The
information in this Prospectus is not complete and may be changed. We may
not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This Prospectus is not an offer to
sell
these securities and is not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.
.
Subject
to Completion
Preliminary
Prospectus Dated ______, 2008
PROSPECTUS
Insight
Small Cap Growth Fund
Class
A Shares
__________________________,
2008
The
Securities and Exchange Commission (“SEC”) has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus.
Any
representation to the contrary is a criminal offense.
Insight
Small Cap Growth Fund
A
series of Investment Managers Series Trust (the “Trust”)
Insight
Small Cap Growth Fund (the
“Fund”) is a mutual fund that seeks capital appreciation.
.
Insight
Capital Research & Management, Inc.® (the “Advisor” or “Insight Capital”) is
the investment advisor to the Fund.
Table
of Contents
|
AN
OVERVIEW OF THE FUND
|
3
|
|
PERFORMANCE
|
3
|
|
FEES
AND EXPENSES
|
4
|
|
INVESTMENT
OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
|
6
|
|
PRINCIPAL
RISKS OF INVESTING IN THE FUND
|
7
|
|
MANAGEMENT
OF THE FUND
|
8
|
|
RULE
12B-1 PLAN AND SHAREHOLDER SERVICING PLAN
|
10
|
|
YOUR
ACCOUNT WITH THE FUND
|
10
|
|
SERVICE
FEES - OTHER PAYMENTS TO THIRD PARTIES
|
19
|
|
DIVIDENDS
AND DISTRIBUTIONS
|
19
|
|
FEDERAL
INCOME TAX CONSEQUENCES
|
19
|
|
PRIVACY
NOTICE
|
21
|
This
Prospectus sets forth basic information about the Fund that you should
know
before investing. It should be read and retained for future
reference.
The
date of this Prospectus is _________________________,
2008.
|
What
is the Fund’s
Investment
Objective?
|
|
The
Fund’s investment objective is capital appreciation.
|
|
What
are the Fund’s
Principal
Investment
Strategies?
|
|
The
Fund seeks to achieve its objective by investing primarily in
the common
stock of smaller, rapidly growing emerging growth companies.
|
|
What
are the Principal
Risks
of Investing in the
Fund?
|
|
There
is the risk that you could lose money by investing in the Fund.
The value
of your investment in the Fund will fluctuate as the stocks in
the Fund’s
portfolio change in price. The prices of the stocks the Advisor
selects
may decrease in value. Also, the stock market may decline suddenly,
and
for extended periods of time, thereby adversely affecting the
prices of
the stocks held by the Fund. In addition, there is risk for investing
in
smaller companies which may have limited product lines, markets
or
financial resources and they may depend on a few key
employees.
Because
the Fund is new, its success cannot be guaranteed. There is a
risk that
the Fund will be liquidated if the Fund does not attract enough
assets to
support its continued existence. Liquidation does not require
prior
approval of the Fund’s shareholders and will trigger a taxable event for
federal income tax purposes equivalent to redemption of Fund
shares.
By
itself, the Fund is not a complete, balanced investment plan
and the Fund
cannot guarantee that it will achieve its investment objective.
|
|
Who
may want to Invest
in
the Fund?
|
|
The
Fund may be appropriate for investors who:
· Have
a long-term investment time horizon;
· Have
a retirement plan or 401(k) plan;
· Want
to add an investment with the potential for capital appreciation
to
diversify their investment portfolio;
· Can
accept the greater risks of investing in a fund with smaller
companies
common stock holdings; and
· Are
not primarily concerned with stability of
principal.
|
Because
the Fund is new, it does not have a full calendar year performance record
to
compare against other mutual funds or broad measures of securities market
performance such as indices. Performance information will be available
after the
Fund has been in operation for one calendar year.
Your
investment in the Fund is not a bank deposit and is not insured or guaranteed
by
the Federal Deposit Insurance Corporation or any other government agency,
entity
or person.
This
table describes the fees and expenses that you may pay if you buy and hold
Class
A shares of the Fund.
|
|
|
|
|
|
Shareholder
Fees
|
|
|
|
|
(fees
paid directly from your investment)
|
|
|
|
|
|
|
|
|
|
Maximum
sales charge (load) imposed on purchases
|
|
|
4.75%1
|
|
|
Maximum
deferred sales charge (load)
|
|
|
None
|
|
|
Redemption
fee (as a percentage of amount redeemed)
|
|
|
2.00%2
|
|
|
|
|
|
|
|
|
Annual
Fund Operating Expenses
|
|
|
|
|
|
(expenses
that are deducted from Fund assets)
|
|
|
|
|
|
|
|
|
|
|
|
Management
fees
|
|
|
1.00
|
%
|
|
Distribution
and Service (Rule 12b-1) fees
|
|
|
0.25
|
%
|
|
Shareholder
servicing fee
|
|
|
0.10
|
%
|
|
Acquired
fund fees and expenses3
|
|
|
0.01
|
%
|
|
Other
expenses 4
|
|
|
0.39
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total
annual fund operating expenses5
|
|
|
|
% |
|
|
|
|
|
|
|
1
|
Because
of rounding in the calculation of front-end sales charges, the
actual
front-end sales charge paid by an investor may be higher or lower
than the
percentage noted above. A 1% contingent deferred sales charge
may apply to
shares redeemed within 12 months of purchase from initial investments
of
$1 million or more, where no sales charge applies.
|
|
2
|
The
Fund charges a 2% fee if you redeem shares of the Fund within
30 days of
purchase.
The Fund’s transfer agent UMB Fund Services, Inc. (“Transfer Agent”)
charges a $15 fee for wire redemptions and for redemption checks
sent via
overnight delivery.
|
|
3
|
Reflects
the estimated pro-rata portion of the net operating expenses
of any money
market fund or other fund held by the Fund. Shareholders indirectly
bear
these underlying expenses because the NAV and/or distributions
paid
reflect such underlying expenses.
|
|
4
|
These
expenses, which include a shareholder servicing fee of 0.10%, are
estimated for the current fiscal
year.
|
|
5
|
The
Advisor has contractually agreed to waive its fees and/or absorb
expenses
of the Fund to ensure that Net Annual Fund Operating Expenses
do not
exceed 1.75% of average daily net assets of the Fund. The duration
of this
contract is indefinite and may be terminated by the Trust’s Board of
Trustees (the “Board”). In turn, the Advisor is permitted to seek
reimbursement from the Fund, subject to limitations, for fees
it waived
and Fund expenses it paid. The Advisor is permitted to seek reimbursement
from the Fund for three years from the date fees were waived
or
reimbursed.
|
This
example is intended to help you compare the costs of investing in the Fund
with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods.
The
example includes the initial sales charge. The example also assumes that
your
investment has a 5% return each year, that dividends and distributions
are
reinvested, and that the Fund’s operating expenses remain the same.
Please
note that the figures below are based on the Fund’s net expenses resulting from
the expense limitation agreement described above. Although your actual
costs may
be higher or lower, based on these assumptions your costs would be:
|
INVESTMENT
OBJECTIVE AND PRINCIPAL INVESTMENT
STRATEGIES
|
The
Insight Small Cap Growth Fund’s investment objective is capital appreciation.
The Fund’s investment objective is a non-fundamental policy and may be changed
without shareholder approval upon 60 days notice.
Principal
Strategies
Under
normal market conditions, the Fund will invest at least 80% of its net
assets
(plus any borrowings for investment purposes) in the equity
securities of
growing small cap companies. The Fund may invest in smaller, rapidly growing
emerging growth companies. Emerging small cap growth companies are those
whose
market capitalizations, at the time of purchase, are less than or equal
to the
capitalization of the company with the largest capitalization in the Russell
2000®
Index or
the S&P Small Cap 600 Index , which as of ________________, 2007,
was $__ billion. The Fund will generally invest in industry segments
experiencing rapid growth and will likely have a portion of its assets
in
technology and technology-related stocks. The Fund may invest in both domestic
and foreign securities.
At
the
discretion of the Advisor, the Fund may invest up to 100% of its assets
in cash,
cash equivalents, and high-quality, short-term debt securities and money
market
instruments for temporary defensive purposes. During such a period, the
Fund may
not reach its investment objective. For example, should the market advance
during this period, the Fund may not participate as much as it would have
if it
had been more fully invested.
Fund’s
Portfolio Selection Process
The
Advisor uses a disciplined, three-step process to evaluate the investable
domestic universe of actively traded public companies. The process includes
quantitative analysis, fundamental analysis, and a stock price performance
analysis. Insight Capital’s approach to portfolio construction is based entirely
on a “bottom-up” approach. The Fund typically holds between 40 and 60 stocks.
Insight
Capital considers companies that:
|
·
|
|
are
rapidly growing in sales and earnings;
|
|
·
|
|
show
attractive relative risk/return characteristics;
|
|
·
|
|
have
highly defensible competitive advantages;
|
|
·
|
|
have
strong management teams; and
|
|
·
|
|
have
stocks with good relative
performance.
|
The
Fund
may sell a security when its performance deteriorates relative to the market.
A
security may also be sold if the company’s fundamental attractiveness
weakens, this may include slowing earnings growth, or a prospective slowing
of earnings growth.
Portfolio
Turnover
The
Fund’s annual portfolio turnover rate indicates changes in portfolio
investments. The Advisor will sell a security when appropriate and consistent
with the Fund’s investment objectives and policies regardless of the effect on
the Fund’s portfolio turnover rate.
A
high
portfolio turnover rate (100% or more) has the potential to result in the
realization and distribution to shareholders of higher amounts of capital
gains.
This may mean that you would be likely to have a higher tax liability.
A high
portfolio turnover rate also leads to higher transactions costs, which
could
negatively affect the Fund’s performance. Distributions to shareholders of
short-term capital gains are taxed as ordinary income under federal income
tax
laws.
The
Fund
cannot accurately predict future annual portfolio turnover rates. They
may vary
substantially from year to year since portfolio adjustments are made when
conditions affecting relevant markets, particular industries or individual
issues warrant such action. In addition, portfolio turnover may also be
affected
by sales of portfolio securities necessary to meet cash requirements for
redemptions of shares.
Temporary
or Cash Investments
Under
normal market conditions, the Fund will invest substantially all of its
assets
according to its principal investment strategies as noted above. The Fund
may,
however, temporarily depart from its principal investment strategies by
making
short-term investments in cash, cash equivalents and/or money market instruments
in response to adverse market, economic or political conditions. This may
result
in the Fund not achieving its investment objective during that
period.
For
longer periods of time, the Fund may hold a substantial cash position.
If the
market advances during periods when the Fund is holding a large cash position,
the Fund may not participate in the advance as much as it would have if
it had
been more fully invested. To the extent the Fund uses a money market fund
for
its cash position, there will be some duplication of expenses because the
Fund
would bear its pro rata portion of such money market fund’s advisory fees and
operational expenses.
|
PRINCIPAL
RISKS OF INVESTING IN THE
FUND
|
The
principal risks that may adversely affect the Fund’s net asset value or total
return have previously been summarized under “An Overview of the Fund.” These
risks are discussed in more detail below.
The
Fund
is designed for long-term investors and is not a complete investment program.
You may lose money by investing in the Fund.
Market
Risk
The
Fund
is designed for long-term investors who can accept the risks of investing
in a
portfolio with significant common stock holdings. Common stocks tend to
be more
volatile than other investment choices such as bonds and money market
instruments. The value of the Fund’s shares will go up and down due to movement
of the overall stock market or of the value of the individual securities
held by
the Fund, and you could lose money.
Equity
Risk
The
equity securities held by the Fund may experience sudden, unpredictable
drops in
value or long periods of decline in value. This may occur because of factors
that affect the securities market generally, such as adverse changes in
economic
conditions, the general outlook for corporate earnings, interest rates
or
investor sentiment. Equity securities may also lose value because of factors
affecting an entire industry or sector, such as increases in production
costs,
or factors directly related to a specific company, such as decisions made
by its
management.
Smaller
Company Risk
Market
risk and liquidity risk are particularly pronounced for stocks of smaller
companies. These companies may have limited product lines, markets or financial
resources and they may depend on a few key employees.
Liquidity
Risk
A
security may not be sold at the time desired or without adversely affecting
the
price.
Non-U.S.
Investment Risk
Although
the Fund will limit its investment in securities of foreign issuers to
American
Depositary Recepits (“ADRs”) and other U.S. dollar-denominated equity securities
of foreign issuers traded on U.S. exchanges, the Fund's investments in
non-U.S.
issuers may involve unique risks compared to investing in securities of
U.S.
issuers. Adverse political, economic or social developments could undermine
the
value of the Fund's investments or prevent the Fund from realizing the
full
value of its investments. Financial reporting standards for companies based
in
foreign markets differ from those in the U.S. Finally, the value of the
currency
of the country in which the Fund has invested could decline relative to
the
value of the U.S. dollar, which may affect the value of the investment
to U.S.
investors. In addition, the underlying issuers of certain depositary receipts,
particularly unsponsored or unregistered depositary receipts, are under
no
obligation to distribute shareholder communications to the holders of such
receipts, or to pass through to them any voting rights with respect to
the
deposited securities.
Management
Risk
The
skill
of the Advisor will play a significant role in the Fund’s ability to achieve its
investment objective. The Fund’s ability to achieve its investment objective
depends on the Advisor’s ability to select stocks, particularly in volatile
stock markets. The Advisor could be incorrect in its analysis of industries,
companies and the relative attractiveness of growth and value stocks and
other
matters.
Sector
Risk
From
time
to time, the Fund may invest a significant amount of its total assets in
certain
sectors, which may be subject to specific risks. These risks include
governmental regulation of the sector and governmental monetary and fiscal
policies which impact interest rates and currencies and affect corporate
funding
and international trade. Certain sectors may be more vulnerable than others
to
these factors. In addition, market sentiment and expectations toward a
particular sector could affect a company’s market valuations and access to
equity funding.
Technology
Companies Risk
Technology
companies are subject to special risks. Because of the increasing rate
of
technological innovation, the products of technology companies are subject
to
intense pricing pressure and may become obsolete at a more frequent rate
than
other types of companies. In addition, such companies tend to be capital
intensive and as a result, may not be able to recover all capital investment
costs.
Conflicts
of Interest Risk
The
Advisor may advise other clients with investment objectives similar to
those of
the Fund. The Advisor has a policy to allocate trades fairly among clients.
However, there may be instances in which the Fund would not be able to
invest in
certain limited investment opportunities due to the investment by other
clients
advised by the Advisor.
Portfolio
Holdings Information
A
description of the Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio securities is available in the Fund’s
Statement of Additional Information dated ________________________ (the
“SAI”).
Currently, disclosure of the Fund’s holdings is required to be made quarterly
within 60 days of the end of each fiscal quarter in the Fund’s Annual Report and
Semi-Annual Report to Fund shareholders and in the quarterly holdings report
on
Form N-Q.
Investment
Advisor
Insight
Capital Research & Management, Inc., is the Fund’s investment advisor and
provides investment advisory services to the Fund pursuant to an investment
advisory agreement between the Advisor and the Trust (the “Advisory Agreement”).
The Advisor’s address is 2121 N. California Blvd, Suite 560, Walnut Creek, CA
94596. The Advisor has provided investment advisory services to individual
and
institutional accounts since 1988. The Advisor has provided investment
advisory
services to the Fund since its inception and as of _______________________
managed over $____ billion in assets, which included one other pooled investment
vehicles as well as separately managed accounts.
The
Advisor provides the Fund with advice on buying and selling securities.
The
Advisor also furnishes the Fund with office space and certain administrative
services. For its services, the Advisor is entitled to receive an annual
management fee, calculated daily and payable monthly, equal to 1.00% of
the
Fund’s average daily net assets.
A
discussion regarding the basis for the Board’s approval of the Advisory
Agreement will be available in the Fund’s Semi-Annual Report dated May 31,
2008.
Prior
Performance for Similar Accounts managed by the Advisor
The
bar
chart illustrates the variability of returns for each calendar year end
achieved
by Insight Capital for accounts with investment objectives, policies and
investment strategies substantially similar to that of the Fund. The composite
performance does not represent the historical performance of the Fund and
should
not be interpreted as being indicative of future performance of the Fund.
| |
|
|
|
|
|
|
|
Highest Quarter
|
|
Lowest Quarter
|
| |
|
|
|
|
|
Insight
Capital Composite
|
|
51.63%, 4Q 1999
|
|
-30.75%, 4Q 2000
|
Average
Annual Total Returns
for
Similar Accounts managed by the Advisor
| |
|
One
Year
|
|
Five
Years
|
|
Ten
Years
|
|
|
Insight
Capital Composite
|
|
|
55.38
|
%
|
|
32.31
|
%
|
|
14.78
|
%
|
|
Russell
2000 Growth Index^
|
|
|
18.94
|
%
|
|
18.70
|
%
|
|
3.65
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
The
following chart summarizes the composite performance of the Advisor’s investment
results for accounts with investment objectives similar to that of the
Fund. The
Advisor’s similar account performance has been adjusted to reflect the fees and
expenses of the Fund.
The
data is provided to illustrate the past performance of the Advisor in managing
substantially similar accounts as measured against market indices and does
not
represent the performance of the Fund. The similar accounts are not subject
to
certain investment limitations, diversification requirements and other
restrictions imposed by the Investment Company Act of 1940, as amended,
and the
Internal Revenue Code of 1986, as amended, which if applicable, may have
adversely affected the investment results of the similar accounts. You
should
not consider this performance data as an indication of future performance
of the
Fund.
*
The
Advisor’s similar account performance is a composite of all portfolios managed
by the Advisor with substantially similar investment objectives, policies
and
investment strategies and without significant client imposed restrictions,
adjusted to reflect the fees and expenses of the Fund’s A share class, including
sales loads. The
composite performance does not represent the historical performance of
the Fund
and should not be interpreted as being indicative of the future performance
of
the Fund.
