one of the largest Japanese
brokerage firms. Wako Securities and its affiliated companies have in excess
of $37 billion in mutual fund, pension plan and corporate assets under manage-
ment. The Fund expects to conduct substantially all or a majority of its bro-
kerage transactions through Wako Securities, an affiliated broker of the
Advisor.
13
<PAGE>
As the Fund's investment advisor, the Advisor makes the investment decisions
concerning the assets of the Fund and continuously reviews, supervises and ad-
ministers the Fund's investment programs, subject to the supervision of, and
policies established by, the Trustees of the Trust.
Dr. James L. Farrell, Jr., CFA, Chairman of the Advisor since 1991, manages
the Fund. Prior to 1991, he was Chairman and Chief Investment Officer of MPT
Associates, a New York based independent investment counseling subsidiary of
an insurance company, where he managed $1 billion of equity assets. He has ex-
tensive experience in portfolio management and applied financial research at a
major U.S. bank and The College Retirement Equities Fund (CREF). Mr. Farrell
is also Chairman of the Institute for Quantitative Research in Finance, a co-
operative group of 100 financial institutions, securities brokers, investment
plan sponsors and international investment organizations.
For providing investment advisory services, the Fund pays the Advisor a
monthly fee which is calculated daily by applying an annual rate of 0.98% of
the average daily net assets of the Fund. The investment advisory fee is
higher than that paid by most investment companies, although the Advisor be-
lieves the fee to be comparable to that paid by investment companies with sim-
ilar investment objectives and policies. From time to time, the Advisor may
voluntarily waive all or a portion of its management fee, and/or absorb cer-
tain expenses of the Fund without further notification of the commencement or
termination of any such waiver or absorption. Any such waiver or absorption
will have the effect of lowering the overall expense ratio of the Fund and in-
creasing the Fund's overall return to investors at the time any such amounts
are waived and/or absorbed. The Advisor has voluntarily agreed to waive all or
a portion of its fee, and/or to reimburse expenses of the Fund to the extent
necessary in order to limit total operating expenses to an annual rate of not
more than 2.25% of the Fund's average daily net assets. The Advisor reserves
the right to terminate its voluntary fee waiver and expense reimbursement at
any time, in its sole discretion. Any reductions in its fee that are made by
the Advisor are subject to reimbursement by the Fund within the following
three years, provided that the Fund is able to effect such reimbursement and
remain in compliance with applicable expense limitations.
THE UNDERWRITER
FPS Broker Services, Inc. ("FPSB"), 3200 Horizon Drive, King of Prussia, Penn-
sylvania 19406-0903, was engaged pursuant to an agreement dated June 28, 1995
for the limited purpose of acting as underwriter to facilitate the registration
of shares of the Fund under state securities laws and to assist in the sale of
shares.
THE ADMINISTRATOR
FPS Services, Inc. ("FPS"), which has its principal business address at 3200
Horizon Drive, P.O. Box 61503, King of Prussia, Pennsylvania 19406-0903, serves
as administrator pursuant to an Administrative Services Agreement. The
services that FPS provides to the Fund include: coordinating and
monitoring any third parties which furnish services to the Fund; providing the
necessary of-fice space, equipment and personnel to perform administrative and
clerical functions for the Fund; preparing, filing
14
<PAGE>
and distributing proxy materials, periodic reports to shareholders, registra-
tion statements and other documents; and responding to shareholder inquiries.
Pursuant to the Administrative Services Agreement, FPS receives a fee
computed at the annual rate of 0.15% of the first $75 million of total average
net assets, 0.10% of the next $75 million of total average net assets and
0.05% of total net assets in excess of $150 million. Pursuant to the Adminis-
trative Services Agreement, aggregate administration fees shall not be less
than $95,000.
THE CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING/PRICING AGENT
Sumitomo Bank of New York Trust Company, 2 World Financial Center Tower B, 225
Liberty Street, 35th Floor, New York, New York 10281 is the custodian for the
cash and securities of the Fund. FPS serves as the Fund's transfer agent
and, in its capacity as such, maintains the records of each shareholder's ac-
count, answers shareholder inquiries concerning accounts, processes purchases
and redemptions of the Fund's shares, acts as dividend and distribution dis-
bursing agent and performs other shareholder service functions. As fund ac-
counting agent, FPS performs certain accounting and pricing services for
the Fund, including the daily calculation of the Fund's net asset value.
EXPENSES
The Fund shall be responsible for all of its own operating expenses. Such ex-
penses may include, but are not limited to: management fees; expenses for
printing, and distribution costs of, prospectuses and reports to existing
shareholders; brokerage fees and commissions; fees for the registration or
qualification of Fund shares under federal or state securities laws; expenses
of the organization of the Fund; transfer agent, custodian, administrator, le-
gal and auditing fees; the expenses of obtaining quotations of portfolio secu-
rities and pricing the Fund's shares; trade association dues; all costs asso-
ciated with shareholder meetings and the preparation and dissemination of
proxy materials; costs of liability insurance and fidelity bonds; fees for
Trustees who are not officers, directors or employees of the Advisor; and any
extraordinary and nonrecurring expenses which are not expressly assumed by the
Advisor.
HOW TO PURCHASE SHARES
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Shares of the Fund are sold on a continuous basis and may be purchased di-
rectly from the Fund's distributor, FPSB, either by mail or by telephone.
Shares of the Fund are offered only to residents of states in which the shares
are eligible for purchase.
Shares of the Fund are offered at the public offering price. The public offer-
ing price is equal to the current net asset value per share next determined
after receipt of a purchase order in proper form, by the transfer agent.
Shares may also be bought and sold through any securities dealer having a
dealer agreement with FPSB, the Fund's principal underwriter.
The minimum initial investment is $1,000 ($500 for IRA and SEP accounts) and
subsequent purchases must be at least $100. The Fund reserves the right to re-
ject any purchase order and to suspend the offering of shares of the Fund. The
Fund reserves the right to vary the initial investment minimum and minimums
for additional investments, at any time. In addition, the Advisor may waive
the minimum initial investment requirement for any investor.
15
<PAGE>
Purchase orders for shares of the Fund that are received by FPS in
proper form by the close of regular trading on the New York Stock Exchange
("NYSE") (currently 4:00 p.m. Eastern time), on any day that the NYSE is open
for trading, will be purchased at the Fund's next determined public offering
price. Orders for Fund shares received after 4:00 p.m. Eastern time will be
purchased at the public offering price determined on the following business
day. When market conditions are extremely busy, it is possible that investors
may experience difficulties placing orders by telephone, and investors may
wish to place orders by mail.
If a check received for the purchase of shares does not clear, the purchase
will be cancelled, and the investor could be liable for any losses or fees in-
curred. The Fund reserves the right to reject a purchase order when the Fund
determines that it is not in the best interest of the Fund or its shareholders
to accept such order. For example, the Fund may refuse purchases of shares of
the Fund by any person or group if, in the Advisor's judgment, the Fund would
be unable to invest effectively in accordance with its investment objectives
and policies, or would otherwise potentially be adversely affected.
Shareholders may purchase shares of the Fund in one of the ways explained be-
low.
PURCHASES BY MAIL
Shares of the Fund may be purchased initially by completing the application
accompanying this Prospectus and mailing it to the transfer agent, together
with a check payable to "The Japan Alpha Fund." The check or money order and
application should be mailed to FPS Services, Inc., 3200 Horizon Drive,
P.O. Box 61503, King of Prussia, PA 19406-0903. If this is an initial pur-
chase, please send a minimum of $1,000 (or $500 for IRA and SEP accounts).
Subsequent investments in an existing account in the Fund may be made at any
time by sending a check payable to The Japan Alpha Fund, c/o FPS Servic-
es, Inc., P.O. Box 412797, Kansas City, Missouri 64141-2797. Please enclose
the stub of your account statement and indicate the amount of the investment.
PURCHASES BY WIRE
Before making an initial investment by wire, an investor must first telephone
the transfer agent at (800) 262-7751 or (610) 239-4991 in order to be assigned
an account number. The investor's name, account number, taxpayer identifica-
tion number or Social Security number and address must be specified in the
wire. In addition, an account application should be promptly forwarded to:
FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prus-
sia, Pennsylvania 19406-0903. Shareholders having an account with a commercial
bank that is a member of the Federal Reserve System may purchase shares of the
Fund by requesting their bank to transmit funds by wire to:
United Missouri Bank KC NA
ABA #10-10-00695
For: FPS Services, Inc.
A/C 98-7037-071-9
FBO "The Japan Alpha Fund"
Shareholder Name and Account Number
16
<PAGE>
Additional investments may be made at any time through the wire procedures de-
scribed above, which must include a shareholder's name and account number. The
shareholder's bank may impose a fee for investments by wire. The Fund will not
be responsible for the consequence of delays, including delays in the banking
or Federal Reserve wire systems.
PURCHASES THROUGH BROKER-DEALERS
The Fund may accept telephone orders from brokers, financial institutions or
service organizations which have been previously approved by the Fund. It is
the responsibility of such brokers, financial institutions or service organi-
zations to promptly forward purchase orders and payments for the same to the
Fund. Shares of the Fund purchased through brokers, financial institutions,
service organizations, banks and bank trust departments, may charge the share-
holder a transaction fee or other fee for its services at the time of pur-
chase. Banks and other financial institutions may be subject to various state
laws regarding the services described above, and may be required to register
as dealers pursuant to state law.
Wire orders for shares of the Fund received by dealers prior to 4:00 p.m.
Eastern time, and received by FPS before 5:00 p.m. Eastern time on the
same day, are confirmed at that day's public offering price. Orders received
by dealers after 4:00 p.m. Eastern time are confirmed at the public offering
price on the following business day. It is the dealer's obligation to place
the order with FPS before 5:00 p.m. Eastern time.
SUBSEQUENT INVESTMENTS
Once an account has been opened, subsequent purchases may be made by mail,
bank wire, automatic investing or direct deposit. The minimum for subsequent
investments is $100 for all accounts. When making additional investments by
mail, simply return the remittance portion of a previous confirmation with
your investment in the envelope that is provided with each confirmation state-
ment. Your check should be made payable to The Japan Alpha Fund and mailed to
FPS Services, Inc., P.O. Box 412797, Kansas City, Missouri 64141-2797.
Orders to purchase shares are effective on the day FPS receives your
check or money order.
All investments must be made in U.S. dollars, and, to avoid fees and delays,
checks must be drawn only on banks located in the United States. A charge
(minimum of $20) will be imposed if any check used for the purchase of shares
is returned. The Fund and FPS each reserve the right to reject any pur-
chase order in whole or in part.
HOW TO REDEEM SHARES
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Shareholders may redeem their shares of the Fund on any business day that the
NYSE is open for business.
Redemptions will be effective at the current net asset value per share next
determined after the receipt by the transfer agent of a redemption request
meeting the requirements described below.
