The price you pay for a share of a Fund, and the price you receive
upon selling or redeeming a share of a Fund, is called the Fund’s net asset value (“NAV”). The NAV is calculated by taking the total value of a Fund’s assets, subtracting its liabilities, and then dividing by the number of shares
that have already been issued. This is a standard calculation, and forms the basis for all transactions involving buying, selling, exchanging or reinvesting shares. The NAV is generally calculated as of the close of trading on the New York Stock
Exchange (usually 4:00 p.m. Eastern Time) every day the Exchange is open. Your order will be priced at the next NAV calculated after your order is accepted by the Funds’ transfer agent, UMB Fund Services, Inc. (the “Transfer Agent”).
The Funds’ investments are valued based on market value, or where market quotations are not readily available, based on fair value as determined in good faith by the Funds’ Board of Trustees. The Funds may use pricing services to determine
market value. The Funds may invest in portfolio securities that are primarily listed on foreign exchanges that trade on weekends or other days when the Funds do not price their shares. The value of portfolio securities held by those Funds may change
on days when shareholders will not be able to purchase or redeem shares.
14
Instructions For Opening and Adding to an Account
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TO OPEN AN ACCOUNT
BY MAIL
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TO ADD TO AN ACCOUNT
BY
MAIL
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Complete and sign the Account Application or an IRA Application.
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Complete the investment slip that is included in your account statement, and write your account number on your check. If you no longer have your investment
slip, please reference your name, account number and address on your check.
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• Make your check payable to the Marsico Funds.
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• For IRA accounts, please specify the year for which the
contribution is made.
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MAIL YOUR APPLICATION AND CHECK TO:
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MAIL THE SLIP AND THE CHECK TO:
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Marsico Funds
c/o UMB Fund Services, Inc.
P.O. Box 3210
Milwaukee, WI 53201-3210
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Marsico Funds
c/o UMB Fund Services, Inc.
P.O. Box 3210
Milwaukee, WI 53201-3210
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BY OVERNIGHT COURIER, SEND TO:
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BY OVERNIGHT COURIER, SEND TO:
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Marsico Funds
c/o UMB Fund Services, Inc.
803 West Michigan Street
Suite A
Milwaukee, WI 53233-2301
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Marsico Funds
c/o UMB Fund Services, Inc.
803 West Michigan Street
Suite A
Milwaukee, WI
53233-2301
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BY TELEPHONE
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BY TELEPHONE
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Telephone transactions may not be used for initial purchases.
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You automatically are granted telephone transaction privileges unless you decline them on your Account Application or by calling 888-860-8686. You may call
888-860-8686 to purchase shares in an existing account. Investments made by electronic funds transfer must be from a pre-designated bank account and in amounts of at least $50 and not greater than $50,000, and will be effective at the NAV next
computed after your instruction is accepted by the Transfer Agent.
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15
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BY INTERNET
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BY INTERNET
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You may open new accounts through the Marsico Funds Website at www.marsicofunds.com. For important information on this feature, see “Fund Transactions
Through the Marsico Funds Website” on page 23 of this Prospectus.
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You may purchase shares in an existing account through the Marsico Funds Website at www.marsicofunds.com. To establish online transaction privileges, you
must enroll through the Website. You automatically have the ability to establish online transaction privileges unless you decline them on your Account Application or by calling 888-860-8686. For important information on this feature, see “Fund
Transactions Through the Marsico Funds Website” on page 23 of this Prospectus.
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TO OPEN AN ACCOUNT
BY WIRE
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TO ADD TO AN ACCOUNT
BY WIRE
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Call 888-860-8686 for instructions and to obtain an account number prior to wiring the funds.
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Send your investment to UMB Bank, n.a. by following the instructions listed in the column to the left.
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Send your investment to UMB Bank, n.a.
with these instructions:
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*
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For Credit to the Marsico Funds
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*
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For further credit to: investor account
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number; name(s) of investor(s); SSN or
TIN; name of
Fund to be purchased.
16
AUTOMATIC SERVICES
WITH AN INITIAL INVESTMENT indicate on your application which of the automatic service(s) described on page 25 that you want. Return your application with your
investment.
TELEPHONE AND WIRE TRANSACTIONS
Only bank accounts held at domestic financial institutions
that are Automated Clearing House (ACH) members can be used for telephone transactions. It takes 15 calendar days after receipt by the Funds of your bank account information to establish this feature. Purchases by ACH transfer may not be made during
this time. You automatically are granted telephone transaction privileges unless you decline them on your Account Application or by calling 888-860-8686. You must have ACH instructions on your account in order to conduct online purchases. With
respect to purchases made by telephone, the Funds and their agents will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures may include, among others, requiring some form of personal
identification prior to acting upon telephone instructions, providing written confirmation of all such transactions, and/or tape recording all telephone instructions. If reasonable procedures are followed, the Funds or their agents will not be
liable for any loss, cost or expense for acting upon telephone instructions or for any unauthorized telephone transactions.
If you purchase your initial shares by wire, the Transfer Agent first must have received a completed Account Application and issued an account number to you. The account number must be included in the wiring instructions set forth
above.
The Transfer Agent must receive your Account Application to establish shareholder privileges and to verify
your account information. Payment of redemption proceeds may be delayed and taxes may be withheld unless the Funds receive a properly completed and executed Account Application.
Shares purchased by wire will be purchased at the NAV next determined after the Transfer Agent receives your wired funds and all required information is provided in the
wire instructions. If the Transfer Agent is notified no later than 3:00 p.m. Eastern time of the wire instructions, and the wired funds are received by the Transfer Agent no later than 5:00 p.m. Eastern time, then the shares purchased will be priced
at the NAV determined on that business day. If the wire is not received by 5:00 p.m. Eastern time, the purchase will be effective at the NAV next calculated after receipt of the wire.
Exchange Privilege: As a convenience, the Funds’ shareholders may exchange all or part of their investment in the Funds for the Marsico Shares of Nations Cash Reserves
Fund (“Nations Money Market Fund”), a money market fund advised by Banc of America Advisors, LLC (and not by the Adviser) that invests in a diversified portfolio of high quality money market instruments. THE SHARES OF THE NATIONS MONEY
MARKET FUND ARE NOT OFFERED BY THIS PROSPECTUS. For important information on this exchange feature, please see page 22 of this Prospectus.
17
Additional Purchase Information
If you may need to redeem your investment shortly after
your purchase, you should purchase shares by wire. The Funds may hold redemption proceeds until the proceeds used to purchase shares have been collected (e.g. your check has cleared, or your ACH payments have been received), but in no event for more
than 10 calendar days. If you fail to provide and certify to the accuracy of your Social Security Number or Taxpayer Identification Number, the Funds will be required to withhold 30.5% of all dividends, distributions and payments, including
redemption proceeds.
Please note that the Funds are offered and sold only to persons residing in the United
States or Puerto Rico. Applications will only be accepted if they contain a U.S. or Puerto Rico address. This Prospectus should not be considered a solicitation to buy or an offer to sell shares of the Funds in any jurisdiction where it would be
unlawful under the securities laws of that jurisdiction.
The Funds will not accept your Account Application if
you are investing for another person as attorney-in-fact. The Funds will not accept accounts with “Power of Attorney” or “POA” in the registration section of the Account Application.
All purchases must be made in U.S. dollars and checks must be drawn on U.S. banks. No cash, credit cards or third party checks will be
accepted. A $20 fee will be charged against your account for any payment check returned to the Transfer Agent or for any incomplete ACH or other electronic funds transfer, or for insufficient funds, stop payment, closed account or other reasons. You
will also be responsible for any losses suffered by the Funds as a result. The Funds may redeem shares you own in this or any identically registered Marsico Funds account as reimbursement for any such losses. The Funds reserve the right to reject
any purchase order for Fund shares.
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MINIMUM INVESTMENTS
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INITIAL
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ADDITIONAL
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Regular accounts
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$2,500
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$100
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Traditional IRAs and IRA Rollovers
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1,000
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100
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Spousal IRAs
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500
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100
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Roth IRAs
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1,000
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100
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SEP-IRAs
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500
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100
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Gifts to minors
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500
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50
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Automatic Investment Plans
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1,000
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50
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INVESTMENTS MADE THROUGH FINANCIAL SERVICES AGENTS
If you invest through a financial services agent (rather than directly with the Funds through the Transfer Agent), the policies
and fees may be different than those described here. Financial advisers, financial supermarkets and other financial services agents may charge transaction and other fees and may set different minimum investments or limitations on buying
18
or selling shares. Consult a representative of your financial services agent if you have any questions.
Your financial services agent is responsible for transmitting your orders in a timely manner.
Certain financial
services agents may enter into agreements with the Funds or their agents which permit them to confirm orders on behalf of customers by phone, with payment to follow later, in accordance with the Transfer Agent’s procedures. If payment is not
received within the time specified, the transaction may be rescinded and the financial services agent will be held liable for any resulting fees or losses.
Instructions for Selling Fund Shares
TO SELL SHARES
BY MAIL
Write a letter of instruction that includes:
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*
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the name(s) and signature(s) of all account owners
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*
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the dollar or share amount you want to sell
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*
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how and where to send the proceeds
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*
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if redeeming from your IRA, please note applicable withholding requirements
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Obtain a signature guarantee or other documentation, if required.
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MAIL YOUR REQUEST TO:
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BY OVERNIGHT COURIER, SEND TO:
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Marsico Funds
c/o UMB Fund Services, Inc.
P.O. Box 3210
Milwaukee, WI 53201-3210
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Marsico Funds
c/o UMB Fund Services, Inc.