^
The
Russell 2000 Growth Index is a widely recognized, unmanaged index that
measures
the performance of those Russell 2000 Index companies (representing
small-capitalization U.S. common stocks) with higher price-to-book ratios
and
forecasted growth rates. The Index does not incur expenses or reflect any
deduction for taxes and cannot be purchased directly by investors.
Portfolio
Managers
Mr.
Lee
Molendyk
and Mr.
Lance
Swanson
are
responsible for the day-to-day management of the Fund since its
inception.
Lee Molendyk is
a portfolio manager of a portion of the Fund. Mr. Molendyk, a Chartered
Financial Analyst, is a Vice President and Portfolio Manager. He is a
Co-Portfolio Manager and Equity Analyst for the All-Cap Growth/Small-Cap
Growth
Portfolio Team. He is also a member of Insight Capital’s Investment Committee.
Prior to joining Insight Capital in 1999, he worked as a Financial Advisor
at
Morgan Stanley.
Lance Swanson is
a
portfolio manager of a portion of the Fund. Mr. Swanson, a Vice President
and Portfolio Manager, is a Co-Portfolio Manager and Equity Analyst for
the
All-Cap Growth/Small-Cap Growth Portfolio team. He is also a member of
Insight’s
Investment Committee. Mr. Swanson first joined Insight in 1996. From late
2000 until early 2002, he worked for Thomas Weisel Partners in San Francisco
and
then rejoined Insight in 2002.
The
SAI
provides additional information about the portfolio managers’ method of
compensation, other accounts managed by the portfolio managers and the
portfolio
managers’ ownership of securities in the Fund.
Fund
Expenses
The
Fund
is responsible for its own operating expenses. The Advisor has contractually
agreed, however, to waive its fees and/or absorb expenses of the Fund to
ensure
that the net annual fund operating expenses (excluding front-end or contingent
deferred loads, taxes, leverage interest, brokerage commissions, expenses
incurred in connection with any merger or reorganization, or extraordinary
expenses such as litigation) do not exceed 1.75% of the Fund’s average daily net
assets. Any reduction in advisory fees or payment of expenses made by the
Advisor may be reimbursed by the Fund in subsequent fiscal years if the
Advisor
so requests. This reimbursement may be requested if the aggregate amount
actually paid by the Fund toward operating expenses for such fiscal year
(taking
into account the reimbursement) does not exceed the applicable limitation
on
Fund expenses. The Advisor is permitted to be reimbursed for fee reductions
and/or expense payments made for a period of three years from the date
the
expenses were waived and/or Fund expenses were reimbursed. Any such
reimbursement is contingent upon the Board’s subsequent review and ratification
of the reimbursed amounts. The Fund must pay current ordinary operating
expenses
before the Advisor is entitled to any reimbursement of fees and/or
expenses.
RULE
12B-1 PLAN AND SHAREHOLDER SERVICING PLAN
Rule
12b-1 Plan
The
Trust
has adopted a plan pursuant to Rule 12b-1of the Investment Company Act
of 1940,
as amended, that allows the Fund to pay distribution/shareholder
services fees for the sale and distribution of its shares. With respect to
Class A shares of the Fund, the plan provides for the payment of a
distribution/shareholder services fee at the annual rate of up to 0.25%
of
average daily net assets. Because these fees are paid out of the Fund’s assets,
over time these fees will increase the cost of your investment and may
cost you
more than paying other types of sales charges.
Shareholder
Servicing Plan
In
addition, the Trust, on behalf of the Fund, has entered into a Shareholder
Servicing Plan with the Advisor. Under the Shareholder Servicing Plan,
the
Advisor will provide, or arrange for others to provide, certain shareholder
services to shareholders of the Funds. The Shareholder Servicing Plan provides
for the payment to the Advisor of a service fee at the annual rate of 0.10%
of
Class A of the Fund’s average daily net assets.
|
YOUR
ACCOUNT WITH THE FUND
|
Share
Price
Shares
of
the Fund are sold at Net Asset Value (the “NAV”) per share, which is determined
by the Fund as of the close of regular trading (generally, 4:00 p.m.
Eastern time) on each day that the New York Stock Exchange (“NYSE”) is open for
unrestricted business. However, the Fund’s NAV may be calculated earlier if
trading on the NYSE is restricted or as permitted by the SEC. The NYSE
is closed
on weekends and most national holidays.
Purchase
and redemption requests are priced at the next NAV calculated after receipt
by
the Transfer Agent of such requests in good order. The NAV is determined
by
dividing the value of the Fund’s securities, cash and other assets, minus all
expenses and liabilities, by the number of shares outstanding
(assets-liabilities/ # of shares = NAV). The NAV takes into account the
expenses
and fees of the Fund, including management and administration fees, which
are
accrued daily.
The
Fund’s investments are valued according to market value. Stocks that are “thinly
traded” or events occurring after the close of the NYSE may create a situation
where a market quote would not be readily available. When a market quote
is not
readily available, the security’s value is based on “fair value” as determined
by procedures adopted by the Board. The Board will periodically review
the
reliability of the Fund’s fair value methodology. The Fund may hold portfolio
securities, such as those traded on foreign exchanges that trade on weekends
or
other days when the Fund’s shares are not priced. Therefore, the value of the
Fund’s shares may change on days when shareholders will not be able to purchase
or redeem shares.
Description
of Class
The
Trust
has adopted a multiple class plan that allows the Fund to offer one or
more
classes of shares for the Fund. This Prospectus offers Class A shares of
the
Fund. With the Class A shares of the Fund, you will pay a sales charge
when you
initially invest in the Fund and a 2.00%
redemption fee on shares redeemed within 30 days of investing. The Fund’s Class
A shares impose a 0.25% Rule 12b-1 distribution/shareholder services fee
and a
0.10% shareholder servicing fee against the shares average net assets
attributable to Class A and over time could cost you more than if you paid
other
types of sales charges.
Class
A Shares
Class A
shares are sold at the public offering price, which includes a front-end
sales
charge. Shares are purchased at the next NAV calculated after your investment
is
received by the Transfer Agent in good order. The sales charge declines
with the
size of your purchase, as shown below:
|
Amount
Invested
|
|
Sales
Charge as a % of
Offering
Price
|
|
Sales
Charge as a % of
Net
Investment
|
|
Dealer
Reallowance(1)
|
|
|
Less
than $50,000
|
|
|
4.75
|
%
|
|
4.99
|
%
|
|
4.75
|
%
|
|
$50,000
but less than $100,000
|
|
|
4.25
|
%
|
|
4.44
|
%
|
|
4.25
|
%
|
|
$100,000
but less than $250,000
|
|
|
3.25
|
%
|
|
3.36
|
%
|
|
3.25
|
%
|
|
$250,000
but less than $500,000
|
|
|
2.50
|
%
|
|
2.56
|
%
|
|
2.50
|
%
|
|
$500,000
but less than $1,000,000
|
|
|
1.50
|
%
|
|
1.52
|
%
|
|
1.50
|
%
|
|
$1
million or more(2)
|
|
|
0.00
|
%
|
|
0.00
|
%
|
|
1.00%
|
(2)
|
|
(1)
|
Dealers
who have entered into selected dealer agreements with the Fund’s
distributor, Grand Distribution Services, LLC (the “Distributor”) receive
a percentage of the initial sales charge on sales of shares of
the Fund.
The dealer’s reallowance may be changed from time to time, and the
Distributor may from time to time offer incentive compensation
to dealers
who sell shares of the Fund.
|
|
(2)
|
The
sales load on purchases of one million dollars or more, or on
purchases in
accounts with an aggregate value of one million or more, will
be waived
and the dealer reallowance on these purchases will be paid by
the Advisor.
|
Rights
of Combination.
As shown
in the table above, purchases of shares of the Fund by a “single investor” may
be eligible for sales charge reductions. A “single investor” is defined as a
single individual or entity; members of a family unit comprising husband,
wife,
and minor children; or a trustee or its fiduciary purchasing for a single
fiduciary account. Certain employee benefit and retirement benefit plans
may
also be considered as “single investors” if certain uniform criteria are met.
Please refer to the SAI.
Rights
of Accumulation.
You may
qualify for a “volume discount” on purchases of shares of the Fund if the total
amount being invested in shares, in the aggregate, reaches levels indicated
in
the sales charge schedule above. Under this “Right of Accumulation,” you may
combine your new purchases of shares with shares currently owned for the
purpose
of qualifying for the lower initial sales charge rates that apply to larger
purchases. The applicable sales charge for the new purchase is based on
the
total of your current purchase and the current NAV of the all other shares
you
own.
Letter
of Intent.
By
signing a letter of intent (“LOI”) you can reduce your sales charge. Your
individual purchases will be made at the applicable sales charge based
on the
amount you intend to invest over a 13-month period. The LOI will apply
to all
purchases of the Fund. Any shares purchased within 90 days of the date
you sign
the LOI may be used as credit toward completion, but the reduced sales
charge
will only apply to new purchases made on or after that date. Purchases
resulting
from the reinvestment of dividends and capital gains do not apply toward
fulfillment of the LOI. Shares equal to 4.75% of the amount of the LOI
will be
held in escrow during the 13-month period. If, at the end of that time
the total
amount of purchases made is less than the amount intended, you will be
required
to pay the difference between the reduced sales charge and the sales charge
applicable to the individual purchases had the LOI not been in effect.
This
amount will be obtained from redemption of the escrow shares. Any remaining
escrow shares will be released to you.
If
you
establish LOI with the Fund you can aggregate your accounts as well as
the
accounts of your immediate family members. You will need to provide written
instruction with respect to the other accounts whose purchases should be
considered in fulfillment of the LOI.
Exempt
Share Purchases.
Investors (i) who purchase shares on the advice of an investment consultant
to whom the investor has paid a fee relating to such advice; (ii) who
acquire shares through an investment account with the Advisor or a brokerage
account with an affiliate of the Advisor; or (iii) who acquired their shares
in
a 401(k) or other retirement program administered by a third party and
which
invest in the Fund through an omnibus account will not be subject to a
sales
charge. Purchases of shares by investors who are officers, directors, trustees
or employees of the Advisor or the Trust, any of the Advisor’s affiliates, any
selected dealer, or any member of the immediate family of the foregoing
(including shares purchased as part of any such individual’s contribution to a
qualified retirement plan including 401(k) plans) are not subject to any
sales
charge. Similarly exempt are shares acquired via exchange from other mutual
funds (whether or not managed by the Advisor) as a result of a merger or
reorganization or by an employee trust, pension, profit sharing, or other
employee benefit plan. To make a sales charge exempt purchase, you must
notify the Fund or your financial intermediary in writing at the time of
the
purchase order that an exemption will apply to your purchase. Additional
information regarding sales charges exemptions is included in the
SAI.
Reinstatement
Privilege.
Investors who sold shares of the Fund on which a sales charge was paid,
may
request to reinstate the shares previously sold at NAV, with no sales charge,
within 120 calendar days. The reinstated shares must be registered exactly
as
previously redeemed. The Fund’s minimum investment must be met at the time of
reinstatement. The sale of Fund shares and reinvestments may still result
in a
tax liability for federal income tax purposes. Send your written reinstatement
request to Insight Small Cap Growth Fund,
P.O.
Box xxxx, Milwaukee, WI 53201, You can call the Fund at 1-866-XXX-XXXX
for more
information.
You
should keep the records necessary to demonstrate that the reinstatement
privilege applies to your purchase.
Buying
Fund Shares
To
purchase shares of the Fund, you must invest at least the minimum amount.
|
Minimum
Investments
|
|
To
Open
Your
Account
|
|
To
Add to
Your
Account
|
|
|
Regular
Accounts
|
|
$
|
5,000
|
|
$
|
1,000
|
|
|
Retirement
Accounts
|
|
$
|
2,500
|
|
$
|
1,000
|
|
Shares
of
the Fund may be purchased by check or by wire transfer of funds through
a bank
or through approved financial supermarkets, investment advisors and consultants,
financial planners, brokers, dealers and other investment professionals
and
their agents (“Brokers”) authorized by the Fund to receive purchase orders. The
Fund’s minimum initial investment (as well as subsequent additional investments)
depends on the nature of the account as shown in the table above. For regular
accounts, the Fund requires an initial investment of $5,000. For retirement
and
other non-taxable accounts (IRAs, SEP-IRAs, pension and profit sharing
plans,
etc.), the Fund requires an initial investment of $2,500. Minimum investment
amounts may be made in an amount in excess of this amount and may be waived
from
time to time by the Fund. Minimum investment amounts are waived when shares
are purchased by current or retired directors and employees of the Advisor
and
its affiliates.
In-Kind
Purchases and Redemptions
The
Fund
reserves the right to accept payment for shares in the form of securities
that
are permissible investments for the Fund. The Fund also reserves the right
to
pay redemptions by a distribution “in-kind” of securities (instead of cash) from
the Fund. In-kind purchases and redemptions are taxable events and may
result in
the recognition of gain or loss for federal income tax purposes. See the
SAI for
further information about the terms of these purchases and
redemptions.
Additional
Investments
Additional
purchases in the Fund may be made for $1,000 or more. Exceptions may be
made at
the Fund’s discretion. The additional purchases minimum is waived when shares
are purchased by current or retired directors and employees of the Advisor
and
its affiliates. You may purchase additional shares of the Fund by sending
a
check, with the stub from your account statement, to the Fund at the addresses
listed below. Please ensure that you include your account number on the
check.
If you do not have the stub from your account statement, include your name,
address and account number on a separate statement. You may also make additional
purchases by wire or through a broker. Please follow the procedures described
in
this Prospectus.
Short-term
or excessive trading into and out of the Fund may harm performance by disrupting
management strategies and by increasing expenses. Accordingly, the Fund
may
reject your purchase order if in the Advisor’s opinion, you have a pattern of
short-term or excessive trading, your trading has been or may be disruptive
to
the Fund, or rejection otherwise would be in the Fund’s best interest. To
discourage market timing, the Fund imposes fees on certain redemptions. The
Fund will reject any purchase request that the Fund regards as disruptive
to
efficient portfolio management. Furthermore, a redemption fee is imposed
on all
Fund shares held for 30 days or less.
To
help
the government fight the funding of terrorism and money laundering activities,
federal law requires all financial institutions to obtain, verify and record
information that identifies each person who opens an account. When you
open an
account, you will be asked for you name, date of birth (for a natural person),
your residential address or principal place of business, as the case may
be, and
mailing address, if different, as well as your Social Security Number or
Taxpayer Identification Number. Additional information is required for
corporations, partnerships and other entities. Applications without such
information will not be considered in good order. The Fund reserves the
right to
deny applications or redeem your account if the application is not in good
order.
Shares
of
the Fund have not been registered for sale outside of the United States.
The
Fund generally does not sell shares to investors residing outside of the
United
States, even if they are United States citizens or lawful permanent residents,
except to investors with Puerto Rico, Guam, U.S. Virgin Islands or United
States
military APO or FPO addresses.
Automatic
Investment Plan
Once
your
account has been opened with the initial minimum investment, you may make
additional purchases at regular intervals through the Automatic Investment
Plan
(“AIP”). If elected on your account application, money can be automatically
transferred from your checking or savings account on the 5th,
10th,
15th,
20th
or
25th
of the
month. In order to participate in the AIP, each purchase must be in the
amount
of $500 or more, and your financial institution must be a member of the
Automated Clearing House (“ACH”) network. The first AIP purchase will take place
no earlier than 15 days after the Transfer Agent has received your request.
The
Transfer Agent will charge a $25 fee for any ACH payment that is rejected
by
your bank. You may terminate your participation in the AIP by notifying
the
Transfer Agent at 1-866-______________, five days prior to the date of
the next
AIP transfer. The Fund may modify or terminate the AIP at any time without
notice.
Timing
and Nature of Requests
Your
share price will be the next NAV calculated after the Transfer Agent or
your
authorized financial intermediary receives your request in good order.
“Good
order” means that your purchase request includes: (1) the name of the Fund,
(2) the dollar amount of shares to be purchased, (3) your purchase
application or investment stub, and (4) a check payable to the “Insight
Small Cap Growth Fund.” All requests received in good order before
4:00 p.m. (Eastern time) will be processed on that same day. Requests
received after 4:00 p.m. (Eastern time) will receive the next business
day’s NAV.
Methods
of Buying
|
Through
a broker-
dealer
or other
financial
intermediary
|
|
The
Fund is offered through a sales agent (e.g., broker-dealer or
other
financial intermediary). The Fund is also offered directly through
the
distributor. An order placed with a sales agent is treated as
if it was
placed directly with the Fund, and will be executed at the next
share
price calculated by the Fund. Your sales agent will hold your
shares in a
pooled account in the sales agent’s name. The Fund may pay the sales agent
to maintain your individual ownership information, for maintaining
other
required records, and for providing other shareholder services.
The sales
agent who offers shares may require payment of fees from its
individual
clients. If you invest through a sales agent, the policies and
fees may be
different than those described in this Prospectus. For example,
the sales
agent may charge transaction fees or set different minimum investments.
The sales agent is responsible for processing your order correctly
and
promptly, keeping you advised of the status of your account,
confirming
your transactions and ensuring that you receive copies of the
Fund’s
Prospectus. Please contact your sales agent to see if they are
an approved
sales agent of the Fund or for additional
information.
|
|
By
mail
|
|
The
Fund will not accept payment in cash, including cashier’s checks. Also, to
prevent check fraud, the Fund will not accept third party checks,
Treasury
checks, credit card checks, traveler’s checks, money orders or starter
checks for the purchase of shares.
To
buy shares of the Fund, complete an account application form
and send it
together with your check for the amount you wish to invest in
the Fund to
the address below. To make additional investments once you have
opened
your account, write your account number on the check and send
it together
with the most recent confirmation statement received from the
Transfer
Agent. If your check is returned for any reason, your purchase
will be
canceled and a $25 fee will be assessed against your account
by the
Transfer Agent.
|
|
|
|
Regular
Mail
Insight
Small Cap Growth Fund
P.O.