18
<PAGE>
REDEMPTION BY MAIL
Shareholders may redeem their shares by submitting a written request for re-
demption to FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503,
King of Prussia, Pennnsylvania 19406-0903.
A written request must be in good order, which means that it must: (i) iden-
tify the shareholder's account name and account number; (ii) state the number
of shares or dollar amount to be redeemed and (iii) be signed by each regis-
tered owner exactly as the shares are registered. To prevent fraudulent re-
demptions, a signature guarantee for the signature of each person in whose
name an account is registered is required for all written redemption requests
exceeding $10,000. A guarantee may be obtained from any commercial bank,
credit union, member firm of a national securities exchange, registered secu-
rities association, clearing agency and savings and loan association. A credit
union must be authorized to issue signature guarantees; notary public endorse-
ments will not be accepted. Signature guarantees will be accepted from any el-
igible guarantor institution that participates in a signature guarantee pro-
gram. The transfer agent may require additional supporting documents for re-
demptions made by corporations, executors, administrators, trustees or guardi-
ans and retirement plans.
REDEMPTION BY TELEPHONE
Shareholders who have so indicated on the application, or have subsequently
arranged in writing to do so, may redeem shares by calling the transfer agent
at (800) 262-7751 or (610) 239-4991 during normal business hours. 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 with a signature guarantee must be sent to the transfer agent
at the address listed above, under the caption "Redemption By Mail."
The Fund reserves 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.
During periods of unusual economic or market changes, telephone redemptions
may be difficult to implement. In such event, shareholders should follow the
procedures for redemption by mail.
GENERAL REDEMPTION INFORMATION
A redemption request will not be deemed to be properly received until the
transfer agent receives all required documents in proper form. If you have any
questions with respect to the proper form for redemption requests you should
contact the transfer agent at (800) 262-7751 or (610) 239-4991.
Redemptions will be processed only on a business day during which the NYSE is
open for business. Redemptions will be effective at the net asset value per
share next determined after the receipt by the transfer agent of a redemption
request meeting the requirements described above. The Fund normally sends re-
demption proceeds on the next business day, but, in any event, redemption pro-
ceeds are sent within seven calendar days of receipt of a redemption request
in proper form. Payment may also be made by wire directly to any bank previ-
ously designated by an investor on his or her new account application. There
is a $9.00 charge for redemptions made
18
<PAGE>
by wire to domestic banks. Wires to foreign or overseas banks may be charged
higher rates. It should also be noted that banks may impose a fee for wire
services. In addition, there may be fees for redemptions made through brokers,
financial institutions and service organizations.
Except as noted below, redemption requests received in proper form by the
transfer agent prior to the close of regular trading hours on the NYSE on any
business day on which the Fund calculates its net asset value are effective as
of that day. Redemption requests received after the close of the NYSE will be
effected at the net asset value per share determined on the next business day
following receipt. No redemption will be processed until the transfer agent
has received a completed application with respect to the account.
The Fund will satisfy redemption requests for cash to the fullest extent fea-
sible, as long as such payments would not, in the opinion of the Board of
Trustees, result in the necessity of the Fund to sell assets under disadvanta-
geous conditions or to the detriment of the remaining shareholders of the
Fund.
Pursuant to the Fund's Trust Instrument, however, payment for shares redeemed
may also be made in kind, or partly in cash and partly in-kind. The Fund has
elected, pursuant to Rule 18f-1 under the 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. Any portfolio securities
paid or distributed in-kind would be in readily marketable securities and val-
ued in the manner described below. See "Net Asset Value." In the event that an
in-kind distribution is made, a shareholder may incur additional expenses,
such as brokerage commissions, on the sale or other disposition of the securi-
ties received from the Fund. In-kind payments need not constitute a cross-sec-
tion of the Fund's portfolio.
The Fund may suspend the right of redemption or postpone the date of payment
for more than seven days during any period when (1) trading on the NYSE is re-
stricted or the NYSE is closed, other than customary weekend and holiday
closings; (2) the U.S. Securities and Exchange Commission has, by order, per-
mitted such suspension; (3) an emergency, as defined by rules of the U.S.
Securities and Exchange Commission, exists making disposal of portfolio
investments or determination of the value of the net assets of the Fund not
reasonably practicable.
Shares of the Fund may be redeemed through certain brokers, financial institu-
tions, service organizations, banks, and bank trust departments who may charge
the investor a transaction or other fee for their services at the time of re-
demption. Such additional transaction fees would not otherwise be charged if
the shares were redeemed directly from the Fund.
TELEPHONE TRANSACTIONS
Shareholders who wish to initiate redemption transactions by telephone must
first elect the option, as described above. The Fund and the transfer agent
will each employ reasonable procedures to confirm that telephone instructions
are genuine, and may be liable for losses resulting from unauthorized or
fraudulent telephone transactions if they do not employ those procedures. The
Fund and its transfer agent require personal identification information before
accepting a telephone redemption. The Fund reserves the right to refuse a tel-
ephone redemption if it is believed advisable to do so. Written confirmation
will be provided for all redemption transactions initiated by telephone.
19
<PAGE>
MINIMUM BALANCES
Due to the relatively high cost of maintaining smaller accounts, the Fund re-
serves the right to involuntarily redeem shares in any account at its then
current net asset value (which will be promptly paid to the shareholder) if at
any time the total investment does not have a value of at least $500 as a re-
sult of redemptions but not market fluctuations. A shareholder will be noti-
fied that the value of his or her account is less than the required minimum
and such shareholder will be allowed at least 60 days to bring the value of
his or her account up to the minimum before the redemption is processed.
SHAREHOLDER SERVICES
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
The following special services are available to shareholders of the Fund.
There are no charges for the programs noted below and a shareholder may change
or stop these plans at any time by written notice to the Fund.
AUTOMATIC INVESTMENT PLAN
Once an account has been opened, a shareholder can make additional monthly
purchases of shares of the Fund through an automatic investment plan. An in-
vestor may authorize the automatic withdrawal of funds from his or her bank
account by opening his or her account with a minimum $1,000 purchase and com-
pleting the appropriate section on the new account application enclosed with
this Prospectus. Subsequent monthly investments are subject to a minimum re-
quired amount of $50.
RETIREMENT PLANS
The Fund is available for investment by pension and profit sharing plans in-
cluding Individual Retirement Accounts, through which an investor may purchase
Fund shares. For details concerning any of the retirement plans, please call
the Fund at (800) 471-7174.
NET ASSET VALUE
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
The net asset value per share of the Fund is computed once daily as of the
close of regular trading on the NYSE, currently 4:00 p.m. Eastern time. Cur-
rently, the NYSE is closed on the following holidays or days on which the fol-
lowing holidays are observed: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas.
The net asset value per share is computed by adding the value of all securi-
ties and other assets in the portfolio, deducting any liabilities, and divid-
ing by the total number of outstanding shares. Expenses are accrued daily and
applied when determining the net asset value. The Fund's equity securities are
valued based on market quotations or, when no market quotations are available,
at fair value as determined in good faith by, or under direction of, the Board
of Trustees.
20
<PAGE>
Foreign securities are valued as of the close of trading on the primary ex-
change on which they trade. The value is then converted to U.S. dollars using
current exchange rates. Securities listed on any national securities exchange
are valued at their last sale price on the exchange where the securities are
principally traded or, if there has been no sale on that date, at the mean be-
tween the last reported bid and asked prices. Securities traded over-the-
counter are priced at the mean of the last bid and asked prices. Listed secu-
rities which are traded by foreign investors in Japan in over-the-counter
transactions are valued at prices at which it is expected that such securities
may be sold, as determined in good faith by, or under the direction of, the
Board of Trustees.
Securities are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by in-
vestment dealers in accordance with procedures established by the Board of
Trustees.
Short-term investments having a maturity of 60 days or less are valued at am-
ortized cost, which the Board of Trustees believes represents fair value. When
a security is valued at amortized cost, it is valued at its cost when pur-
chased, and thereafter by assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. All other securities and other assets are
valued at their fair value as determined in good faith under procedures estab-
lished by and under the supervision of the Board of Trustees.
Foreign currency exchange rates are generally determined prior to the close of
trading on the NYSE. Occasionally, events affecting the value of foreign in-
vestments and such exchange rates occur between the time at which they are de-
termined and the close of trading on the NYSE. Such events would not normally
be reflected in a calculation of the Fund's net asset value on that day. If
events that materially affect the value of the Fund's foreign investments or
the foreign currency exchange rates occur during such period, the investments
will be valued at their fair value as determined in good faith by, or under
the direction of, the Board of Trustees. Foreign securities held by the Fund
may be traded on days and at times when the NYSE is closed. Accordingly, the
net asset value of the Fund may be significantly affected on days when share-
holders have no access to the Fund.
The Japanese stock exchanges are: Tokyo, Hiroshima, Osaka, Nagoya, Kyoto, Sap-
poro, Niigata, Fukuoka and JASDAQ (collectively the "Japanese Exchanges"). The
Fund will, in some cases, value its portfolio securities as of a day on which
the Japanese Exchanges are closed for Japanese holidays or other reasons. At
such times, the Fund will follow such procedures as the Board of Trustees has
determined to be reasonable.
For valuation purposes, quotations of foreign portfolio securities, other as-
sets and liabilities and forward contracts stated in foreign currency are
translated into U.S. dollar equivalents at the prevailing market rates.
DIVIDENDS AND TAXES
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
DIVIDENDS
The Fund will distribute its net investment income annually in December. Any
net gain realized from the sale of portfolio securities and net gains realized
from foreign currency transactions are distributed at least once each
21
<PAGE>
year unless they are used to offset losses carried forward from prior years,
in which case no such gain will be distributed. Such income dividends and cap-
ital gain distributions are reinvested automatically in additional shares at
net asset value, unless a shareholder elects to receive them in cash. Distri-
bution options may be changed at any time by requesting a change in writing.
Any check tendered in payment of dividends or other distributions which cannot
be delivered by the post office or which remains uncashed for a period of more
than one year may be reinvested in the shareholder's account at the then cur-
rent net asset value, and the dividend option may be changed from cash to re-
invest. Dividends are reinvested on the ex-dividend date (the "ex-date") at
the net asset value determined at the close of business on that date. Divi-
dends and distributions are treated the same for tax purposes whether received
in cash or reinvested in additional shares. Please note that shares purchased
shortly before the record date for a dividend or distribution may have the ef-
fect of returning capital although such dividends and distributions are sub-
ject to taxes.