803 West Michigan Street
Suite A
Milwaukee, WI
53233-2301
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BY TELEPHONE
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* You automatically are granted telephone transaction privileges
unless you decline them on your Account Application or by
calling 888-860-8686. You may redeem Fund shares by calling
888-860-8686. Redemption proceeds will be mailed
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* Unless you decline telephone privileges on your Account
Application, as long as the Funds take reasonable measures
to verify the order, you will be responsible for any
fraudulent telephone order.
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19
directly to you or electronically transferred
to your predesignated bank account.
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*
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You may redeem as little as $500 and as
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much as $50,000 by telephone
Redemptions.
BY INTERNET
You may redeem shares through the Marsico Funds Website at www.marsicofunds.com. To establish online transaction privileges you must enroll through the Website. You automatically have the ability to
establish online transaction privileges unless you decline them on your Account Application or by calling 888-860-8686. For important information on this feature, see “Fund Transactions Through the Marsico Funds Website” on page 23 of this
Prospectus.
SYSTEMATIC WITHDRAWAL PLAN
Call us to request a Systematic Withdrawal Plan. It may be set up over the phone or by letter of instruction.
For specific information on how to redeem your account, and to determine if a signature guarantee or other documentation is required,
please call toll free in the U.S.: 888-860-8686.
As explained under “How to Exchange Shares,” (page 22)
shareholders in the Funds may exchange all or part of their investment for shares of the Nations Money Market Fund. To redeem shares from the Nations Money Market Fund, follow the same procedures that apply to redeeming shares of the Funds. If you
have any questions about redeeming shares of the Nations Money Market Fund, please call 888-860-8686. Please note that when redeeming less than all of your shares of the Nations Money Market Fund, your proceeds will exclude accrued and unpaid income
from the Nations Money Market Fund through the date of the redemption. When redeeming your entire balance from the Nations Money Market Fund, accrued income will automatically be paid to you when the income is collected and paid from the Nations
Money Market Fund, at the end of the month.
Additional Redemption Information
PAYMENT OF REDEMPTION PROCEEDS
You may sell shares at any time. Your shares will be sold at the next NAV per share calculated after your order
is accepted by the Transfer Agent. Your order will be processed promptly and you will generally receive the proceeds within seven days after receiving your properly completed request. Payment of the redemption proceeds for shares of the Funds where
you request wire payment will normally be made in federal funds on the next business day.
Before selling recently
purchased shares, please note that if the Transfer Agent has not yet collected payment for the shares you are selling, it may delay sending the proceeds for up to
20
10 calendar days. This procedure is intended to protect the Funds and their shareholders from loss.
The Transfer Agent will wire redemption proceeds only to the bank and account designated on the Account
Application or in written instructions (with signatures guaranteed) subsequently received by the Transfer Agent, and only if the bank is a member of the Federal Reserve System. The Transfer Agent currently charges a $10 fee for each payment by wire
of redemption proceeds, which will be deducted from your redemption proceeds.
If the dollar or share amount
requested to be redeemed is greater than the current value of your account, your entire account balance will be redeemed. If you choose to redeem your account in full, any automatic service currently in effect for the account will be terminated
unless you indicate otherwise in writing.
The International Opportunities Fund imposes a redemption fee of 2.00%
of the total redemption amount (calculated at market value) if you sell or exchange your shares after holding them for three months or less. The redemption fee is paid directly to the International Opportunities Fund and is designed to offset
brokerage commissions, market impact, and other costs associated with short-term trading. For purposes of determining whether the redemption fee applies, the shares that were held the longest will be redeemed first. The redemption fee will not apply
to shares acquired through the reinvestment of dividends or distributions paid by the Fund. The redemption fee may not apply on certain accounts such as 401(k) plans. Please contact us at 1-888-860-8686 if you have questions as to whether the
redemption fee applies to some or all of your shares.
SIGNATURE GUARANTEES
A signature guarantee of each owner is required to redeem shares in the following situations: (i) if you change ownership on
your account; (ii) when you want the redemption proceeds sent to a different address than that registered on the account; (iii) if the proceeds are to be made payable to someone other than the account’s owner(s); (iv) any redemption transmitted
by federal wire transfer to a bank other than your bank of record; and (v) if a change of address request has been received by the Transfer Agent within the last 15 days. In addition, signature guarantees are required for all redemptions of $50,000
or more from any shareholder account.
Signature guarantees are designed to protect both you and the Funds from
fraud. Signature guarantees can be obtained from most banks, credit unions or savings associations, or from broker/dealers, municipal securities broker/dealers, government securities broker/dealers, national securities exchanges, registered
securities exchanges or clearing agencies deemed eligible by the Securities and Exchange Commission. Notaries Public cannot provide signature guarantees.
21
CORPORATE, TRUST AND OTHER ACCOUNTS
Redemption requests from corporate, trust and institutional accounts, and executors, administrators and guardians, require documents in
addition to those described above, evidencing the authority of the officers, trustees or others. In order to avoid delays in processing redemption requests for these accounts, you should call the Funds at 888-860-8686 before making the redemption
request to determine what additional documents are required.
TRANSFER OF OWNERSHIP
In order to change the account registration or transfer ownership of an account, additional documents will be required. In
order to avoid delays in processing these requests, you should call the Funds at 888-860-8686 before making your request to determine what additional documents are required.
REDEMPTION INITIATED BY THE FUNDS
If your account balance falls below $500, your Fund may ask you to increase your balance. If your account balance is still below $500 after 30 days, the Fund may close your account and send you the proceeds. This minimum balance
requirement does not apply to IRAs and other tax-sheltered investment accounts. The right of redemption by the Funds will not apply if the value of your account drops below $500 because of market performance. The Funds may also close your account
and send you the proceeds under certain other circumstances allowed under the Investment Company Act of 1940, as amended.
You may exchange all or a portion of your investment from one
Marsico Fund to another. You may exchange shares by mail, by telephone or through the Marsico Funds Website. You automatically are granted telephone transaction privileges unless you decline them on your Account Application or by calling
888-860-8686. You must have telephone transaction privileges in order to conduct online transactions. You may establish online exchange privileges by enrolling through the Website. For important information on this feature, see “Fund
Transactions Through the Marsico Funds Website” on page 23 of this Prospectus. Any new account established through an exchange will have the same privileges as your original account and will also be subject to the minimum investment
requirements described above. Aside from this requirement, there is a $500 minimum for exchanging shares under the program. There is currently no fee for an exchange. Exchanges will be executed on the basis of the relative NAV of the shares
exchanged. An exchange is considered to be a sale of shares for federal income tax purposes on which you may realize a taxable gain or loss.
In addition to your ability to exchange all or a portion of your investment between the Marsico Funds, you may also exchange Fund shares for shares of the Nations Money Market Fund by sending a written
exchange request to Marsico Funds or, if you have established telephone exchange privileges, call 888-860-8686. Please read that Prospectus before making an exchange into the Nations Money Market Fund. This exchange privilege is offered as a
convenience to the Funds’ shareholders. Please note that when exchanging from a Fund to the
22
Nations Money Market Fund, you will begin accruing income from the Nations Money Market Fund the day
following the exchange. When exchanging less than all of the balance from the Nations Money Market Fund to your Fund, your exchange proceeds will exclude accrued and unpaid income from the Nations Money Market Fund through the date of exchange. When
exchanging your entire balance from the Nations Money Market Fund, accrued income will automatically be exchanged into the Fund when the income is collected and paid from the Nations Money Market Fund, at the end of the month.
MORE INFORMATION ABOUT THE EXCHANGE PRIVILEGE: The Funds are intended as long-term investment vehicles and not to provide a
means of speculating on short-term market movements. In addition, excessive trading can hurt the Funds’ performance and shareholders. Therefore, the Funds may terminate, without notice, the exchange privilege of any investor who uses the
exchange privilege excessively (more than six times each year). This policy does not apply to investors who have elected to participate in the Automatic Exchange Program, described on page 25.
The Funds may change, temporarily suspend or terminate the exchange privilege during unusual market conditions or when the Fund determines such action to be in the
best interests of the Fund or its Shareholders.
During periods of significant economic or market change,
telephone transactions may be difficult to complete. If you are unable to contact the Funds by telephone, you may also mail the requests to the Funds at the address listed under Instructions for Opening and Adding to an Account, page 15 or access
your account through Marsico Funds’ Website at www.marsicofunds.com.
ABOUT THE NATIONS MONEY MARKET FUND:
Please be sure to read the Nations Money Market Fund Prospectus before investing in that Fund.
The Nations Money
Market Fund seeks current income to the extent consistent with the preservation of capital and the maintenance of liquidity by investing in a diversified portfolio of high quality money market instruments with remaining maturities of 397 days or
less from the date of purchase.
The Nations Money Market Fund is managed by Banc of America Advisors, LLC and not
by the Adviser. BACAP Distributors, LLC is the distributor of the Nations Money Market Fund’s shares.
FUND TRANSACTIONS THROUGH THE MARSICO FUNDS WEBSITE
In addition to checking your Fund
account balance(s) and historical transactions, you may purchase, redeem or exchange shares of the Funds through the Marsico Funds Website at www.marsicofunds.com. You may establish online transaction privileges by enrolling on the Website. You
automatically have the ability to establish online transaction privileges unless you decline them on your Account Application or by calling 888-860-8686. You will be required to enter into a user’s agreement through the Website in order to
enroll for these privileges. In order to conduct online transactions, you must have telephone transaction privileges. To purchase shares online, you must also have ACH instructions on your account. If you opened your account
23
online, then any redemption proceeds will only be sent to you via ACH or wire to the account from which the initial proceeds were drawn.
Otherwise, redemption proceeds may be sent by check or, if your account has bank information, by wire or ACH.