Box ______________
|
|
Overnight
Delivery
Insight
Small Cap Growth Fund
803
West Michigan Street
|
|
|
NOTE: The
Fund does not consider the U.S. Postal Service or other independent
delivery services to be its agents.
|
|
|
|
|
|
By
telephone
|
|
To
make additional investments by telephone, you must authorize
telephone
purchases on your account application. If you have given authorization
for
telephone transactions and your account has been open for at
least
15 days, call the Transfer Agent toll-free at
1-866-__________________ and you will be allowed to move money
in amounts
of $1,000 or more, from your bank account to your Fund account
upon
request. Only bank accounts held at U.S. institutions that are
ACH members
may be used for telephone transactions. If your order is placed
before
4:00 p.m. (Eastern time) shares will be purchased in your account
at the
NAV determined on that day. For security reasons, requests by
telephone
will be recorded.
|
| |
|
|
|
By
wire
|
|
To
open an account by wire, a completed account application is required
before your wire can be accepted. You may mail or send by overnight
delivery your account application to the Transfer Agent. Upon
receipt of
your completed account application form, an account will be established
for you. The account number assigned will be required as part
of the
instruction that should be provided to your bank to send the
wire. Your
bank must include the name of the Fund, the account number, and
your name
so that monies can be correctly applied. Your bank should transmit
funds
by wire to:
UMB
Bank, N.A.
ABA
Number _______________________
For
credit to Insight Small Cap Growth Fund
A/C#
_________________________
|
| |
|
|
| |
|
For
further credit to:
Insight
Small Cap Growth Fund
Your
account number
Name(s)
of investor(s)
Social
security or tax ID numbers
Before
sending your wire, please contact the Transfer Agent at
1-866-__________________ to advise them of your intent to wire
funds. This
will ensure prompt and accurate credit upon receipt of your
wire.
Wired
funds must be received prior to 4:00 p.m. (Eastern time) to be
eligible
for same day pricing. The
Fund and UMB Bank, N.A. are not responsible for the consequences
of delays
resulting from the banking or Federal Reserve wire system, or
from
incomplete wiring
instructions.
|
Selling
(Redeeming) Fund Shares
|
Through
a broker-
dealer
or other
financial
intermediary
|
|
If
you purchased your shares through a sales agent (e.g., broker-dealer
or
other financial intermediary), your redemption order must be
placed
through the same sales agent. The sales agent must receive and
transmit
your redemption order to the Transfer Agent prior to 4:00 p.m.
(Eastern time) for the redemption to be processed at the current
day’s
NAV. Orders received after 4:00 p.m. (Eastern time) will receive
the next
business day’s NAV. Please keep in mind that your sales agent may charge
additional fees for its services.
|
|
|
|
|
|
By
mail
|
|
You
may redeem shares purchased directly from the Fund by mail. Send
your
written redemption request to the Fund at the address below.
Your request
should be in good order and contain the Fund’s name, the name(s) on the
account, your account number and the dollar amount or the number
of shares
to be redeemed. Be sure to have all shareholders sign the redemption
request. Additional documents are required for certain types
of
shareholders, such as corporations, partnerships, executors,
trustees,
administrators, or guardians (i.e., corporate resolutions, or
trust
documents indicating proper authorization).
|
|
|
Regular
Mail
Insight
Small Cap Growth Fund
P.O.
Box ____________
|
|
Overnight
Delivery
Insight
Small Cap Growth Fund 803
West Michigan Street
|
|
|
A
Medallion signature guarantee must be included if any of the
following
situations apply:
|
|
|
You
wish to redeem more than $50,000 worth of
shares;
|
|
|
When
redemption proceeds are sent to any person, address or bank account
not on
record;
|
|
|
If
a change of address was received by the Transfer Agent within
the last 15
days;
|
|
|
If
ownership is changed on your account;
or
|
|
|
When
establishing or modifying certain services on your
account.
|
In
addition to the situations described above, the Fund reserves the right
to
require a Medallion signature guarantee in other instances based on the
circumstances relative to the particular situation.
Shareholders
redeeming their shares by mail should submit written instructions with
a
Medallion guarantee of their signature(s) by an eligible institution acceptable
to the Transfer Agent, such as a domestic bank or trust company, broker,
dealer,
clearing agency or savings association, as well as from participants in
a
medallion program recognized by the Securities Transfer Association. The
three
recognized medallion programs are Securities Transfer Agents Medallion
Program,
Stock Exchanges Medallion Program and New York Stock Exchange, Inc. Medallion
Signature Program. Signature guarantees that are not part of these programs
will
not be accepted. A
notary public cannot provide a signature guarantee.
|
By
telephone
|
|
To
redeem shares by telephone, call the Fund at 1-866-_______________
and
specify the amount of money you wish to redeem. You may have
a check sent
to the address of record, or, if previously established on your
account,
you may have proceeds sent by wire or electronic funds transfer
through
the ACH network directly to your bank account. Wires are subject
to a $15
fee paid by the investor and your bank may charge a fee to receive
wired
funds. You do not incur any charge when proceeds are sent via
the ACH
network; however, credit may not be available for two to three
business
days.
If
you are authorized to perform telephone transactions (either
through your
account application form or by subsequent arrangement in writing
with the
Fund) you may redeem shares in any amount, by instructing the
Fund by
phone at 1-866-_______________. Unless noted on the initial application,
a
Medallion signature guarantee is required of all shareholders
in order to
qualify for or to change telephone redemption privileges.
Note:
Neither the Fund nor its service providers will be liable for
any loss or
expense in acting upon instructions that are reasonably believed
to be
genuine. To confirm that all telephone instructions are genuine,
the
caller must verify the following:
|
|
|
That
you correctly state the Fund account number;
|
|
|
The
name in which your account is
registered;
|
|
|
The
social security or tax identification number under which the
account is
registered; and
|
|
|
The
address of the account holder, as stated in the account application
form.
|
Systematic
Withdrawal Plan
You
may
request that a predetermined dollar amount be sent to you each month or
quarter.
Your account must have a value of at least $5,000 for you to be eligible
to
participate in the Systematic Withdrawal Plan (the “SWP”). The minimum
withdrawal is $1,000. If you elect this method of redemption, the Fund
will send
a check to your address of record, or will send the payment via electronic
funds
transfer through the ACH network, directly to your bank account. You may
request
an application for the SWP by calling the Transfer Agent toll-free at
1-866-_______________. The Fund may modify or terminate the SWP at any
time. You
may terminate your participation in the SWP by calling the Transfer Agent
sufficiently in advance of the next withdrawal.
Payment
of Redemption Proceeds
You
may
redeem the Fund’s shares at a price equal to the NAV next determined after the
Transfer Agent receives your redemption request in good order. Generally,
your
redemption request cannot be processed on days the NYSE is closed. All
requests
received in good order by the Fund before the close of the regular trading
session of the NYSE (generally, 4:00 p.m. Eastern time) will usually be
sent to the bank you indicate or mailed on the following day to the address
of
record. In all cases, proceeds will be processed within seven calendar
days and
sent to you after your redemption request has been received.
If
you
purchase shares using a check and soon after request a redemption, the
Fund will
honor the redemption request, but will not mail the proceeds until your
purchase
check has cleared (usually within 12 days). Furthermore, there are certain
times when you may be unable to sell the Fund shares or receive proceeds.
Specifically, the Fund may suspend the right to redeem shares or postpone
the
date of payment upon redemption for more than three business days (1) for
any period during which the NYSE is closed (other than customary weekend
or
holiday closings) or trading on the NYSE is restricted; (2) for any period
during which an emergency exists as a result of which disposal by the Fund
of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets;
or
(3) for such other periods as the SEC may permit for the protection of the
Fund’s shareholders.
Other
Redemption Information
Shareholders
who have an IRA or other retirement plan must indicate on their redemption
request whether to withhold federal income tax. Redemption requests failing
to
indicate an election not to have taxes withheld will generally be subject
to 10%
federal income tax withholding.
The
Fund
generally pays sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection
of the
Fund’s remaining shareholders) the Fund may pay all or part of a shareholder’s
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption-in-kind).
Specifically,
if the amount you are redeeming is in excess of the lesser of $250,000
or 1% of
the Fund’s net assets, the Fund has the right to redeem your shares by giving
you the amount that exceeds $250,000 or 1% of the Fund’s net assets in
securities instead of cash. If the Fund pays your redemption proceeds by
a
distribution of securities, you could incur brokerage or other charges
in
converting the securities to cash, and will bear any market risks associated
with such securities until they are converted into cash. Redemptions-in-kind
are
taxable events for federal income tax purposes in the same manner as when
the
sale proceeds are paid in cash.
Tools
to Combat Frequent Transactions
The
Fund
discourages excessive, short-term trading and other abusive trading practices
that may disrupt portfolio management strategies and harm the Fund’s
performance. The Fund takes steps to reduce the frequency and effect of
these
activities in the Fund. These steps include monitoring trading activity
and
using fair value pricing. Although these efforts (which are described in
more
detail below) are designed to discourage abusive trading practices, these
tools
cannot eliminate the possibility that such activity may occur. Further,
while
the Fund makes efforts to identify and restrict frequent trading, the Fund
receives purchase and sale orders through financial intermediaries and
cannot
always know or detect frequent trading that may be facilitated by the use
of
intermediaries or the use of group or omnibus accounts by those intermediaries.
The Fund seeks to exercise its judgment in implementing these tools to
the best
of its ability in a manner that the Fund believes is consistent with shareholder
interests.
Redemption
Fee
You
will
be charged a redemption fee of 2.00% of the value of the shares being redeemed
if you redeem your shares of the Fund within 30 days of purchase. There
will be
no redemption fee on the redemption of shares acquired through reinvestment
of
distributions. The “first in, first out” (“FIFO”) method is used to determine
the holding period; this means that if you bought shares on different days,
the
shares purchased first will be redeemed first for the purpose of determining
whether the redemption fee applies. The redemption fee is deducted from
your
proceeds and is retained by the Fund for the benefit of its long-term
shareholders.
Although
the Fund aims to apply the redemption fee uniformly, the redemption fee
may not
apply in certain circumstances where it is not currently practicable for
the
Fund to impose the fee, such as redemptions of shares held in certain omnibus
accounts or retirement plans that cannot implement the redemption
fee.
Monitoring
Trading Practices
The
Fund
monitors trades in an effort to detect short-term trading activities. If,
as a
result of this monitoring, the Fund believes that a shareholder has engaged
in
excessive short-term trading, it may, in its discretion, ask the shareholder
to
stop such activities or refuse to process purchases in the shareholder’s
accounts. In making such judgments, the Fund seeks to act in a manner that
it
believes is consistent with the best interest of shareholders. Due to the
complexity and subjectivity involved in identifying abusive trading activity
there can be no assurance that the Fund’s efforts will identify all trades or
trading practices that may be considered abusive.
Fair
Value Pricing
The
Fund
employs fair value pricing selectively to ensure greater accuracy in its
daily
NAV and to prevent dilution by frequent traders or market timers who seek
to
take advantage of temporary market anomalies. The Board has developed procedures
which utilize fair value pricing when reliable market quotations are not
readily
available or the Fund’s pricing service does not provide a valuation (or
provides a valuation that in the judgment of the Advisor to the Fund does
not
represent the security’s fair value), or when, in the judgment of the Advisor,
events have rendered the market value unreliable (see, e.g., discussion
of
non-U.S. securities below). Valuing securities at fair value involves reliance
on judgment. Fair value determinations are made in good faith in accordance
with
procedures adopted by the Board and are reviewed by the Board. There can
be no
assurances that the Fund will obtain the fair value assigned to a security
if it
were to sell the security at approximately the time at which the Fund determines
its NAV per share.
Fair
value pricing may be applied to non-U.S. securities. The trading hours
for most
non-U.S. securities end prior to the close of the NYSE, the time that the
Fund’s
NAV is calculated. The occurrence of certain events after the close of
non-U.S.
markets, but prior to the close of the NYSE (such as a significant surge
or
decline in the U.S. market) often will result in an adjustment to the trading
prices of non-U.S. securities when non-U.S. markets open on the following
business day. If such events occur, the Fund may value non-U.S. securities
at
fair value, taking into account such events, when the NAV is calculated.
Other
types of securities that the Fund may hold for which fair value pricing
might be
required include, but are not limited to: (a) investments which are
frequently traded and/or the market price of which the Advisor believes
may be
stale; (b) illiquid securities, including “restricted” securities and
private placements for which there is no public market; (c) securities of
an issuer that has entered into a restructuring; (d) securities whose
trading has been halted or suspended; and (e) fixed income securities that
have gone into default and for which there is not a current market value
quotation.
General
Transaction Policies
Some
of
the following policies are mentioned above. In general, the Fund reserves
the
right to:
| |
·
|
vary
or waive any minimum investment
requirement;
|
| |
·
|
refuse,
change, discontinue, or temporarily suspend account services,
including
purchase, or telephone redemption privileges, for any
reason;
|
| |
·
|
reject
any purchase request for any reason. Generally, the Fund does
this if the
purchase is disruptive to the efficient management of the Fund
(due to the
timing of the investment or an investor’s history of excessive
trading);
|
| |
·
|
redeem
all shares in your account if your balance falls below the Fund’s minimum
initial investment requirement due to redemption activity. If,
within
30 days of the Fund’s written request, you have not increased your
account balance, you may be required to redeem your shares. The
Fund will
not require you to redeem shares if the value of your account
drops below
the investment minimum due to fluctuations of the Fund’s
NAV;
|
| |
·
|
delay
paying redemption proceeds for up to seven calendar days after
receiving a
request, if an earlier payment could adversely affect the Fund;
and
|
| |
·
|
reject
any purchase or redemption request that does not contain all
required
documentation.
|
If
you
elect telephone privileges on the account application form or in a letter
to the
Fund, you may be responsible for any fraudulent telephone orders as long
as the
Fund has taken reasonable precautions to verify your identity. In addition,
once
you place a telephone transaction request, it cannot be canceled or
modified.
During
periods of significant economic or market change, telephone transactions
may be
difficult to complete. If you are unable to contact the Fund by telephone,
you
may also mail your request to the Fund at the address listed under “Methods of
Buying.”
Your
broker or other financial intermediary may establish policies that differ
from
those of the Fund. For example, the organization may charge transaction
fees,
set higher minimum investments, or impose certain limitations on buying
or
selling shares in addition to those identified in this Prospectus. Contact
your
broker or other financial intermediary for details.
|
SERVICE
FEES - OTHER PAYMENTS TO THIRD
PARTIES
|
The
Fund
may pay service fees to intermediaries such as banks, broker-dealers, financial
advisors or other financial institutions for sub-administration, sub-transfer
agency and other shareholder services associated with shareholders whose
shares
are held of record in omnibus, other group accounts or accounts traded
through
registered securities clearing agents.
The
Advisor, out of its own resources, and without additional cost to the Fund
or
its shareholders, may provide additional cash payments or non-cash compensation
to intermediaries who sell shares of the Fund. Such payments and compensation
are in addition to service fees paid by the Fund. These additional cash
payments
are generally made to intermediaries that provide shareholder servicing,
marketing support and/or access to sales meetings, sales representatives
and
management representatives of the intermediary. The Advisor may pay cash
compensation for inclusion of the Fund on a sales list, including a preferred
or
select sales list, in other sales programs or as an expense reimbursement
in
cases where the intermediary provides shareholder services to the Fund’s
shareholders. The Advisor may also pay cash compensation in the form of
finder’s
fees that vary depending on the Fund and the dollar amount of the shares
sold.
|
DIVIDENDS
AND DISTRIBUTIONS
|
The
Fund
will make distributions of net investment income and capital gains, if
any, at
least annually, typically in December. The Fund may make an additional
payment
of dividends or distributions if it deems it desirable at any other time
during
the year.
All
dividends and distributions will be reinvested in Fund shares unless you
choose
one of the following options: (1) receive net investment income dividends
in cash, while reinvesting capital gain distributions in additional Fund
shares;
or (2) receive all dividends and distributions in cash. If you wish to
change your distribution option, write to the Transfer Agent in advance
of the
payment date of the distribution.
If
you
elect to receive distributions in cash and the U.S. Postal Service cannot
deliver your check, or if your check remains uncashed for six months, the
Fund
reserves the right to reinvest the distribution check in your account at
the
Fund’s then current NAV and to reinvest all subsequent
distributions.
|
FEDERAL
INCOME TAX CONSEQUENCES
|
The
Fund
intends to qualify and elect to be treated as a regulated investment company
under the Internal Revenue code of 1986, as amended (the “Code”). If the Fund so
qualifies, it will not pay federal income tax on the net investment income
and
capital gains that it distributes to its shareholders.
The
Fund
intends to distribute all of its net investment income and capital gains,
if
any, to shareholders. Unless otherwise exempt, shareholders are required
to pay
federal income tax on any dividends and other distributions received. This
applies whether dividends or distributions are received in cash or additional
shares.
Distributions
of net investment income, other than “qualified dividend income,” are taxable
for federal income tax purposes at ordinary income tax rates. For taxable
years
beginning on or before December 31, 2010, distributions designated as qualified
dividend income are taxed to individuals and other noncorporate investors
at
rates applicable to long-term capital gains, provided certain holding period
and
other requirements contained in the Code are satisfied. Distributions of
net
long-term capital gain (i.e., the excess of net long-term capital gain
over net
short-term capital loss) are taxable for federal income tax purposes as
long-term capital gain regardless of how long the shareholder has held
Fund
shares. Long-term capital gain is currently taxable to noncorporate shareholders
at a maximum federal income tax rate of 15%. Distributions of net short-term
capital gain (i.e., net short-term capital gain less any net long-term
capital
loss) are taxable as ordinary income regardless of how long the shareholder
has
held Fund shares. Dividends paid by the Fund may qualify in part for the
dividends received deduction available to corporate shareholders, provided
certain holding period and other requirements are satisfied.
Dividends
declared in October, November or December to shareholders of record as
of a date
in such month and paid during the following January are treated as if received
on December 31 of the calendar year declared. Information on the federal
income
tax status of dividends and distributions is provided annually.
