O'Shaughnessy Funds Inc.
Building New Standards for Investment Success
Aggressive Growth Fund
35 Mason Street, Greenwich, Connecticut 06830
Toll-Free 877-OSFUNDS (673-8637)
www.osfunds.com
NASDAQ Symbol: OSAGX
THE FUND
O'Shaughnessy Aggressive Growth Fund (the "Fund") is an investment portfolio or
series of O'Shaughnessy Funds, Inc., an open-end management investment company
with multiple portfolios or series available for investment.
INVESTMENT OBJECTIVE
The investment objective of the Fund is capital appreciation.
STRATEGY
The Fund seeks to achieve its objective through implementation of proprietary
aggressive growth models developed by O'Shaughnessy Capital Management, Inc.,
the Fund's investment manager (the "Manager").
The Fund's portfolio will generally consist of approximately 45 common stocks
selected by the Manager which meet certain criteria. For a more detailed
description of the Fund, see "About the Fund - Investment Objective and
Policies."
RISK/REWARD
Although the stocks in which the Fund may invest have, in the Manager's
judgment, the potential to provide superior return, such stocks are likely to be
subject to greater than average price volatility, which may result in
substantial declines in the Fund's share price. Accordingly, the Fund is
suitable only for the most aggressive investors. For a discussion of the
additional risks associated with an investment in the Fund, see "About the Fund
- -- Investment Objective and Policies."
PURCHASE OF SHARES
Shares of the Fund will be offered to investors during the continuous offering
at a price equal to the next determined net asset value per share. There are no
fees or charges to purchase or sell shares or to reinvest dividends, however, a
fee applies to certain short-term redemptions, see "Information About Your
Account - Redemption of Shares". There are no Rule 12b-1 fees.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTUS
November 30, 1998
This Prospectus contains the information you should know about the Fund before
you invest. Please keep it for future reference. A statement containing
additional information about the Fund, dated November 30, 1998 has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this Prospectus. It is available, at no charge, by calling or by writing
the Fund at the telephone number or address set forth above. The SEC maintains
an internet site (http://www.sec.gov) that contains the SAI, other material
incorporated by reference and other information about companies that file
electronically with the SEC.
O'Shaughnessy Capital Management, Inc.
Manager
First Fund Distributors, Inc.
Distributor
TABLE OF CONTENTS
About the Fund ............................................. 3
Financial Highlights ....................................... 5
Management and Organization of the Fund .................... 9
Information about Your Account ............................. 11
Information on Distributions and Taxes ..................... 18
Performance Information .................................... 19
Net Asset Value ............................................ 20
Other Shareholder Services ................................. 21
2
ABOUT THE FUND
TRANSACTION AND FUND EXPENSES
The following table and example should help you understand the kinds of expenses
you will bear directly or indirectly as a Fund shareholder. In the table,
"Shareholder Transaction Expenses," shows that you pay no sales charges. All the
money you invest in the Fund goes to work for you, subject to the fees noted in
the table. "Annual Fund Operating Expenses" shows how much it would cost to
operate the Fund for a year, based on estimated expenses through the end of the
Fund's first full year. These costs you pay indirectly, because they are
deducted from the Fund's total assets before the daily share price is calculated
and before dividends and other distributions are made. You will not see these
expenses on your account statement.
FEE TABLE
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on
Dividend Reinvestments None
Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds,
whichever is lower) None
Redemption fee (a)
(on shares held less than 90 days) 1.50%
Exchange Fee (a) (b)
(on shares held less than 90 days) 1.50%
Annual Fund Operating Expenses
(as a percentage of average net assets):
Management Fees (c) (d) 0.74%
Rule 12b-1 Fees None
Other Expenses (d) 1.26%
Total Fund Operating Expenses (d) 2.00%
- ----------
(a) A 1.5% redemption fee, payable to the Funds, will be assessed on shares
purchased and held for less than 90 days. Shareholders who effect
redemptions of Fund shares by wire transfer will pay a $12.00 wire transfer
fee. See "Information About Your Account - Redemption of Shares."
(b) Shareholders who effect exchanges of shares of the Fund for shares of
another fund by telephone in accordance with the exchange privilege will be
charged a $5.00 exchange fee in addition to any fees applicable as
indicated in footnote (a). See "Information About Your Account - Exchange
Privilege."
(c) See "Management and Organization of the Fund - Management."
(d) To limit the Fund's expenses, the Manager has voluntarily agreed to reduce
its fees or reimburse the Fund through at least September 30, 1999 to
ensure that the Fund's total operating expenses do not exceed 2.00% of
average net assets annually. Any such reductions made by the Manager in its
fees or reimbursement of expenses with respect to the Fund are subject to
reimbursement by the Fund to the Manager (recapture by the Manager),
provided the Fund is able to effect such reimbursement while keeping total
operating expenses at or below 2.00% of average net assets annually, and
that no reimbursement will be made after September 30, 2000. Any amounts
reimbursed will have the effect of increasing fees otherwise paid by the
Fund. In absence of any reimbursement, the expense ratio would have been
2.24% for the fiscal period ended September 30, 1998.
3
EXAMPLE:
An investor would pay the following expenses on a $1,000 investment assuming:
(1) the operating expense ratio set forth in the table above; (2) a 5% annual
return throughout the period; and (3) redemption at the end of the period:
Cumulative Expenses Paid for the Period of:
One year $ 20
Three years $ 63
Five years $108
Ten years $236
The table and example are intended to assist investors in understanding the
costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The example should not be considered a representation of past or
future expenses or annual rate of return, and actual expenses or annual rate of
return may be more or less than those shown.
4
FINANCIAL HIGHLIGHTS
The table that follows is included in the Fund's Annual Report and has been
audited by McGladrey & Pullen, LLP, Independent Certified Public Accountants.
Their reports on the financial statements and financial highlights are included
in the Annual Report. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the Fund's Statement of
Additional Information.
Per Share Operating Performance
(For a share outstanding throughout the period)
Year November 1, 1996*
Ended through
September 30, 1998 September 30, 1997
------------------ ------------------
Net asset value, beginning of period $ 14.29 $ 10.00
------- -------
Income from investment operations:
Net investment loss (0.15) (.06)
Net realized & unrealized
loss on investments (3.21)* 4.35
Total from investment operations (3.36) 4.29
Less distributions:
From net realized gains (0.20) --
------- -------
Net asset value, end of period $ 10.73 $ 14.29
------- -------
Total Return (23.70%) 42.90%**
======= =======
Ratios/supplemental data:
Net assets, end of period (millions) $ 8.3 $ 5.6
Ratio of expenses to average net assets:
Before expense reimbursement 2.24% 7.01%+
After expense reimbursement 2.00% 1.98%+
Ratio of net investment loss
to average net assets:
Before expense reimbursement (1.77%) (6.41%)+
After expense reimbursement (1.53%) (1.39%)+
Portfolio turnover rate 206.30% 104.77%
* Commencement of operations.
** Not Annualized.
+ Annualized.
5
INVESTMENT OBJECTIVE AND POLICIES
To help you decide whether the Fund is appropriate for you, this section takes a
closer look at the Fund's investment objective and policies.
What is the Fund's objective? The investment objective of the Fund is capital
appreciation. There can be no assurance that the Fund will achieve its
investment objective.