Payment for purchases of shares through the Website may be made only through an ACH debit of your bank account. Redemptions will be paid by check, wire or ACH transfer only to the address or bank account of record. Redemptions from
accounts established through the Funds’ Website will be paid only to the bank account of record. Only bank accounts held at domestic financial institutions that are ACH members can be used for transactions through the Funds’ Website.
The Funds impose a limit of $50,000 on purchase and redemption transactions through the Website. Transactions
through the Website are subject to the same minimums as other transaction methods.
You should be aware that the
Internet is an unsecured, unstable, unregulated and unpredictable environment. Your ability to use the Website for transactions is dependent upon the Internet and equipment, software, systems, data and services provided by various vendors and third
parties. While the Funds and their service providers have established certain security procedures, the Funds, their distributor and their Transfer Agent cannot assure you that inquiries, account information or trading activity will be completely
secure.
There may also be delays, malfunctions or other inconveniences generally associated with this medium.
There may also be times when the Website is unavailable for Fund transactions or other purposes. Should this happen, you should consider purchasing, redeeming or exchanging shares by another method. Neither the Funds, their Transfer Agent,
distributor or Adviser will be liable for any such delays or malfunctions or unauthorized interception or access to communications or account information.
In addition, neither the Funds, their Transfer Agent, distributor or Adviser will be liable for any loss, liability, cost or expense for following instructions communicated through the Internet,
including fraudulent or unauthorized instructions.
The Funds offer a wide variety of retirement plans for
individuals and institutions, including large and small businesses. For information on establishing retirement accounts and for a complete list of retirement accounts offered, please call 888-860-8686. Complete instructions about how to establish
and maintain your plan and how to open accounts for you and your employees will be included in the retirement plan kit you receive in the mail.
The retirement plans currently available to shareholders of the Funds include:
TRADITIONAL IRA AND IRA ROLLOVERS: an individual retirement account. Your contribution may or may not be deductible depending on your circumstances. Rollovers are not deductible. Assets can grow tax-free and distributions are taxable
as income.
24
SPOUSAL IRA: an IRA funded by a working spouse in the name of a non-earning
spouse.
SEP-IRA: an individual retirement account funded by employer contributions. Your assets grow tax-free and
distributions are taxable as income.
ROTH IRA: an IRA with non-deductible contributions, and tax-free growth of
asset and tax-free distributions for qualified distributions.
403(b): an arrangement that allows employers of
charitable or educational organizations to make voluntary salary reduction contributions to a tax deferred account.
Automatic Services for Fund Investors
Buying or selling shares automatically is easy
with the services described below. With each service, you select a schedule and an amount, subject to certain restrictions. You can set up most of these services with your Account Application or by calling 888-860-8686.
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FOR INVESTING
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AUTOMATIC INVESTMENT PLAN
|
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PAYROLL DIRECT DEPOSIT PLAN
|
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For making automatic investments from
a designated bank account.
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For making automatic investments
from your payroll check.
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DIVIDEND REINVESTMENT
If you do not specify an election, all income dividends and capital gains distributions will be automatically reinvested in shares of the
Funds.
FOR INVESTING AND FOR SELLING SHARES
AUTOMATIC EXCHANGE PLAN
For making regular exchanges from your Fund into another Marsico Fund or between a Marsico Fund and the Nations Money Market Fund. This plan is available to IRA accounts having a minimum balance of $1,000.
FOR SELLING SHARES
For making regular withdrawals from the Funds
Shareholder Communications
ACCOUNT STATEMENTS. Every quarter, Marsico investors automatically receive regular
account statements. You will also be sent a yearly statement detailing the tax characteristics of any dividends and distributions you have received.
25
CONFIRMATION. Confirmation Statements will be sent after each transaction that
affects your account balance or account registration.
REGULATORY MAILINGS. Financial reports will be sent at
least semiannually. Annual reports will include audited financial statements. To reduce Fund expenses, one copy of each report will be mailed to each taxpayer identification number even though the investor may have more than one account in the
Funds.
You may elect to receive statements, confirmations and/or regulatory mailings electronically in lieu of
paper copies by registering for this feature on the Website. For existing accounts, please call 888-860-8686 for instructions.
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 27, 2003
This Statement of
Additional Information is not a prospectus and should be read in conjunction with the prospectus for The Marsico Investment Fund dated January 27, 2003, as amended from time to time, a copy of which may be obtained without charge by calling
1-888-860-8686 or writing to UMB Fund Services, Inc., P.O. Box 3210, Milwaukee, WI 53201-3210. The financial statements of the Funds appearing in the Annual Report to Shareholders for the year ended September 30, 2002 are incorporated herein by
reference.
TABLE OF CONTENTS
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56
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INTRODUCTION
INVESTMENT OBJECTIVES AND POLICIES
The Marsico Focus Fund (“Focus Fund”) is a non-diversified fund that
seeks long-term growth of capital.
The Marsico Growth Fund (“Growth Fund”) is a diversified fund that seeks long-term growth of
capital.
The Marsico 21st Century Fund (“21st Century Fund”) is a diversified fund that seeks long-term growth of capital.
The Marsico International Opportunities Fund (“International Opportunities Fund”) is a diversified fund that seeks long-term
growth of capital.
FUNDAMENTAL INVESTMENT RESTRICTIONS
As indicated in the Prospectus, the Funds are subject to certain fundamental
policies and restrictions that may not be changed without shareholder approval. Shareholder approval means approval by the lesser of (i) more than 50% of the outstanding voting securities of the Trust (or a particular Fund if a matter affects just
that Fund), or (ii) 67% or more of the voting securities present at a meeting if the holders of more than 50% of the outstanding voting securities of the Trust (or a particular Fund) are present or represented by proxy. As fundamental policies, each
Fund may not:
(1) Invest 25% or more of the value of their respective total assets in any particular
industry (other than U.S. government securities).
(2) Invest directly in real estate; however, the
Funds may own debt or equity securities issued by companies engaged in those businesses.
(3) Purchase
or sell physical commodities other than foreign currencies unless acquired as a result of ownership of securities (but this limitation shall not prevent the Funds from purchasing or selling options, futures, swaps and forward contracts or from
investing in securities or other instruments backed by physical commodities).
(4) Lend any security or
make any other loan if, as a result, more than 25% of a Fund’s total assets would be lent to other parties (but this limitation does not apply to purchases of commercial paper, debt securities or repurchase agreements).
(5) Act as an underwriter of securities issued by others, except to the extent that a Fund may be deemed an underwriter in
connection with the disposition of portfolio securities of such Fund.
(6) Issue senior securities,
except as permitted under the Investment Company Act of 1940 (the “1940 Act”).
(7) Borrow
money, except that the Funds may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 33
1
/
3
% of the value of their respective total assets (including the amount borrowed) less liabilities (other than borrowings). If borrowings exceed 33
1
/
3
% of the value of a Fund’s total assets by reason of a decline in net assets, the Fund will reduce its borrowings within three days to the extent
necessary to comply with the 33
1
/
3
% limitation. This policy shall not prohibit reverse repurchase agreements,
deposits of assets to margin or guarantee positions in futures, options,
2
swaps or forward contracts, or the segregation of assets in connection with such contracts. None of the Funds will purchase securities while its
borrowings exceed 5% of that Fund’s total assets.
In addition to the foregoing, as a fundamental policy,
neither the Growth Fund, the 21st Century Fund nor the International Opportunities Fund may own more than 10% of the outstanding voting securities of any one issuer and, as to seventy-five percent (75%) of the value of its total assets, purchase the
securities of any one issuer (except cash items and “government securities” as defined under the 1940 Act), if immediately after and as a result of such purchase, the value of the holdings of the Fund in the securities of such issuer
exceeds 5% of the value of the Fund’s total assets.
As a fundamental policy, the Focus Fund may not own more
than 10% of the outstanding voting securities of any one issuer and, as to fifty percent (50%) of the value of its total assets, purchase the securities of any one issuer (except cash items and “government securities” as defined under the
1940 Act), if immediately after and as a result of such purchase, the value of the holdings of the Focus Fund in the securities of such issuer exceeds 5% of the value of the Focus Fund’s total assets.
For purposes of the Funds’ restriction on investing in a particular industry, the Funds will rely primarily on industry
classifications as published by Bloomberg L.P. To the extent that Bloomberg L.P. classifications are so broad that the primary economic characteristics in a single class are materially different, the Funds may further classify issuers in accordance
with industry classifications as published by the Securities and Exchange Commission (“SEC”).
ADDITIONAL INVESTMENT RESTRICTIONS
The Trustees have adopted additional investment
restrictions for the Funds. These restrictions are operating policies of the Funds and may be changed by the Trustees without shareholder approval. The additional investment restrictions adopted by the Trustees to date include the following:
(a) A Fund will not (i) enter into any futures contracts and related options for purposes
other than bona fide hedging transactions within the meaning of Commodity Futures Trading Commission (“CFTC”) regulations if the aggregate initial margin and premiums required to establish positions in futures contracts and related options
that do not fall within the definition of bona fide hedging transactions will exceed 5% of the fair market value of a Fund’s net assets, after taking into account unrealized profits and unrealized losses on any such contracts it has entered
into; and (ii) enter into any futures contracts if the aggregate amount of such Fund’s commitments under outstanding futures contracts positions would exceed the market value of its total assets.
(b) The Funds do not currently intend to sell securities short, unless they own or have the right to obtain
securities equivalent in kind and amount to the securities sold short without the payment of any additional consideration therefor, and provided that transactions in futures, options, swaps and forward contracts are not deemed to constitute selling
securities short.