TAXES
The Fund has qualified, and intends to continue to qualify, as a "regulated
investment company" for purposes of the Internal Revenue Code (the "Code"),
which will relieve the Fund of any liability for federal income tax to the ex-
tent that its earnings and net realized capital gains are distributed to
shareholders. To so qualify, the Fund will, among other things limit its in-
vestments so that, at the close of each quarter of its taxable year, (i) not
more than 25% of the market value of the Fund's total assets will be invested
in the securities of any single issuer and (ii) with respect to 50% of the
market value of its total assets, not more than 5% of the market value of its
total assets will be invested in the securities of any single issuer, and the
Fund will not own more than 10% of the outstanding voting securities of a sin-
gle issuer.
An investment in the Fund has certain tax consequences, depending on the type
of account. The Fund will distribute all of its net investment income to
shareholders. Distributions are subject to federal income tax and may also be
subject to state and local income taxes. Distributions are generally taxable
when they are paid, whether in cash or by reinvestment in additional shares,
except that distributions declared in October, November or December and paid
in the following January are taxable as if they were paid on December 31. If
you have a qualified retirement account, taxes are generally deferred until
distributions are made from the retirement account.
For federal income tax purposes, income dividends and short-term capital gain
distributions are taxed as ordinary income. Distributions of net capital gains
(the excess of net long-term capital gain over net short-term capital loss)
are usually taxed as long-term capital gains, regardless of how long a share-
holder has held the Fund's shares. The tax treatment of distributions of ordi-
nary income or capital gains will be the same whether the shareholder rein-
vests the distributions or elects to receive them in cash.
Shareholders may be subject to a 31 percent back-up withholding on reportable
dividend and redemption payments ("back-up withholding") if a certified tax-
payer identification number is not on file with the Fund, or if to the Fund's
knowledge, an incorrect number has been furnished. An individual's taxpayer
identification number is his/her social security number.
22
<PAGE>
Shareholders will be advised annually of the source and tax status of all dis-
tributions for federal income tax purposes. Information accompanying a share-
holder's statement will show the portion of those distributions that are not
taxable in certain states. Further information regarding the tax consequences
of investing in the Fund is included in the Statement of Additional Informa-
tion. The above discussion is intended for general information only. Investors
should consult their own tax advisers for more specific information on the tax
consequences of particular types of distributions.
The Fund intends to make sufficient distributions prior to the end of each
calendar year in order to avoid liability for federal excise tax.
Dividends and interest received by the Fund from sources within foreign coun-
tries may be subject to foreign income taxes withheld at the source. To the
extent that the Fund is liable for foreign income taxes so withheld, the Fund
intends to operate so as to meet the requirements of the Code to pass through
to the shareholders credit for foreign income taxes paid. Although the Fund
intends to meet Code requirements in order to pass through credit for such
taxes, there can be no assurance that the Fund will be able to do so. Sale,
exchange or redemption of the Fund's shares is a taxable event to the share-
holder.
PERFORMANCE INFORMATION
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Performance information such as total return for the Fund may be quoted in ad-
vertisements or in communications to shareholders. Such performance informa-
tion may be useful in reviewing the performance of the Fund and for providing
a basis for comparison with other investment alternatives. However, because
net investment return of the Fund changes in response to fluctuations in mar-
ket conditions, interest rates and Fund expenses, any given performance quota-
tion should not be considered representative of the Fund's performance for any
future period. The value of an investment in the Fund will fluctuate and an
investor's shares, when redeemed, may be worth more or less than their origi-
nal cost.
The Fund's total return is the change in value of an investment in the Fund
over a particular period, assuming that all distributions have been reinvest-
ed. Thus, total return reflects not only income earned, but also variations in
share prices at the beginning and end of the period. Average annual return re-
flects the average percentage change per year in the value of an investment in
the Fund. Aggregate total return reflects the total percentage change over the
stated period. Please refer to the Statement of Additional Information for
more information on performance. Shareholders may obtain current performance
information about the Fund by calling (800) 471-7174 (or (212) 319-3944 for
overseas investors).
GENERAL INFORMATION
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
ORGANIZATION
Farrell Alpha Strategies is organized as a Delaware business trust pursuant to
a Trust Instrument dated April 6, 1995. The Trust is registered under the Act
as an open-end management investment company, commonly known
23
<PAGE>
as a mutual fund. The Trustees of the Trust may establish additional series or
classes of shares without the approval of shareholders. The assets of each se-
ries will belong only to that series, and the liabilities of each series will
be borne solely by that series and no other.
TRUSTEES AND OFFICERS OF THE FUND
The Trustees of the Fund have overall responsibility for the operation of the
Fund. The officers of the Fund who are employees or officers of the Advisor
serve without compensation from the Fund.
DESCRIPTION OF SHARES
The Trust is authorized to issue an unlimited number of shares of beneficial
interest with no par value. Shares of the Fund represent equal proportionate
interests in the assets of the Fund only, and have identical voting, dividend,
redemption, liquidation and other rights. All shares issued are fully paid and
non-assessable, and shareholders have no preemptive or other right to sub-
scribe to any additional shares. Currently, only one class of shares is being
offered by the Fund. The validity of shares of beneficial interest offered by
this prospectus will be passed on by Brown Raysman Millstein Felder & Steiner
LLP, 120 West Forty-fifth Street, New York, NY 10036. All accounts will be
maintained in book-en-try form; therefore, no share certificates will be issued.
VOTING RIGHTS
A shareholder is entitled to one vote for each full share held (and a frac-
tional vote for each fractional share held). All shares of the Fund partici-
pate equally in regard to dividends, distributions, and liquidations with re-
spect to the Fund. Shareholders do not have preemptive, conversion or cumula-
tive voting rights.
As of July 7, 1997, Wako Securities America Inc. of New York, New York was a
con-trol person of the Fund by nature of its shareholdings. Under the Act, a
control person possesses the ability to control the outcome of matters submitted
for shareholder vote.
SHAREHOLDER MEETINGS
The Trustees are not required, and do not intend, to hold annual meetings of
shareholders. The Trustees have undertaken to the U.S. Securities and Exchange
Commission, however, that they will promptly call a meeting of shareholders
for the purpose of voting upon the question of removal of any Trustee when re-
quested to do so by holders of not less than 10% of the outstanding shares of
the Fund. In addition, subject to certain conditions, shareholders of the Fund
may apply to the Fund to communicate with other shareholders to request a
shareholders' meeting to vote upon the removal of a Trustee or Trustees.
SHAREHOLDER REPORTS AND INQUIRIES
The Trust issues unaudited financial information semiannually and audited fi-
nancial statements annually. Shareholder inquiries should be addressed to the
Fund c/o FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, Pennnsylvania 19406-0903, (800) 262-7751 or (610) 239-4991. Purchase
and redemption transac-tions should be made through the transfer agent by
calling (800) 262-7751 or (610) 239-4991.
24
<PAGE>
Investment Advisor:
FARRELL-WAKO GLOBAL INVESTMENT MANAGEMENT, INC.
780 THIRD AVENUE, 38TH FLOOR
NEW YORK, NEW YORK 10017
(212) 319-3944
Underwriter:
FPS BROKER SERVICES, INC.
3200 HORIZON DRIVE
P.O. BOX 61503
KING OF PRUSSIA, PENNSYLVANIA 19406-0903
(800) 262-7751
(610) 239-4991
Shareholder Services:
FPS SERVICES, INC.
3200 HORIZON DRIVE
P.O. BOX 61503
KING OF PRUSSIA, PENNSYLVANIA 19406-0903
(800) 262-7751
(610) 239-4991
Custodian:
SUMITOMO BANK OF NEW YORK TRUST COMPANY
2 WORLD FINANCIAL CENTER TOWER B
225 LIBERTY STREET 35TH FLOOR
NEW YORK, NEW YORK 10281
Legal Counsel:
BROWN RAYSMAN MILLSTEIN FELDER & STEINER LLP
120 WEST FORTY-FIFTH STREET
NEW YORK, NEW YORK 10036
Independent Accountants:
COOPERS & LYBRAND, L.L.P.
2400 ELEVEN PENN CENTER
PHILADELPHIA, PENNSYLVANIA 19103
For Additional Information about The Japan Alpha Fund call:
(800) 471-7174 (or
(212) 319-3944 for overseas investors)
<PAGE>
FARRELL ALPHA STRATEGIES
THE JAPAN ALPHA FUND
STATEMENT OF ADDITIONAL INFORMATION
July 29, 1997
This Statement of Additional Information dated July 29, 1997, is not a
prospectus but should be read in conjunction with the Prospectus of The Japan
Alpha Fund (the "Fund") dated July 29, 1997, as amended or supplemented from
time to time. This Statement of Additional Information is intended to provide
additional information regarding the activities and operations of the Fund. No
investment in shares should be made without first reading the Prospectus. A copy
of the Fund's Prospectus may be obtained without charge from Farrell Alpha
Strategies (the "Trust") at the addresses and telephone numbers below.
Underwriter: Advisor:
FPS Broker Services, Inc. Farrell-Wako Global
3200 Horizon Drive Investment Management, Inc.
P.O. Box 61503 780 Third Avenue, 38th Floor
King of Prussia, Pennsylvania 19406-0903 New York, New York 10017
(800) 239-4991 (212) 319-3944
(800) 471-7174
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectus in connection with the offering made by the Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Trust or its distributor. The Prospectus does not
constitute an offering by the Trust or by the distributor in any jurisdiction in
which such offering may not lawfully be made.
Page 27
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
The Trust and the Fund..........................................................
Investment Policies and Techniques..............................................
American Depository Receipts..................................................
Convertible Securities........................................................
Foreign Securities............................................................
Repurchase Agreements.........................................................
Loans of Portfolio Securities.................................................
Securities of Other Investment Companies......................................
Illiquid Securities...........................................................
Rule 144A Securities..........................................................
Other Investments.............................................................
Investment Restrictions.........................................................
Trustees and Officers...........................................................
Principal Shareholders..........................................................
Investment Advisory and Other Services..........................................
Investment Advisory Agreement.................................................
Administrator.................................................................
Underwriter...................................................................
Custodian.....................................................................
Independent Accountants.......................................................
Distribution Plan.............................................................
Net Asset Value.................................................................
Taxes...........................................................................
Federal Income Tax............................................................
Foreign Taxes.................................................................
Portfolio Transactions..........................................................
Portfolio Turnover............................................................
Performance Information.........................................................
In General....................................................................
Total Return Calculation......................................................
Yield Calculation.............................................................
Performance and Advertisements................................................
Other Information...............................................................
Shareholder Liability.........................................................
Limitations on Trustees' Liability............................................
Description of Commercial Paper Ratings.........................................
Financial Statements............................................................
</TABLE>
Page 28
<PAGE>
THE TRUST AND THE FUND
This Statement of Additional Information relates to The Japan Alpha Fund (the
"Fund"), a separate series of Farrell Alpha Strategies (the "Trust"), a
diversified, open-end management company established on April 6, 1995 under
Delaware law as a Delaware business trust. The Trust Instrument permits the
Trust to offer separate series of shares of beneficial interest. The Trust
currently is comprised of one series, The Japan Alpha Fund.