By
law,
the Fund must withhold a percentage of your distributions and redemption
proceeds (“backup withholding”) if you do not provide your correct social
security or taxpayer identification number or certify that you are not
subject
to backup withholding, or if the Internal Revenue Service instructs the
Fund to
do so. Backup withholding is not an additional tax. Any amounts withheld
may be
credited against your federal income tax liability provided the appropriate
information is furnished to the Internal Revenue Service.
If
you
sell your Fund shares, it is considered a taxable event for you. Depending
on
the purchase price and the sale price of the shares you sell, you may have
a
gain or a loss on the transaction. The gain or loss will generally be treated
as
a long-term capital gain or loss if you held your shares for more than
one year.
If you held your shares for one year or less, the gain or loss will generally
be
treated as a short-term capital gain or loss. Short-term capital gain is
taxable
at ordinary federal income tax rates. Shareholders may be limited in their
ability to utilize capital losses. You are responsible for any tax liabilities
generated by your transaction.
Prospective
shareholders of the Fund should consult with their own tax advisors concerning
the effect of owning shares of the Fund in light of their particular tax
situation.
PRIVACY
NOTICE
The
Fund
collects non-public information about you from the following
sources:
| |
·
|
Information
we receive about you on applications or other
forms;
|
| |
·
|
Information
you give us orally; and/or
|
| |
·
|
Information
about your transactions with us or
others.
|
We
do not disclose any non-public personal information about our customers
or
former customers without the customer’s authorization, except as permitted by
law or in response to inquiries from governmental authorities. We may share
information with affiliated and unaffiliated third parties with whom we
have
contracts for servicing the Fund. We will provide unaffiliated third parties
with only the information necessary to carry out their assigned
responsibilities. We maintain physical, electronic and procedural safeguards
to
guard your non-public personal information and require third parties to
treat
your personal information with the same high degree of
confidentiality.
In
the event that you hold shares of the Fund through a financial intermediary,
including, but not limited to, a broker-dealer, bank, or trust company,
the
privacy policy of your financial intermediary would govern how your non-public
personal information would be shared by those entities with unaffiliated
third
parties.
THIS
IS NOT A PART OF THE PROSPECTUS
Investment
Advisor
Insight
Capital Research & Management, Inc.®
2121
N.
California Blvd., Suite 560
Independent
Registered Public Accounting Firm
Tait,
Weller & Baker LLC
1818
Market Street, Suite 2400
Custodian
UMB
Bank,
n.a.
928
Grand
Boulevard, 10th
Floor
Fund
Co-Administrator
Mutual
Fund Administration Corporation
2220
E.
Route 66, Suite 226
Fund
Co-Administrator, Transfer Agent and Fund Accountant
UMB
Fund
Services, Inc.
803
West
Michigan Street, Suite A
Distributor
Grand
Distribution Services, LLC
803
West
Michigan Street, Suite A
Insight
Small Cap Growth Fund
A
series of Investment Managers Series Trust
You
can
find more information about the Fund in the following documents:
Statement
of Additional Information
The
SAI
provides additional details about the investments and techniques of the
Fund and
certain other additional information. A current SAI is on file with the
SEC and
is incorporated into this Prospectus by reference. This means that the
SAI is
legally considered a part of this Prospectus even though it is not physically
within this Prospectus.
.
The
SAI
is available free of charge on the Fund’s website at www.___________________.com.
You can
obtain a free copy of the SAI, request other information, or make general
inquires about the Fund by contacting a broker that sells the Fund or by
calling
the Fund (toll-free) at 1-866- ________________ or by writing to:
Insight
Small Cap Growth Fund
c/o
UMB
Fund Services, Inc.
803
West
Michigan Street, Suite A
You
may
review and copy information including the Shareholder Reports and SAI at
the
Public Reference Room of the SEC in Washington, DC. You can obtain information
on the operation of the Public Reference Room by calling (202) 551-8090.
Reports and other information about the Fund are also available:
| |
·
|
Free
of charge from the SECs EDGAR database on the SEC’s Internet website at
http://www.sec.gov;
|
| |
·
|
For
a fee, by writing to the Public Reference Room of the SEC, Washington,
DC
20549-0102; or
|
(The
Trust’s SEC Investment Company Act file number is 811- 21719)
The
information in this Statement of Additional Information is not complete and
may
be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This Statement
of Additional Information is not an offer to sell these securities and is
not
soliciting an offer to buy these securities in any state where the offer
or sale
is not permitted.
Statement
of Additional Information
__________________ , 2008
INSIGHT
SMALL CAP GROWTH FUND
a
series of Investment Managers Series Trust
This
Statement of Additional Information (“SAI”) is not a prospectus, and it should
be read in conjunction with the Prospectus dated ___________, 2008, as may
be amended from time to time, of the Insight Small Cap Growth Fund (the “Fund”),
a series of Investment Managers Series Trust (the “Trust”). Insight Capital
Research & Management, Inc.® (the “Advisor”) is the Advisor to the Fund. A
copy of the Fund’s Prospectus may be obtained by contacting the Fund at the
address or telephone number below.
Insight
Small Cap Growth Fund
c/o
UMB Fund Services, LLC
P.O.
Box ______
1-866-__________
|
THE
TRUST
|
2
|
|
INVESTMENT
OBJECTIVE AND POLICIES
|
2
|
|
MANAGEMENT
|
12
|
|
PORTFOLIO
TRANSACTIONS AND BROKERAGE
|
21
|
|
PORTFOLIO
TURNOVER
|
23
|
|
PROXY
VOTING POLICY
|
23
|
|
ANTI-MONEY
LAUNDERING PROGRAM
|
24
|
|
PORTFOLIO
HOLDINGS INFORMATION
|
24
|
|
DETERMINATION
OF NET ASSET VALUE
|
26
|
|
PURCHASE
AND REDEMPTION OF FUND SHARES
|
27
|
|
FEDERAL
INCOME TAX MATTERS
|
28
|
|
DIVIDENDS
AND DISTRIBUTIONS
|
32
|
|
GENERAL
INFORMATION
|
33
|
|
FINANCIAL
STATEMENTS
|
35
|
|
APPENDIX
“A”
|
36
|
THE
TRUST
The
Trust
(formerly called Claymore Trust) is an open-end management investment company
organized as a Delaware statutory trust under the laws of the State of Delaware
on February 15, 2005. The Trust changed its name to Investment Managers
Series Trust on ____________, 2007. The Trust currently consists of one other
series of shares of beneficial interest, par value $0.01 per share. This
SAI
relates only to the Fund and not to the other series of the Trust.
The
Trust
is registered with the Securities and Exchange Commission (“SEC”) as an open-end
management investment company. Such a registration does not involve supervision
of the management or policies of the Fund. The Prospectus of the Fund and
this
SAI omit certain of the information contained in the Registration Statement
filed with the SEC. Copies of such information may be obtained from the SEC
upon
payment of the prescribed fee.
INVESTMENT
OBJECTIVE AND POLICIES
The
Fund’s investment objective is capital appreciation. The Fund seeks to achieve
its objective by investing primarily in smaller, rapidly growing emerging
growth
companies. The Fund is diversified. Under applicable federal securities laws,
the diversification of a mutual fund’s holdings is measured at the time the fund
purchases a security. However, if a fund purchases a security and holds it
for a
period of time, the security may become a larger percentage of the fund’s total
assets due to movements in the financial markets. If the market affects several
securities held by a fund, the fund may have a greater percentage of its
assets
invested in securities of fewer issuers. A fund is then subject to the risk
that
its performance may be hurt disproportionately by the poor performance of
relatively few securities despite the fund qualifying as a diversified fund
under applicable federal securities laws. There is no assurance that the
Fund
will achieve its objective. The discussion below supplements information
contained in the Fund’s Prospectus as to investment policies of the
Fund.
Investment
Company Securities
The
Fund
may invest in securities issued by other registered investment companies.
The
Fund generally may invest up to 10% of its total assets in the aggregate
in
shares of other investment companies and up to 5% of its assets in any one
investment company, as long as no investment represents more than 3% of the
outstanding voting stock of the acquired investment company at the time of
investment. Investment in another investment company may involve the payment
of
a premium above the value of such issuers’ portfolio securities, and is subject
to market availability. The Fund does not intend to invest in such vehicles
or
funds unless, in the judgment of the Advisor and subject to the Fund’s
investment restrictions set forth in its Prospectus and SAI, the potential
benefits of the investment justify the payment of any applicable premium
or
sales charge. As a shareholder in an investment company, Fund shareholders
would
indirectly pay a portion of that investment company’s expenses, including its
advisory, administration, brokerage, shareholder servicing and other expenses.
At the same time the Fund would continue to pay its own management fees and
other expenses.
Short-Term
Investments
The
Fund
may invest in any of the following securities and instruments:
Bank
Certificates of Deposit, Bankers’ Acceptances and Time Deposits.
The Fund
may acquire certificates of deposit, bankers’ acceptances and time deposits.
Certificates of deposit are negotiable certificates issued against monies
deposited in a commercial bank for a definite period of time and earning
a
specified return. Bankers’ acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are “accepted” by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers’ acceptances acquired by the Fund will be
dollar-denominated obligations of domestic or foreign banks or financial
institutions which at the time of purchase have capital, surplus and undivided
profits in excess of $100 million (including assets of both domestic and
foreign branches), based on latest published reports, or less than
$100 million if the principal amount of such bank obligations are fully
insured by the U.S. Government. If the Fund holds instruments of foreign
banks
or financial institutions, it may be subject to additional investment risks
that
are different in some respects from those incurred by a fund that invests
only
in debt obligations of U.S. domestic issuers. See “Foreign Investments” below.
Such risks include future political and economic developments, the possible
imposition of withholding taxes by the particular country in which the issuer
is
located, the possible seizure or nationalization of foreign deposits, the
possible establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on these securities.
Domestic
banks and foreign banks are subject to different governmental regulations
with
respect to the amount and types of loans that may be made and interest rates
that may be charged. In addition, the profitability of the banking industry
depends largely upon the availability and cost of funds for the purpose of
financing lending operations under prevailing money market conditions. General
economic conditions as well as exposure to credit losses arising from possible
financial difficulties of borrowers play an important part in the operations
of
the banking industry.
As
a
result of federal and state laws and regulations, domestic banks are, required
to maintain specified levels of reserves, limited in the amount that they
can
loan to a single borrower, and subject to other regulations designed to promote
financial soundness. However, such laws and regulations do not necessarily
apply
to foreign bank obligations that the Fund may acquire.
In
addition to purchasing certificates of deposit and bankers’ acceptances, to the
extent permitted under its investment objective and policies stated above
and in
its Prospectus, the Fund may make interest-bearing time deposits or other
interest-bearing deposits in commercial or savings banks. Time deposits are
non-negotiable deposits maintained at a banking institution for a specified
period of time at a specified interest rate.
Savings
Association Obligations.
The Fund
may invest in certificates of deposit (interest-bearing time deposits) issued
by
savings banks or savings and loan associations that have capital, surplus
and
undivided profits in excess of $100 million, based on latest published
reports, or less than $100 million if the principal amount of such
obligations is fully insured by the U.S. Government.
Commercial
Paper, Short-Term Notes and Other Corporate Obligations. The
Fund
may invest a portion of its assets in commercial paper and short-term notes.
Commercial paper consists of unsecured promissory notes issued by corporations.
Issues of commercial paper and short-term notes will normally have maturities
of
less than nine months and fixed rates of return, although such instruments
may
have maturities of up to one year.
Commercial
paper and short-term notes will consist of issues rated at the time of purchase
“A-2” or higher by S&P, “Prime-1” or “Prime-2” by Moody’s, or similarly
rated by another nationally recognized statistical rating organization or,
if
unrated, will be determined by the Advisor to be of comparable quality. These
rating symbols are described in Appendix A.
Corporate
obligations include bonds and notes issued by corporations to finance
longer-term credit needs than can be supported by commercial paper. While
such
obligations generally have maturities of ten years or more, the Fund may
purchase corporate obligations which have remaining maturities of one year
or
less from the date of purchase and which are rated “AA” or higher by S&P or
“Aa” or higher by Moody’s.
Government
Obligations
The
Fund
may make short-term investments in U.S. Government obligations. Such obligations
include Treasury bills, certificates of indebtedness, notes and bonds, and
issues of such entities as the Government National Mortgage Association
(“GNMA”), Export-Import Bank of the United States, Tennessee Valley Authority,
Resolution Funding Corporation, Farmers Home Administration, Federal Home
Loan
Banks, Federal Intermediate Credit Banks, Federal Farm Credit Banks, Federal
Land Banks, Federal Housing Administration, Federal National Mortgage
Association (“FNMA”), Federal Home Loan Mortgage Corporation, and the Student
Loan Marketing Association.
Some
of
these obligations, such as those of the GNMA, are supported by the full faith
and credit of the U.S. Treasury; others, such as those of the Export-Import
Bank
of the United States, are supported by the right of the issuer to borrow
from
the Treasury; others, such as those of the FNMA, are supported by the
discretionary authority of the U.S. Government to purchase the agency’s
obligations; still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored agencies if it is not obligated to do so by
law.
The
Fund
may invest in sovereign debt obligations of foreign countries. A sovereign
debtor’s willingness or ability to repay principal and interest in a timely
manner may be affected by a number of factors, including its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor’s policy toward
principal international lenders and the political constraints to which it
may be
subject. Emerging market governments could default on their sovereign debt.
Such
sovereign debtors also may be dependent on expected disbursements from foreign
governments, multilateral agencies and other entities abroad to reduce principal
and interest arrearages on their debt. The commitments on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a sovereign debtor’s implementation of economic reforms and/or economic
performance and the timely service of such debtor’s obligations. Failure to meet
such conditions could result in the cancellation of such third parties’
commitments to lend funds to the sovereign debtor, which may further impair
such
debtor’s ability or willingness to service its debt in a timely
manner.
Options
on Securities
Writing
Call Options.
The Fund
may write covered call options. A call option is “covered” if the Fund owns the
security underlying the call or has an absolute right to acquire the security
without additional cash consideration (or, if additional cash consideration
is
required, cash or cash equivalents in such amounts as are held in a segregated
account by the Custodian). The writer of a call option receives a premium
and
gives the purchaser the right to buy the security underlying the option at
the
exercise price. The writer has the obligation upon exercise of the option
to
deliver the underlying security against payment of the exercise price during
the
option period. If the writer of an exchange-traded option wishes to terminate
his obligation, he may effect a “closing purchase transaction.” This is
accomplished by buying an option of the same series as the option previously
written. A writer may not effect a closing purchase transaction after it
has
been notified of the exercise of an option.
Effecting
a closing transaction in the case of a written call option will permit the
Fund
to write another call option on the underlying security with either a different
exercise price, expiration date or both. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any securities
subject to the option to be used for other investments of the Fund. If the
Fund
desires to sell a particular security from its portfolio on which it has
written
a call option, it will effect a closing transaction prior to or concurrent
with
the sale of the security.
The
Fund
will realize a gain from a closing transaction if the cost of the closing
transaction is less than the premium received from writing the option or
if the
proceeds from the closing transaction are more than the premium paid to purchase
the option. The Fund will realize a loss from a closing transaction if the
cost
of the closing transaction is more than the premium received from writing
the
option or if the proceeds from the closing transaction are less than the
premium
paid to purchase the option. However, because increases in the market price
of a
call option will generally reflect increases in the market price of the
underlying security, any loss to the Fund resulting from the repurchase of
a
call option is likely to be offset in whole or in part by appreciation of
the
underlying security owned by the Fund.
In
addition to covered call options, the Fund may write uncovered (or “naked”) call
options on securities, including exchange traded funds (“ETFs”), and indices;
however, SEC rules require that the Fund segregates assets on its books and
records with a value equal to the value of the securities or the index that
the
holder of the option is entitled to call. Segregated securities cannot be
sold
while the option strategy is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that segregation of
a large
percentage of the Fund’s assets could impede portfolio management or the Fund’s
ability to meet redemption requests or other current obligations.
Writing
Covered Index Call Options.
The
Fund may sell index call options. The Fund may also execute a closing purchase
transaction with respect to the option it has sold and sells another option
(with either a different exercise price or expiration date or both). The
Fund’s
objective in entering into such closing transactions is to increase option
premium income, to limit losses or to protect anticipated gains in underlying
stocks. The cost of a closing transaction, while reducing the premium income
realized from the sale of the option, should be offset, at least in part,
by
appreciation in the value of the underlying index, and by the opportunity
to
realize additional premium income from selling a new option.
When
the
Fund sells an index call option, it does not deliver the underlying stocks
or
cash to the broker through whom the transaction is effected. In the case
of an
exchange-traded option, the Fund establishes an escrow account. The Trust’s
custodian (or a securities depository acting for the custodian) acts as the
Fund’s escrow agent. The escrow agent enters into documents known as escrow
receipts with respect to the stocks included in the Fund (or escrow receipts
with respect to other acceptable securities). The escrow agent releases the
stocks from the escrow account when the call option expires or the Fund enters
into a closing purchase transaction. Until such release, the underlying stocks
cannot be sold by the Fund. The Fund may enter into similar collateral
arrangements with the counterparty when it sells over-the-counter index call
options.
When
the
Fund sells an index call option, it is also required to “cover” the option
pursuant to requirements enunciated by the staff of the SEC. The staff has
indicated that a mutual fund may “cover” an index call option by (1) owning
and holding for the term of the option a portfolio of stocks substantially
replicating the movement of the index underlying the call option;
(2) purchasing an American-style call option on the same index with an
exercise price no greater than the exercise price of the written option;
or
(3) establishing and maintaining for the term of the option a segregated
account consisting of cash, U. S. government securities or other high-grade
debt
securities, equal in value to the aggregate contract price of the call option
(the current index value times the specific multiple). The Fund generally
“covers” the index options it has sold by owning and holding stocks
substantially replicating the movement of the applicable index. As an
alternative method of “covering” the option, the Fund may purchase an
appropriate offsetting option.