(c) The Funds do not currently intend to purchase securities on margin,
except that the Funds may obtain such short-term credits as are necessary for the clearance of transactions,
3
and provided that margin payments and other deposits in connection with transactions in futures, options, swaps and forward contracts shall not
be deemed to constitute purchasing securities on margin.
(d) A Fund may not mortgage or
pledge any securities owned or held by such Fund in amounts that exceed, in the aggregate, 15% of that Fund’s net asset value, provided that this limitation does not apply to reverse repurchase agreements, deposits of assets to margin,
guarantee positions in futures, options, swaps or forward contracts, or the segregation of assets in connection with such contracts.
(e) The Funds do not currently intend to purchase any securities or enter into a repurchase agreement if, as a result, more than 15% of their respective net assets would be invested in repurchase
agreements not entitling the holder to payment of principal and interest within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on resale or the absence of a readily available market. The Trustees, or
the Funds’ investment adviser acting pursuant to authority delegated by the Trustees, may determine that a readily available market exists for securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as amended,
(“Rule 144A Securities”), or any successor to such rule, and Section 4(2) commercial paper. Accordingly, such securities may not be subject to the foregoing limitation. In addition, a foreign security that may be freely traded on or
through the facilities of an offshore exchange or other established offshore securities market is not subject to this limitation.
(f) The Funds may not invest in companies for the purpose of exercising control of management.
Except as otherwise noted herein and in the Funds’ prospectus, a Fund’s investment objectives and policies may be changed by a vote of the Trustees without a vote of shareholders.
TYPES OF SECURITIES AND INVESTMENT TECHNIQUES
ILLIQUID INVESTMENTS
Each Fund may invest up to 15% of its net assets in illiquid securities, for which there is a limited trading
market and for which a low trading volume of a particular security may result in abrupt and erratic price movements. A Fund may be unable to dispose of its holdings in illiquid securities at acceptable prices and may have to dispose of such
securities over extended periods of time. Marsico Capital Management, LLC (“Marsico Capital” or “Adviser”) will take reasonable steps to bring a Fund into compliance with this policy if the level of illiquid investments exceeds
15%. Each Fund may invest in (i) securities that are sold in private placement transactions between their issuers and their purchasers and that are neither listed on an exchange nor traded over-the-counter, and (ii) securities that are sold in
transactions between qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. Such securities are subject to contractual or legal restrictions on subsequent transfer. As a result of the absence of a public
trading market, such restricted securities may in turn be less liquid and more difficult to value than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from the sales
could, due to illiquidity, be less than those originally paid by a Fund or less than their fair value and in some instances, it may be difficult to locate any purchaser. In addition, issuers whose securities are
4
not publicly traded may not be subject to the disclosure and other investor protection requirements that may be applicable if their securities
were publicly traded. If any privately placed or Rule 144A securities held by a Fund are required to be registered under the securities laws of one or more jurisdictions before being resold, a Fund may be required to bear the expenses of
registration. Securities which are freely tradable under Rule 144A may be treated as liquid if the Trustees of the Fund are satisfied that there is sufficient trading activity and reliable price information. Investing in Rule 144A securities could
have the effect of increasing the level of illiquidity of the Fund’s portfolio to the extent that qualified institutional buyers become, for a time, uninterested in purchasing such 144A securities.
See Appendix A for risks associated with certain other investments.
The Trustees have authorized Marsico Capital to make liquidity determinations with respect to its securities, including Rule 144A Securities and commercial paper. Under the
guidelines established by the Trustees, Marsico Capital will consider the following factors: (1) the frequency of trades and quoted prices for the obligation; (2) the number of dealers willing to purchase or sell the security and the number of other
potential purchasers; (3) the willingness of dealers to undertake to make a market in the security; and (4) the nature of the security and the nature of marketplace trades, including the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer. In the case of commercial paper, Marsico Capital will also consider whether the paper is traded flat or in default as to principal and interest and any ratings of the paper by a nationally
recognized statistical rating organization (“NRSRO”). A foreign security that may be freely traded on or through the facilities of an offshore exchange or other established offshore securities market is not deemed to be a restricted
security subject to these procedures.
ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES
Each Fund may invest up to 5% of its assets in zero coupon, pay-in-kind and step coupon securities. Zero coupon
bonds are issued and traded at a discount from their face value. They do not entitle the holder to any periodic payment of interest prior to maturity. Step coupon bonds trade at a discount from their face value and pay coupon interest. The coupon
rate is low for an initial period and then increases to a higher coupon rate thereafter. The discount from the face amount or par value depends on the time remaining until cash payments begin, prevailing interest rates, liquidity of the security and
the perceived credit quality of the issuer. Pay-in-kind bonds normally give the issuer an option to pay cash at a coupon payment date or give the holder of the security a similar bond with the same coupon rate and a face value equal to the amount of
the coupon payment that would have been made.
Current federal income tax law requires holders of zero coupon
securities and step coupon securities to report the portion of the original issue discount on such securities that accrues during a given year as interest income, even though the holders receive no cash payments of interest during the year. In order
to qualify as a “regulated investment company” under the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “Code”), a Fund must distribute its investment company taxable income, including the original
issue discount accrued on zero coupon or step coupon bonds. BECAUSE A FUND WILL NOT RECEIVE CASH PAYMENTS ON A CURRENT BASIS IN RESPECT OF ACCRUED
5
ORIGINAL-ISSUE DISCOUNT PAYMENTS, IN SOME YEARS THAT FUND MAY HAVE TO DISTRIBUTE CASH OBTAINED FROM OTHER SOURCES IN ORDER TO SATISFY THE
DISTRIBUTION REQUIREMENTS UNDER THE CODE. A Fund might obtain such cash from selling other portfolio holdings which might cause that Fund to incur capital gains or losses on the sale. Additionally, these actions are likely to reduce the assets to
which Fund expenses could be allocated and to reduce the rate of return for that Fund. In some circumstances, such sales might be necessary in order to satisfy cash distribution requirements even though investment considerations might otherwise make
it undesirable for a Fund to sell the securities at the time.
Generally, the market prices of zero coupon, step
coupon and pay-in-kind securities are more volatile than the prices of securities that pay interest periodically and in cash and are likely to respond to changes in interest rates to a greater degree than other types of debt securities having
similar maturities and credit quality.
PASS-THROUGH SECURITIES
Each Fund may invest up to 5% of its respective total assets in various types of pass-through securities, such as mortgage-backed
securities and asset-backed securities. A pass-through security is a share or certificate of interest in a pool of debt obligations that have been repackaged by an intermediary, such as a bank or broker-dealer. The purchaser of a pass-through
security receives an undivided interest in the underlying pool of securities. The issuers of the underlying securities make interest and principal payments to the intermediary which are passed through to purchasers, such as the Funds. The most
common type of pass-through securities are mortgage-backed securities. Government National Mortgage Association (“GNMA”) Certificates are mortgage-backed securities that evidence an undivided interest in a pool of mortgage loans. GNMA
Certificates differ from bonds in that principal is paid back monthly by the borrowers over the term of the loan rather than returned in a lump sum at maturity. A Fund will generally purchase “modified pass-through” GNMA Certificates,
which entitle the holder to receive a share of all interest and principal payments paid and owned on the mortgage pool, net of fees paid to the “issuer” and GNMA, regardless of whether or not the mortgagor actually makes the payment. GNMA
Certificates are backed as to the timely payment of principal and interest by the full faith and credit of the U.S. Government. Freddie Mac issues two types of mortgage pass-through securities: mortgage participation certificates (“PCs”)
and guaranteed mortgage certificates (“GMCs”). PCs resemble GNMA Certificates in that each PC represents a pro rata share of all interest and principal payments made and owned on the underlying pool. Freddie Mac guarantees timely payments
of interest on PCs and the full return of principal. GMCs also represent a pro rata interest in a pool of mortgages. However, these instruments pay interest semiannually and return principal once a year in guaranteed minimum payments. This type of
security is guaranteed by FHLMC as to timely payment of principal and interest but it is not guaranteed by the full faith and credit of the U.S. government.
Fannie Mae issues guaranteed mortgage pass-through certificates (“Fannie Mae Certificates”). Fannie Mae Certificates resemble GNMA Certificates in that each Fannie Mae Certificate represents
a pro rata share of all interest and principal payments made and owned on the underlying pool. This type of security is guaranteed by Fannie Mae as to timely payment of principal and interest but it is not guaranteed by the full faith and credit of
the U.S. government.
6
Except for GMCs, each of the mortgage-backed securities described above is
characterized by monthly payments to the holder, reflecting the monthly payments made by the borrowers who received the underlying mortgage loans. The payments to the security holders (such as the Funds), like the payments on the underlying loans,
represent both principal and interest. Although the underlying mortgage loans are for a specified period of time, such as 20 or 30 years, the borrowers can, and typically do, pay them off sooner. Thus, the security holders frequently receive
prepayments of principal in addition to the principal that is part of the regular monthly payments. A portfolio manager will consider estimated prepayment rates in calculating the average weighted maturity of a Fund. A borrower is more likely to
prepay a mortgage that bears a relatively high rate of interest. This means that in times of declining interest rates, higher yielding mortgage-backed securities held by a Fund might be converted to cash and that a Fund would be forced to accept
lower interest rates when that cash is used to purchase additional securities in the mortgage-backed securities sector or in other investment sectors. Additionally, prepayments during such periods will limit a Fund’s ability to participate in
as large a market gain as may be experienced with a comparable security not subject to prepayment.
Asset-backed
securities represent interests in pools of consumer loans and are backed by paper or accounts receivables originated by banks, credit card companies or other providers of credit. Generally, the originating bank or credit provider is neither the
obligor nor the guarantor of the security, and interest and principal payments ultimately depend upon payment of the underlying loans by individuals.