What is the Fund's investment strategy? The Fund will seek to achieve its
objective through the implementation of proprietary aggressive growth models
developed by O'Shaughnessy Capital Management, Inc., the Fund's investment
manager (the "Manager").
The Fund's portfolio will generally consist of approximately 45 stocks, selected
through implementation of the Manager's proprietary aggressive growth models. At
the time of purchase, such stocks will generally possess the following
characteristics:
- - a market capitalization in excess of $150 million;
- - outstanding price performance during the last six months or one year period
prior to purchase;
- - high earnings gains during the one year period prior to purchase; and
- - expected high future earnings gains in the general consensus of market
analysts.
It is expected that the proprietary aggressive growth models used by the Manager
in selecting stocks for the Fund's portfolio will select stocks for investment
without regard to capitalization, except that the issuers must have market
capitalizations in excess of $150 million. The majority of these stocks will be
common stocks of domestic corporations and American Depository Receipts
("ADRs").
The Manager may invest the Fund's assets in stocks which do not meet all of the
above criteria, if, in the opinion of the Manager, such stocks possess
characteristics similar to stocks meeting such criteria. In addition, the
Manager may continue to hold a stock in the Fund's portfolio which no longer
meets the initial criteria for investment if the Manager believes such
investments are consistent with the Fund's investment objective.
What are the potential risks of investing primarily in common stocks? The
fundamental risk associated with any common stock fund is the risk that the
value of the stocks it holds might decrease. Stock values may fluctuate in
response to the activities of an individual company or in response to general
market and/or economic conditions. Historically, common stocks have provided
greater long-term returns and have entailed greater short-term risks than other
investment choices. Smaller or newer issuers are more likely to realize more
substantial growth as well as suffer more significant losses than larger or more
established issuers. Investments in such companies can be both more volatile and
more speculative.
OTHER INVESTMENT POLICIES AND PRACTICES
This section takes a detailed look at other investment policies and practices of
the Fund. The Fund's investments are subject to further restrictions and risks
described in the Statement of Additional Information.
Shareholder approval is required to change the Fund's investment objective and
certain investment restrictions noted in the following section as "fundamental
policies." The Manager also follows certain "operating policies" which can be
changed without shareholder approval. However, significant changes in operating
policies are discussed with shareholders in Fund reports.
The Fund's holdings in certain kinds of investments cannot exceed maximum
percentages of total assets, which are set forth below. While these restrictions
provide a useful level of detail about the Fund's investments, investors should
6
not view them as an accurate gauge of the potential risk of such investments.
The net effect of a particular investment depends on its volatility and the size
of its overall return in relation to the performance of all the Fund's other
investments.
CASH AND SHORT-TERM SECURITIES. The Fund may temporarily invest a portion of its
total assets in cash or liquid short-term securities pending investment of such
assets in stocks in accordance with the Fund's investment strategy and in order
to meet redemption requests. The Fund may also invest a portion of its assets in
cash or liquid short-term securities for temporary defensive purposes, but is
under no obligation to do so. Short-term securities in which the Fund may invest
include certificates of deposit, commercial paper, notes, obligations issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities,
and repurchase agreements involving such securities. See "Repurchase
Agreements," below.
The Manager does not expect assets invested in cash or liquid short-term
securities to exceed 5% of the Fund's total assets at any time.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. The Fund
may only enter into repurchase agreements with a member bank of the Federal
Reserve System or a well-established securities dealer in U.S. government
securities. In the event of a bankruptcy or default by the seller of the
repurchase agreement the Fund may suffer delays and incur costs or possible
losses in liquidating the underlying security which is held as collateral, and
the Fund may incur a loss if the value of the collateral declines during this
period. As a matter of operating policy, the Fund may not invest more than 15%
of its total assets in repurchase agreements maturing in more than seven days.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in illiquid
securities. Illiquid securities are securities which cannot be readily resold
because of legal or contractual restrictions or which cannot otherwise be
marketed, redeemed, put to the issuer or a third party, or which do not mature
within seven days, or which the Manager, in accordance with guidelines approved
by the Board of Directors, has not determined to be liquid.
The Fund may purchase, without regard to the above limitation, securities that
are not registered under the Securities Act of 1933 (the "Securities Act") but
that can be offered and sold to "qualified institutional buyers" under Rule 144A
under the Securities Act, provided that the Board of Directors, or the Manager
pursuant to guidelines adopted by the Board, continuously determines, based on
the trading markets for the specific Rule 144A security, that it is liquid.
LENDING OF PORTFOLIO SECURITIES. Like other mutual funds, the Fund may from time
to time lend securities from its portfolio to banks, brokers and other financial
institutions to earn additional income. The principal risk is that the borrower
may default on its obligation to return borrowed securities, because of
insolvency or otherwise. In this event, the Fund could experience delays in
recovering its securities and capital. In accordance with applicable law, the
Fund may not lend portfolio securities representing in excess of 33 1/3% of its
total assets. The lending policy is a fundamental policy.
BORROWING. The Fund may borrow money from banks in an amount up to 33% of its
total assets for extraordinary or emergency purposes such as meeting anticipated
redemptions, and may pledge assets in connection with such borrowing. The
borrowing policy is a fundamental policy.
SMALL CAP STOCKS. It is anticipated that the Fund's portfolio will include small
cap stocks (i.e., stocks whose issuers have market capitalizations exceeding
$150 million but less than $1 billion). Small cap stocks may present greater
opportunities for capital appreciation and a higher degree of risk; they tend to
be more vulnerable to financial and other risks and thus are more volatile than
stocks of larger, more established companies. Because the Fund may invest in
stocks with greater than average volatility, which may result in substantial
declines in the Fund's share price, it is suitable only for the most aggressive
investors.
INDUSTRY CONCENTRATION. The Fund may not invest more than 25% of its total
assets in any one industry (excluding U.S. Government securities). The
concentration policy is a fundamental policy.
7
FOREIGN SECURITIES. The Fund may invest up to 25% of its total assets in
securities of foreign issuers, either through (i) direct purchase of securities
of foreign issuers or (ii) purchase of American Depository Receipts ("ADRs")
which are dollar-denominated securities of foreign issuers traded in the U.S.
Such investments increase diversification of the Fund's portfolio and may
enhance return, but they also involve some special risks such as exposure to
potentially adverse local political and economic developments, nationalization
and exchange controls; potentially lower liquidity and higher volatility;
possible problems arising from regulatory practices that differ from U.S.
standards; the imposition of withholding taxes on income from such securities;
confiscating taxation; and the chance that fluctuations in foreign exchange
rates will decrease the investment's value (favorable changes can increase its
value). These risks are heightened for investment in developing countries and
there is no limit on the amount of the Fund's foreign investments that may be
invested in such countries.
The Fund may invest in ADRs through both sponsored and unsponsored arrangements.
The issuers of unsponsored ADRs are not obligated to disclose material
information in the United States, and therefore, there may not be a correlation
between such information and the market value of the ADRs.
HEDGING AND RETURN ENHANCEMENT STRATEGIES. The Fund is permitted to utilize
certain hedging and return enhancement strategies and techniques such as options
on securities and securities indices, futures contracts on securities and
securities indices and options on futures contracts, as described below.