INVESTMENT POLICIES AND TECHNIQUES
The following supplements the information contained in the Fund's Prospectus
regarding the permitted investments and risk factors and the investment
objective and policies of the Fund.
American Depository Receipts
The Fund may invest in foreign securities by purchasing American Depository
Receipts ("ADRs"). These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. Generally,
ADRs, in registered form, are denominated in U.S. dollars and are designed for
use in the U.S. securities markets. ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities.
For purposes of the Fund's investment policies, ADRs are deemed to have the same
classification as the underlying securities they represent. Thus, an ADR
representing ownership of common stock will be treated as common stock. ADR
facilities may be established as either "unsponsored" or "sponsored". While
ADRs issued under these two types of facilities are similar in some respects,
there are distinctions between them relating to the rights and obligations of
ADR holders and the practices of market participants.
Convertible Securities
The Fund may invest in convertible securities. Common stock occupies the most
junior position in a company's capital structure. Convertible securities
entitle the holder to exchange such securities for a specified number of shares
of common stock, usually of the same company, at specified prices within a
certain period of time, and to receive interest or dividends until the holder
elects to convert. The provisions of any convertible security determine its
ranking in a company's capital structure. In the case of subordinated
convertible debentures, the holder's claims on assets and earnings are
subordinated to the claims of other creditors, and are senior to the claims of
preferred and common shareholders. In the case of preferred stock and
convertible preferred stock, the holder's claims on assets and earnings are
subordinated to the claims of all creditors but are senior to the claims of
common shareholders.
To the extent that a convertible security's investment value is greater than its
conversion value, its price will be primarily a reflection of such investment
value, and its price will be likely to increase when interest rates fall and
decrease when interest rates rise, as is the case with a fixed income security.
If the conversion value exceeds the investment value, the price of the
convertible security will rise above its investment value and, in addition, may
sell at some premium over its conversion value. At such times, the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security.
Foreign Securities
Investments in securities of foreign issuers may subject the Fund to investment
risks that differ in some respects from those related to investments in
obligations of U.S. domestic issuers. Such risks include future adverse
political and economic developments, the possible imposition of withholding
taxes on interest or other income, possible seizure, nationalization or
expropriation of foreign deposits, the possible establishment of exchange
controls or taxation at the source, greater fluctuations in value due to changes
in currency exchange rates, or the adoption of other foreign governmental
restrictions which might adversely affect the payment of principal and interest
on such obligations. Such investments may also have higher custodial fees and
sales commission than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those regarding domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may
Part 29
<PAGE>
be subject to less stringent reserve requirements than those applicable to
domestic branches of U.S. banks. In addition, foreign markets may be
characterized by lower liquidity, greater price volatility, less regulation and
higher transaction costs than U.S. markets.
Repurchase Agreements
The repurchase price under the repurchase agreements described in the
Prospectuses generally equals the price paid by the Fund plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the securities underlying the repurchase agreement).
Repurchase agreements may be considered to be loans by the Fund under the
Investment Company Act of 1940, as amended (the "1940 Act").
The financial institutions with whom the Fund may enter into repurchase
agreements are banks and non-bank dealers of U.S. government securities that are
listed on the Federal Reserve Bank of New York's list of reporting dealers and
banks, if such banks and non-bank dealers are deemed creditworthy by Farrell-
Wako Global Investment Management, Inc. (the "Advisor"). The Advisor will
continue to monitor the creditworthiness of the seller under a repurchase
agreement, and will require the seller to maintain during the term of the
agreement the value of the securities subject to the agreement at not less than
the repurchase price. The Fund will only enter into a repurchase agreement
where the market value of the underlying security, including interest accrued,
will at all times be equal to or exceed the value of the repurchase agreement.
The Fund may invest in repurchase agreements with foreign parties or a
repurchase agreement based on securities denominated in foreign currencies.
Legal structures in foreign countries, including bankruptcy laws, may offer less
protection to investors such as the Fund. Furthermore, foreign repurchase
agreements generally involve greater risks than repurchase agreements made in
the United States.
Loans of Portfolio Securities
The Fund may lend portfolio securities to broker-dealers and financial
institutions provided that (1) the loan is secured continuously by collateral
marked-to-market daily, and maintained in an amount at least equal to the
current market value of the securities loaned; (2) the Fund may call the loan at
any time and receive the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities and (4) the aggregate market
value of securities loaned by the Fund will not at any time exceed 33% of the
total assets of the Fund.
Collateral will consist of U.S. government securities, cash equivalents or
irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral. Therefore, the Fund will only enter into portfolio loans
after a review by the Advisor, under the supervision of the Board of Trustees,
including a review of the creditworthiness of the borrower. Such reviews will
be monitored on an ongoing basis.
Securities of Other Investment Companies
The Fund may invest in the securities of other investment companies that invest
solely in money market securities, which may result in duplicative fees and
expenses. The Fund currently intends to limit its investments in securities
issued by other investment companies so that, as determined immediately after a
purchase of such securities is made, (i) not more than 5% of the value of the
Fund's total assets will be invested in the securities of any one investment
company; (ii) not more than 10% of its total assets will be invested in the
aggregate in securities of investment companies as a group and (iii) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the Fund.
Illiquid Securities
The Fund may invest up to 10% of its net assets in securities that are illiquid,
which means that they cannot be expected to be sold within seven days at
approximately the price at which they are valued. The Board of Trustees has
delegated the function of making day-to-day determinations of liquidity to the
Advisor pursuant to guidelines reviewed by the Board of Trustees. The Advisor
will monitor the liquidity of securities held by the Fund, and report
periodically on such determinations to the Board of Trustees.
Page 30
<PAGE>
Rule 144A Securities
The Fund may invest in securities that are exempt from the registration
requirements of the Securities Act of 1933 pursuant to Securities Exchange
Commission ("SEC") Rule 144A. Those securities, purchased pursuant to Rule
144A, are traded among qualified institutional buyers, and are subject to the
Fund's limitation on illiquid investment.
Investing in securities under Rule 144A could have the effect of increasing the
levels of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. The
Fund will limit its investments in securities of issuers which the Fund is
restricted from selling to the public without registration under the Securities
Act of 1933 to no more than 10% of the Fund's net assets, excluding restricted
securities eligible for resale pursuant to Rule 144A that have been determined
to be liquid by the Fund's Board of Trustees.
Other Investments
Subject to prior disclosure to shareholders, the Board of Trustees may, in the
future, authorize the Fund to invest in securities other than those listed here
and in the prospectus, provided that such investment would be consistent with
the Fund's investment objective, and that it would not violate any fundamental
investment policies or restrictions applicable to the Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental restrictions and may
not be changed without the approval of a majority of the outstanding voting
shares (as defined in the 1940 Act) of the Fund. Unless otherwise indicated,
all percentage limitations listed below apply only at the time of the
transaction. Accordingly, if a percentage restriction is adhered to at the time
of investment, a later increase or decrease in the percentage which results from
a relative change in values or from a change in the Fund's total assets will not
be considered a violation.
Except as set forth under "INVESTMENT OBJECTIVE AND POLICIES" and "DESCRIPTION
OF PERMITTED INVESTMENTS AND RISK FACTORS" in each Prospectus, the Fund may not:
1. Purchase or sell real estate (but this restriction shall not prevent the
Fund from investing directly or indirectly in portfolio instruments secured
by real estate or interests therein, or acquiring securities of real estate
investment trusts or other issuers that deal in real estate), real estate
limited partnership interests, interests in oil, gas and/or mineral
exploration or development programs or leases. However, in order to comply
with the "blue sky" restrictions of certain states, the Fund will limit its
purchases of readily marketable real estate investment trusts to 10% of its
total assets, and the Fund will not invest in real estate limited
partnerships;
2. Purchase or sell commodities or commodity contracts;
3. Make investments in securities for the purpose of exercising control;
4. Purchase the securities of any one issuer if, immediately after such
purchase, the Fund would own more than 10% of the outstanding voting
securities of such issuer;
5. Sell securities short or purchase securities on margin, except for such
short-term credits as are necessary for the clearance of transactions;
6. Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of debt instruments in accordance with the Fund's
investment objectives and policies, (b) the lending of portfolio
securities, or (c) entry into repurchase agreements with banks or broker-
dealers;
Page 31
<PAGE>
7. Borrow money or issue senior securities, except that the Fund may borrow
from banks in amounts up to one-third of the value of its total assets at
the time of such borrowing; or mortgage, pledge or hypothecate any assets,
except in connection with any such borrowing and in amounts not in excess
of the lesser of the dollar amounts borrowed or 10% of the value of the
total assets of the Fund at the time of its borrowing. All borrowings will
be done from a bank and asset coverage of at least 300% is required. The
Fund will not purchase securities when borrowings exceed 5% of its total
assets;
8. Purchase the securities of issuers conducting their principal business
activities in the same industry (other than obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities) if
immediately after such purchase the value of its investments in such
industry would exceed 25% of the value of the total assets of the Fund;
9. Act as an underwriter of securities, except that, in connection with the
disposition of a security, the Fund may be deemed to be an "underwriter" as
that term is defined in the Securities Act of 1933;
10. Invest in puts, calls, straddles or combinations thereof.
11. Purchase securities of other investment companies except as permitted
by the 1940 Act and the rules and regulations thereunder.
TRUSTEES AND OFFICERS
No officer or Trustee of the Trust who is also an officer or employee of the
Advisor receives any compensation from the Fund for services to the Fund. The
Trust pays each Trustee who is not affiliated with the Advisor a fee of $1,000
per year, plus $250 per meeting and reimburses each Trustee and officer for out-
of-pocket expenses in connection with travel and attendance at Board meetings.
Information pertaining to the Trustees and executive officers of the Fund is set
forth below.
<TABLE>
<CAPTION>
Aggregate
Compensation Total
Position held with the Fund From Trust for Compensation
and Principal Occupation(s) Fiscal Year Ended From Trust Paid
Name and Address Age During Past 5 Years March 31, 1997 to Trustees
- - ---------------- --- --------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
James L. Farrell, Jr.* 60 Chairman of the Board and President; $ 0 $ 0
780 Third Avenue Chairman of Farrell-Wako Global
38th Floor Investment Management, Inc. from
New York, NY 10017 January 1991 to present; formerly
Chairman and Chief Investment Officer
of MPT Associates, New York, New York.
Mr. Farrell has extensive experience
in portfolio management and applied
financial research both at
</TABLE>
Page 32
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Citibank and College Retirement Equities
Fund (CREF). Mr. Farrell has published
widely and has spoken at conferences in
the U.S., Japan, U.K. and Continental
Europe on approaches to systematic
investing. His book, Guide to Portfolio
------------------
Management, is widely known by investment
----------
practitioners and is utilized in leading
business schools. Mr. Farrell is an
adjunct professor of finance at N.Y.U.
and Columbia University. He has a B.S.
from the University of Notre Dame, an
M.B.A from Wharton and a Ph.D. from
New York University.