OTHER INCOME-PRODUCING SECURITIES
Other types of income producing securities that the Funds may purchase include, but are not limited to, the following types of securities:
VARIABLE AND FLOATING RATE OBLIGATIONS. These types of securities are relatively long-term instruments that often carry demand features permitting the holder to demand payment of
principal at any time or at specified intervals prior to maturity. Variable rate obligations are debt securities that provide for periodic adjustments in their interest rate. Floating rate obligations are debt securities with a floating rate of
interest that is tied to another interest rate such as a money market index or Treasury bill rate.
STANDBY
COMMITMENTS. These instruments, which are similar to a put, give a Fund the option to obligate a broker, dealer or bank to repurchase a security held by that Fund at a specified price.
TENDER OPTION BONDS. Tender option bonds are relatively long-term bonds that are coupled with the agreement of a
third party (such as a broker, dealer or bank) to grant the holders of such securities the option to tender the securities to the institution at periodic intervals.
INVERSE FLOATERS. Inverse floaters are debt instruments whose interest bears an inverse relationship to the interest rate on another security. The
Funds will not invest more than 5% of their respective net assets in inverse floaters.
The Funds will purchase
standby commitments, tender option bonds and instruments with demand features primarily for the purpose of increasing the liquidity of their portfolios.
7
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
FUTURES CONTRACTS. To the extent described in the Prospectus, each Fund may enter into contracts for the
purchase or sale for future delivery of fixed-income securities, foreign currencies or contracts based on financial indices, including indices of U.S. government securities, foreign government securities, equity or fixed-income securities. U.S.
futures contracts are traded on exchanges which have been designated “contract markets” by the CFTC and must be executed through a futures commission merchant (“FCM”), or brokerage firm, which is a member of the relevant contract
market. Through their clearing corporations, the exchanges guarantee performance of the contracts as between the clearing members of the exchange.
The buyer or seller of a futures contract is not required to deliver or pay for the underlying instrument unless the contract is held until the delivery date. However, both the buyer and seller are
required to deposit “initial margin” for the benefit of the FCM when the contract is entered into. Initial margin deposits are equal to a percentage of the contract’s value, as set by the exchange on which the contract is traded, and
may be maintained in cash or certain other liquid assets by the Funds’ custodian for the benefit of the FCM. Initial margin payments are similar to good faith deposits or performance bonds. Unlike margin extended by a securities broker, initial
margin payments do not constitute purchasing securities on margin for purposes of the Fund’s investment limitations. If the value of either party’s position declines, that party will be required to make additional “variation
margin” payments for the benefit of the FCM to settle the change in value on a daily basis. The party that has a gain may be entitled to receive all or a portion of this amount. In the event of the bankruptcy of the FCM that holds margin on
behalf of a Fund, that Fund may be entitled to return of margin owed to such Fund only in proportion to the amount received by the FCM’s other customers. Marsico Capital will attempt to minimize the risk by careful monitoring of the
creditworthiness of the FCMs with which the Funds do business and by depositing margin payments in a segregated account with the Funds’ custodian.
The Funds intend to comply with guidelines of eligibility for exclusion from the definition of the term “commodity pool operator” adopted by the CFTC and the National Futures Association,
which regulate trading in the futures markets. The Funds will use futures contracts and related options primarily for bona fide hedging purposes within the meaning of CFTC regulations. To the extent that the Funds hold positions in futures contracts
and related options that do not fall within the definition of bona fide hedging transactions, the aggregate initial margin and premiums required to establish such positions will not exceed 5% of the fair market value of a Fund’s net assets,
after taking into account unrealized profits and unrealized losses on any such contracts it has entered into.
Although a Fund will segregate cash and liquid assets in an amount sufficient to cover its open futures obligations, the segregated assets would be available to that Fund immediately upon closing out the futures position, while
settlement of securities transactions could take several days. However, because a Fund’s cash that may otherwise be invested would be held uninvested or invested in other liquid assets so long as the futures position remains open, such
Fund’s return could be diminished due to the opportunity losses of foregoing other potential investments.
8
A Fund’s primary purpose in entering into futures contracts is to protect
that Fund from fluctuations in the value of securities or interest rates without actually buying or selling the underlying debt or equity security. For example, if a Fund anticipates an increase in the price of stocks, and it intends to purchase
stocks at a later time, that Fund could enter into a futures contract to purchase a stock index as a temporary substitute for stock purchases. If an increase in the market occurs that influences the stock index as anticipated, the value of the
futures contracts will increase, thereby serving as a hedge against that Fund not participating in a market advance. This technique is sometimes known as an anticipatory hedge. To the extent a Fund enters into futures contracts for this purpose, the
segregated assets maintained to cover such Fund’s obligations with respect to the futures contracts will consist of other liquid assets from its portfolio in an amount equal to the difference between the contract price and the aggregate value
of the initial and variation margin payments made by that Fund with respect to the futures contracts.
Conversely,
if a Fund holds stocks and seeks to protect itself from a decrease in stock prices, the Fund might sell stock index futures contracts, thereby hoping to offset the potential decline in the value of its portfolio securities by a corresponding
increase in the value of the futures contract position. A Fund could protect against a decline in stock prices by selling portfolio securities and investing in money market instruments, but the use of futures contracts enables it to maintain a
defensive position without having to sell portfolio securities.
If a Fund owns Treasury bonds and the portfolio
manager expects interest rates to increase, that Fund may take a short position in interest rate futures contracts. Taking such a position would have much the same effect as that Fund selling Treasury bonds in its portfolio. If interest rates
increase as anticipated, the value of the Treasury bonds would decline, but the value of that Fund’s interest rate futures contract would increase, thereby keeping the net asset value of that Fund from declining as much as it may have
otherwise. If, on the other hand, a portfolio manager expects interest rates to decline, that Fund may take a long position in interest rate futures contracts in anticipation of later closing out the futures position and purchasing the bonds.
Although a Fund can accomplish similar results by buying securities with long maturities and selling securities with short maturities, given the greater liquidity of the futures market than the cash market, it may be possible to accomplish the same
result more easily and more quickly by using futures contracts as an investment tool to reduce risk.
The ordinary
spreads between prices in the cash and futures markets, due to differences in the nature of those markets, are subject to distortions. First, all participants in the futures market are subject to initial margin and variation margin requirements.
Rather than meeting additional variation margin requirements, investors may close out futures contracts through offsetting transactions which could distort the normal price relationship between the cash and futures markets. Second, the liquidity of
the futures market depends on participants entering into offsetting transactions rather than making or taking delivery of the instrument underlying a futures contract. To the extent participants decide to make or take delivery, liquidity in the
futures market could be reduced and prices in the futures market distorted. Third, from the point of view of speculators, the margin deposit requirements in the futures market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may cause temporary price distortions. Due to the possibility of
9
the foregoing distortions, a correct forecast of general price trends by the portfolio manager still may not result in a successful use of
futures.
Futures contracts entail risks. Although Marsico Capital believes that use of
such contracts will benefit the Funds, a Fund’s overall performance could be adversely affected by entering into such contracts if the portfolio manager’s investment judgment proves incorrect. For example, if a Fund has hedged against the
effects of a possible decrease in prices of securities held in its portfolio and prices increase instead, that Fund will lose part or all of the benefit of the increased value of these securities because of offsetting losses in its futures
positions. In addition, if a Fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements. Those sales may be, but will not necessarily be, at increased prices which reflect the rising
market and may occur at a time when the sales are disadvantageous to such Fund.
The prices of futures contracts
depend primarily on the value of their underlying instruments. Because there are a limited number of types of futures contracts, it is possible that the standardized futures contracts available to a Fund will not match exactly such Fund’s
current or potential investments. A Fund may buy and sell futures contracts based on underlying instruments with different characteristics from the securities in which it typically invests—for example, by hedging investments in portfolio
securities with a futures contract based on a broad index of securities—which involves a risk that the futures position will not correlate precisely with the performance of such Fund’s investments.
Futures prices can also diverge from the prices of their underlying instruments, even if the underlying instruments closely correlate with
a Fund’s investments. Futures prices are affected by factors such as current and anticipated short-term interest rates, changes in volatility of the underlying instruments and the time remaining until expiration of the contract. Those factors
may affect securities prices differently from futures prices. Imperfect correlations between a Fund’s investments and its futures positions also may result from differing levels of demand in the futures markets and the securities markets, from
structural differences in how futures and securities are traded, and from imposition of daily price fluctuation limits for futures contracts. A Fund may buy or sell futures contracts with a greater or lesser value than the securities it wishes to
hedge or is considering purchasing in order to attempt to compensate for differences in historical volatility between the futures contract and the securities, although this may not be successful in all cases. If price changes in a Fund’s
futures positions are poorly correlated with its other investments, its futures positions may fail to produce desired gains or result in losses that are not offset by the gains in that Fund’s other investments.
Because futures contracts are generally settled within a day from the date they are closed out, compared with a settlement period of three
days for some types of securities, the futures markets can provide superior liquidity to the securities markets. Nevertheless, there is no assurance that a liquid secondary market will exist for any particular futures contract at any particular
time. In addition, futures exchanges may establish daily price fluctuation limits for futures contracts and may halt trading if a contract’s price moves upward or downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it may be impossible for a Fund to enter into new positions or close out existing positions. If the secondary market for a futures contract is not liquid because of price fluctuation limits or
10
otherwise, a Fund may not be able to promptly liquidate unfavorable futures positions and potentially could be required to continue to hold a
futures position until the delivery date, regardless of changes in its value. As a result, such Fund’s access to other assets held to cover its futures positions also could be impaired.