Futures (a type of potentially high-risk derivative) are often used to manage or
hedge risk, because they enable the investor to buy or sell an asset in the
future at an agreed upon price. Options (another potentially high-risk
derivative) give the investor the right, but not the obligation, to buy or sell
an asset at a predetermined price in the future. The Fund may buy and sell
futures and options contracts for any number of reasons, including: to manage
its exposure to changes in securities prices; as an efficient means of adjusting
its overall exposure to certain markets; in an effort to enhance income; and to
protect the value of portfolio securities. The Fund may purchase, sell, or write
call and put options on securities, financial indices and futures.
Futures contracts and options may not always be successful hedges; their prices
can be highly volatile. Using them could lower the Fund's total return, and the
potential loss from the use of futures can exceed the Fund's initial investment
in such contracts.
As a matter of operating policy, initial margin deposits and premiums on options
used for non-hedging purposes will not equal more than 5% of the Fund's net
asset value.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED PURCHASES. The Fund may purchase
securities under a firm commitment agreement or on a when-issued basis. Firm
commitment agreements and when-issued purchases call for the purchase of
securities at an agreed-upon price on a specified future date, and would be
used, for example, when a decline in the yield of securities of a given issuer
is anticipated. The Fund as purchaser assumes the risk of any decline in value
of the security beginning on the date of the agreement or purchase. The Fund
will not enter into such transactions for the purpose of leveraging, and
accordingly, will segregate liquid assets with its custodian equal (on a daily
marked-to-market basis) to the amount of its commitment to purchase the
when-issued securities and securities subject to the firm commitment agreement.
WARRANTS. The Fund may invest in warrants, which are similar to options to
purchase securities at a specific price valid for a specific period of time. The
Fund may not invest more than 5% of its net assets (at the time of investment)
in warrants (other than those attached to other securities). If the market price
of the underlying security never exceeds the exercise price, the Fund will lose
the entire investment in the warrant. Moreover, if a warrant is not exercised
within the specified time period, it will become worthless and the Fund will
lose the purchase price and the right to purchase the underlying security.
8
DIVERSIFICATION. In order to maintain the Fund's status as a diversified
investment company, with respect to 75% of the Fund's total assets: 1) not more
than 5% of the Fund's assets may be invested in the securities of a single
issuer (excluding U.S. Government securities); and 2) the Fund may not hold more
than 10% of the outstanding voting securities of a single issuer. The
diversification policy is a fundamental policy.
PORTFOLIO TRANSACTIONS. In executing portfolio transactions, the Fund seeks to
obtain the best net results, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), size of order,
difficulty of execution, operational facilities of the firm involved and the
firm's risk in positioning a block of securities. While the Fund generally seeks
reasonably competitive commission rates, the Fund does not necessarily pay the
lowest commission or spread available. In addition, consistent with the Conduct
Rules of the National Association of Securities Dealers, Inc., the Manager may
consider sales of shares of the Fund as a factor in the selection of brokers or
dealers to execute portfolio transactions for the Fund.
PORTFOLIO TURNOVER. The Fund anticipates that its annual turnover rate should
not exceed 200% under normal conditions. The portfolio turnover rate is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases or sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of the securities in the portfolio during the year. High portfolio
turnover involves correspondingly greater transaction costs in the form of
brokerage commissions and dealer spreads, which the Fund bears.
MANAGEMENT AND ORGANIZATION OF THE FUND
MANAGEMENT
WHO RUNS THE FUND?
GENERAL OVERSIGHT. O'Shaughnessy Funds, Inc. is governed by a Board of Directors
that meets regularly to review the Fund's investment, performance, expenses, and
other business affairs. The Board elects the Fund's officers.
MANAGER. O'Shaughnessy Capital Management, Inc. acts as investment manager of
the Fund pursuant to a management agreement with O'Shaughnessy Funds on behalf
of the Fund (the "Management Agreement"). In its capacity as investment manager,
the Manager is responsible for selection and management of the Fund's portfolio
investments. For its services, the Fund pays the Manager a fee each month, at
the annual rate of 0.74% of the Fund's average daily net assets.
The Manager's office is located at 35 Mason Street, Greenwich, Connecticut
06830. O'Shaughnessy Capital Management was incorporated in 1988. The Manager
serves as portfolio consultant to a unit investment trust and provides
investment advisory services to investment companies and individual and
institutional accounts with assets in excess of $800 million.
PORTFOLIO MANAGEMENT. James P. O'Shaughnessy has had the day-to-day
responsibility for managing the Fund's portfolio and developing and executing
the Fund's investment program since commencement of operations of the Fund. For
the past ten years, Mr. O'Shaughnessy has served as Chairman and CEO of the
Manager, and in such capacity, has managed equity accounts for high net worth
individuals and served as portfolio consultant to a unit investment trust. Mr.
O'Shaughnessy is recognized as a leading expert and pioneer in quantitative
equity analysis. He is the author of three financial books, Invest Like the
Best, What Works on Wall Street and How to Retire Rich.
DISTRIBUTOR. First Fund Distributors, Inc. (the "Distributor"), a registered
broker-dealer, acts as the principal distributor of the shares of the Fund. The
address of the Distributor is 4455 E. Camelback Road, Suite 261 E, Phoenix,
Arizona 85018. The Distributor provides distribution services to the Fund at no
cost to the Fund.
9
ADMINISTRATOR. Pursuant to an Administration Agreement, Investment Company
Administration, LLC (the "Administrator") serves as Administrator of the Fund.
The Administrator provides certain administrative services, including, among
other responsibilities, coordinating relationships with independent contractors
and agents, preparing for signature by officers and filing of certain documents
required for compliance with applicable laws and regulations, preparing
financial statements, and arranging for the maintenance of books and records.
For its services, the Fund pays the Administrator a fee each month, at the
annual rate of 0.10% of the first $100 million of the Fund's average daily net
assets, 0.05% of the next $100 million of such net assets, and 0.03% of such net
assets over $200 million, with a minimum fee of $40,000 annually. The address of
the Administrator is 4455 E. Camelback Rd., Suite 261 E, Phoenix, Arizona 85018.
The Administrator and the Distributor are under common control and are therefore
considered affiliates of each other.
TRANSFER AGENT AND CUSTODIAN. Firstar Mutual Fund Services, LLC acts as the
Fund's transfer and dividend disbursing agent (the "Transfer Agent"). Firstar
Bank Milwaukee is the Fund's custodian (the "Custodian"). The address of the
Transfer Agent and Custodian is 615 E. Michigan Street, Third Floor, Milwaukee,
Wisconsin 53202.
YEAR 2000 RISK. Like other business organizations around the world, the Fund
could be adversely affected if the computer systems used by its investment
manager and other service providers do not properly process and calculate
information related to dates beginning January 1, 2000. This is commonly known
as the "Year 2000 Issue." The Fund's manager has taken steps that it believes
are reasonably designed to address the Year 2000 Issue with respect to its own
computer systems and the Fund has obtained assurances from the Fund's other
service providers that they are taking comparable steps. However, there can be
no assurance that these actions will be sufficient to avoid any adverse impact
on the Fund.
HOW ARE FUND EXPENSES DETERMINED?