Takeaki Nagashima* 45 Trustee and Treasurer, President of $ 0 $ 0
780 Third Avenue Farrell-Wako Global investment
38th Floor Management, Inc. from May, 1997 to
New York, NY 10017 present; formerly, General Manager of
Wako International (Europe) Company,
Ltd. from July, 1995 to April, 1997;
and Chief Representative and General
Manager of Wako Securities Bahrain
office from April 1982 through June,
1995.
Herbert Passin 80 Trustee; Professor-Emeritus, Sociology, $1,750 $1,750
25 Claremont Avenue Columbia University; Senior Research
New York, NY 10027 Associate, East Asian Institute, Columbia
University and Chairman, Department of
Sociology. Columbia University (retired
from active teaching in 1987), consultant
or advisor to various global corporations
and foundations during the past ten years
including RAND Corporation, Toyota Motor
Co., Ford Foundation and Morrison and
Foerster, among others; Member, Board of
Directors, International Institute for
Global Peace (Japan).
Arthur Williams, III 56 Trustee; President and founder of Pine $1,750 $1,750
382 Springfield Avenue Grove Associates, Inc., an investment
Summit, NJ 07901 advisory and consulting firm, from
February, 1994 to present; formerly,
Director of Retirement Plan Investments
for McKinsey & Co., Inc.. New York,
New York from June, 1987 through
February, 1994; Director, The Investment
Fund for Foundations since February 1994.
Catherine O'Shea* 25 Secretary of Trust since February, 1997; $ 0 $ 0
780 Third Avenue Portfolio Accounting Manager of Farrell-
New York, NY 10017 Wako Global Investment Management, Inc.
from April 1996 to present; formerly,
trading assistant at New Japan Securities
from August, 1994 through March, 1996.
</TABLE>
* Interested person as that term is defined in the 1940 Act.
Page 33
<PAGE>
PRINCIPAL SHAREHOLDERS
As of July 27, 1997, the Officers and Trustees of the Trust, together as a
group, owned beneficially 9,910 shares of the Fund and the Trust, respectively.
As of July 27, 1997, the following persons owned of record and beneficially more
than 5% of the outstanding voting shares of the Fund and the Trust:
Name & Address of Beneficial Owners Percentage
Wako Securities America * 57.92%
One World Trade Center Ste. 8369
New York, NY 10048
Wako International Europe 19.30%
155 Bishopgate 4th Floor
London, EC2
Wako International Hong Kong Ltd. 19.30%
2 Pacific Place
88 Queens Way Room 1911-13
Hong Kong
* Person deemed to control the Fund within the meaning of the 1940 Act. Note
that such persons possess the ability to control the outcome of matters
submitted for the vote of shareholders of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
The Fund and the Advisor have entered into an investment advisory agreement (the
"Investment Advisory Agreement"). The Investment Advisory Agreement provides
that the Advisor shall not be protected against any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
The Investment Advisory Agreement provides that if, for any fiscal year, any
ratio of expenses of the Fund (including amounts payable to the Advisor but
excluding interest, taxes, brokerage, litigation and other extraordinary
expenses) exceeds limitations established by any state in which the shares of
the Fund are registered, the Advisor will bear the amount of such excess.
If the Fund is registered in California, and to the extent that the Fund
purchases securities of open-end investment companies, the Advisor will waive
its advisory fee on that portion of the Fund's assets invested in such
securities.
The Advisor has agreed to waive its advisory fee in an amount equal to the total
expenses of the Fund for any fiscal year which exceeds the permissible limits
applicable to the Fund in any state in which its shares are then qualified for
sale. At the present time, the most restrictive state expense limitation limits
a fund's annual expenses (excluding interest, taxes, distribution expense,
brokerage commissions and extraordinary expenses, and other expenses subject to
approval by state securities administrators) to 2.5% of the first $30 million of
its average daily net assets, 2.0% of the next $70 million of its average daily
net assets and 1.5% of its average daily net assets in excess of $100 million.
For the period April 18, 1995 (commencement of operations) through March 31,
1996 and the fiscal year ended March 31, 1997, the Advisor agreed to waive
advisory fees of $39,409 and $42,802, respectively, and reimburse the Fund for
expenses totaling $236,343 and $250,230, respectively.
The continuance of the Investment Advisory Agreement, after the first two years,
must be specifically approved at least annually (i) by the vote of the Trustees
or by a vote of the shareholders of Fund, and (ii) by the vote of a majority of
the Trustees who are not parties to the Investment Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Investment Advisory Agreement
will terminate automatically in the event of its assignment, and is terminable
at any time without penalty by the Trustees of the Trust, or by a majority of
the outstanding shares of the Fund on not less than 30 days' nor more than 60
days' written notice to the Advisor, or by the Advisor on 90 days' written
notice to the Fund.
Page 34
<PAGE>
Administrator
FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia,
Pennsylvania 19406-0903 (the "Administrator") 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 Transfer Agent and monitors the services they provide 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) supervises the maintenance by
third parties of such books and records of the Fund as may be required by
applicable federal or state law; (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 SEC and other federal and state
regulatory authorities as may be required by applicable law; (8) reviews and
submits to the officers of the Fund for their approval invoices or other
requests for payment of the Fund's expenses and instructs the Custodian to issue
checks in payment thereof and (9) 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.
As compensation for the services performed under the Administrative Services
Agreement, the Administrator receives a fee computed at the annual rate of 0.15%
of the first $75 million of total average net assets, 0.10% of the next $75
million of total average net assets and 0.05% of total net assets in excess of
$150 million. As stated in the Administrative Services Agreement, aggregate
administration fees will not be less $95,000. For the period April 18, 1995
(commencement of operations) through March 31, 1996 and the fiscal year ended
March 31, 1997, the Trust paid $115,203 and $100,596, respectively, for
Administration fees.
Underwriter
FPS Broker Services, Inc. ("FPSB"), 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, Pennsylvania 19406-0903, was engaged pursuant to an agreement for the
limited purpose of acting as underwriter to facilitate the registration of
shares of the Fund under state securities laws and to assist in the sale of
shares. FPSB is a broker-dealer registered with the SEC and a member in good
standing of the National Association of Securities Dealers, Inc.
Custodian
Sumitomo Bank of New York Trust Company,("Sumitomo Bank") 2 World Financial
Center Tower B, 225 Liberty Street 35th Floor, New York, New York 10281 is the
custodian of the cash and securities of the Fund pursuant to a custodian
agreement. Under the custodian agreement, Sumitomo Bank (i) maintains a
separate account or accounts in the name of the Fund (ii) holds and transfers
portfolio securities on account of the Fund, (iii) accepts receipts and makes
disbursements of money on behalf of the Fund, (iv) collects and receives all
income and other payments and distributions on account of the Fund's securities
and (v) makes periodic reports to the Board of Trustees concerning the Fund's
operation.
Independent Accountants
Coopers & Lybrand L.L.P., 2400 Eleven Penn Center, Philadelphia, PA 19103 has
been selected as the independent accountants for the Fund. Coopers & Lybrand
L.L.P. provides audit and tax services along with assistance and consultation
with respect to regulatory filings with the U. S. Securities and Exchange
Commission. The books of the Fund will be audited at least once each year by
Coopers & Lybrand L.L.P.
Page 35
<PAGE>
Distribution Plan
The Board of Trustees of the Trust adopted a distribution plan pursuant to
Rule 12b-1 under the 1940 Act ("the Plan") for the Class A Shares of the Fund.
EFFECTIVE JULY 29, 1996, THE CLASS A SHARES OF THE FUND WERE ABOLISHED AND THERE
ARE NO REMAINING SHAREHOLDERS IN THE CLASS. THE PLAN DOES NOT APPLY TO THE
CLASS D SHARES OF THE FUND, WHICH ARE THE ONLY SHARES CURRENTLY BEING OFFERED.
Pursuant to the Plan, for the fiscal year ended March 31, 1996, the Trust paid
FPS Broker Services, Inc. ("FPSB"), the Distributor, $10,664 from the
assets of the Class A Shares for services and expenses incurred in distributing
and promoting sales of the Class A Shares of the Fund. Of this amount, $3,023
was for printing costs and $7,641 was for other costs associated with the
distribution of the Class A Shares of the Fund. Aggregate fees paid under the
Plan to FPBS and others may not exceed 0.25% of the average daily net assets
attributable to the Class A Shares in any year.
Pursuant to the Plan, for the fiscal year ended March 31, 1997, the Trust paid
FPSB $3,813 from the assets of the Class A Shares, the total amount of which
FPSB redistributed to shareholders following the liquidation of the Class A
Shares.
NET ASSET VALUE
The net asset value per share is computed by dividing the value of the assets of
the Fund, less its liabilities, by the number of shares of the respective class
of shares outstanding. Portfolio securities are valued and net asset value per
share is determined as of the close of regular trading on the New York Stock
Exchange ("NYSE") which currently is 4:00 p.m. (Eastern time), on each day the
NYSE is open for trading.
The NYSE is open for trading every day except Saturdays, Sundays and the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
Trading in securities on the Japanese exchanges and over-the-counter markets is
normally completed well before the close of the business day in New York. In
addition, Japanese trading may not take place on all business days in New York.
Furthermore, trading takes place in Japanese markets on certain Saturdays and in
various foreign markets on days which are not business days the NYSE is open and
therefore the Fund's net asset values are not calculated.
The calculation of the Fund's net asset values may not take place
contemporaneously with the determination of the prices of portfolio securities
held by the Fund. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of the NYSE
will not be reflected in the Fund's calculation of net asset value unless the
Board of Trustees deems that the particular event would materially affect the
net asset value, in which case
Page 36
<PAGE>
an adjustment will be made. Assets or liabilities initially expressed in terms
of foreign currencies are translated prior to the next determination of the net
asset value of the Fund's shares into U.S. dollars at the prevailing market
rates. The fair value of all other assets is added to the value of securities
to arrive at the total assets.
TAXES
The following is only a summary of certain federal tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus, and is not intended as a substitute for careful tax planning.
Shareholders are urged to consult their tax advisors with specific reference to
their own tax situations, including their state and local tax liabilities. Non-
U.S. investors should consult their tax advisors concerning the tax consequences
of ownership of shares of the Fund, including the possibility that distributions
may be subject to a 31% U.S. withholding tax.
Federal Income Tax
The following discussion of federal income tax consequences is based on the
Internal Revenue Code (the "Code") and the regulations issued thereunder as in
effect on the date of this Statement of Additional Information. New
legislation, as well as administrative changes or court decisions, may
significantly change the conclusions expressed herein, and may have a
retroactive effect with respect to the transactions contemplated herein.