OPTIONS ON FUTURES CONTRACTS. The Funds may buy and write put and call options on futures contracts. An option on a future gives a Fund the right
(but not the obligation) to buy or sell a futures contract at a specified price on or before a specified date. The purchase of a call option on a futures contract is similar in some respects to the purchase of a call option on an individual
security. Depending on the pricing of the option compared to either the price of the futures contract upon which it is based or the price of the underlying instrument, ownership of the option may or may not be less risky than ownership of the
futures contract or the underlying instrument. As with the purchase of futures contracts, when a Fund is not fully invested it may buy a call option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial hedge against declining prices of the security or foreign
currency which is deliverable under, or of the index comprising, the futures contract. If the futures’ price at the expiration of the option is below the exercise price, a Fund will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in that Fund’s portfolio holdings. The writing of a put option on a futures contract constitutes a partial hedge against increasing prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the futures’ price at expiration of the option is higher than the exercise price, a Fund will retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which that Fund is considering buying. If a call or put option a Fund has written is exercised, such Fund will incur a loss which will be reduced by the amount of the premium it received. Depending on
the degree of correlation between the change in the value of its portfolio securities and changes in the value of the futures positions, a Fund’s losses from existing options on futures may to some extent be reduced or increased by changes in
the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some respects
to the purchase of protective put options on portfolio securities. For example, a Fund may buy a put option on a futures contract to hedge its portfolio against the risk of falling prices or rising interest rates. The amount of risk a Fund assumes
when it buys an option on a futures contract is the premium paid for the option plus related transaction costs. In addition to the correlation risks discussed above, the purchase of an option also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of the options bought.
FORWARD
CONTRACTS. A forward contract is an agreement between two parties in which one party is obligated to deliver a stated amount of a stated asset at a specified time in the future and the other party is obligated to pay a
specified amount for the assets at the time of delivery. The Funds may enter into forward contracts to purchase and sell government securities, equity or income securities, foreign currencies or other financial instruments. Forward contracts
generally are traded in an interbank market conducted directly between traders (usually large commercial banks) and their customers. Unlike futures contracts, which are standardized contracts, forward contracts can be specifically drawn to meet the
needs of the
11
parties that enter into them. The parties to a forward contract may agree to offset or terminate the contract before its maturity, or may hold
the contract to maturity and complete the contemplated exchange.
The following discussion summarizes the
Funds’ principal uses of forward foreign currency exchange contracts (“forward currency contracts”). A Fund may enter into forward currency contracts with stated contract values of up to the value of that Fund’s assets. A forward
currency contract is an obligation to buy or sell an amount of a specified currency for an agreed price (which may be in U.S. dollars or a foreign currency). A Fund will exchange foreign currencies for U.S. dollars and for other foreign currencies
in the normal course of business and may buy and sell currencies through forward currency contracts in order to fix a price for securities it has agreed to buy or sell (“transaction hedge”). A Fund also may hedge some or all of its
investments denominated in a foreign currency or exposed to foreign currency fluctuations against a decline in the value of that currency relative to the U.S. dollar by entering into forward currency contracts to sell an amount of that currency (or
a proxy currency whose performance is expected to replicate or exceed the performance of that currency relative to the U.S. dollar) approximating the value of some or all of its portfolio securities denominated in that currency (“position
hedge”) or by participating in options or futures contracts with respect to the currency. A Fund also may enter into a forward currency contract with respect to a currency where the Fund is considering the purchase or sale of investments
denominated in that currency but has not yet selected the specific investments (“anticipatory hedge”). In any of these circumstances a Fund may, alternatively, enter into a forward currency contract to purchase or sell one foreign currency
for a second currency that is expected to perform more favorably relative to the U.S. dollar if the portfolio manager believes there is a reasonable degree of correlation between movements in the two currencies (“cross-hedge”). These types
of hedging minimize the effect of currency appreciation as well as depreciation, but do not eliminate fluctuations in the underlying U.S. dollar equivalent value of the proceeds of or rates of return on a Fund’s foreign currency denominated
portfolio securities. The matching of the increase in value of a forward contract and the decline in the U.S. dollar equivalent value of the foreign currency denominated asset that is the subject of the hedge generally will not be precise. Shifting
a Fund’s currency exposure from one foreign currency to another removes that Fund’s opportunity to profit from increases in the value of the original currency and involves a risk of increased losses to such Fund if its portfolio
manager’s projection of future exchange rates is inaccurate. Proxy hedges and cross-hedges may result in losses if the currency used to hedge does not perform similarly to the currency in which hedged securities are denominated. Unforeseen
changes in currency prices may result in poorer overall performance for a Fund than if it had not entered into such contracts. In addition, a Fund may not always be able to enter into forward contracts at attractive prices and may be limited in its
ability to use these contracts to hedge Fund assets.
The Funds will cover outstanding forward currency contracts
by maintaining liquid portfolio securities denominated in or whose value is tied to, the currency underlying the forward contract or the currency being hedged. To the extent that a Fund is not able to cover its forward currency positions with
underlying portfolio securities, the Funds’ custodian will segregate cash or other liquid assets having a value equal to the aggregate amount of such Fund’s commitments under forward contracts entered into with respect to position hedges,
cross-hedges and anticipatory hedges. If the value of the securities used to cover a position or the value of segregated assets declines, a Fund will find alternative cover or segregate additional cash or
12
liquid assets on a daily basis so that the value of the covered and segregated assets will be equal to the amount of such Fund’s
commitments with respect to such contracts. As an alternative to segregating assets, a Fund may buy call options permitting such Fund to buy the amount of foreign currency being hedged by a forward sale contract or a Fund may buy put options
permitting it to sell the amount of foreign currency subject to a forward buy contract.
OPTIONS ON FOREIGN
CURRENCIES. The Funds may buy and write options on foreign currencies in a manner similar to that in which futures or forward contracts on foreign currencies will be utilized. For example, a decline in the U.S. dollar value of
a foreign currency in which portfolio securities are denominated will reduce the U.S. dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of
portfolio securities, a Fund may buy put options on the foreign currency. If the value of the currency declines, such Fund will have the right to sell such currency for a fixed amount in U.S. dollars, thereby offsetting, in whole or in part, the
adverse effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the cost of such securities, a Fund may buy call options on the foreign currency.
The purchase of such options could offset, at least partially, the effects of the adverse movements in exchange rates. As in the case of other types of options, however, the benefit to a Fund from
purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, if currency exchange rates do not move in the direction or to the extent desired, a Fund could sustain losses on
transactions in foreign currency options that would require such Fund to forego a portion or all of the benefits of advantageous changes in those rates.
The Funds may also write options on foreign currencies. For example, to hedge against a potential decline in the U.S. dollar value of foreign currency denominated securities due to adverse fluctuations
in exchange rates, a Fund could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised and the decline in value of portfolio securities will be
offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against a
potential increase in the U.S. dollar cost of securities to be acquired, a Fund could write a put option on the relevant currency which, if rates move in the manner projected, will expire unexercised and allow that Fund to hedge the increased cost
up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium. If exchange rates do not move in the expected
direction, the option may be exercised and a Fund would be required to buy or sell the underlying currency at a loss which may not be offset by the amount of the premium. Through the writing of options on foreign currencies, a Fund also may lose all
or a portion of the benefits which might otherwise have been obtained from favorable movements in exchange rates.
13
The Funds may write covered call options on foreign currencies. A call option
written on a foreign currency by a Fund is “covered” if that Fund owns the foreign currency underlying the call or has an absolute and immediate right to acquire that foreign currency without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other foreign currencies held in its portfolio. A call option is also covered if a Fund has a call on the same foreign currency in the same
principal amount as the call written if the exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the exercise price of the call written, if the difference is maintained by such
Fund in cash or other liquid assets in a segregated account with the Funds’ custodian.
The Funds also may
write call options on foreign currencies for cross-hedging purposes. A call option on a foreign currency is for cross-hedging purposes if it is designed to provide a hedge against a decline due to an adverse change in the exchange rate in the U.S.
dollar value of a security which a Fund owns or has the right to acquire and which is denominated in the currency underlying the option. Call options on foreign currencies which are entered into for cross-hedging purposes are not covered. However,
in such circumstances, a Fund will collateralize the option by segregating cash or other liquid assets in an amount not less than the value of the underlying foreign currency in U.S. dollars marked-to-market daily.
OPTIONS ON SECURITIES. The Funds may write covered put and call options and buy put and call options on securities
that are traded on United States and foreign securities exchanges and over-the-counter.
A put option written by a
Fund is “covered “ if that Fund (i) segregates cash not available for investment or other liquid assets with a value equal to the exercise price of the put with the Funds’ custodian or (ii) holds a put on the same security and in the
same principal amount as the put written and the exercise price of the put held is equal to or greater than the exercise price of the put written. The premium paid by the buyer of an option will reflect, among other things, the relationship of the
exercise price to the market price and the volatility of the underlying security, the remaining term of the option, supply and demand and interest rates.
A call option written by a Fund is “covered” if that Fund owns the underlying security covered by the call or has an absolute and immediate right to acquire that security without additional
cash consideration (or for additional cash consideration held in a segregated account by the Funds’ custodian) upon conversion or exchange of other securities held in its portfolio. A call option is also deemed to be covered if a Fund holds a
call on the same security and in the same principal amount as the call written and the exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the exercise price of the call written
if the difference is maintained by that Fund in cash and other liquid assets in a segregated account with its custodian.
The Funds also may write call options that are not covered for cross-hedging purposes. A Fund collateralizes its obligation under a written call option for cross-hedging purposes by segregating cash or other liquid assets in an
amount not less than the market value of the underlying security, marked-to-market daily. A Fund would write a call option for cross-hedging purposes, instead of writing a covered call option, when the premium to be received
14
from the cross-hedge transaction would exceed that which would be received from writing a covered call option and its portfolio manager believes
that writing the option would achieve the desired hedge.