The Management Agreement identifies the expenses to be paid by the Fund. In
addition to the fees paid to the Manager, the Fund pays certain additional
expenses, including but not limited to, the following: shareholder service
expenses; custodial, accounting, legal, and audit fees; administrative fees;
costs of preparing and printing prospectuses and reports sent to shareholders;
registration fees and expenses; proxy and annual meeting expenses (if any); and
independent Director fees and expenses. The Manager has voluntarily agreed to
reduce fees payable to it by the Fund or reimburse the Fund to the extent
necessary to limit the Fund's aggregate annual operating expenses to 2.00% of
average net assets (the "expense cap"). Any such reductions made by the Manager
in its fees or reimbursement of expenses with respect to the Fund are subject to
recapture by the Manager provided the Fund is able to effect such recapture
while keeping total operating expenses at or below the annual expense cap, and
that no recapture will be made after September 30, 2000. Any amounts reimbursed
will have the effect of increasing fees otherwise paid by the Fund.
ORGANIZATION
HOW IS THE FUND ORGANIZED?
The Fund is an investment portfolio or series of O'Shaughnessy Funds. There are
three other investment portfolios of O'Shaughnessy Funds, shares of which are
not offered for sale through this Prospectus: O'Shaughnessy Cornerstone Value
Fund, O'Shaughnessy Cornerstone Growth Fund and O'Shaughnessy Dogs of the Market
Fund (the "other O'Shaughnessy Funds"). The charter of O'Shaughnessy Funds
provides that the Board of Directors may issue additional investment portfolios
of shares and/or additional classes of shares for each investment portfolio.
O'Shaughnessy Funds was organized as a corporation in Maryland on May 20, 1996.
WHAT IS MEANT BY "SHARES"?
As with all mutual funds, investors purchase shares when they invest in the
Fund. These shares are a part of a Fund's authorized capital stock, but share
certificates are not generally issued.
10
Each full share and fractional share entitles the shareholder to: receive a
proportional interest in the Fund's capital gain distributions; and cast one
vote per share on certain Fund matters, including the election of Fund
Directors, changes in fundamental policies, or approval of changes in the Fund's
Management Agreement.
Shareholder inquiries may be addressed to the Fund at the address or telephone
number set forth on the cover page of this Prospectus.
DOES THE FUND HAVE ANNUAL SHAREHOLDER MEETINGS?
The Fund is not required to hold annual meetings and does not intend to do so
except when certain matters, such as a change in the Fund's fundamental
policies, are to be decided. In addition, shareholders representing at least 10%
of all eligible votes may call a special meeting if they wish, for the purpose
of voting on the removal of any Fund Director. If a meeting is held and you
cannot attend, you can vote by proxy. Before the meeting, the Fund will send you
proxy materials that explain the issues to be decided and include a voting card
for you to mail back.
INFORMATION ABOUT YOUR ACCOUNT
PURCHASE OF SHARES
The minimum initial investment in the Fund is $2,500 for regular accounts and
$250 for Individual Retirement Accounts. For corporate sponsored retirement
plans, there is no minimum initial investment. There is no minimum subsequent
investment requirement for any account, however, a $100 minimum exists for each
additional investment made through the automatic investment plan.
Investors may make an initial purchase of shares and subsequent investments in
the Fund by mail or wire as described below. The Fund reserves the right in its
sole discretion to waive the minimum investment amounts, including in the case
of investments by employees and affiliates of the Manager and family members of
any of the foregoing, and Individual Retirement Accounts ("IRAs") of
shareholders of the Fund, and certain purchase programs made available to
clients of financial intermediaries eligible to sell shares of the Fund.
The Internal Revenue Service requires the correct reporting of social security
numbers or tax identification numbers. The failure to provide this information
will result in the rejection of an investor's Application.
HOW DO I PURCHASE SHARES BY MAIL?
For initial investments, please send a completed Application, together with a
check payable to O'Shaughnessy Aggressive Growth Fund to O'Shaughnessy Funds,
Inc., c/o Firstar Mutual Fund Services, LLC, at P.O. Box 701, Milwaukee, WI
53201-0701 (for Applications sent by U.S. mail) or 615 E. Michigan Street, Third
Floor, Milwaukee, WI 53202 (for Applications sent via overnight courier).
Subsequent investments must be accompanied by a letter indicating the name(s) in
which the account is registered and the account number or by the remittance
portion of the account statement and mailed to the address stated above.
HOW DO I PURCHASE SHARES BY WIRE?
If you are wiring funds, call the Fund at 877-OSFUNDS (673-8637) for an account
number if this is an initial investment or to inform the Transfer Agent that a
wire is expected if this is a subsequent investment.
For an initial investment, prior to or immediately after the funds are wired, a
completed Application should be sent to O'Shaughnessy Funds, Inc., c/o Firstar
Mutual Fund Services, LLC, at P.O. Box 701, Milwaukee, WI 53201-0701 (for
Applications sent by U.S. mail) or 615 E. Michigan Street, Third Floor,
Milwaukee, WI 53202 (for Applications sent via overnight courier). Instruct your
bank to wire federal funds to O'Shaughnessy Funds, c/o Firstar Mutual Fund
Services, LLC, ABA# 075000022, DDA # 112952137.
The wire should specify the name of the Fund, the name(s) in which the account
is registered, the shareholder's social security number or employer tax
identification number, the account number and the amount being wired. Please
indicate if this is an initial or subsequent investment. Wire purchases are
normally used only for large purchases (over $5,000). Your bank may charge you a
fee for sending the wire.
11
What is the purchase price of Fund shares and when do purchases become
effective? Purchases of Fund shares become effective and shares will be priced
at the net asset value per share ("NAV") next determined after the investor's
check or wire is received by the Transfer Agent. NAV for the Fund is calculated
as of the close of business on the New York Stock Exchange ("NYSE") (currently
4:00 pm, Eastern time). If your request is received in correct form before 4:00
pm, Eastern time, your transaction will be priced at that day's NAV. If your
request is received after 4:00 pm, it will be priced at the next business day's
NAV. Orders that request a particular day or price for your transaction or any
other special conditions cannot be accepted.
The time at which transactions and shares are priced and the time until which
orders are accepted may be changed in case of an emergency or if the NYSE closes
at a time other than 4:00 pm, Eastern time.
The purchase order must include the documentation specified above. Please do not
send purchase orders to the Fund; the Fund forwards purchase orders to the
Transfer Agent and a purchase will not become effective until the Transfer Agent
receives all the necessary documentation.
WHAT ARE THE CONDITIONS OF PURCHASE?
All purchase orders are subject to acceptance or rejection by the Fund or the
Distributor, in their sole discretion. The offering of shares may be suspended
whenever the Fund considers suspension desirable or when required by any order,
rule or regulation of any governmental body having jurisdiction. Checks and
money orders should be drawn on United States banks; the Fund and the
Distributor reserve the right to reject checks drawn on foreign banks.
The Transfer Agent will mail a confirmation of each completed purchase to the
investor. If an order is canceled because an investor's check does not clear,
the investor will be responsible for any loss incurred by the Fund, the Transfer
Agent, the Distributor, the Administrator or the Manager. If the investor is
already a shareholder, the Fund may redeem shares from the account to cover any
loss. If the investor is not a shareholder or if the loss is greater than the
value of the shareholder's account, the Distributor will be responsible for any
loss to the Fund, and will have the right to recover such amount from the
investor.