The Fund has qualified, and intends to continue to qualify, as a "regulated
investment company" ("RIC") as defined under Subchapter M of the Code. By
following such a policy, the Fund expects to eliminate or reduce to a nominal
amount the federal income taxes to which it may be subject. In order to qualify
for treatment as a RIC under the Code, the Fund generally must distribute
annually to its shareholders at least 90% of its investment company taxable
income (generally, net investment income plus net short-term capital gain) (the
"Distribution Requirement") and also must meet several additional requirements.
Among these requirements are the following: (i) at least 90% of the Fund's gross
income each taxable year must be derived from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
stock or securities, or certain other income; (ii) the Fund must derive less
than 30% of its gross income each taxable year from the sale or other
disposition of stocks or securities held for less than three months; (iii) at
the close of each quarter of the Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. government
securities, securities of other RlCs and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of the Fund's assets and that does not represent more
than 10% of the outstanding voting securities of such issuer and (iv) at the
close of each quarter of the Fund's taxable year, not more than 25% of the value
of its assets may be invested in securities (other than U.S. government
securities or the securities of other RICs) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same, similar or
related trades or businesses. Notwithstanding the Distribution Requirement
described above, which requires only that the Fund distribute at least 90% of
its annual investment company taxable income and does not require any minimum
distribution of net capital gain (the excess of net long-term capital gain over
net short-term capital loss), the Fund will be subject to a nondeductible 4%
federal excise tax to the extent that it fails to distribute by the end of any
calendar year 98% of its ordinary income for that year and 98% of its capital
gain net income (the excess of short- and long-term capital gains over short-
and long-term capital losses) for the one-year period ending on October 31 of
that year, plus certain other amounts. The Fund intends to make sufficient
distributions of its ordinary income and capital gain net income prior to the
end of each calendar year to avoid liability for federal excise tax.
Any gain or loss recognized on a sale, redemption or exchange of shares of the
Fund by a non-exempt shareholder who is not a dealer in securities generally
will be treated as a long-term capital gain or loss if the shares have been held
for more than twelve months and otherwise generally will be treated as a short-
term capital gain or loss. If shares of the Fund on which a net capital gain
distribution has been received are subsequently sold, redeemed or exchanged and
such shares have been held for six months or less, any loss recognized will be
treated as a long-term capital loss to the extent of the long-term capital gain
distribution.
In certain cases, the Fund will be required to withhold, and remit to the United
States Treasury, 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup
Page 37
<PAGE>
withholding by the Internal Revenue Service or (3) has not certified to the Fund
that such shareholder is not subject to backup withholding.
If the Fund fails to qualify as a RIC for any taxable year, it will be subject
to tax on its taxable income at regular corporate rates. In such an event, all
distributions from the Fund generally would be eligible for the corporate
dividend received deduction for corporate shareholders.
Foreign Taxes
Foreign governments may withhold taxes from dividends or interest paid with
respect to foreign securities typically at a rate between 10% and 35%. Tax
conversions between certain countries and the United States may reduce or
eliminate such taxes. The Fund intends to elect to pass-through foreign taxes
paid in order for a shareholder to take a credit or deduction if, at the close
of its fiscal year, more than 50% of the Fund's total assets are invested in
securities of foreign issuers.
PORTFOLIO TRANSACTIONS
The Fund does not have an obligation to deal with any broker/dealer or group of
broker/dealers in the execution of transactions in portfolio securities.
Subject to policies established by the Trustees, the Advisor is responsible for
placing the orders to execute transactions for the Fund. In placing orders, it
is the policy of the Fund to seek to obtain the best net results taking into
account such factors as price (including the applicable dealer spread), the
size, type and difficulty of the transaction involved, the firm's general
execution and operational facilities, and the firm's risk in positioning the
securities involved. When more than one firm is believed to meet these
criteria, preference may be given to brokers who provide research or statistical
material or other services to the Fund or the Advisor. While the Advisor
generally seeks reasonably competitive spreads, the Fund will not necessarily be
paying the lowest spread available.
The Fund expects to conduct substantially all or a majority of its brokerage
transactions through Wako Securities Co., Ltd., an affiliated broker of the
Advisor. The commissions on these transactions are deemed by the Fund to be
fair and reasonable compared to the commission, fee or other renumeration
received by other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period. The Trustees, including those who are not "interested
persons" of the Fund, have adopted procedures for evaluating the reasonableness
of commissions paid and will review these procedures periodically. The Fund
incurred brokerage commissions of $135,054 and $84,115 for the period April 18,
1995 (commencement of operations) through March 31, 1996 and the fiscal year
ended March 31, 1997, respectively.
Because the Fund does not market its shares through intermediary brokers or
dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Advisor may place portfolio orders with qualified
broker/dealers who recommend the Fund to clients, and may, when a number of
brokers and dealers can provide best net results on a particular transaction,
consider such recommendations by a broker or dealer in selecting among
broker/dealers.
Page 38
<PAGE>
Portfolio Turnover
Although the Fund cannot accurately predict its portfolio turnover rate, under
normal circumstances the portfolio turnover rate may exceed 100% per year. A
portfolio turnover rate is excess of 100% may involve correspondingly greater
brokerage commissions and other transaction costs, which will be borne directly
by the Fund and ultimately by the shareholders. In addition, high portfolio
turnover may result in increased short-term capital gains, which, when
distributed to shareholders, are treated as ordinary income. For the period
April 18, 1995 (commencement of operations) through March 31, 1996, and the
fiscal year ended March 31, 1997, the Fund's portfolio turnover rates were 123%
and 115%, respectively.
PERFORMANCE INFORMATION
In General
From time to time, the Fund may include general comparative information, such as
statistical data regarding inflation, securities indices or the features or
performance of alternative investments, in advertisements, sales literature and
reports to shareholders. The Fund may also include calculations, such as
hypothetical compounding examples or tax-free compounding examples, which
describe hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions and are not
indicative of the performance of the Fund.
From time to time, the yield and total return of the Fund may be quoted in
advertisements, shareholder reports or other communications to shareholders.
Total Return Calculation
The Fund computes average annual total return by determining the average annual
compounded rate of return during specified periods that equate the initial
amount invested to the ending redeemable value of such investment. This is done
by dividing the ending redeemable value of a hypothetical $1,000 initial payment
by $1,000 and raising the quotient to a power equal to one divided by the number
of years (or fractional portion thereof) covered by the computation and
subtracting one from the result. This calculation can be expressed as follows:
ERV = P (1 + T)/n/
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in
terms of years.
T = average annual total return.
The Fund computes the aggregate total return by determining the aggregate
compounded rate of return during specified period that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
Aggregate Total Return = [ ERV - 1 ]
--------
P
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical
$1,000 payment made at the beginning of the
period.
P = hypothetical initial payment of $1,000.
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<PAGE>
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. Based on the foregoing calculations,
the average annual total return for Class A Shares of the Fund, for the period
April 18, 1995 (commencement of operations) through March 31, 1996 was (7.20%).
The average annual total return for Class D Shares of the Fund, for the period
April 18, 1995 (commencement of operations) through March 31, 1996, and the
fiscal year ended March 31, 1997, were (6.90%) and (28.10%), respectively.
Since performance will fluctuate, performance data for the Fund should not be
used to compare an investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed-upon
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
Yield Calculation
Yield, in its simplest form, is the ratio of income per share derived from the
Fund's investments to a current maximum offering price expressed in terms of a
percentage. The yield is quoted on the basis of earnings after expenses have
been deducted. The yield of the Fund is calculated by dividing the net
investment income per share earned during a 30-day (or one month) period by the
maximum offering price per share on the last day of the period and annualizing
the result. The Fund's net investment income per share earned during the period
is based on the average daily number of shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements. This
calculation can be expressed as follows:
YIELD = 2 [(a - b + 1)/6/ - 1]
-----
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = maximum offering price per share on the last day of the
period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by the
Fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the Fund. Except as noted below, interest
earned on any debt obligations held by the Fund is calculated by computing the
yield to maturity of each obligation held by the Fund based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of the month, the purchase price (plus actual accrued
interest) and dividing the result by 360 and multiplying the quotient by the
market value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is held by the Fund. For purposes of this
calculation, it is assumed that each month contains 30 days. The date on which
the obligation reasonably may be expected to be called or, if none, the maturity
date. With respect to debt obligations purchased at a discount or premium, the
formula generally calls for amortization of the discount or premium. The
amortization schedule will be adjusted monthly to reflect changes in the market
values of such debt obligations.
Expenses accrued for the period (variable "b" in the formula) include all
recurring fees charged by the Fund to all shareholder accounts in proportion to
the length of the base period and the Fund's mean (or median) account size.
Undeclared earned income will be subtracted from the offering price per capital
share (variable "d" in the formula).
Page 40
<PAGE>
Performance and Advertisements
From time to time, in marketing and other fund literature, the Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income and capital gains dividends
reinvested. Such calculations do not include the effect of any sales charges
imposed by other funds. The Fund will be compared to Lipper's appropriate fund
category, that is, by fund objective and portfolio holdings. The Fund's
performance may also be compared to the average performance of its Lipper
category.
The Fund's performance may also be compared to the performance of other mutual
funds by Morningstar, Inc. ("Morningstar") which ranks funds on the basis of
historical risk and total return. Morningstar's rankings range from five stars
(highest) to one star (lowest) and represent Morningstar's assessment of the
historical risk level and total return of a fund as a weighted average for
three, five and ten year periods. Ranks are not absolute or necessarily
predictive of future performance.
The Fund may compare its performance to a wide variety of indices including the
Nikkei Stock Average and the Morgan Stanley Capital International Japan Index.
The Nikkei Stock Average is an index of 225 leading stocks traded on the Tokyo
Stock Exchange.
In assessing such comparisons of yield, return or volatility, an investor should
keep in mind that the composition of the investments in the reported indices and
averages is not identical to those of the Fund, that the averages are generally
unmanaged, and that the items included in the calculations of such averages may
not be identical to the formula used by the Fund to calculate its figures.
Because the Fund's investments primarily are denominated in foreign currencies,
the strength or weakness of the U.S. dollar as against these currencies may
account for part of the Fund's investment performance. Historical information
regarding the value of the dollar versus foreign currencies may be used from
time to time in advertisements concerning the Fund.
OTHER INFORMATION
Shareholder Liability
The Trust is an entity of the type commonly known as a "Delaware business
trust". Under Delaware law, shareholders of such a trust could, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. Even if, however, the Fund were held to be a partnership, the possibility
of the shareholders incurring financial loss for that reason appears remote
because the Trust Instrument contains an express disclaimer of shareholder
liability for obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by or on behalf of the Trust or the Trustees, and because the Trust
Instrument provides for indemnification out of the Trust property for any
shareholder held personally liable for the obligations of the Trust.