The writer of an option may have no control over when
the underlying securities must be sold (in the case of a call option) or bought (in the case of a put option) since with regard to certain options, the writer may be assigned an exercise notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains the amount of the premium. This amount, of course, may, in the case of a covered call option, be offset by a decline in the market value of the underlying security during the option
period. If a call option is exercised, the writer experiences a profit or loss from the sale of the underlying security. If a put option is exercised, the writer must fulfill the obligation to buy the underlying security at the exercise price, which
will usually exceed the then-current market value of the underlying security.
The writer of an option that wishes
to terminate its obligation may effect a “closing purchase transaction.” This is accomplished by buying an option of the same series as the option previously written. The effect of the purchase is that the writer’s position will be
canceled by the clearing corporation. However, a writer may not effect a closing purchase transaction after being notified of the exercise of an option. Likewise, an investor who is the holder of an option may liquidate its position by effecting a
“closing sale transaction.” This is accomplished by selling an option of the same series as the option previously bought. There is no guarantee that either a closing purchase or a closing sale transaction can be effected.
In the case of a written call option, effecting a closing transaction will permit a Fund to write another call option on the
underlying security with either a different exercise price or expiration date or both. In the case of a written put option, such transaction will permit a Fund to write another put option to the extent that the exercise price is secured by other
liquid assets. Effecting a closing transaction also will permit a Fund to use the cash or proceeds from the concurrent sale of any securities subject to the option for other investments. If a Fund desires to sell a particular security from its
portfolio on which it has written a call option, such Fund will effect a closing transaction prior to or concurrent with the sale of the security. A Fund will realize a profit from a closing transaction if the price of the purchase transaction is
less than the premium received from writing the option or the price received from a sale transaction is more than the premium paid to buy the option. A Fund will realize a loss from a closing transaction if the price of the purchase transaction is
more than the premium received from writing the option or the price received from a sale transaction is a less than the premium paid to buy the option. Because increases in the market price of a call option generally will reflect increases in the
market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by appreciation of the underlying security owned by a Fund.
An option position may be closed out only where a secondary market for an option of the same series exists. If a secondary market does not
exist, the Fund may not be able to effect closing transactions in particular options and the Fund would have to exercise the options in order to realize any profit. If a Fund is unable to effect a closing purchase transaction in a secondary market,
it will not be able to sell the underlying security until the option expires or it
15
delivers the underlying security upon exercise. The absence of a liquid secondary market may be due to the following: (i) insufficient trading
interest in certain options, (ii) restrictions imposed by a national securities exchange (“Exchange”) on which the option is traded on opening or closing transactions or both, (iii) trading halts, suspensions or other restrictions imposed
with respect to particular classes or series of options or underlying securities, (iv) unusual or unforeseen circumstances that interrupt normal operations on an Exchange, (v) the facilities of an Exchange or of the Options Clearing Corporation
(“OCC”) may not at all times be adequate to handle current trading volume, or (vi) one or more Exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on that Exchange (or in that class or series of options) would cease to exist, although outstanding options on that Exchange that had been issued by the OCC as a result of
trades on that Exchange would continue to be exercisable in accordance with their terms.
A Fund may write options
in connection with buy-and-write transactions. In other words, a Fund may buy a security and then write a call option against that security. The exercise price of such call will depend upon the expected price movement of the underlying security. The
exercise price of a call option may be below (“in-the-money”), equal to (“at-the-money”) or above (“out-of-the-money”) the current value of the underlying security at the time the option is written.
Buy-and-write transactions using in-the-money call options may be used when it is expected that the price of the underlying
security will remain flat or decline moderately during the option period. Buy-and-write transactions using at-the-money call options may be used when it is expected that the price of the underlying security will remain fixed or advance moderately
during the option period. Buy-and-write transactions using out-of-the-money call options may be used when it is expected that the premiums received from writing the call option plus the appreciation in the market price of the underlying security up
to the exercise price will be greater than the appreciation in the price of the underlying security alone. If the call options are exercised in such transactions, a Fund’s maximum gain will be the premium received by it for writing the option,
adjusted upwards or downwards by the difference between that Fund’s purchase price of the security and the exercise price. If the options are not exercised and the price of the underlying security declines, the amount of such decline will be
offset by the amount of premium received.
The writing of covered put options is similar in terms of risk and
return characteristics to buy-and-write transactions. If the market price of the underlying security rises or otherwise is above the exercise price, the put option will expire worthless and a Fund’s gain will be limited to the premium received.
If the market price of the underlying security declines or otherwise is below the exercise price, a Fund may elect to close the position or take delivery of the security at the exercise price and that Fund’s return will be the premium received
from the put options minus the amount by which the market price of the security is below the exercise price.
A
Fund may buy put options to hedge against a decline in the value of its portfolio. By using put options in this way, a Fund will reduce any profit it might otherwise have realized in the underlying security by the amount of the premium paid for the
put option and by transaction costs.
16
A Fund may buy call options to hedge against an increase in the price of
securities that it may buy in the future. The premium paid for the call option plus any transaction costs will reduce the benefit, if any, realized by such Fund upon exercise of the option, and, unless the price of the underlying security rises
sufficiently, the option may expire worthless to that Fund.
EURODOLLAR INSTRUMENTS. A Fund
may make investments in Eurodollar instruments. Eurodollar instruments are U.S. dollar-denominated futures contracts or options thereon which are linked to the London Interbank Offered Rate (“LIBOR”), although foreign currency-denominated
instruments are available from time to time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. A Fund might use Eurodollar futures contracts and options
thereon to hedge against changes in LIBOR, to which many interest rate swaps and fixed-income instruments are linked.
SWAPS AND SWAP-RELATED PRODUCTS. The Funds may enter into interest rate swaps, caps and floors on either an asset-based or liability-based basis, depending upon whether it is hedging its assets or its
liabilities, and will usually enter into interest rate swaps on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments). The net amount of the excess,
if any, of a Fund’s obligations over its entitlement with respect to each interest rate swap will be calculated on a daily basis and an amount of cash or other liquid assets having an aggregate net asset value at least equal to the accrued
excess will be maintained in a segregated account by the Funds’ custodian. If a Fund enters into an interest rate swap on other than a net basis, it would maintain a segregated account in the full amount accrued on a daily basis of its
obligations with respect to the swap. A Fund will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated in one of the three highest rating
categories of at least one NRSRO at the time of entering into such transaction. Marsico Capital will monitor the creditworthiness of all counterparties on an ongoing basis. If there is a default by the other party to such a transaction, a Fund will
have contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown
substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardizing swap documentation. Marsico Capital has determined that, as a result, the swap market has become
relatively liquid. Caps and floors are more recent innovations for which standardized documentation has not yet been developed and, accordingly, they are less liquid than swaps. To the extent a Fund sells (i.e., writes) caps and floors, it will
segregate cash or other liquid assets having an aggregate net asset value at least equal to the full amount accrued on a daily basis, of its obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that may be entered into by a Fund subject to the segregation requirement described above. These
transactions may in some instances involve the delivery of securities or other underlying assets by a Fund or its counterparty to collateralize obligations under the swap. Under the documentation currently used in those markets, the risk of loss
with respect to interest rate swaps is limited to the net amount of the payments that a Fund is contractually obligated to make. If the other party to an interest rate swap that is not collateralized defaults, a Fund would risk the loss of the net
amount
17
of the payments that it contractually is entitled to receive. A Fund may buy and sell (i.e., write) caps and floors without limitation, subject
to the segregation requirement described above.
ADDITIONAL RISKS OF OPTIONS ON FOREIGN CURRENCIES, FORWARD
CONTRACTS AND FOREIGN INSTRUMENTS. Unlike transactions entered into by the Funds in futures contracts, certain options on foreign currencies and forward contracts are not traded on contract markets regulated by the CFTC or
(with the exception of certain foreign currency options) by the SEC. To the contrary, such instruments are traded through financial institutions acting as market-makers, although foreign currency options are also traded on certain Exchanges, such as
the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. Similarly, options on currencies may be traded over-the-counter. In an over-the-counter trading environment, many of the protections afforded to
Exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the buyer of an option cannot lose
more than the amount of the premium plus related transaction costs, this entire amount could be lost. Moreover, an option writer and buyer or seller of futures or forward contracts could lose amounts substantially in excess of any premium received
or initial margin or collateral posted due to the potential additional margin and collateral requirements associated with such positions.
Options on foreign currencies traded on securities Exchanges are within the jurisdiction of the SEC, as are other securities traded on Exchanges. As a result, many of the protections provided to traders on organized
Exchanges will be available with respect to such transactions. In particular, all foreign currency option positions entered into on a securities Exchange are cleared and guaranteed by the OCC, thereby reducing the risk of counterparty default.
Further, a liquid secondary market in options traded on an Exchange may be more readily available than in the over-the-counter market, potentially permitting a Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit
losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency
options, however, is subject to the risks of the availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and
settlement of such options, to the extent traded on a securities Exchange, must be made exclusively through the OCC, which has established banking relationships in applicable foreign countries for this purpose. As a result, the OCC may, if it
determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on the OCC or its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise.
In addition, options on U.S. government securities, futures contracts, options on futures contracts, forward contracts and options on foreign currencies may be traded on foreign exchanges and
over-the-counter in foreign countries. Such transactions are subject to the risk of governmental actions affecting trading in or the prices of foreign currencies or securities. The
18
value of such positions also could be adversely affected by (i) other complex foreign political and economic factors, (ii) lesser availability
than in the United States of data on which to make trading decisions, (iii) delays in a Fund’s ability to act upon economic events occurring in foreign markets during non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the United States, and (v) low trading volume.