WHO DO I CONTACT IF I HAVE QUESTIONS ABOUT MY ACCOUNT OR NEED ADDITIONAL
INFORMATION CONCERNING AN INVESTMENT IN THE FUND?
If you have investment questions about the Fund, or if you would like any
additional information relating to an investment in the Fund, please call
877-OSFUNDS (673-8637) (toll-free), or write to the Distributor at First Fund
Distributors, Inc., 4455 E. Camelback Road, Suite 261 E, Phoenix AZ 85018. If
you are a shareholder and have questions about your account, or if you wish to
arrange for wire transactions, please call the Fund at 877-OSFUNDS (673-8637).
Before telephoning, please be sure to have your account number and social
security number or employer tax identification number readily available.
WILL I RECEIVE SHARE CERTIFICATES FOR SHARES PURCHASED?
Share certificates will not be issued for shares unless the investor sends a
written request for certificates to O'Shaughnessy Funds, Inc., c/o Firstar
Mutual Fund Services, LLC, at P.O. Box 701, Milwaukee, WI 53201-0701 (for
requests sent via U.S. mail) or 615 E. Michigan Street, Third Floor, Milwaukee,
WI 53202 (for requests sent via overnight courier). Share certificates are
issued only for full shares and may be redeposited in the shareholder's account
at any time. In order to facilitate redemptions and exchanges, most shareholders
elect not to receive certificates, since a shareholder wishing to redeem or
exchange shares represented by a certificate must surrender such certificate,
properly endorsed on the reverse side together with a signature guarantee. (See
"Redemption of Shares - When are signature guarantees required?" below). If a
certificate is lost, the shareholder may incur an expense in replacing it.
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CAN I PURCHASE SHARES THROUGH BROKER-DEALERS OTHER THAN THE DISTRIBUTOR?
O'Shaughnessy Funds may enter into agreements with various outside brokers on
behalf of the Funds through which shareholders may purchase shares. Such shares
may be held by such outside brokers in an omnibus account rather than in the
name of the individual shareholder. The Manager may reimburse the outside
brokers for providing shareholder services to the omnibus accounts in an amount
equal to what the Fund would otherwise have paid to provide shareholder services
to each individual shareholder account. Investors may also arrange to purchase
shares of the Fund through other outside broker-dealers with which O'Shaughnessy
Funds does not have an arrangement, and such broker-dealers may purchase shares
of the Fund by telephone if they have made arrangements in advance with the
Fund. To place a telephone order such broker-dealer should call the Fund at
877-OSFUNDS (673-8637). Purchases by broker-dealers become effective and shares
will be priced as described above. If an investor purchases shares through
broker-dealers other than the Distributor, such broker-dealers may charge the
investor a service fee that is reasonable for the service performed, bearing in
mind that the investor could have acquired or redeemed the Fund's shares
directly without the payment of any fee. No part of any such service fee will be
received by the Distributor, the Manager, the Administrator or the Fund.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of each of the other
O'Shaughnessy Funds (i.e., O'Shaughnessy Cornerstone Value Fund, O'Shaughnessy
Cornerstone Growth Fund and O'Shaughnessy Dogs of the Market Fund). Prospectuses
for the other O'Shaughnessy Funds may be obtained by writing to the Distributor
at 4455 E. Camelback Road, Suite 261 E, Phoenix AZ 85018, Attention:
O'Shaughnessy Funds, Inc. or by calling 877-OSFUNDS (673-8637) (toll-free).
You may also exchange shares of the Fund for shares of the Firstar Money Market
Fund, a money market mutual fund not affiliated with O'Shaughnessy Funds or the
Manager. Prior to making such an exchange, you should obtain and carefully read
the prospectus for the Firstar Money Market Fund. The exchange privilege does
not constitute an offering or recommendation on the part of the Fund or the
Manager of an investment in the Firstar Money Market Fund.
If you exchange into shares of the Firstar Money Market Fund you may establish
checkwriting privileges on the Firstar Money Market Fund. Contact the Fund at
877-OSFUNDS (673-8637) for a checkwriting application and signature card.
THE EXCHANGE PROCEDURES ARE DESCRIBED BELOW.
Is there any sales charge or minimum investment applicable to an exchange?
Shareholders of the Fund may exchange their shares of the Fund, without the
payment of any sales or service charge unless the exchange is effected via
telephone instructions for which a $5.00 charge will be levied or on shares held
less than 90 days for which a redemption fee will be charged (see "Information
About Your Account - Redemption of Shares"), for shares of any other fund into
which an exchange is permitted equal in value to the net asset value of the
shares being exchanged. All exchanges are subject to all applicable terms set
forth in the prospectus of the fund into which the exchange is being made. If a
shareholder exchanges shares through a broker-dealer other than the Distributor,
such broker-dealer may charge the shareholder a service fee, no part of which
will be received by the Distributor, the Manager, the Fund, or the fund into
which the exchange is being made.
At what price is an exchange effected? An exchange is effected at the respective
net asset values of the two funds with respect to which shares are being
exchanged as next determined following receipt by the fund into which the
exchange is being made of all necessary documentation in connection with the
redemption of Fund shares as described below under "Redemption of Shares - How
do I redeem shares by mail?"
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DO CURRENT INSTRUCTIONS CONCERNING RECEIPT OF DIVIDENDS AND DISTRIBUTIONS CARRY
OVER TO EXCHANGED SHARES?
Dividend and distribution instructions with respect to exchanged shares will
remain the same as those given previously by the shareholders to the fund from
which the shareholder is exchanging the shares, unless the shareholder
designates a change in such instructions by writing to the Transfer Agent.
Please note that such changed instructions (i) must be signed by the registered
owners(s) of the shares, exactly as the account is registered and signature
guaranteed, and (ii) include the name of the account, the account number, and
the name of the fund for which instructions have changed.
WHAT ARE THE CONDITIONS APPLICABLE TO AN EXCHANGE?
Exchanges involving the redemption of shares recently purchased by personal,
corporate or government check will be permitted only after the Fund has
reasonable belief that the check has cleared, which may take up to fifteen days
after the purchase date. The exchange privilege is available only in states
where shares of the other O'Shaughnessy Funds or the Firstar Money Market Fund
may be sold legally.
The Fund, the other O'Shaughnessy Funds and the Firstar Money Market Fund each
reserves the right to reject any order to acquire its shares through exchange or
otherwise and to restrict or terminate the exchange privilege at any time. If
the exchange privilege is to be permanently terminated, the Fund will provide
its shareholders with written notice of such termination. The Fund reserves the
right to suspend temporarily the telephone exchange privilege in emergency
circumstances or in cases where, in the judgment of the Fund, continuation of
the privilege would be detrimental to the Fund and its shareholders as a whole.
Such temporary suspension can be without prior notification.
HOW CAN I MAKE EXCHANGES BY TELEPHONE?
Shareholders who have completed the section of the Fund's Application entitled
"Shareholder Privileges" are eligible to make telephone requests for exchanges
and may do so by telephoning the Fund at 877-OSFUNDS (673-8637). A shareholder
who has not completed the Shareholder Privileges section of the Application but
who wishes to become eligible to make telephone exchanges should designate a
change in such instructions by writing to the Transfer Agent. Please note that
such changed instructions must (i) be signed by the registered owner(s) of the
shares exactly as the account is registered and signature guaranteed, and (ii)
include the name of the account, the account number and the name of the Fund.