The
purchaser of an index call option sold by the Fund may exercise the option
at a
price fixed as of the closing level of the index on the date of exercise.
Unless
the Fund has liquid assets sufficient to satisfy the exercise of the index
call
option, the Fund would be required to liquidate portfolio securities to satisfy
the exercise. The market value of such securities may decline between the
time
the option is exercised and the time the Fund is able to sell the securities.
If
the Fund fails to anticipate an exercise, it may have to borrow from a bank
(in
amounts not exceeding 5% of the Fund’s total assets) pending settlement of the
sale of the portfolio securities and thereby incur interest charges. If trading
were interrupted on the index, the Fund would not be able to close out its
option positions.
Risks
of Transactions in Options.
There
are several risks associated with transactions in options on securities and
indices. Options may be more volatile than the underlying securities and,
therefore, on a percentage basis, an investment in options may be subject
to
greater fluctuation in value than an investment in the underlying securities
themselves. There are also significant differences between the securities
and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objective. In addition,
a liquid secondary market for particular options may be absent for reasons
which
include the following: there may be insufficient trading interest in certain
options; restrictions may be imposed by an exchange on opening transactions
or
closing transactions or both; trading halts, suspensions or other restrictions
may be imposed with respect to particular classes or series of options of
underlying securities; unusual or unforeseen circumstances may interrupt
normal
operations on an exchange; the facilities of an exchange or clearing corporation
may not be adequate to handle current trading volume at all times; or one
or
more exchanges could, for economic or other reasons, decide or be compelled
at
some future date to discontinue the trading of options (or a particular class
or
series of options), in which event the secondary market on that exchange
(or in
that class or series of options) would cease to exist, although outstanding
options that had been issued by a clearing corporation as a result of trades
on
that exchange would continue to be exercisable in accordance with their
terms.
A
decision as to whether, when and how to use options involves the exercise
of
skill and judgment, and even a well-conceived transaction may be unsuccessful
to
some degree because of market behavior or unexpected events. The extent to
which
the Fund may enter into options transactions may be limited by the requirements
of the Internal Revenue Code of 1986, as amended (the “Code”), for qualification
of the Fund as a regulated investment company. See “Dividends and Distributions”
and “Federal Income Taxation.”
Dealer
Options.
The Fund
may engage in transactions involving dealer options as well as exchange-traded
options. Certain additional risks are specific to dealer options. While the
Fund
might look to a clearing corporation to exercise exchange-traded options,
if the
Fund were to purchase a dealer option it would need to rely on the dealer
from
which it purchased the option to perform if the option were exercised. Failure
by the dealer to do so would result in the loss of the premium paid by the
Fund
as well as loss of the expected benefit of the transaction.
Exchange-traded
options generally have a continuous liquid market while dealer options may
not.
Consequently, the Fund may generally be able to realize the value of a dealer
option it has purchased only by exercising or reselling the option to the
dealer
who issued it. Similarly, when the Fund writes a dealer option, the Fund
may
generally be able to close out the option prior to its expiration only by
entering into a closing purchase transaction with the dealer to whom the
Fund
originally wrote the option. While the Fund will seek to enter into dealer
options only with dealers who will agree to and which are expected to be
capable
of entering into closing transactions with the Fund, there can be no assurance
that the Fund will at any time be able to liquidate a dealer option at a
favorable price at any time prior to expiration. Unless the Fund, as a covered
dealer call option writer, is able to effect a closing purchase transaction,
it
will not be able to liquidate securities (or other assets) used as cover
until
the option expires or is exercised. In the event of insolvency of the other
party, the Fund may be unable to liquidate a dealer option. With respect
to
options written by the Fund, the inability to enter into a closing transaction
may result in material losses to the Fund. For example, because the Fund
must
maintain a secured position with respect to any call option on a security
it
writes, the Fund may not sell the assets which it has segregated to secure
the
position while it is obligated under the option. This requirement may impair
the
Fund’s ability to sell portfolio securities at a time when such sale might be
advantageous.
The
SEC
has taken the position that purchased dealer options are illiquid securities.
The Fund may treat the cover used for written dealer options as liquid if
the
dealer agrees that the Fund may repurchase the dealer option it has written
for
a maximum price to be calculated by a predetermined formula. In such cases,
the
dealer option would be considered illiquid only to the extent the maximum
purchase price under the formula exceeds the intrinsic value of the option.
Accordingly, the Fund will treat dealer options as subject to the Fund's
limitation on illiquid securities. If the SEC changes its position on the
liquidity of dealer options, the Fund will change its treatment of such
instruments accordingly.
Repurchase
Agreements
The
Fund
may enter into repurchase agreements with respect to its portfolio securities.
Pursuant to such agreements, the Fund acquires securities from financial
institutions such as banks and broker-dealers as are deemed to be creditworthy
by the Advisor, subject to the seller’s agreement to repurchase and the Fund’s
agreement to resell such securities at a mutually agreed upon date and price.
The repurchase price 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 underlying portfolio security). Securities subject to
repurchase agreements will be held by the Custodian or in the Federal
Reserve/Treasury Book-Entry System or an equivalent foreign system. The seller
under a repurchase agreement will be required to maintain the value of the
underlying securities at not less than 102% of the repurchase price under
the
agreement. If the seller defaults on its repurchase obligation, the Fund
will
suffer a loss to the extent that the proceeds from a sale of the underlying
securities are less than the repurchase price under the agreement. Bankruptcy
or
insolvency of such a defaulting seller may cause the Fund’s rights with respect
to such securities to be delayed or limited. Repurchase agreements are
considered to be loans under the 1940 Act.
Illiquid
Securities
Typically,
the Fund may invest up to 15% of its net assets in illiquid securities,
including (i) securities for which there is no readily available market;
(ii) securities the disposition of which would be subject to legal
restrictions (so called, “restricted securities”); and (iii) repurchase
agreements having more than seven days to maturity. A considerable period
of
time may elapse between the Fund's decision to dispose of such securities
and
the time when the Fund is able to dispose of them, during which time the
value
of the securities could decline.
Restricted
securities issued pursuant to Rule 144A under the Securities Act of 1933,
as amended that have a readily available market usually are not deemed illiquid
for purposes of this limitation by the Fund. However, investing in
Rule 144A securities could result in increasing the level of the Fund’s
illiquidity if qualified institutional buyers become, for a time, uninterested
in purchasing these securities.
Lending
Portfolio Securities
The
Fund
may lend its portfolio securities in an amount not exceeding one-third of
its
total assets to financial institutions such as banks and brokers if the loan
is
collateralized in accordance with applicable regulations. Under the present
regulatory requirements which govern loans of portfolio securities, the loan
collateral must, on each business day, at least equal the value of the loaned
securities and must consist of cash, letters of credit of domestic banks
or
domestic branches of foreign banks, or securities of the U.S. Government
or its
agencies. To be acceptable as collateral, letters of credit must obligate
a bank
to pay amounts demanded by the Fund if the demand meets the terms of the
letter.
Such terms and the issuing bank would have to be satisfactory to the Fund.
Any
loan might be secured by any one or more of the three types of collateral.
The
terms of the Fund’s loans must permit the Fund to reacquire loaned securities on
five days’ notice or in time to vote on any serious matter and must meet certain
tests under the Code.
Short
Sales
The
Fund
does not intend to engage in short selling. However, it may engage in short
selling involving commitments (on a daily marked-to-market basis) not to
exceed
25% of its net assets.
In a
short sale, the Fund sells a security that it does not own, in anticipation
of a
decline in the market value of the security. To complete the sale, the Fund
must
borrow the security (generally from the broker through which the short sale
is
made) in order to make delivery to the buyer. The Fund is then obligated
to
replace the security borrowed by purchasing it at the market price at the
time
of replacement. The Fund is said to have a “short position” in the securities
sold until it delivers them to the broker. The period during which the Fund
has
a short position can range from one day to more than a year. Until the security
is replaced, the proceeds of the short sale are retained by the broker, and
the
Fund is required to pay to the broker a negotiated portion of any dividends
or
interest which accrue during the period of the loan. To meet current margin
requirements, the Fund is also required to deposit with the broker additional
cash or securities so that the total deposit with the broker is maintained
daily
at 150% of the current market value of the securities sold short (100% of
the
current market value if a security is held in the account that is convertible
or
exchangeable into the security sold short within 90 days without
restriction other than the payment of money).
Short
sales by the Fund create opportunities to increase the Fund’s return but, at the
same time, involve specific risk considerations and may be considered a
speculative technique. Since the Fund in effect profits from a decline in
the
price of the securities sold short without the need to invest the full purchase
price of the securities on the date of the short sale, the Fund’s net asset
value per share will tend to increase more when the securities it has sold
short
decrease in value, and to decrease more when the securities it has sold short
increase in value, than would otherwise be the case if it had not engaged
in
such short sales. The amount of any gain will be decreased, and the amount
of
any loss increased, by the amount of any premium, dividends or interest the
Fund
may be required to pay in connection with the short sale. Furthermore, under
adverse market conditions the Fund might have difficulty purchasing securities
to meet its short sale delivery obligations, and might have to sell portfolio
securities to raise the capital necessary to meet its short sale obligations
at
a time when fundamental investment considerations would not favor such
sales.
Temporary Investments
The
Fund
may take temporary defensive measures that are inconsistent with the Fund’s
normal fundamental or non-fundamental investment policies and strategies
in
response to adverse market, economic, political, or other conditions as
determined by the Advisor. Such measures could include, but are not limited
to,
investments in (1) highly liquid short-term fixed income securities issued
by or
on behalf of municipal or corporate issuers, obligations of the U.S. Government
and its agencies, commercial paper, and bank certificates of deposit; (2)
repurchase agreements involving any such securities; and (3) other money
market
instruments. There is no limit on the extent to which the Fund may take
temporary defensive measures. In taking such measures, the Fund may fail
to
achieve its investment objective.
Investment
Restrictions
The
Trust
(on behalf of the Fund) has adopted the following restrictions as fundamental
policies, which may not be changed without the favorable vote of the holders
of
a “majority,” as defined in the 1940 Act, of the outstanding voting securities
of the Fund. Under the 1940 Act, the “vote of the holders of a majority of the
outstanding voting securities” means the vote of the holders of the lesser of
(i) 67% of the shares of the Fund represented at a meeting at which the
holders of more than 50% of its outstanding shares are represented or
(ii) more than 50% of the outstanding shares of the Fund. The
Fund’s investment objective is a non-fundamental policy and may be changed
without shareholder approval upon 60 days notice. As a matter of fundamental
policy, the Fund is diversified.
In
addition, the Fund may not:
|
1.
|
Issue
senior securities, borrow money or pledge its assets, except that
(i) the Fund may borrow from banks in amounts not exceeding one-third
of its total assets (including the amount borrowed); and (ii) this
restriction shall not prohibit the Fund from engaging in options
transactions or short sales;
|
|
2.
|
Act
as underwriter (except to the extent the Fund may be deemed to
be an
underwriter in connection with the sale of securities in its investment
portfolio);
|
|
3.
|
Invest
25% or more of its total assets, calculated at the time of purchase
and
taken at market value, in any one industry (other than U.S. Government
securities);
|
|
4.
|
Purchase
or sell real estate or interests in real estate or real estate
limited
partnerships (although the Fund may purchase and sell securities
which are
secured by real estate and securities of companies which invest
or deal in
real estate);
|
|
5.
|
Make
loans of money (except for purchases of debt securities consistent
with
the investment policies of the Fund and except for repurchase agreements);
or
|
|
6.
|
Purchase
or sell commodities or commodity futures contracts, except that
the Fund
may purchase and sell foreign currency contracts in accordance
with any
rules of the Commodity Futures Trading
Commission.
|
The
Fund
observes the following restrictions as a matter of operating but not fundamental
policy, pursuant to positions taken by federal regulatory
authorities:
The
Fund
may not:
|
1.
|
Invest
in the securities of other investment companies or purchase any
other
investment company’s voting securities or make any other investment in
other investment companies except to the extent permitted by federal
law;
or
|
|
2.
|
Invest,
in the aggregate, more than 15% of its net assets in securities
with legal
or contractual restrictions on resale, securities that are not
readily
marketable and repurchase agreements with more than seven days
to
maturity.
|
Except
with respect to borrowing, if a percentage or rating restriction on investment
or use of assets set forth herein or in the Prospectus is adhered to at the
time
a transaction is effected, later changes in percentage resulting from any
cause
other than actions by the Fund will not be considered a violation.
MANAGEMENT
The
overall management of the business and affairs of the Trust is vested with
its
Board. The Board approves all significant agreements between the Trust and
persons or companies furnishing services to it, including the agreements
with
the Advisor, administrator, custodian and transfer agent. The day-to-day
operations of the Trust are delegated to its officers, subject to the Fund’s
investment objective, strategies, and policies and to general supervision
by the
Board.
The
trustees and officers of the Trust, their year of birth and positions with
the
Trust, term of office with the Trust and length of time served, their business
addresses and principal occupations during the past five years and other
directorships held are listed in the table below. Unless noted otherwise,
each
person has held the position listed for a minimum of five
years.
| |
|
|
|
|
|
|
|
|
|
|
|
Name,
Address
and
Age
|
|
Position
with
The
Trust
|
|
Term
of Office and Length of Time Served
|
|
Principal
Occupation
During
Past Five Years
|
|
Number
of Portfolios
in
Fund Complex
Overseen
by Trustees*
|
|
Other
Directorships
Held
|
|
Independent
Trustees
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Charles
H. Miller
(born 19__)
2220
E. Route 66
Suite
226
|
|
Trustee
|
|
Indefinite
term since ______ 2007.
|
|
Executive
Vice President, Client Management and Development, Access Data
Corporation, a provider of technology and services to asset
management
firms (1997-present).
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Ashley
Toomey Rabun
(born 19__)
2220
E. Route 66
Suite
226
|
|
Trustee
|
|
Indefinite
term since ______ 2007.
|
|
President
and Founder, InvestorReach, Inc. a financial services consulting
firm
(1996-present).
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
William
H. Young
(born 19__)
2220
E. Route 66
Suite
226
|
|
Trustee
|
|
Indefinite
term since ______ 2007.
|
|
Independent
financial services consultant (1996-present); Consultant-Interim
CEO,
Unified Fund Services, a mutual fund service provider (2003-2006);
Ex-officio Board Member of the National Investment Company
Service
Association and past President and Chairman (1995-1997); Senior
Vice
President, Oppenheimer Management Company (1983-1996).
|
|
|
|
|
|
Interested
Trustee of the Trust
|
|
|
|
|
|
John
P. Zader**
(born
1961)
803
W. Michigan Street
|
|
Trustee
and President
|
|
Indefinite
term since ______, 2007.***
|
|
Chief
Executive Officer, UMB Fund Services, LLC since December 2006;
Consultant,
Jefferson Wells from September 2006 to December 2006; Senior
Vice
President and Chief Financial Officer, U.S. Bancorp Fund Services,
LLC
from August 1988 to May 2006.
|
|
1
|
|
None.
|
| |
|
|
|
|
|
|
|
|
|
|
|
Officers
of the Trust
|
|
|
|
|
Eric
M. Banhazl
(born
1957)
2220
E. Route 66
Suite
226
|
|
Vice
President
|
|
Annual.
Since
______, 2007.
|
|
President,
Mutual Fund Administration Corp. since September 2006; Senior
Vice
President, U.S. Bancorp Fund Services, LLC from July 2001 to
August
2006.
|
|
1
|
|
N/A
|
| |
|
|
|
|
|
|
|
|
|
|
|
Rita
Dam
(born
1966)
2220
E. Route 66
Suite
226
|
|
Treasurer
|
|
Annual.
Since ______, 2007.
|
|
Vice
President, Mutual Fund Administration Corp. since October 2006;
Vice
President, U.S. Bancorp Fund Services, LLC from _______1994 to
September
2006.
|
|
N/A
|
|
N/A
|
| |
|
|
|
|
|
|
|
|
|
|
|
Joy
Ausili
(born
1966)
2220
E. Route 66
Suite
226
|
|
Secretary
|
|
Annual.
Since ______, 2007.
|
|
Vice
President, Mutual Fund Administration Corp. since September 2006;
Vice
President, U.S. Bancorp Fund Services, LLC from May 1997 to August
2006.
|
|
N/A
|
|
N/A
|
| |
|
|
|
|
|
|
|
|
|
|
|
*
|
The
Trust is comprised of two portfolios managed
by unaffiliated investment advisors.
The term “Fund Complex” applies only to the Fund. The Fund does not hold
itself out as related to any other series within the Trust for
investment
purposes, nor does it share the same investment advisor with any
other
series.
|
|
**
|
Mr.
Zader is an interested person of the Trust by virtue of his position
as
President of the Trust and Chief Executive Officer of UMB Fund
Services,
Inc.
|
|
***
|
Mr.
Zader ‘s term of office as President of the Trust is
annual
|
Compensation
The
Independent Trustees receive $5,000 for each meeting attended and the
Chairperson receives $6,000 for each meeting attended. The Audit Committee
chairman receives an additional $500 for each Audit Committee meeting. The
Trust
has no pension or retirement plan. No other entity affiliated with the Trust
pays any compensation to the Trustees.
| |
|
|
|
|
|
|
|
|
|
Name
of Person/Position
|
|
Aggregate
Compensation
From
the
Fund1
|
|
Pension
or Retirement Benefits Accrued as Part of Fund
Expenses
|
|
Estimated
Annual Benefits Upon Retirement
|
|
Total
Compensation from Trust Paid to Trustees
|
|
Independent
Trustees
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
________________,
Trustee
|
|
$0
|
|
None
|
|
None
|
|
$0
|
| |
|
|
|
|
|
|
|
|
|
________________,
Trustee
|
|
$0
|
|
None
|
|
None
|
|
$0
|
| |
|
|
|
|
|
|
|
|
|
________________,
Trustee
|
|
$0
|
|
None
|
|
None
|
|
$0
|
|
1
|
Estimated
annual compensation.
|
Board
Committees
The
Trust
has four standing committees: The Audit Committee, the Nominating Committee,
and
the Valuation Committee. The Audit Committee is comprised of all of the
Independent Trustees. It does not include any Interested Trustees. The Audit
Committee typically meets once per year with respect to the various series
of
the Trust. The function of the Audit Committee, with respect to each series
of
the Trust, is to review the scope and results of the audit and any matters
bearing on the audit or the Fund’s financial statements and to ensure the
integrity of the Fund’s pricing and financial reporting. The Audit Committee has
not met with respect to the Fund.