Limitation of Trustees' Liability
The Trust Instrument provides that a Trustee shall be liable only for his own
willful defaults and, if reasonable care has been exercised in the selection of
officers, agents, employees or investment advisors, shall not be liable for any
neglect or wrongdoing of any such person. The Trust Instrument also provides
that the Trust will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with actual or threatened litigation in which
they may be involved because of their offices with the Trust unless it is
determined in the manner provided in the Trust Instrument that they have not
acted in good faith in the reasonable belief that their actions were in the best
interests of the Trust. However, nothing in the Trust Instrument shall protect
or indemnify a Trustee against any liability for his willful misfeasance, bad
faith, gross negligence or reckless disregard of his duties.
Page 41
<PAGE>
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc.
("Duff") and IBCA Limited and IBCA, Inc. (together, "IBCA").
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1, 1 + and 2, to indicate the relative degree of safety. Issues rated A-
1+ are those with an "overwhelming degree" of credit protection. Those Rated A-1
reflect a "very strong" degree of safety regarding timely payment. Those Rated
A-2 reflect a safety regarding timely payment but not as high as A-1.
Commercial paper issues rated Prime-1 or Prime-2 by Moody's are judged by
Moody's to be of superior quality and strong quality, respectively, on the basis
of relative repayment capacity.
F-1 + (Exceptionally Strong) is the highest commercial paper rating Fitch
assigns; paper rated F-1 + is regarded as having the strongest degree of
assurance for timely payment. Paper rated F-1 (Very Strong) reflects an
assurance of timely payment only slightly less in degree than paper rated F-1+.
The rating F-2 (Good) reflects a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues rated F-1 + or
F-1.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by good fundamental protection
factors. Risk factors are minor. Duff has incorporated gradations of 1 + and 1 -
to assist investors in recognizing quality differences within this highest tier.
Paper rated Duff-1 + has the highest certainty of timely payment, with
outstanding short-term liquidity and safety just below risk-free U.S. Treasury
short-term obligations. Paper rated Duff-1- has high certainty of timely payment
with strong liquidity factors which are supported by good fundamental protection
factors. Risk factors are very small. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets (although
ongoing funding may enlarge total financing requirements) and sound liquidity
factors and company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a
strong capacity for timely repayment. Those obligations rated A1 + are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a satisfactory capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
FINANCIAL STATEMENTS
The Fund's financial statements, including the notes thereto, dated as of
March 31, 1997, which have been audited by Coopers & Lybrand, L.L.P., are
incorporated by reference from the Fund's 1997 Annual Report to Shareholders.
Page 42
<PAGE>
FARRELL ALPHA STRATEGIES
Form N-1A
Part C - Other Information
Part C. Other Information
Item 24. Financial Statements and Exhibits.
- - -------------------------------------------
(a) Financial Statements.
Included in Part A:
(1) Financial Highlights for the period April 18, 1995
(commencement of operations) through March 31, 1996
(audited) and the fiscal year ended March 31, 1997
(audited).
Incorporated by reference in Part B:
The Japan Alpha Fund
--------------------
(1) Schedule of Investments as of March 31, 1997 (audited).
(2) Statement of Assets and Liabilities at March 31, 1997
(audited).
(3) Statement of Operations for the fiscal year ended March 31,
1997 (audited).
(4) Statement of Changes in Net Assets for the period of
April 18, 1995 (commencement of operations) through
March 31, 1996 and fiscal year ended March 31, 1997
(audited).
(5) Notes to Financial Statements dated March 31, 1997.
(6) Financial Highlights (audited).
(7) Report of Independent Accountants
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Copies of Charter -- Trust Instrument is filed herewith
electronically, previously filed as Exhibit No. (1) to
Registration Statement No. 33-92540 filed May 19, 1995.
(2) Copies of existing By-Laws -- Not Applicable.
(3) Copies of any voting trust agreement -- Not Applicable.
(4) Copies of all instruments defining the rights of holders of
the securities -- Not Applicable -Registrant proposes to
maintain investments as non-certificated book entry shares.
(5) Copies of all investment advisory contracts -- Investment
Advisory Agreement previously filed electronically as Exhibit
No. (5) to Registration Statement No. 33-92540 on July 29,
1996.
(6) Copies of each underwriting or distribution contract --
Underwriting Agreement previously filed electronically as
Exhibit No. (6) to Registration Statement No. 33-92540 on
July 29, 1996.
Page 43
<PAGE>
(7) Copies of all bonus, profit sharing, pension or other similar
contracts -- Not Applicable.
(8) Copies of all custodian agreements -- Custodian Agreement
and Sub-Custodian Agreement previously filed electronically
as Exhibit No. (8) to Registration Statement No. 33-92540 on
July 29, 1996.
(9) Copies of all other material contracts not made in the
ordinary course of business which are to be performed.
(a) Transfer Agent Services Agreement between Registrant
and Fund/Plan Services, Inc. dated June 28, 1995
previously filed electronically as Exhibit No. (9)(a) to
Registration Statement No. 33-92540 on July 29, 1996.
(b) Administration Agreement between Registrant and
Fund/Plan Services, Inc. dated June 28, 1995 previously
filed electronically as Exhibit No. (9)(b) to
Registration Statement No. 33-92540 on July 29, 1996.
(c) Accounting Services Agreement between Registrant and
Fund/Plan Services, Inc. dated June 28, 1995 previously
filed electronically as Exhibit No. (9)(c) to
Registration Statement No. 33-92540 on July 29, 1996.
(10) (a) Opinion and Consent of Counsel as to the legality of the
securities to be issued is incorporated by reference to
Registrant's Rule 24f-2 Notice filed electronically on
May 27, 1997.
(b) Opinion and Consent of Counsel as to the legality of the
Securities to be registered pursuant to Rule 24e-2 under
the Investment Company Act of 1940, as amended -- filed
herewith electronically.
(11) Copies of any other opinions, appraisals or rulings --
(a) Consent of Independent Accountants - filed herewith
electronically.
(12) All financial statements omitted from Item 23. --
Not Applicable.
(13) Copies of any agreements or understandings made in
consideration for providing the initial capital between or
among the Registrant -- Not Applicable.
(14) Copies of the model plan -- Not Applicable.
(15) Copies of any plan entered into by Registrant pursuant to
Rule 12b-1 previously filed electronically as Exhibit No.
(15) to Registration Statement No. 33-92540 on July 29, 1996.
(16) Schedule for Computation of Performance Quotations
incorporated herein by reference to Post-Effective Amendment
No. 2 as Exhibit No. 99(16) to Item 24 as electronically
filed on July 29, 1996.
(18) The Multiple Class Plan previously filed electronically as
Exhibit No. (18) to Registration Statement No. 33-92540 on
July 29, 1996.
(19) Trustees' Powers of Attorney for (a) Takeaki Nagashima;
(b) James L. Farrell, Jr.; (c) Herbert Passin; and
(d) Arthur Williams, III are filed herewith electronically.
Page 44
<PAGE>
(27) Electronic Filers -- The Financial Data Schedule is filed
herewith electronically
Item 25. Persons Controlled by or under Common Control with Registrant.
- - -----------------------------------------------------------------------
None.
Item 26. Number of Holders of Securities.
- - -----------------------------------------
Number of Record holders as of July 27, 1997
--------------------------------------------
16
Item 27. Indemnification.
- - -------------------------
Reference is made to Article X of the Registrant's Trust Instrument
which was filed as Exhibit 1, and is incorporated by reference herein.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "1933 Act") may be permitted to directors, officers
and controlling persons of the Registrant by the Registrant pursuant to
the Trust's Trust Instrument, or otherwise, the Registrant is aware
that in the opinion of the U.S. Securities and Exchange Commission,
such indemnification is against public policy as expressed in the 1933
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with the successful
defense of any act, suit or proceeding) is asserted by such trustees
officers or controlling persons in connection with shares being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Advisor.
- - ---------------------------------------------------
Farrell-Wako Global Investment Management, Inc., 780 Third Avenue,
38th Floor, New York, New York 10017 provides investment advisory
services to individual and institutional investors, and as of
July 1, 1997 had approximately $323 million in assets under
management.
For information as to any other business, vocation or employment of a
substantial nature in which each Director or officer of the
Registrant's investment advisor has been engaged for his own account
or in the capacity of Director, officer, employee, partner or trustee,
reference is made to the Form ADV (File #801-41830) filed by it under
the Investment Advisers Act of 1940.
Item 29. Principal Underwriter.
- - -------------------------------
(a) FPS Broker Services, Inc. ("FPSB"), the principal
underwriter for the Registrant's securities, currently acts as
principal underwriter for the following entities:
Bjurman Funds
Farrell Alpha Strategies
Fairport Funds
Page 45
<PAGE>
Focus Trust, Inc.
The Govett Funds, Inc.
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
Polynous Trust
Matthews International Funds
McM Funds
Metropolitan West Funds
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
Trainer Wortham First Mutual Funds
(b) The table below sets forth certain information as to the
Underwriter's Directors, Officers and Control Persons:
<TABLE>
<CAPTION>
Position Position and
Name and Principal and Offices Offices with
Business Address with Underwriter Registrant
------------------ ---------------- ------------
<S> <C> <C>
Kenneth J. Kempf Director, President None
3200 Horizon Drive and Principal
King of Prussia, PA 19406-0903
Lynne M. Cannon Director, None
3200 Horizon Drive Vice President and
King of Prussia, PA 19406-0903 Principal
Rocco C. Cavalieri Director and None
3200 Horizon Drive Vice President
King of Prussia, PA 19406-0903
Gerald J. Holland Director, Senior None
3200 Horizon Drive Vice President
King of Prussia, PA 19406-0903 and Principal
Joseph M. O'Donnell, Esq. Director and None
3200 Horizon Drive Vice President
King of Prussia, PA 19406-0903
Sandra L. Adams Assistant Vice President None
3200 Horizon Drive and Principal
King of Prussia, PA 19406-0903
Carolyn F. Mead Secretary None
3200 Horizon Drive
King of Prussia, PA 19406-0903
John H. Leven Treasurer None
3200 Horizon Drive
King of Prussia, PA 19406-0903
</TABLE>
Page 46
<PAGE>
James W. Stratton may be considered a control person of the Underwriter due to
his direct or indirect ownership of FPS Services, Inc., the parent of the
Underwriter.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
- - ------------------------------------------
All records described in Section 31(a) of the 1940 Act and the
Rules 17 CFR 270.31a-1 to 31a-31 promulgated thereunder, are
maintained by the Trust's Investment Advisor, Farrell-Wako Global
Investment Management, Inc., 780 Third Avenue, 38th Floor,
New York, NY 10017, except for those maintained by the Fund's
Custodian, Sumitomo Bank of New York Trust Company, 277 Park Avenue,
New York, New York 10172 and the Trust's Administrator, Transfer
Agent and Fund Accounting Services Agent, FPS Serices Inc.
3200 Horizon Drive, King of Prussia, PA 19406-0903.
Item 31. Management Services.