See "Redemption of Shares - How do I redeem shares by telephone?" below, which
describes the time of day at which telephone redemptions and exchanges will be
priced and processed. Telephone requests for exchanges cannot be accepted with
respect to shares represented by certificates. Shares of the other O'Shaughnessy
Funds or the Firstar Money Market Fund acquired pursuant to a telephone request
for exchange will be held under the same account registration as the shares
redeemed through the exchange.
14
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Neither the Fund nor any of its service
contractors will be liable for any loss or expense in acting on telephone
instructions that are reasonably believed to be genuine. In attempting to
confirm that telephone instructions are genuine, the Fund will use procedures
that are considered reasonable, including requesting a shareholder to correctly
state the account number, the name(s) in which the account is registered, the
social security number(s) registered to the account, and certain additional
personal identification.
Shareholders should be aware that, at times, the volume of telephone calls or
other factors beyond the Fund's control may make it difficult to reach the
Transfer Agent by telephone. This will be true particularly during periods of
drastic economic market changes. In such cases, shareholders should continue to
telephone or utilize the written exchange procedures described below.
Shareholders who effect exchanges of Fund shares by telephone will be charged a
$5.00 exchange fee.
HOW DO I MAKE EXCHANGES BY MAIL?
To exchange shares by mail, send a written request for exchange signed by the
registered owner(s) of the shares, exactly as the account is registered to
O'Shaughnessy Funds, Inc., c/o Firstar Mutual Fund Services, LLC, at P.O. Box
701, Milwaukee, WI 53201-0701 (for requests sent by U.S. mail) or 615 E.
Michigan Street, Third Floor, Milwaukee, WI 53202 (for requests sent via
overnight courier). The request for exchange should include the following
information: the name of the account, the account number, the number of Fund
shares or the dollar value of Fund shares to be exchanged, the shares of which
other fund (either another O'Shaughnessy Fund or the Firstar Money Market Fund)
that shares of the Fund are to be exchanged for, and the name on the account and
the account number (if already established) with such other fund.
REDEMPTION OF SHARES
Shareholders can redeem their shares by giving instructions to the Transfer
Agent in writing or by telephone. As more fully described below, these
redemption instructions may have to be accompanied by additional documentation,
which may include a signature guarantee.
If a shareholder redeems shares through a broker-dealer other than the
Distributor, such broker-dealer may charge the shareholder a service fee, no
part of which will be received by the Distributor, the Manager, the
Administrator or the Fund.
HOW DO I REDEEM SHARES BY MAIL?
To redeem shares by mail, send a written request for redemption signed by the
registered owner(s) of the shares, exactly as the account is registered to
O'Shaughnessy Funds, Inc., c/o Firstar Mutual Fund Services, LLC, at P.O. Box
701, Milwaukee, WI 53201-0701 (for requests sent by U.S. mail) or 615 E.
Michigan Street, Third Floor, Milwaukee, WI 53202 (for requests sent via
overnight courier). The request should include the following: the name of the
account, the account number, the number of shares or the dollar value of shares
to be redeemed and whether proceeds are to be sent by mail or wire, and if by
wire, giving the wire instructions; (ii) duly endorsed share certificates, if
any have been issued for the shares redeemed; (iii) any signature guarantees
that are required as described below; and (iv) any additional documents which
might be required for redemptions by corporations, executors, administrators,
trustees, guardians or other similar shareholders. Except as otherwise directed
by the Fund in its discretion, the Transfer Agent will not redeem shares until
it has received all necessary documents; corporate and institutional investors
and fiduciaries should contact the Transfer Agent to ascertain what additional
documentation is required.
15
WHEN WOULD I PAY A REDEMPTION FEE?
The Fund can experience substantial price fluctuations and are intended for
long-term investors. Short-term "market timers" who engage in frequent purchases
and redemptions can disrupt the Funds' investment programs and create additional
transaction costs that are borne by all shareholders. For these reasons, the
Fund will assess a 1.5% fee on redemptions (including exchanges) of Fund shares
purchased and held for less than 90 days.
Redemption fees will be paid to the Fund to help offset transaction costs. The
Fund will use the "first-in, first-out" (FIFO) method to determine the 90 day
holding period. Under this method, the date of redemption or exchange will be
compared with the earliest purchse date of shares held in the account. If this
holding period is less than 90 days, the fee will be assessed.
The fee does not apply to any shares purchased through reinvested distributions
(dividends and capital gains) or to shares held in retirement plans such as
401(k), 403(b), 457, Koegh, profit sharing, SIMPLE IRA, SEP-IRA, and money
purchase pension accounts. These exceptions may not apply to shares held in
broker omnibus accounts. The fee does apply to shares held in IRA accounts and
to shares purchased through automatic investment plans (see "Other Shareholder
Services - Automatic Investment Plan").
MAY I SEND REDEMPTION REQUESTS TO THE FUND?
Please do not send redemption requests to the Fund. The Fund must forward all
redemption requests to the Transfer Agent and instructions for redemption will
not be effective until received by the Transfer Agent. Shares redeemed will be
priced at the net asset value per share next determined after acceptance of a
complete redemption request by the Transfer Agent. Redemption requests received
by the Transfer Agent after the close of the NYSE (currently 4:00 pm, Eastern
time) will be treated as though received on the next business day. The Transfer
Agent cannot accept redemption requests that specify a particular date for
redemption or special redemption conditions.
WHEN ARE SIGNATURE GUARANTEES REQUIRED?
Except as indicated below, all of the signatures on any request for redemption
or share certificates tendered for redemption must be guaranteed by a bank,
broker-dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency or savings association. A notary public cannot
provide a signature guarantee.
The Fund will waive the signature guarantee requirement on a redemption request
that instructs that the proceeds be sent by mail if all of the following
conditions apply: (i) the redemption is for $10,000 or less; (ii) the redemption
check is payable to the shareholder(s) of record; (iii) the redemption check is
mailed to the shareholder(s) at the address of record; and (iv) no shares
represented by certificate are being redeemed. Share certificates submitted for
redemption or exchange must be properly endorsed and contain signature
guarantees. In addition, the Fund in its discretion may waive the signature
guarantee for employees and affiliates of the Manager, the Distributor and the
Administrator, and family members of the foregoing.
The requirement of a guaranteed signature protects against an unauthorized
person redeeming shares and obtaining the redemption proceeds.
HOW DO I REDEEM SHARES BY TELEPHONE?
Shareholders who have completed the section of the Fund's Application entitled
"Shareholder Privileges" are eligible to make telephone requests for redemptions
(without charge) and may do so by telephoning the Fund at 877-OSFUNDS
(673-8637). A shareholder who has not completed the Shareholder Privileges
section of the Application but who wishes to become eligible to make telephone
redemptions, should designate a change in such instructions by writing to the
Transfer Agent. Please note that such changed instructions must (i) be signed by
the registered owner(s) of the shares exactly as the account is registered and
signature guaranteed, and (ii) include the name of the account, the account
number and the name of the Fund.