The
Nominating Committee is responsible for seeking and reviewing candidates
for
consideration as nominees for Trustees as is considered necessary from time
to
time and meets only as necessary. The Nominating Committee has not met with
respect to the Fund. The Independent Trustees comprise the Nominating
Committee.
The
Audit Committee also serves as the Qualified Legal Compliance Committee (“QLCC”)
for the Trust for the purpose of compliance with Rules 205.2(k) and
205.3(c) of the Code of Federal Regulations, regarding alternative reporting
procedures for attorneys retained or employed by an issuer who appear and
practice before the SEC on behalf of the issuer (the “issuer attorneys”). An
issuer attorney who becomes aware of evidence of a material violation by
the
Trust, or by any officer, director, employee, or agent of the Trust, may
report
evidence of such material violation to the QLCC as an alternative to the
reporting requirements of Rule 205.3(b) (which requires reporting to the
chief legal officer and potentially “up the ladder” to other entities). The QLCC
meets as needed. The QLCC has not met with respect to the Fund.
The
Trust’s Board has delegated day-to-day valuation issues to a Valuation Committee
that is comprised of the Board of Trustees. The function of the Valuation
Committee is to value securities held by any series of the Trust for which
current and reliable market quotations are not readily available. Such
securities are valued at their respective fair values as determined in good
faith by the Valuation Committee and the actions of the Valuation Committee
are
subsequently reviewed and ratified by the Board. The Valuation Committee
meets
as needed. The Valuation Committee is comprised of all the Trustees. The
Valuation Committee has not met with respect to the Fund.
Fund
Shares Beneficially Owned by Trustees. As
of
__________, 2007, no Trustee, including the Independent Trustees,
beneficially owned shares of the Fund.
| |
|
|
|
|
|
Name
of Trustee
|
|
Dollar
Range of Equity Securities in the Funds
(None,
$1-$10,000, $10,001-$50,000, $50,001-$100,000, Over
$100,000)
|
|
Aggregate
Dollar Range of Equity Securities in all Registered Investment
Companies
Overseen by Trustee in Family of Investment
Companies
|
|
_____________,
Independent Trustee
|
|
None
|
|
None
|
|
_____________,
Independent Trustee
|
|
None
|
|
None
|
|
_____________,
Independent Trustee
|
|
None
|
|
None
|
|
John
Zader, Interested Trustee
|
|
None
|
|
None
|
Control
Persons, Principal Shareholders, and Management Ownership
A
principal shareholder is any person who owns of record or beneficially 5%
or
more of the outstanding shares of the Fund. A control person is one who owns
beneficially or through controlled companies more than 25% of the voting
securities of a company or acknowledges the existence of control.
As
of the
date of this SAI, the Fund is under the control of _____________________,
an
affiliate of the Advisor, who had voting authority with respect to 100% of
the
outstanding shares in the Fund on such date. However, once the Fund commences
investment operations and its shares are sold to the public, _____________'
control will be diluted. The Trustees and Officers of the Trust as a group
did
not own more than 1% of the outstanding shares of the Fund. Furthermore,
neither the Trustees who are “not interested” persons of the Fund, as that term
is defined in the 1940 Act, nor members of their immediate family, own
securities beneficially or of record in the Advisor, the Distributor or any
affiliate of the Advisor or Distributor. Accordingly, neither the Trustees
who
are “not interested” persons of the Fund nor members of their immediate family,
have direct or indirect interest, the value of which exceeds $120,000, in
the
Advisor, the Distributor or any of their affiliates.
The
Advisor
Insight
Capital Research & Management, Inc.,® 2121 N. California Blvd., Suite 560,
Walnut Creek, CA 94596, acts as investment advisor to the Fund pursuant to
an
Investment Advisory Agreement (the “Advisory Agreement”). Subject to such
policies as the Board of Trustees may determine, the Advisor is ultimately
responsible for investment decisions for the Fund. Pursuant to the terms
of the
Advisory Agreement, the Advisor provides the Fund with such investment advice
and supervision, as it deems necessary for the proper supervision of the
Fund’s
investments. The Advisor also continuously monitors and maintains the Fund’s
investment criteria and determines from time to time what securities may
be
purchased by the Fund.
The
Advisory Agreement dated ________ will remain in effect for an initial two
year
period. After the initial two years period, the Advisory Agreement will continue
in effect from year to year only if such continuance is specifically approved
at
least annually by the Board or by vote of a majority of the Fund’s outstanding
voting securities and by a majority of the Trustees who are not parties to
the
Advisory Agreement or interested persons of any such party, at a meeting
called
for the purpose of voting on such Advisory Agreement. The Advisory Agreement
is
terminable without penalty by the Trust on behalf of the Fund, upon giving
the
Advisor 60 days’ notice when authorized either by a majority vote of a Fund’s
shareholders or by a vote of a majority of the Board, or by the Advisor on
60
days’ written notice, and will automatically terminate in the event of its
“assignment” (as defined in the 1940 Act). The Advisory Agreement
provides that the Advisor under such agreement shall not be liable for any
error
of judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of the Advisory Agreement except a loss
resulting from a breach of fiduciary duty with respect to receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence in the performance of its duties, or from reckless
disregard by the Advisor of its duties under the Advisory
Agreement.
In
consideration of the services to be provided by the Advisor pursuant to the
Advisory Agreement, the Advisor is entitled to receive from the Fund an
investment advisory fee computed daily and paid monthly based on an annual
rate
equal to a percentage of a Fund’s average daily net assets specified in the
Prospectus.
The
Fund
is responsible for its own operating expenses. The Advisor has contractually
agreed to reduce fees payable to it by the Fund and/or to pay Fund operating
expenses to the extent necessary to limit the Fund’s aggregate annual operating
expenses (excluding front-end or contingent deferred loads, taxes, leverage
interest, brokerage commissions, expenses incurred in connection with any
merger
or reorganization, or extraordinary expenses such as litigation) to the limit
set forth in the Expense Table in the Prospectus (the “expense cap”). Any such
reductions made by the Advisor in its fees or payment of expenses which are
the
Fund’s obligation are subject to reimbursement by the Fund to the Advisor, if
so
requested by the Advisor, in subsequent fiscal years if the aggregate amount
actually paid by the Fund toward the operating expenses for such fiscal year
(taking into account the reimbursement) does not exceed the applicable
limitation on Fund expenses. The Advisor is permitted to be reimbursed only
for
fee reductions and expense payments made in the previous three fiscal years
from
the date the expense was incurred. Any such reimbursement is also
contingent upon the Board’s subsequent review and ratification of the reimbursed
amounts. Such reimbursement may not be paid prior to the Fund’s payment of
current ordinary operating expenses.
Portfolio
Manager
Lee
Molendyk
and Lance
Swanson
are the
portfolio managers responsible for the day-to-day management of the Fund.
The
following table shows the number of other accounts managed by Mr. Molendyk
and
Mr.
Swanson
and the
total assets in the accounts managed within various categories as of ________,
2008.
Lee
Molendyk
| |
|
|
|
| |
|
|
With
Advisory Fee based on performance
|
|
Type
of Accounts
|
Number
of
Accounts
|
Total
Assets
|
Number
of
Accounts
|
Total
Assets
|
|
Registered
Investment Companies
|
|
|
|
|
|
Other
Pooled Investments
|
|
|
|
|
|
Other
Accounts
|
|
|
|
|
Lance
Swanson
| |
|
|
|
| |
|
|
With
Advisory Fee based on performance
|
|
Type
of Accounts
|
Number
of
Accounts
|
Total
Assets
|
Number
of
Accounts
|
Total
Assets
|
|
Registered
Investment Companies
|
|
|
|
|
|
Other
Pooled Investments
|
|
|
|
|
|
Other
Accounts
|
|
|
|
|
Material
Conflict of Interest.
Where
conflicts of interest arise between the Fund and other accounts managed by
the
portfolio managers, Mr. Molendyk and Mr.
Swanson
will
proceed in a manner that ensures that the Fund will not be treated materially
less favorably. There may be instances where similar portfolio transactions
may
be executed for the same security for numerous accounts managed by Mr. Molendyk
and Mr.
Swanson.
In such
instances, securities will be allocated in accordance with the Advisor’s trade
allocation policy.
Compensation.
Pending
Securities
Owned in the Fund by Portfolio Managers.
As of
the date of this SAI, the portfolio managers did not own any of the equity
securities of the Fund.
Service
Providers
Pursuant
to a Co-Administration Agreement (the “Co-Administration Agreement”), UMB Fund
Services, Inc. (“UMB”), 803 West Michigan Street, Milwaukee, Wisconsin, 53233
and Mutual Fund Administration Corp. (“MFAC”), 2220 Route 66, Suite 226,
Glendora, CA 91740, (collectively the “Co-Administrators”), act as
co-administrators for the Fund. The Co-Administrators provide certain
administrative services to the Fund, including, among other responsibilities,
coordinating the negotiation of contracts and fees with, and the monitoring
of
performance and billing of, the Fund’s independent contractors and agents;
preparation for signature by an officer of the Trust of all documents required
to be filed for compliance with applicable laws and regulations including
those
of the securities laws of various states; arranging for the computation of
performance data, including net asset value and yield; arranging for the
maintenance of books and records of the Fund; and providing, at its own expense,
office facilities, equipment and personnel necessary to carry out its duties.
In
this capacity, the Co-Administrators do not have any responsibility or authority
for the management of the Fund, the determination of investment policy, or
for
any matter pertaining to the distribution of Fund shares.
UMB
also
acts as fund accountant, transfer agent and dividend disbursing agent pursuant
to separate agreements.
UMB
Bank,
n.a., an affiliate of UMB, is the custodian of the assets of the Fund (the
“Custodian”) pursuant to a custody agreement between the Custodian and the
Trust, whereby the Custodian provides for fees on a transactional basis plus
out-of-pocket expenses. The Custodian’s address is 928 Grand Boulevard, Kansas
City, Missouri, 64104. The Custodian does not participate in decisions relating
to the purchase and sale of securities by the Fund.
___________________
is the independent registered public accounting firm for the Fund whose services
include auditing the Fund’s financial statements and the performance of related
tax services.
Vedder
Price P.C., 222 North LaSalle Street, Chicago, Illinois 60601-1003, is
independent counsel to the Fund and the Independent Trustees.
Distribution
Agreement
The
Trust
has entered into a Distribution Agreement (the “Distribution Agreement”) with
Grand Distribution Services, LLC, 803 West Michigan Street, Milwaukee,
Wisconsin, 53233 (the “Distributor”), pursuant to which the Distributor acts as
the Fund’s distributor, provides certain administrative services and arranges
for the sale of the Fund’s shares. The offering of the Fund’s shares is
continuous. The Distributor, UMB and Custodian are affiliated companies.
The
Distributor is a registered broker-dealer and a member of the Financial Industry
Regulatory Authority (“FINRA”).
The
Distribution Agreement has an initial term of up to two years and will continue
in effect only if such continuance is specifically approved at least annually
by
the Board or by vote of a majority of the Fund’s outstanding voting securities
and, in either case, by a majority of the trustees who are not parties to
the
Distribution Agreement or “interested persons” (as defined in the 1940 Act) of
any such party. The Distribution Agreement is terminable without penalty
by the
Trust on behalf of the Fund on 60 days’ written notice when authorized
either by a majority vote of the Fund’s shareholders or by vote of a majority of
the Board, including a majority of the trustees who are not “interested persons”
(as defined in the 1940 Act) of the Trust, or by the Distributor on
60 days’ written notice, and will automatically terminate in the event of
its “assignment” (as defined in the 1940 Act).
Rule
12b-1 Plan
The
Board
has adopted, on behalf of the Fund, a plan for Class A shares pursuant to
Rule
12b-1 under the 1940 Act (the “A Plan”). The A Plan provides that the Fund will
pay a 12b-1 distribution/shareholder services fee to the Distributor at an
annual rate of up to 0.25% of its average daily net assets for expenses incurred
in marketing its shares, including advertising, printing and compensation
to
securities dealers or other industry professionals.
Shareholder
Servicing Plan
The
Board
has adopted, on behalf of the Fund, a Shareholder Servicing Plan (the “Servicing
Plan”) under which the Advisor will provide, or arrange for others to provide,
certain specified shareholder services. As compensation for the provision
of
shareholder services, the Fund will pay the Advisor a monthly fee at an annual
rate of 0.10% of the Fund’s average daily net assets. The Advisor will pay
certain banks, trust companies, broker-dealers and other financial
intermediaries (each, a “Participating Organization”) out of the fees the
Advisor receives from the Fund under the Servicing Plan to the extent that
the
Participating Organization performs shareholder servicing functions for,
Class A
shares owned by its customers.
Dealer
Commissions
Sales
charges imposed on purchases of the Fund shares are paid to retail dealers,
as
follows:
|
Amount
Invested
|
Sales
Charge as
a
% of
Offering
Price
|
|
Less
than $50,000
|
4.75%
|
|
$50,000
but less than $100,000
|
4.25%
|
|
$100,000
but less than $250,000
|
3.25%
|
|
$250,000
but less than $500,000
|
2.50%
|
|
$500,000
but less than $1,000,000
|
1.50%
|
|
$1
million or more
|
*
|
*
A commission of up to 1.00% is paid
to financial
institutions that initiate purchases of $1 million or
more.
PORTFOLIO
TRANSACTIONS AND BROKERAGE
Pursuant
to the Advisory Agreement, the Advisor determines which securities are to
be
purchased and sold by the Fund and which broker-dealers are eligible to execute
the Fund’s portfolio transactions. The purchases and sales of securities in the
over-the-counter market will generally be executed by using a broker for
the
transaction.
Purchases
of portfolio securities for the Fund also may be made directly from issuers
or
from underwriters. Where possible, purchase and sale transactions will be
effected through dealers (including banks) that specialize in the types of
securities which the Fund will be holding unless better executions are available
elsewhere. Dealers and underwriters usually act as principals for their own
accounts. Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the spread
between the bid and the asked price. If the execution and price offered by
more
than one dealer or underwriter are comparable, the order may be allocated
to a
dealer or underwriter that has provided research or other services as discussed
below.
In
placing portfolio transactions, the Advisor will use its reasonable efforts
to
choose broker-dealers capable of providing the services necessary to obtain
the
most favorable price and execution available. The full range and quality
of
services available will be considered in making these determinations, such
as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm’s risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that
more
than one broker-dealer can offer the services needed to obtain the most
favorable price and execution available, consideration may be given to those
broker-dealers which furnish or supply research and statistical information
to
the Advisor that they may lawfully and appropriately use in their investment
advisory capacities, as well as provide other services in addition to execution
services. The Advisor considers such information, which is in
addition to and not in lieu of the services required to be performed by it
under
its Advisory Agreement with the Fund, to be useful in varying degrees, but
of
indeterminable value.
While
it
is the Fund’s general policy to seek to obtain the most favorable price and
execution available in selecting a broker-dealer to execute portfolio
transactions for the Fund, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services as defined in Section
28(e) of the Securities Exchange Act of 1934, as amended, to
the
Fund or to the Advisor, even if the specific services are not directly useful
to
the Fund and may be useful to the Advisor in advising other clients. In
negotiating commissions with a broker or evaluating the spread to be paid
to a
dealer, the Fund may therefore pay a higher commission or spread than would
be
the case if no weight were given to the furnishing of these supplemental
services, provided that the amount of such commission or spread has been
determined in good faith by the Advisor to be reasonable in relation to the
value of the brokerage and/or research services provided by such broker-dealer.
The standard of reasonableness is to be measured in light of the Advisor’s
overall responsibilities to the Fund.
Investment
decisions for the Fund are made independently from those of other client
accounts that may be managed or advised by the Advisor. Nevertheless, it
is
possible that at times identical securities will be acceptable for both the
Fund
and one or more of such client accounts. In such event, the position of the
Fund
and such client accounts in the same issuer may vary and the length of time
that
each may choose to hold its investment in the same issuer may likewise vary.
However, to the extent any of these client accounts seek to acquire the same
security as the Fund at the same time, the Fund may not be able to acquire
as
large a position in such security as it desires, or it may have to pay a
higher
price or obtain a lower yield for such security. Similarly, the Fund may
not be
able to obtain as high a price for, or as large an execution of, an order
to
sell any particular security at the same time as the Advisor’s other client
accounts. If one or more of such client accounts simultaneously purchases
or
sells the same security that the Fund is purchasing or selling, each day’s
transactions in such security will be allocated between the Fund and all
such
client accounts in a manner deemed equitable by the Advisor, taking into
account
the respective sizes of the accounts and the amount being purchased or sold.
It
is recognized that in some cases this system could have a detrimental effect
on
the price or value of the security insofar as the Fund is concerned. In other
cases, however, it is believed that the ability of the Fund to participate
in
volume transactions may produce better executions for the Fund.
The
Fund
does not effect securities transactions through brokers in accordance with
any
formula, nor does it effect securities transactions through brokers for selling
shares of the Fund. However, broker-dealers who execute brokerage transactions
may effect purchase of shares of the Fund for their customers.