- - -----------------------------
There are no management-related service contracts not discussed in
Part A or Part B.
Item 32. Undertakings.
- - ----------------------
(a) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of
removal of any Trustee when requested in writing to do so by the
record holders of not less than 10 percent of the Registrant's
outstanding shares and to assist its shareholders in accordance
with the requirements of Section 16(c) of the Investment Company
Act of 1940 relating to shareholder communications.
(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge.
Page 47
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, 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 has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of King of Prussia, and Commonwealth of
Pennsylvania on the 29th day of July, 1997.
Farrell Alpha Strategies
---------------------------------
Name of Registrant
By /s/ James L. Farrell, Jr.
------------------------------
James L. Farrell, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement of Farrell Alpha Strategies has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- - --------- -------- ----
<S> <C> <C>
/s/ James L. Farrell, Jr. President, Chairman of the 7/29/97
- - --------------------------- Board and Principal Executive
James L. Farrell, Jr. Officer
/s/ Takeaki Nagashima Trustee, Treasurer and 7/29/97
- - --------------------------- Principal Accounting and
Takeaki Nagashima Financial Officer
/s/ Herbert Passin Trustee 7/29/97
- - ---------------------------
Herbert Passin
/s/ Arthur Williams, III Trustee 7/29/97
- - ---------------------------
Arthur Williams, III
</TABLE>
- - ---------------------
By: /s/ Carolyn F. Mead, Esq. as
Attorney-in-Fact and Agent pursuant
to Power of Attorney
Page 48
<PAGE>
FARRELL ALPHA STRATEGIES
Index to Exhibits to Form N-1A
<TABLE>
<CAPTION>
Exhibit Description of Sequentially
Number Exhibit Numbered Page
<S> <C> <C>
(99.B10)(b) Opinion and Consent of Counsel.........................
(99.B11)(a) Consent of Independent Accountants.....................
(99.B24) Trustees' Powers of Attorney...........................
(99.B27)(a) Financial Data Schedule-Class A........................
(99.B27)(b) Financial Data Schedule-Class D........................
</TABLE>
Page 49
<PAGE>
EXHIBIT 99B.10(b)
[LETTERHEAD OF BROWN RAYSMAN MILLSTEIN FELDER & STEINER APPEARS HERE]
July 24, 1997
Farrell Alpha Strategies
c/o Farrell-Wako Global Investment Management, Inc.
780 Third Avenue
New York, NY 10017
Re: Farrell Alpha Strategies
Post-Effective Amendment No. 5 to Registration Statement
on Form N-1A Registration No. 811-9048
-------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Farrell Alpha Strategies, a Delaware business trust
(the "Trust"), and have been informed by the Trust of the registration of 9,801
shares of beneficial interest ("Shares"), pursuant to Post-Effective Amendment
No. 3 to the Trust's Registration Statement under the Securities Act of 1933, as
amended. The registration of such Shares has been made upon reliance on Rule
24c-2 under the Investment Company Act of 1940, as amended.
The Trust is an open-end investment company authorized to issue an unlimited
number of shares of beneficial interest (without par value). We have reviewed
the Trust's Declaration of Trust, its by-laws, resolutions adopted by its Board
of Trustees and holders of its Shares, and such other legal and factual matters
as we have deemed appropriate, and we have relied on information provided by the
Trust in Post-Effective No. 3 as to the number of shares being registered.
This opinion is based exclusively on the business trust law of the State of
Delaware and the federal law of the United States of America.
Based on the foregoing, we are of the opinion that the foregoing Shares of
beneficial interest, when issued for payment as described in the Trust's
Prospectus, will be validly issued, fully paid and non-assessable by the Trust.
We hereby consent to the filing of this opinion with the U.S. Securities and
Exchange Commission as an Exhibit to Post-Effective Amendment No. 3 to the
Trust's Registration Statement.
Very truly yours,
/s/ Brown Raysman Millstein Felder & Steiner
<PAGE>
Exhibit 99.B11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 3 to the Registration Statement (File No. 33-92540) under the Securities Act
of 1933 on Form N-1A of our report dated April 23, 1997 accompanying the
financial statements and financial highlights of Farrell Alpha Strategies - The
Japan Alpha Fund. We also consent to the reference to our Firm under the caption
"Financial Highlights" in the Prospectus and under the captions "Independent
Accountants" and "Financial Statements" in the Statement of Additional
Information.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 29, 1997
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints WILLIAM J. BALTRUS, GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ. and JOSEPH
M. O'DONNELL, ESQ. and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission any amendment to the registration statement
of Farrell Alpha Strategies (the "Trust"), execute and file any request for
exemptive relief from state and federal regulations, and perform on behalf of
the Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of the United States or
any individual state, and in connection therewith to execute and file all
requisite papers and documents, including but not limited to, applications,
reports, notices, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as each
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
______ day of May, 1997
____________________
Takeaki Nagashima
Treasurer & Trustee
ACKNOWLEDGMENT
--------------
State of )
) ss:
County of )
The foregoing instrument was acknowledged before me this ______day of May, 1997,
by Takeaki Nagashima, Trustee and Treasurer, of Farrell Alpha Strategies.
________________
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints WILLIAM J. BALTRUS, GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ. and JOSEPH
M. O'DONNELL, ESQ. and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission any amendment to the registration statement
of Farrell Alpha Strategies (the "Trust"), execute and file any request for
exemptive relief from state and federal regulations, and perform on behalf of
the Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of the United States or
any individual state, and in connection therewith to execute and file all
requisite papers and documents, including but not limited to, applications,
reports, notices, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as each
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
______ day of May, 1997
____________________
James L. Farrell, Jr.
President & Chairman of the Board
ACKNOWLEDGMENT
--------------
State of )
) ss:
County of )
The foregoing instrument was acknowledged before me this _______ day of May,
1997, by James L. Farrell, Jr, President and Chairman of the Board of Trustees
of Farrell Alpha Strategies.
________________
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints WILLIAM J. BALTRUS, GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ. and JOSEPH
M. O'DONNELL, ESQ. and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission any amendment to the registration statement
of Farrell Alpha Strategies (the "Trust"), execute and file any request for
exemptive relief from state and federal regulations, and perform on behalf of
the Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of the United States or
any individual state, and in connection therewith to execute and file all
requisite papers and documents, including but not limited to, applications,
reports, notices, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as each
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
______ day of ______, 1997
____________________
Herbert Passin
Trustee
ACKNOWLEDGMENT
--------------
State of )
) ss:
County of )
The foregoing instrument was acknowledged before me this _______ day of _______,
1997, by Herbert Passin, Trustee of Farrell Alpha Strategies.
________________
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints WILLIAM J. BALTRUS, GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ. and JOSEPH
M. O'DONNELL, ESQ. and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission any amendment to the registration statement
of Farrell Alpha Strategies (the "Trust"), execute and file any request for
exemptive relief from state and federal regulations, and perform on behalf of
the Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of the United States or
any individual state, and in connection therewith to execute and file all
requisite papers and documents, including but not limited to, applications,
reports, notices, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as each
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
_____ day of May, 1997
____________________
Arthur Williams III
Trustee
ACKNOWLEDGMENT
--------------
State of )
) ss:
County of )
The foregoing instrument was acknowledged before me this _____ day of May, 1997,
by Arthur Williams III, Trustee of Farrell Alpha Strategies.
________________
Notary Public
<PAGE>
[ARTICLE] 6
[CIK] 0000945523
[NAME] FARRELL ALPHA STRATEGIES
[SERIES]
[NUMBER] 1
[NAME] THE JAPAN ALPHA FUND-CLASS A
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAR-31-1997
[PERIOD-START] APR-01-1996
[PERIOD-END] MAR-31-1997
[INVESTMENTS-AT-COST] 4,492,776
[INVESTMENTS-AT-VALUE] 3,301,163
[RECEIVABLES] 109,390
[ASSETS-OTHER] 329
[OTHER-ITEMS-ASSETS] 112,352
[TOTAL-ASSETS] 3,523,234
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 65,671
[TOTAL-LIABILITIES] 65,671
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 4,925,654
[SHARES-COMMON-STOCK] 516,722
[SHARES-COMMON-PRIOR] 519,412
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (276,592)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (1,191,499)
[NET-ASSETS] 3,457,563
[DIVIDEND-INCOME] 42,711
[INTEREST-INCOME] 229
[OTHER-INCOME] 0
[EXPENSES-NET] 102,081
[NET-INVESTMENT-INCOME] (59,141)
[REALIZED-GAINS-CURRENT] (280,157)
[APPREC-INCREASE-CURRENT] (1,010,530)
[NET-CHANGE-FROM-OPS] (1,349,828)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 2
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 373
[NUMBER-OF-SHARES-REDEEMED] 503,370
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (1,361,945)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 42,802
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 352,311
[AVERAGE-NET-ASSETS] 4,366,039
[PER-SHARE-NAV-BEGIN] 9.28
[PER-SHARE-NII] 0.07
[PER-SHARE-GAIN-APPREC] (0.26)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.09
[EXPENSE-RATIO] 2.50
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000945523
[NAME] FARRELL ALPHA STRATEGIES
[SERIES]
[NUMBER] 2
[NAME] THE JAPAN ALPHA FUND-CLASS D
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAR-31-1997
[PERIOD-START] APR-01-1996
[PERIOD-END] MAR-31-1997
[INVESTMENTS-AT-COST] 4,492,776
[INVESTMENTS-AT-VALUE] 3,301,163
[RECEIVABLES] 109,390
[ASSETS-OTHER] 329
[OTHER-ITEMS-ASSETS] 112,352
[TOTAL-ASSETS] 3,523,234
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 65,671
[TOTAL-LIABILITIES] 65,671
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 4,925,654
[SHARES-COMMON-STOCK] 516,722
[SHARES-COMMON-PRIOR] 519,412
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (276,592)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (1,191,499)
[NET-ASSETS] 3,457,563
[DIVIDEND-INCOME] 42,711
[INTEREST-INCOME] 229
[OTHER-INCOME] 0
[EXPENSES-NET] 102,081
[NET-INVESTMENT-INCOME] (59,141)
[REALIZED-GAINS-CURRENT] (280,157)
[APPREC-INCREASE-CURRENT] (1,010,530)
[NET-CHANGE-FROM-OPS] (1,349,828)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 2
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 504,901
[NUMBER-OF-SHARES-REDEEMED] 4,891
[SHARES-REINVESTED] 297
[NET-CHANGE-IN-ASSETS] (1,361,945)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 42,802
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 352,311
[AVERAGE-NET-ASSETS] 4,366,039
[PER-SHARE-NAV-BEGIN] 9.31
[PER-SHARE-NII] 0.01
[PER-SHARE-GAIN-APPREC] (2.62)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.01)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 6.69
[EXPENSE-RATIO] 2.25
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