16
Telephone redemptions cannot be accepted with respect to shares represented by
certificates or for IRA accounts. In such cases, redemption can only be made by
mail as described above under "Redemption of Shares - How do I redeem shares by
mail?" Telephone requests for redemptions (or exchanges - see "Exchange
Privilege" above) received before the close of business on the NYSE (currently
4:00 pm, Eastern time) on a business day will be priced and processed as of the
close of business on that day; requests received after that time will be
processed as of the close of business on the next business day.
As noted above, the Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and may, along with their
service contractors, be liable for a failure to use such procedures. See
"Exchange Privilege - How can I make exchanges by telephone?" above.
Shareholders should be aware that, at times, the volume of telephone calls or
other factors beyond the Fund's control may make it difficult to reach the
Transfer Agent by telephone. This will be true particularly during periods of
drastic economic or market changes. In the event of difficulty in reaching the
Transfer Agent, shareholders should continue to telephone or utilize the written
redemption procedures described above under "Redemption of Shares - How do I
redeem shares by mail?"
The Fund reserves the right to terminate the telephone redemption privilege at
any time and, if so terminated, will provide the shareholders with written
notice of such termination. The Fund reserves the right to suspend temporarily
telephone redemptions in emergency circumstances or in cases where, in the
judgment of the Fund, continuation of the privilege would be detrimental to the
Fund and its shareholders as a whole. Such temporary suspension can be without
prior notification.
WHAT OPTIONS DO I HAVE IN RECEIVING REDEMPTION PROCEEDS?
Redemption proceeds may be sent to shareholders by mail or by wire as described
below. Wire redemptions will only be made if the Transfer Agent has received
appropriate written wire instructions. Because of fluctuations in the value of
the Fund's portfolio, the net asset value of shares redeemed may be more or less
than the investor's cost.
REDEMPTION BY MAIL. In the case of shareholders who request that their
redemption proceeds be sent by mail, the Transfer Agent mails checks for
redemption proceeds typically within one or two business days, but no later than
seven days, after it receives the request and all the necessary documents.
REDEMPTION BY WIRE. In the case of shareholders who request that their
redemption proceeds be sent by bank wire, the Transfer Agent typically wires
redemption proceeds the next business day, but no later than seven days, after
it receives the request and all necessary documents.
Wire redemptions will be made only if the Transfer Agent has received
appropriate written instructions from the shareholder either on the Fund's
Application or by separate letter. A shareholder who has not indicated wire
instructions on the Application, but would like to have redemption proceeds
wired to a particular bank for each redemption request, should so designate by
writing to the Transfer Agent. Please note that such instructions must (i) be
signed by the registered owner(s) of the shares exactly as the account is
registered and signature guaranteed, and (ii) include the name of the account,
the account number and the name of the Fund.
A shareholder who would like to change the wire instructions indicated on the
Application should designate a change in such instructions by writing to the
Transfer Agent and complying with the requirements set forth in the preceding
paragraph. There is a $1,000 minimum on redemption proceeds by bank wire.
Shareholders who effect redemptions by wire transfer will pay a $12.00 wire
transfer fee to the Transfer Agent to cover costs associated with the transfer.
In addition, a shareholder's bank may impose a charge for receiving wires.
17
WHEN WOULD THE PAYMENT OF PROCEEDS BE DELAYED?
Please note that shares paid for by personal, corporate or government check
cannot be redeemed before the Fund has reasonable belief that the check has
cleared, which may take up to fifteen days after payment of the purchase price.
This delay can be avoided by paying for shares by certified check or bank-wire.
An investor will be notified promptly by the Transfer Agent if a redemption
request cannot be accepted.
WOULD MY ACCOUNT EVER BE INVOLUNTARILY REDEEMED?
Due to the relatively high cost to the Fund of maintaining small accounts, we
ask you to maintain an account balance of at least $2,500. If your balance is
below $2,500 for three months or longer due to redemptions, we have the right to
close your account after giving you 60 days in which to increase your balance.
INFORMATION ON DISTRIBUTIONS AND TAXES
DIVIDENDS AND OTHER DISTRIBUTIONS GENERALLY
Dividend and capital gain distributions are reinvested in additional Fund shares
in your account unless you select another option on your Application. The
advantage of reinvesting distributions arises from compounding; that is, you
receive dividends and capital gain distributions on an increasing number of
shares. Distributions not reinvested are paid by check or transmitted to your
bank account.
INCOME DIVIDENDS
The Fund declares and pays dividends (if any) annually.
CAPITAL GAINS
A capital gain or loss is the difference between the purchase and sale price of
a security. If the Fund has net capital gains for the year (after subtracting
any capital losses), they are usually declared and paid in December to
shareholders of record on a specified date that month.
TAX INFORMATION
You need to be aware of the possible tax consequences when: (1) the Fund makes a
distribution to your account; (2) you sell Fund shares; or (3) you exchange
shares of the Fund for shares of one of the other O'Shaughnessy Funds or the
Firstar Money Market Fund. The following summary does not apply to retirement
accounts, such as IRAs, which are tax-deferred until you withdraw money from
them.
Will I pay taxes on redemptions or exchanges of Fund shares? When you sell or
exchange shares in the Fund, you may realize a gain or loss. Unless you are a
dealer in securities, such gain or loss will be capital gain or loss. Consult
your tax advisor concerning the tax rate applicable to your sale or exchange of
Fund shares.
A loss recognized on a sale or exchange of shares of the Fund will be disallowed
if other Fund shares are acquired (whether through automatic reinvestment of
dividends or otherwise) within a 61-day period beginning 30 days before and
ending 30 days after the date that the shares are disposed of. In such case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss. In
addition, if you realize a loss on the sale or exchange of Fund shares held six
months or less, your short-term loss recognized is reclassified to long-term to
the extent of any long-term capital gain distribution received.
18
WILL I PAY TAXES ON FUND DISTRIBUTIONS?
Distributions of ordinary income and short-term capital gains are taxable as
ordinary income. The dividends of the Fund will be eligible for the 70%
deduction for dividends received by corporations only to the extent the Fund's
income consists of dividends paid by U.S. corporations. Distributions designated
as capital gains dividends are taxable as capital gains regardless of the length
of time shares of the Fund have been held.
WHAT IS THE TAX EFFECT OF THE FUND'S INVESTMENT IN FOREIGN SECURITIES?
Pursuant to the Fund's investment objectives, the Fund may invest in foreign
securities through ADRs. Foreign taxes may be paid by the Fund as a result of
tax laws of countries in which the Fund may invest. Income tax treaties between
certain countries and the United States may reduce or eliminate such taxes. It
is impossible to determine in advance the effective rate of foreign tax to which
the Fund will be subject, since the amount of Fund assets to be invested in
various countries is not known. Because the Fund limits its investment in
foreign securities, shareholders will not be entitled to claim foreign tax
credits with respect to their share of foreign taxes paid by the Fund on income
from investments of foreign securities held by the Fund.
WHAT ARE THE TAX EFFECTS OF BUYING SHARES BEFORE A DISTRIBUTION?
If you buy shares shortly before or on the "record date" - the date that
establishes you as the person to receive the upcoming distribution - you will
receive, in the form of a taxable distribution, a portion of the money you just
invested. Therefore, you may wish to find out the Fund's record date(s) before
investing. Of course, a Fund's share price may, at any time, reflect
undistributed capital gains or unrealized appreciation.