PORTFOLIO
TURNOVER
Although
the Fund generally will not invest for short-term trading purposes, portfolio
securities may be sold without regard to the length of time they have been
held
when, in the opinion of the Advisor, investment considerations warrant such
action. Portfolio turnover rate is calculated by dividing (1) the lesser of
purchases or sales of portfolio securities for the fiscal year by (2) the
monthly average of the value of portfolio securities owned during the fiscal
year. A 100% turnover rate would occur if all the securities in the Fund’s
portfolio, with the exception of securities whose maturities at the time
of
acquisition were one year or less, were sold and either repurchased or replaced
within one year. A high rate of portfolio turnover (100% or more) generally
leads to higher transaction costs and may result in a greater number of taxable
transactions. To the extent net short-term capital gains are realized, any
distributions resulting from such gains will be taxed at ordinary income
tax
rates for federal income tax purposes.
PROXY
VOTING POLICY
The
Board
has adopted Proxy Voting Policies and Procedures (“Policies”) on behalf of the
Trust, which delegates the responsibility for voting proxies to the Advisor,
subject to the Board’s continuing oversight. The Policies require that the
Advisor vote proxies received in a manner consistent with the best interests
of
the Fund and its shareholders. The Policies also require the Advisor to present
to the Board, at least annually, the Advisor’s Proxy Voting Policies and
Procedures (“Advisor’s Proxy Policies”) and a record of each proxy voted by the
Advisor on behalf of the Fund, including a report on the resolution of all
proxies identified by the Advisor as involving a conflict of
interest.
The
Advisor has adopted the Advisor’s Proxy Policies which underscore the Advisor’s
concern that all proxies voting decisions be made in the best interests of
the
Fund and that the Advisor will act in a prudent and diligent manner intended
to
enhance the economic value of the assets of the Fund.
The
Advisor has established a general statement of voting policy and specific
voting
positions. This policy is intended to serve as a guideline and to further
the
economic value of each security held by the Fund. There will be regular review
of this policy. Each proxy will be considered individually, taking into account
the relevant circumstances at the time of each vote.
Where
a
proxy proposal raises a material conflict between the Advisor’s interests and
the Fund’s interests, the Advisor will resolve the conflict by following the
policy guidelines or the recommendation of an independent third
party.
The
Fund
is required to annually file Form N-PX, which lists the Fund’s complete proxy
voting record for the 12-month period ending each June 30th.
Once
filed, the Fund’s proxy voting record will be available without charge, upon
request, by calling toll-free 1-866-XXX-XXXX and
on
the SEC’s web site at www.sec.gov.
ANTI-MONEY
LAUNDERING PROGRAM
The
Trust
has established an Anti-Money Laundering Compliance Program (the “Program”) as
required by the Uniting and Strengthening America by Providing Appropriate
Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”). In
order to ensure compliance with this law, the Program provides for the
development of internal practices, procedures and controls, designation of
anti-money laundering compliance officers, an ongoing training program and
an
independent audit function to determine the effectiveness of the
Program.
Procedures
to implement the Program include, but are not limited to, determining that
the
Fund’s Distributor and transfer agent have established proper anti-money
laundering procedures, reporting suspicious and/or fraudulent activity, checking
shareholder names against designated government lists, including Office of
Foreign Asset Control (“OFAC”), and a complete and thorough review of all new
opening account applications. The Trust will not transact business with any
person or entity whose identity cannot be adequately verified under the
provisions of the USA PATRIOT Act.
PORTFOLIO
HOLDINGS INFORMATION
The
Advisor and the Fund maintain portfolio holdings disclosure policies (the
“Holdings Policies”) that govern the timing and circumstances of disclosure to
shareholders and third parties of information regarding the portfolio
investments held by the Fund. These portfolio holdings disclosure policies
have
been approved by the Board. Disclosure of the Fund’s complete holdings is
required to be made quarterly within 60 days of the end of each fiscal quarter
in the Annual Report and Semi-Annual Report to Fund shareholders and in the
quarterly holdings report on Form N-Q. These reports are available, free
of
charge, on the EDGAR database on the SEC’s website at www.sec.gov. When the
Advisor’s web site is established, the Fund’s complete portfolio holdings will
be available at the end of each calendar quarter with a five to ten day lag
time.
Pursuant
to the Fund’s Holdings Policies, information about the Fund’s portfolio holdings
is not distributed to any person unless:
| |
§
|
The
disclosure is required pursuant to a regulatory request, court
order or is
legally required in the context of other legal
proceedings;
|
| |
§
|
The
disclosure is made to a mutual fund rating and/or ranking organization,
or
person performing similar functions, who is subject to a duty of
confidentiality, including a duty not to trade on any non-public
information;
|
| |
§
|
The
disclosure is made to internal parties involved in the investment
process,
administration, operation or custody of the Fund, including, but
not
limited to UMB, MFAC and the Board, attorneys, auditors or
accountants;
|
| |
§
|
The
disclosure is made: (a) in connection with a quarterly, semi-annual
or
annual report that is available to the public; or (b) relates to
information that is otherwise available to the public;
or
|
| |
§
|
The
disclosure is made with the prior written approval of either the
Trust’s
Chief Compliance Officer (“CCO”) or his or her
designee.
|
Certain
of the persons listed above receive information about the Fund’s portfolio
holdings on an ongoing basis. The Fund believes that these third parties
have
legitimate objectives in requesting such portfolio holdings information and
operate in the best interest of the Fund’s shareholders. These persons
include:
| |
§
|
A
mutual fund rating and/or ranking organization, or person performing
similar functions, who is subject to a duty of confidentiality,
including
a duty not to trade on any non-public
information;
|
| |
§
|
Rating
and/or ranking organizations, specifically: Lipper; Morningstar;
Standard
& Poor’s; Bloomberg; Vickers-Stock Research Corporation; Wilshire
& Associates, Inc.; Thomson Financial; Citigate Financial
Intelligence; and Interactive Data Corporation;
or
|
| |
§
|
Internal
parties involved in the investment process, administration, operation
or
custody of the Fund, specifically: UMB; MFAC; the Board;
and the Trust’s attorneys and accountants (currently ____________), all of
which typically receive such information after it is
generated.
|
Any
disclosure to additional parties not described above is made with the approval
of either the Trust’s CCO or his or her designee, pursuant to the Fund’s
Holdings Policies.
The
Board
exercises continuing oversight of the disclosure of the Fund’s portfolio
holdings by (1) overseeing the implementation and enforcement of the Holdings
Policies, codes of ethics and other relevant policies of the Fund and its
service providers by the Trust’s CCO, (2) by considering reports and
recommendations by the Trust’s Chief Compliance Officer concerning any material
compliance matters (as defined in Rule 38a-1 under the 1940 Act), and (3)
by
considering to approve any amendment to these Holdings Policies. The Board
reserves the right to amend the Holdings Policies at any time without prior
notice in their sole discretion.
In
the
event of a conflict between the interests of the Fund and the interests of
the
Advisor or an affiliated person of the Advisor, the Chief Compliance Officer
of
the Advisor, in consultation with the Trust’s CCO, shall make a determination in
the best interests of the Fund, and shall report such determination to the
Advisor’s Board of Directors and to the Board at the end of the quarter in which
such determination was made. Any employee of the Advisor who suspects a breach
of this obligation must report the matter immediately to the Advisor’s Chief
Compliance Officer or to his or her supervisor.
In
addition, material non-public holdings information may be provided without
lag
as part of the normal investment activities of the Fund to each of the following
entities which, by explicit agreement or by virtue of their respective duties
to
the Fund, are required to maintain the confidentiality of the information
disclosed: Co-Administrators, fund accountant, Custodian, transfer agent,
auditors, counsel to the Fund or the trustees, broker-dealers (in connection
with the purchase or sale of securities or requests for price quotations
or bids
on one or more securities), and regulatory authorities. Portfolio holdings
information not publicly available with the SEC or through the Fund’s web
site
may only
be provided to additional third parties, in accordance with the Holdings
Policies, when the Fund has a legitimate business purpose and the third party
recipient is subject to a confidentiality agreement.
In
no
event shall the Advisor, its affiliates or employees, or the Fund receive
any
direct or indirect compensation in connection with the disclosure of information
about the Fund’s portfolio holdings.
There
can
be no assurance that the Holdings Policies and these procedures will protect
the
Fund from potential misuse of that information by individuals or entities
to
which it is disclosed.
DETERMINATION
OF NET ASSET VALUE
The
net
asset value (“NAV”) of the Fund’s shares will fluctuate and is determined as of
the close of trading on the New York Stock Exchange (the “NYSE”) (generally
4:00 p.m. Eastern time) each business day. The NYSE annually announces the
days on which it will not be open for trading. The most recent announcement
indicates that the NYSE will not be open for the following holidays: New
Year’s
Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. However,
the
NYSE may close on days not included in that announcement.
The
NAV
is computed by dividing the value of the securities held by the Fund plus
any
cash or other assets (including interest and dividends accrued but not yet
received) minus all liabilities (including accrued expenses) by the total
number
of shares in the Fund outstanding at such time.
|
Net
Assets
|
=
|
Net
Asset Value Per Share
|
|
Shares
Outstanding
|
Generally,
the Fund’s investments are valued at market value or, in the absence of a market
value, at fair value as determined in good faith by the Advisor and the Trust’s
Valuation Committee pursuant to procedures approved by or under the direction
of
the Board. Pursuant to those procedures, the Board considers, among other
things: 1) the last sale price on the securities exchange, if any, on which
a security is primarily traded; 2) the mean between the bid and asked
prices; 3) price quotations from an approved pricing service, and
4) other factors as necessary to determine a fair value under certain
circumstances.
The
Fund’s securities which are traded on securities exchanges are valued at the
last sale price on the exchange on which such securities are traded, as of
the
close of business on the day the securities are being valued or, lacking
any
reported sales, at the mean between the last available bid and asked
price.
Securities
that are traded on more than one exchange are valued on the exchange determined
by the Advisor to be the primary market. Securities primarily traded in the
National Association of Securities Dealers Automated Quotation (“NASDAQ”)
National Market System for which market quotations are readily available
shall
be valued using the NASDAQ Official Closing Price (“NOCP”). If the NOCP is not
available, such securities shall be valued at the last sale price on the
day of
valuation, or if there has been no sale on such day, at the mean between
the bid
and asked prices.
Over-the-counter (“OTC”) securities which are not traded in the NASDAQ National
Market System shall be valued at the most recent trade price.
Short-term
debt obligations with remaining maturities in excess of 60 days are valued
at current market prices, as discussed above. Short-term securities with
60 days or less remaining to maturity are, unless conditions indicate
otherwise, amortized to maturity based on their cost to a Fund if acquired
within 60 days of maturity or, if already held by the Fund on the
60th day,
based on the value determined on the 61st day.
All
other
assets of the Fund are valued in such manner as the Board in good faith deems
appropriate to reflect their fair value.
PURCHASE
AND REDEMPTION OF FUND SHARES
Detailed
information on the purchase and redemption of shares is included in the Fund’s
Prospectus. Shares of the Fund are sold at the next offering price calculated
after receipt of an order for purchase. In order to purchase shares of the
Fund,
you must invest the initial minimum investment for the relevant class of
shares.
However, the Fund reserves the right, in its sole discretion, to waive the
minimum initial investment amount for certain investors, or to waive or reduce
the minimum initial investment for 401(k) plans or other tax-deferred retirement
plans. You may purchase shares on any day that the NYSE is open for business
by
placing orders with the Fund.
The
Fund
reserves the right to refuse any purchase requests, particularly those that
would not be in the best interests of the Fund or its shareholders and could
adversely affect the Fund or its operations. This includes those from any
individual or group who, in the Fund’s view, is likely to engage in or has a
history of excessive trading (usually defined as more than four round-trip
transactions out of the Fund within a calendar year). Furthermore, the Trust
may
suspend the right to redeem its shares or postpone the date of payment upon
redemption for more than three business days (i) for any period during
which the NYSE is closed (other than customary weekend or holiday closings)
or
trading on the NYSE is restricted; (ii) for any period during which an
emergency exists as a result of which disposal by the Fund of securities
owned
by it is not reasonably practicable or it is not reasonably practicable for
the
Fund fairly to determine the value of its net assets; (iii) for such other
periods as the SEC may permit for the protection of the Fund’s shareholders; or
(iv) to ensure a recent purchase made by check clears.
FEDERAL
INCOME TAX MATTERS
Each
series of the Trust is treated as a separate entity for federal income tax
purposes. The Fund, as a series of the Trust, intends to qualify and elect
to be
treated as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the “Code”), provided it complies
with all applicable requirements under the Code, including, among other things,
the source of its income, diversification of its assets and timing of
distributions. The Fund’s policy is to distribute to its shareholders all of its
investment company taxable income (determined without regard to the deduction
for dividends paid) and any net realized long-term capital gains for each
fiscal
year in a manner that complies with the distribution requirements of the
Code,
so that the Fund will not be subject to any federal income or excise taxes.
In
order to avoid liability for the feral excise tax, the Fund must distribute
(or
be deemed to have distributed) by December 31 of each calendar year
(i) at least 98% of its ordinary income for such year, (ii) at least
98% of the excess of its realized capital gains over its realized capital
losses
for the 12-month period ending on October 31 during such year and
(iii) any amounts from the prior calendar year that were not distributed
and on which the Fund
paid no
federal income tax.
Shareholders
will be subject to federal income taxes on distributions made by the Fund
whether received in cash or additional shares. Distributions of net investment
income (including interest, dividend income and net short-term capital gain
in
excess of any net long-term capital loss, less certain expenses), other than
qualified dividend income, will be taxable to shareholders as ordinary income.
For taxable years beginning on or before December 31, 2010, distributions
of
qualified dividend income, as such term is defined in Section 1(h)(11) of
the
Code (generally dividends received from U.S. domestic corporations and qualified
foreign corporations), generally will be taxed to noncorporate shareholders
at
the federal income tax rates applicable to net capital gain, provided the
Fund
designates the amount distributed as qualified dividend income an certain
holding period and other requirements are satisfied. Distributions of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), if any, will be taxable to noncorporate shareholders at a
maximum
federal income tax rate of 15% without regard to how long a shareholder has
held
shares of the Fund. Unless extended by future legislation, the 15% federal
income tax rate on net capital gain will expire for taxable years beginning
after December 31, 2010 and will be replaced by a maximum federal income
tax
rate on net capital gains of 20%. Corporate shareholders are taxed on net
capital gain at the same federal income tax rates applicable to ordinary
income.
Dividends paid by the Fund may qualify in part for the 70% dividends received
deduction available to corporate shareholders, provided the Fund designates
the
amount distributed as a qualifying dividend and certain holding period and
other
requirements under the Code are satisfied. The designated amount, however,
cannot exceed the aggregate amount of qualifying dividends received by the
Fund
for its taxable year. In view of the Fund’s investment policies, it is expected
that dividends from domestic corporations will be part of the Fund’s gross
income and that, accordingly, a portion of the distributions by the Fund
will be
eligible for treatment as qualified dividend income or the dividends received
deduction. However, the portion of the Fund’s gross income attributable to
qualified dividend income and qualifying dividends is largely dependent on
the
Fund’s investment activities for a particular year and, therefore, cannot be
predicted with any certainty. Qualified dividend income treatment and the
dividends received deduction may be reduced or eliminated if, among other
things, (i) the shareholder is under an obligation (whether pursuant to a
short
sale or otherwise) to make related payments with respect to positions in
substantially similar or related property or (ii) certain holding period
requirements are not satisfied at both the Fund and shareholder levels. In
addition, qualified dividend income treatment is not available if a shareholder
elects to have the dividend income treated as investment income for purposes
of
the limitation on deductibility of investment interest.
Shareholders
who choose to receive distributions in the form of additional shares will
have a
cost basis for federal income tax purposes in each share so received equal
to
the net asset value of a share on the reinvestment date. Distributions are
generally taxable when received. However, distributions declared in
October, November or December to shareholders of record on a date in such
a
month and paid the following January are taxable for federal income tax purposes
as if received on December 31 of the calendar year in which declared.
Distributions are includable in alternative minimum taxable income in computing
a shareholder's liability for the federal alternative minimum tax.
A
redemption of Fund shares may result in recognition of a taxable gain or
loss.
The gain or loss will generally be treated as a long-term capital gain or
loss
if the shares were held for more than one year. If the shares were held for
one
year or less, the gain or loss will generally be treated as a short-term
capital
gain or loss. Short-term capital gain is taxable at ordinary federal income
tax
rates. Any loss realized upon a redemption of shares held for six months
or less
will be treated as a long-term capital loss to the extent of any amounts
treated
as distributions of long-term capital gains during such six-month period.
Any
loss realized upon a redemption may be disallowed under certain wash sale
rules
to the extent shares of the same Fund or other substantially indentical stock
or
security are purchased (through reinvestment of distributions or otherwise)
within 30 days before or after the redemption.
The
Fund’s transactions in options and other similar transactions may be subject to
special provisions of the Code that, among other things, affect the character
of
any income realized by the Fund from such investments, accelerate recognition
of
income to the Fund, defer Fund losses, affect the holding period of the Fund’s
securities, affect whether distributions will be eligible for the dividends
received deduction or be treated a qualified dividend income and affect the
determination of whether capital gain and loss is characterized as long-term
or
short-term capital gain or loss. These rules could therefore affect the
character, amount and timing of distributions to shareholders. These provisions
may also require the Fund to “mark-to-market” certain types of the positions in
its portfolio (i.e., treat them as if they were closed out), which may cause
the
Fund to recognize income without receiving cash with which to make distributions
in amounts necessary to satisfy the distribution requirements for avoiding
U.S.
federal income and excise taxes. The Fund will monitor its transactions and
will
make the appropriate entries in its books and records, and if the Fund deems
it
advisable, will make appropriate elections in order to mitigate the effect
of
these rules, prevent disqualification of the Fund as a regulated investment
company and minimize the imposition of U.S. federal income and excise
taxes.
The
Fund’s transactions in broad based equity index futures contracts, exchange
traded options on such indices and certain other futures contracts are generally
considered “Section 1256 contracts” for federal income tax purposes. Any
unrealized gains or losses on such Section 1256 contracts are treated as
though
they were realized at the end of each taxable year. The resulting gain or
loss
is treated as sixty percent long-term capital gain or loss and forty percent
short-term capital gain or loss. Gain or loss recognized on actual sales
of
Section 1256 contracts is treated in the same manner. As noted above,
distributions of net short-term capital gain are taxable to shareholders
as
ordinary income while distributions of net long-term capital gain are taxable
to
shareholders as long-term capital gain, regardless of how long the shareholder
has held shares of the Fund.