The foregoing is a general and abbreviated summary of the applicable provisions
of the Code and Treasury regulations presently in effect, and does not address
the state and local tax consequences of an investment in the Fund. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action either
prospectively or retroactively. For additional information regarding federal
income tax consequences of an investment in the Fund, see "Additional
Information About Dividends and Taxes" in the Statement of Additional
Information.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to Federal, state, local or foreign taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in the
Fund.
PERFORMANCE INFORMATION
This section should help you understand the terms used to describe Fund
performance. The Fund's annual report will contain additional performance
information and will be available upon request and without charge.
WHAT IS TOTAL RETURN?
This tells you how much an investment in the Fund has changed in value over a
given time period. It reflects any net increase or decrease in the share price
and assumes that all dividends and capital gains (if any) paid during the period
were reinvested in additional shares. Including reinvested distributions means
that total return numbers include the effect of compounding, i.e, you receive
income and capital gain distributions on an increasing number of shares.
19
Advertisements for the Fund may include cumulative or compound average annual
total return figures, which may be compared with various indices, other
performance measures, or other mutual funds.
WHAT IS CUMULATIVE TOTAL RETURN?
This is the actual rate of return on an investment for a specified period. A
cumulative return does not indicate how much the value of the investment may
have fluctuated between the beginning and the end of the period specified.
WHAT IS AVERAGE ANNUAL TOTAL RETURN?
This is always hypothetical. Working backward from the actual cumulative return,
it tells you what constant year-by-year return would have produced the actual,
cumulative return. By smoothing out all the variations in annual performance, it
gives you an idea of the investment's annual contribution to your portfolio
provided you held it for the entire period in question.
NET ASSET VALUE
The price at which the Fund's shares are purchased or redeemed is the Fund's
next determined net asset value per share. The net asset value per share is
calculated as of the close of the NYSE (currently 4:00 pm, Eastern time) on each
day that the NYSE is open for business and on each other day in which there is a
sufficient degree of trading in the Fund's portfolio securities that the current
net asset value of the Fund's shares may be materially affected by changes in
the value of the Fund's portfolio securities.
HOW IS NET ASSET VALUE DETERMINED?
The Fund determines the net asset value per share by subtracting the Fund's
total liabilities from the Fund's total assets (the value of the securities the
Fund holds plus cash and other assets), dividing the remainder by the total
number of shares outstanding, and adjusting the result to the nearest full cent.
HOW ARE THE SECURITIES HELD IN THE FUND'S PORTFOLIO VALUED?
Securities listed on the NYSE, American Stock Exchange or other national
exchanges are valued at the last sale price on such exchange on the day as of
which the net asset value per share is to be calculated. Over-the-counter
securities included in the NASDAQ National Market System are valued at the last
sale price. If there is no sale on a particular security on such day, it is
valued at the mean between the bid and asked prices. Other securities, to the
extent that market quotations are readily available, are valued at market value
in accordance with procedures established by the Board of Directors. Any
securities and other assets for which market quotations are not readily
available are valued in good faith in a manner determined by the Directors of
the Fund best to reflect their fair value.
20
OTHER SHAREHOLDER SERVICES
AUTOMATIC INVESTMENT PLAN
An Automatic Investment Plan allows a shareholder to make automatic monthly or
quarterly investments into a Fund account, in amounts of at least $100, by
having the Transfer Agent draw an automatic clearing house (ACH) debit
electronically against a shareholder's checking or savings account. A
shareholder may establish an Automatic Investment Plan by completing the
appropriate section on the Application Form for new accounts or by calling the
Fund at 877- OSFUNDS (673-8637) and requesting an Automatic Investment Plan
Application for existing accounts. A shareholder should be aware that a signed
Application should be received by the Transfer Agent at least 15 business days
prior to the initial transaction. The Transfer Agent will assess a $20.00 fee if
the automatic investment cannot be made due to insufficient funds, stop payment,
or for any other reason. The Fund cannot guarantee acceptance by your bank.
SYSTEMATIC CASH WITHDRAWAL PLAN
When an account of $10,000 or more is opened or when an existing account reaches
that size, a shareholder may participate in the Fund's Systematic Cash
Withdrawal Plan by filling out the appropriate part of the Application. Under
this plan, a shareholder may receive (or designate a third party to receive) a
monthly or quarterly check in a stated amount of not less than $50. Fund shares
will be redeemed as necessary to meet withdrawal payments. All participants must
elect to have their dividends and capital gain distributions reinvested
automatically. A shareholder who decides later to use this service should call
the Fund at 877-OSFUNDS (673-8637).
REPORTS TO SHAREHOLDERS
Each time a shareholder invests, redeems, transfers or exchanges shares, or
receives a distribution, the Fund will send a confirmation of the transaction
which will include a summary of all of the shareholder's most recent
transactions.
At such time as prescribed by law, the Fund will send to each shareholder the
following reports (if they are applicable), which may be used in completing U.S.
income tax returns:
Form 1099-DIV Report taxable distributions during the preceding calendar year.
(If a shareholder did not receive taxable distributions in the previous year,
such shareholder will not be sent a 1099-DIV.)
Form 1099-B Reports redemption proceeds paid (including those resulting from
exchanges) during the preceding calendar year.
Form 1099-R Report distributions from retirement plan accounts during the
preceding calendar year.
Form 5498 Reports contributions to IRAs for the previous calendar year.
If an investor's shares are held by an outside broker in an omnibus account, it
is the responsibility of such outside broker to provide shareholders whose
shares are held in the omnibus account with any reports prescribed by law which
the shareholders require in order to complete their U.S. income tax returns.
Shareholders will also receive annual and semi-annual reports including the
financial statements of the Funds for the respective periods.
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RETIREMENT PLANS
Eligible investors may invest in the Fund under the following prototype
retirement plans:
"Education" Individual Retirement Account (IRA)
"Traditional" Individual Retirement Account (IRA)
"Roth" Individual Retirement Account (IRA)
Simplified Employee Pension (SEP) for sole proprietors,
partnerships and corporations
Profit-Sharing and Money Purchase Pension Plans for corporations
and their employees
AUTOMATIC REINVESTMENT PLAN
For the convenience of investors, all dividends and distributions are
automatically reinvested in full and fractional shares of the Fund at the net
asset value per share at the close of business on the record date, unless
otherwise specified on the Application or requested by a shareholder in writing.
If the Transfer Agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested. If a shareholder elects to receive
dividends and distributions in cash and the U.S. Postal Service cannot deliver
the checks, or if the checks remain uncashed for six months, the shareholder's
distribution checks will be reinvested into the shareholder's account at the
then current net asset value.
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund, the Investment Adviser, the Administrator or
the Distributor. This Prospectus does not constitute an offering in any state in
which such offering may not lawfully be made.
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INVESTMENT MANAGER
O'Shaughnessy Capital Management, Inc.
35 Mason Street
Greenwich, Connecticut 06830
ADMINISTRATOR
Investment Company Administration, LLC
4455 E. Camelback Road, Suite 261 E
Phoenix, Arizona 85018
DISTRIBUTOR
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261 E
Phoenix, Arizona 85018
TRANSFER AGENT
Firstar Mutual Fund Services, LLC
615 E. Michigan Street
Milwaukee, Wisconsin 53202
AUDITORS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
LEGAL COUNSEL
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, New York 10022