The
Fund’s entry into a short sale transaction, an option or certain other contracts
could be treated as the constructive sale of an appreciated financial position,
causing the Fund to realize gain, but not loss, on the position.
If
the
Fund invests in certain pay-in-kind securities, zero coupon securities, deferred
interest securities or, in general, any other securities with original issue
discount (or with market discount if the Fund elects to include market discount
in income currently), the Fund must accrue income on such investments for
each
taxable year, which generally will be prior to the receipt of the corresponding
cash payments.
However,
the Fund must distribute, at least annually, all or substantially all of
its
investment company taxable income (determined without regard to the deduction
for dividends paid), including such accrued income to shareholders to avoid
federal income and excise taxes. Therefore, the Fund may have to dispose
of
portfolio securities under disadvantageous circumstances to generate cash,
or
may have to leverage itself by borrowing the cash, to satisfy these distribution
requirements.
The
Fund
may acquire market discount bonds. A market discount bond is a security acquired
in the secondary market at a price below its redemption value (or its adjusted
issue price if it is also an original issue discount bond). If the Fund invests
in a market discount bond, it will be required to treat any gain recognized
on
the disposition of such market discount bond as ordinary income (instead
of
capital gain) to the extent of the accrued market discount, unless the Fund
elects to include the market discount in income as it accrues as discussed
above.
The
Fund
may be subject to withholding and other taxes imposed by foreign countries,
including taxes on interest, dividends and capital gains with respect to
its
investments in those countries, which would, if imposed, reduce the yield
on or
return from those investments. Tax treaties between certain countries and
the
U.S. may reduce or eliminate such taxes in some cases. The Fund does not
expect
to satisfy the requirements for passing through to its shareholders their
pro
rata share of qualified foreign taxes paid by the Fund, with the result that
shareholders will not be required to include such taxes in their gross incomes
and will not be entitled to a tax deduction or credit for such taxes on their
own federal income tax returns.
Foreign
exchange gains and losses realized by the Fund in connection with certain
transactions involving foreign currency-denominated debt securities, certain
options and futures contracts relating to foreign currency, foreign currency
forward contracts, foreign currencies, or payables or receivables denominated
in
a foreign currency are subject to Section 988 of the Code, which generally
causes such gains and losses to be treated as ordinary income and losses
and may
affect the amount, timing and character of distributions to
shareholders.
Under
the
Code, the Fund will be required to report to the Internal Revenue Service
(“IRS”) all distributions of income and capital gains as well as gross proceeds
from the redemption of Fund shares, except in the case of exempt shareholders,
which includes most corporations. Pursuant to the backup withholding provisions
of the Code distributions of any taxable income and capital gains and proceeds
from the redemption of Fund shares may be subject to withholding of federal
income tax in the case of non-exempt shareholders who fail to furnish the
Fund
with their taxpayer identification numbers or with required certifications
regarding their status under the federal income tax law or if the IRS is
notified, the Fund that such withholding is required. If the withholding
provisions are applicable, any such distributions and proceeds, whether taken
in
cash or reinvested in additional shares, will be reduced by the amounts required
to be withheld. Corporate and other exempt shareholders should provide the
Fund
with their taxpayer identification numbers or certify their exempt status
in
order to avoid possible erroneous application of backup withholding. The
Fund
reserves the right to refuse to open an account for any person failing to
provide a certified taxpayer identification number.
The
foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts and estates. Each shareholder who is not
a
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such a shareholder
may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower
rate under an applicable income tax treaty).
This
discussion and the related discussion in the Prospectus have been prepared
by
Fund management, and counsel to the Fund has expressed no opinion in respect
thereof.
DIVIDENDS
AND DISTRIBUTIONS
The
Fund
will receive income in the form of dividends and interest earned on its
investments in securities. This income, less the expenses incurred in its
operations, is the Fund’s net investment income, substantially all of which will
be declared as dividends to the Fund’s shareholders.
The
amount of income dividend payments by the Fund is dependent upon the amount
of
net investment income received by the Fund from its portfolio holdings, is
not
guaranteed and is subject to the discretion of the Board. The Fund does not
pay
“interest” or guarantee any fixed rate of return on an investment in its
shares.
The
Fund
also may derive capital gains or losses in connection with sales or other
dispositions of its portfolio securities. Any net gain the Fund may realize
from
transactions involving investments held for less than the period required
for
long-term capital gain or loss recognition or otherwise producing short-term
capital gains and losses (taking into account any carryover of capital losses
from the eight previous taxable years), although a distribution from capital
gains, will be distributed to shareholders with and as a part of the income
dividends paid by the Fund and will be taxable to shareholders as ordinary
income for federal income tax purposes. If during any year the Fund realizes
a
net gain on transactions involving investments held for more than the period
required for long-term capital gain or loss recognition or otherwise producing
long-term capital gains and losses, the Fund will have a net long-term capital
gain. After deduction of the amount of any net short-term capital loss, the
balance (to the extent not offset by any capital losses carried over from
the
eight previous taxable years) generally will be distributed and treated as
long-term capital gains in the hands of the shareholders regardless of the
length of time the Fund’s shares may have been held by the shareholders. For
more information concerning applicable capital gains tax rates, see your
tax
advisor.
Any
dividend or distribution paid by the Fund reduces the Fund’s NAV on the date
paid by the amount of the dividend or distribution per share. Accordingly,
a
dividend or distribution paid shortly after a purchase of shares by a
shareholder would represent, in substance, a partial return of capital (to
the
extent it is paid on the shares so purchased), even though it would be subject
to federal income taxes.
Dividends
and other distributions will be made in the form of additional shares of
the
Fund unless the shareholder has otherwise indicated. Investors have the right
to
change their elections with respect to the reinvestment of dividends and
distributions by notifying the transfer agent in writing, but any such change
will be effective only as to dividends and other distributions for which
the
record date is seven or more business days after the transfer agent has received
the written request.
GENERAL
INFORMATION
Investment
Managers Series Trust (formerly known as Claymore Trust) is an open-end
management investment company organized as a Delaware statutory trust under
the
laws of the State of Delaware on February 15, 2005. The Trust currently consists
of two series of shares of beneficial interest, par value of $0.01 per share.
The Declaration of Trust permits the Trustees to issue an unlimited number
of
full and fractional shares of beneficial interest and to divide or combine
the
shares into a greater or lesser number of shares without thereby changing
the
proportionate beneficial interest in the Fund. Each share represents an interest
in the Fund proportionately equal to the interest of each other share. Upon
the
Fund’s liquidation, all shareholders would share pro rata in the net assets of
the Fund available for distribution to shareholders.
With
respect to the Fund, the Trust may offer more than one class of shares. The
Trust has reserved the right to create and issue additional series or classes.
Each share of a series or class represents an equal proportionate interest
in
that series or class with each other share of that series or class. Currently,
the Fund offers Class A shares only.
The
shares of each series or class participate equally in the earnings, dividends
and assets of the particular series or class. Expenses of the Trust, which
are
not attributable to a specific series or class, are allocated among all the
series in a manner believed by management of the Trust to be fair and equitable.
Shares have no pre-emptive or conversion rights. Shares when issued are fully
paid and non-assessable, except as set forth below. Shareholders are entitled
to
one vote for each share held. Shares of each series or class generally vote
together, except when required under federal securities laws to vote separately
on matters that only affect a particular series or class, such as the approval
of distribution plans for a particular class.
The
Trust
is not required to hold annual meetings of shareholders but will hold special
meetings of shareholders of a series or class when, in the judgment of the
Board, it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have, under certain circumstances, the right to communicate
with
other shareholders in connection with requesting a meeting of shareholders
for
the purpose of removing one or more trustees. Shareholders also have, in
certain
circumstances, the right to remove one or more trustees without a meeting.
No
material amendment may be made to the Trust’s Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding shares of
each
portfolio affected by the amendment. The Trust’s Declaration of Trust provides
that, at any meeting of shareholders of the Trust or of any series or class,
a
shareholder servicing agent may vote any shares as to which such shareholder
servicing agent is the agent of record and which are not represented in person
or by proxy at the meeting, proportionately in accordance with the votes
cast by
holders of all shares of that portfolio otherwise represented at the meeting
in
person or by proxy as to which such shareholder servicing agent is the agent
of
record. Any shares so voted by a shareholder servicing agent will be deemed
represented at the meeting for purposes of quorum requirements. Any series
or
class may be terminated (i) upon the merger or consolidation with, or the
sale or disposition of all or substantially all of its assets to, another
entity, if approved by the vote of the holders of two-thirds of its outstanding
shares, except that if the Board recommends such merger, consolidation or
sale
or disposition of assets, the approval by vote of the holders of a majority
of
the series’ or class’ outstanding shares will be sufficient, or (ii) by the
vote of the holders of a majority of its outstanding shares, or (iii) by
the Board by written notice to the series’ or class’ shareholders. Unless each
series and class is so terminated, the Trust will continue
indefinitely.
The
Trust’s Declaration of Trust also provides that the Trust shall maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the Trust, its shareholders, trustees,
officers, employees and agents covering possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its
obligations.
The
Declaration of Trust does not require the issuance of stock certificates.
If
stock certificates are issued, they must be returned by the registered owners
prior to the transfer or redemption of shares represented by such
certificates.
Rule 18f-2
under the 1940 Act provides that as to any investment company which has two
or
more series outstanding and as to any matter required to be submitted to
shareholder vote, such matter is not deemed to have been effectively acted
upon
unless approved by the holders of a “majority” (as defined in the rule) of the
voting securities of each series affected by the matter. Such separate voting
requirements do not apply to the election of Trustees or the ratification
of the
selection of accountants. The Rule contains special provisions for
cases in which an advisory contract is approved by one or more, but not all,
series. A change in investment policy may go into effect as to one or more
series whose holders so approve the change even though the required vote
is not
obtained as to the holders of other affected series.
The
Board, the Advisor and the Distributor have adopted Codes of Ethics under
Rule 17j-1 of the 1940 Act. These codes of ethics permit, subject to
certain conditions, personnel of the Advisor and Distributor to invest in
securities that may be purchased or held by the Fund.
FINANCIAL
STATEMENTS
As
the
Fund has recently commenced operations, there are no financial statements
available at this time. Shareholders of the Fund will be informed of the
Fund’s
progress through periodic reports when those reports become available. Financial
statements certified by the independent registered public accounting firm
will
be submitted to shareholders at least annually.
APPENDIX
“A”
DESCRIPTION
OF BOND RATINGS
Standard
& Poor’s Ratings Group. A Standard & Poor’s corporate bond rating is a
current assessment of the credit worthiness of an obligor with respect to
a
specific obligation. This assessment of credit worthiness may take into
consideration obligors, such as guarantors, insurers or lessees. The debt
rating
is not a recommendation to purchase, sell or hold a security, inasmuch as
it
does not comment as to market price or suitability for a particular
investor.
The
ratings are based on current information furnished to Standard & Poor’s by
the issuer or obtained by Standard & Poor’s from other sources it considers
reliable. Standard & Poor’s does not perform any audit in connection with
the ratings and may, on occasion, rely on unaudited financial information.
The
ratings may be changed, suspended or withdrawn as a result of changes in,
unavailability of such information, or for other circumstances.
The
ratings are based, in varying degrees, on the following
considerations:
|
1.
|
Likelihood
of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with
the
terms of the obligation.
|
|
2.
|
Nature
of and provisions of the
obligation.
|
|
3.
|
Protection
afforded by, and relative position of, the obligation in the event
of
bankruptcy, reorganization or their arrangement under the laws
of
bankruptcy and other laws affecting creditors’
rights.
|
AAA
- This is the highest rating assigned by Standard & Poor’s to a debt
obligation and indicates an extremely strong capacity to pay interest and
repay
any principal.
AA
- Debt rated AA also qualifies as high quality debt obligations. Capacity
to pay
interest and repay principal is very strong and in the majority of instances
they differ from AAA issues only in small degree.
A
- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in
circumstances and economic conditions than debt in higher rated
categories.
BBB
- Debt rated BBB is regarded as having an adequate capacity to pay interest
and
repay principal. Whereas they normally exhibit protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to
a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
BB,
B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a balance,
as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation.
BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB
- Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to
adverse business, financial, or economic conditions that could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B
- Debt rated B has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to
pay interest and repay principal. The B rating category is also used for
debt
subordinated to senior debt that is assigned an actual or implied BB or
BB-rating.
CCC
- Debt rated CCC has a currently indefinable vulnerability to default, and
is
dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is
also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC
- The rating CC is typically applied to debt subordinated to senior debt
that is
assigned an actual or implied CCC rating.
C
- The rating C is typically applied to debt subordinated to senior debt that
is
assigned an actual or implied CCC- debt rating. The C rating may be used
to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1
- The rating C1 is reserved for income bonds on which no interest is being
paid.
D
- Debt rated D is in payment default. It is used when interest payments or
principal payments are not made on a due date even if the applicable grace
period has not expired, unless Standard & Poor’s believes that such payments
will be made during such grace periods; it will also be used upon a filing
of a
bankruptcy petition if debt service payments are jeopardized.
Plus
(+) or Minus (-) - To provide more detailed indications of credit quality,
the
ratings from AA to CCC may be modified by the addition of a plus or minus
sign
to show relative standing within the major rating categories.
NR
- indicates that no public rating has been requested, that there is insufficient
information on which to base a rating, or that Standard & Poor’s does not
rate a particular type of obligation as a matter of policy. Debt obligations
of
issuers outside the United States and its territories are rated on the same
basis as domestic corporate issues. The ratings measure the credit worthiness
of
the obligor but do not take into account currency exchange and related
uncertainties.
Bond
Investment Quality Standards: Under present commercial bank regulations issued
by the Comptroller of the Currency, bonds rated in the top four categories
(AAA,
AA, A, BBB, commonly known as “Investment Grade” ratings) are generally regarded
as eligible for bank investment. In addition, the Legal Investment Laws of
various states may impose certain rating or other standards for obligations
eligible for investment by savings banks, trust companies, insurance companies
and fiduciaries generally.
Moody’s
Investors Service, Inc. A brief description of the applicable Moody’s rating
symbols and their meanings follows:
Aaa
- Bonds which are rated Aaa are judged to be of the best quality. They carry
the
smallest degree of investment risk and are generally referred to as “gilt edge”.
Interest payments are protected by a large or by an exceptionally stable
margin
and principal is secure. While the various protective elements are likely
to
change such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
- Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which
make
the long-term risks appear somewhat larger than in Aaa
securities.
A
- Bonds which are rated A possess many favorable investment attributes and
are
to be considered as upper medium grade obligations. Factors giving security
to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa
- Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured.
Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over
any great length of time. Some bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
NOTE:
Bonds within the above categories which possess the strongest investment
attributes are designated by the symbol “1” following the rating.
Ba
- Bonds which are rated Ba are judged to have speculative elements; their
future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during
good and bad times over the future. Uncertainty of position characterizes
bonds
in this class.
B
- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of
other terms of the contract over any long period of time may be
small.
Caa
- Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca
- Bonds which are rated Ca represent obligations which are speculative in
a high
degree. Such issues are often in default or have other marked
shortcomings.
C
- Bonds which are rated C are the lowest rated class of bonds and issue so
rated
can be regarded as having extremely poor prospects of ever attaining any
real
investment standing.
Duff
& Phelps, Inc.: AAA -- highest credit quality, with negligible risk factors;
AA -- high credit quality, with strong protection factors and modest risk,
which
may vary very slightly from time to time because of economic conditions;
A--
average credit quality with adequate protection factors, but with greater
and
more variable risk factors in periods of economic stress. The indicators
“+” and
“-” to the AA and A categories indicate the relative position of a credit within
those rating categories.
Fitch
Investors Service LLP.: AAA -- highest credit quality, with an exceptionally
strong ability to pay interest and repay principal; AA --very high credit
quality, with very strong ability to pay interest and repay principal; A
-- high
credit quality, considered strong as regards principal and interest protection,
but may be more vulnerable to adverse changes in economic conditions and
circumstances. The indicators “+” and “-” to the AA, A and BBB categories
indicate the relative position of credit within those rating
categories.
DESCRIPTION
OF NOTE RATINGS
A
Standard & Poor’s note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
|
-
|
Amortization
schedule (the larger the final maturity relative to other maturities
the
more likely it will be treated as a
note).
|
|
-
|
Source
of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.) Note
rating
symbols are as follows:
|
|
-
|
SP-1
Very strong or strong capacity to pay principal and interest. Those
issues
determined to possess overwhelming safety characteristics will
be given a
plus (+) designation.
|
|
-
|
SP-2
Satisfactory capacity to pay principal and
interest.
|
|
-
|
SP-3
Speculative capacity to pay principal and
interest.
|
Moody’s
Short-Term Loan Ratings - Moody’s ratings for state and municipal short-term
obligations will be designated Moody’s Investment Grade (MIG). This distinction
is in recognition of the differences between short-term credit risk and
long-term risk. Factors affecting the liquidity of the borrower are uppermost
in
importance in short-term borrowing, while various factors of major importance
in
bond risk are of lesser importance over the short run.
Rating
symbols and their meanings follow:
|
-
|
MIG
1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or
demonstrated broad-based access to the market for
refinancing.
|
|
-
|
MIG
2 - This designation denotes high quality. Margins of protection
are ample
although not so large as in the preceding
group.
|
|
-
|
MIG
3 - This designation denotes favorable quality. All security elements
are
accounted for but this is lacking the undeniable strength of the
preceding
grades. Liquidity and cash flow protection may be narrow and market
access
for refinancing is likely to be less well
established.
|
|
-
|
MIG
4 - This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although
not
distinctly or predominantly speculative, there is specific
risk.
|
⇒