ADDITIONAL DERIVATIVE INSTRUMENT RISKS
Additional risks inherent
in the use of derivative instruments include:
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•
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the risk that interest rates, securities prices and currency markets will not move in the direction that the portfolio manager anticipates;
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•
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imperfect correlation between the price of derivative instruments and movement in the prices of the securities, interest rates or currencies being hedged;
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•
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the fact that skills needed to use these strategies are different from those needed to select portfolio securities;
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•
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inability to close out certain hedged positions to avoid adverse tax consequences;
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•
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the possible absence of a liquid secondary market for any particular instrument and possible exchange-imposed price fluctuation limits, either of which may make
it difficult or impossible to close out a position when desired;
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•
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leverage risk, or the risk that adverse price movements in an instrument can result in a loss substantially greater than a Fund’s initial investment in
that instrument (in some cases, the potential loss is unlimited); and
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•
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particularly in the case of privately negotiated instruments, the risk that the counterparty will fail to perform its obligations, which could leave a Fund
worse off than if it had not entered into the position.
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Although the Funds believe the use of
derivative instruments will benefit the Funds, the Funds’ performance could be worse than if the Funds had not used such instruments if the portfolio manager’s judgment proves incorrect. When a Fund invests in a derivative instrument, it
may be required to segregate cash and other liquid assets or certain portfolio securities with its custodian to “cover” the Fund’s position. Assets segregated or set aside generally may not be disposed of so long as a Fund maintains
the positions requiring segregation or cover. Segregating assets could diminish the Fund’s return due to the opportunity losses of foregoing other potential investments with the segregated assets.
SHORT SALES
Each Fund may engage in “short sales against the box.” This technique involves selling either a security that a Fund owns, or a security equivalent in kind and amount to the security sold
short that a Fund has the right to obtain, for delivery at a specified date in the future, without
19
the payment of additional cost. A Fund will enter into a short sale against the box to hedge against anticipated declines in the market price of
portfolio securities. If the value of the securities sold short increases prior to the scheduled delivery date, a Fund loses the opportunity to participate in the gain.
DEPOSITARY RECEIPTS
The Funds may invest in sponsored and unsponsored American Depositary Receipts (“ADRs”), which are receipts issued by an American bank or trust company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs, in registered form, are designed for use in U.S. securities markets. Unsponsored ADRs may be created without the participation of the foreign issuer. Holders of these ADRs generally bear all the costs of the ADR facility, whereas
foreign issuers typically bear certain costs in a sponsored ADR. The bank or trust company depositary of an unsponsored ADR may be under no obligation to distribute shareholder communications received from the foreign issuer or to pass through
voting rights. The Funds may also invest in European Depositary Receipts (“EDRs”), Global Depositary Receipts (“GDRs”) and in other similar instruments representing securities of foreign companies. EDRs are receipts issued by a
European financial institution evidencing an arrangement similar to that of ADRs. EDRs, in bearer form, are designed for use in European securities markets.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
In a repurchase agreement, a Fund purchases a security and simultaneously commits to resell that security to the seller at an agreed-upon price on an agreed upon date within a number of days (usually not more than seven)
from the date of purchase. The resale price reflects the purchase price plus an agreed-upon incremental amount that is unrelated to the coupon rate or maturity of the purchased security. A repurchase agreement involves the obligation of the seller
to pay the agreed-upon price, which obligation is in effect secured by the value (at least equal to the amount of the agreed-upon resale price and marked-to-market daily) of the underlying security or “collateral.” A Fund may engage in a
repurchase agreement with respect to any security in which it is authorized to invest. A risk associated with repurchase agreements is the failure of the seller to repurchase the securities as agreed, which may cause a Fund to suffer a loss if the
market value of such securities decline before they can be liquidated on the open market. In the event of bankruptcy or insolvency of the seller, a Fund may encounter delays and incur costs in liquidating the underlying security. Repurchase
agreements that mature in more than seven days will be subject to the 15% limit on illiquid investments. While it is not possible to eliminate all risks from these transactions, it is the policy of the Funds to limit repurchase agreements to those
parties whose creditworthiness has been reviewed and found satisfactory by Marsico Capital.
A Fund may use
reverse repurchase agreements to provide cash to satisfy unusually heavy redemption requests or for other temporary or emergency purposes without the necessity of selling portfolio securities, or to earn additional income on portfolio securities,
such as Treasury bills or notes. In a reverse repurchase agreement, a Fund sells a portfolio security to another party, such as a bank or broker-dealer, in return for cash and agrees to repurchase the instrument at a particular price and time. While
a reverse repurchase agreement is outstanding, a Fund will maintain cash and appropriate liquid assets in a segregated custodial account to cover
20
its obligation under the agreement. The Funds will enter into reverse repurchase agreements only with parties that Marsico Capital deems
creditworthy. Using reverse repurchase agreements to earn additional income involves the risk that the interest earned on the invested proceeds is less than the expense of the reverse repurchase agreement transaction. This technique may also have a
leveraging effect on the Fund’s portfolio, although the Fund’s intent to segregate assets in the amount of the reverse repurchase agreement minimizes this effect.
HIGH-YIELD/HIGH-RISK SECURITIES
Each Fund may invest up to 5% of its respective total assets in debt securities that are rated below investment grade (i.e., securities rated BB or lower by Standard & Poor’s Ratings Services (“Standard &
Poor’s”) or Ba or lower by Moody’s Investors Service, Inc. (“Moody’s”)). Lower-rated securities involve a higher degree of credit risk, which is the risk that the issuer will not make interest or principal payments when
due. In the event of an unanticipated default, a Fund would experience a reduction in its income, and could expect a decline in the market value of the securities so affected. The Funds will not purchase debt securities rated lower than
“CCC” by Standard & Poor’s or “Caa” by Moody’s.
Each Fund may invest in unrated
debt securities of foreign and domestic issuers. Unrated debt, while not necessarily of lower quality than rated securities, may not have as broad a market. Unrated debt securities will be included in the stated limit for investments in high-yield
investments by each Fund unless the portfolio manager deems such securities to be the equivalent of investment grade securities.
FINANCIAL AND MARKET RISKS. Investments in high-yield/high risk securities involve a high degree of financial and market risks that can result in substantial or, at times, even total losses. High-yield
securities are more vulnerable to real or perceived economic changes, political changes or adverse developments specific to the issuer. Issuers of such securities may have substantial capital needs and may become involved in bankruptcy or
reorganization proceedings. Among the problems involved in investments in such issuers is the fact that it may be difficult to obtain information about the condition of such issuers. The market prices of such securities also are subject to abrupt
and erratic movements and above average price volatility, and the spread between the bid and asked prices of such securities may be greater than normally expected.
DISPOSITION OF PORTFOLIO SECURITIES. Although the Funds generally will purchase securities for which the portfolio manager expects an active market
to be maintained, high-yield/high-risk securities may be less actively traded than other securities and it may be difficult to dispose of substantial holdings of such securities at prevailing market prices. The Funds will limit holdings of any
securities to amounts that the portfolio manager believes could be readily sold, and holdings of such securities would, in any event, be limited so as not to limit the Funds’ ability to readily dispose of securities to meet redemptions.
CREDIT RISK. The value of lower quality securities generally is more dependent on the
ability of the issuer to meet interest and principal payments than is the case for higher quality securities. Conversely, the value of higher quality securities may be more sensitive to interest rate movements than lower quality securities. Issuers
of high-yield securities may not be as
21
strong financially as those issuing bonds with higher credit ratings. Investments in such companies are considered to be more speculative than
higher quality investments.
GENERAL CHARACTERISTICS OF FOREIGN SECURITIES.
Foreign securities involve certain inherent risks that are different from those of domestic issuers, including political or
economic instability of the issuer or the country of issue, diplomatic developments which could affect U.S. investments in those countries, changes in foreign currency and exchange rates and the possibility of adverse changes in investment or
exchange control regulations. As a result of these and other factors, foreign securities purchased by the Funds may be subject to greater price fluctuation than securities of U.S. companies.
Most foreign stock markets are not as large or liquid as in the United States. Fixed commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government supervision and regulation of foreign stock exchanges, brokers and companies than in the United States. Investors should recognize that foreign markets have different clearance
and settlement procedures and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Funds are uninvested and no return is earned thereon. The inability of the Funds to make intended security purchases due to settlement problems could cause the Funds to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems either could result in losses to the Funds due to subsequent declines in value of the portfolio security or, if the Funds have entered into a contract to sell the security,
could result in a possible liability to the purchaser. Payment for securities without delivery may be required in certain foreign markets. Further, the Fund may encounter difficulties or be unable to pursue legal remedies and obtain judgments in
foreign courts. Foreign governments can also levy confiscatory taxes, expropriate assets, and limit repatriations of assets. Typically, there is less publicly available information about a foreign company than about a U.S. company, and foreign
companies may be subject to less stringent reserve, auditing and reporting requirements. It may be more difficult for the Funds’ agents to keep currently informed about corporate actions such as stock dividends or other matters which may affect
the prices of portfolio securities.
Arrangements with foreign custodians are generally necessary to hold fund
assets in foreign countries. These foreign custody arrangements may pose potential risks. A foreign bank or securities depository or other custodian may maintain internal controls that differ from those customarily applicable to U.S. custodians, may
face less stringent regulatory scrutiny, and may be subject to less extensive legal or financial protections for asset holders.
Communications between the United States and foreign countries may be less reliable than within the United States, thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio
securities. Individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments
position.
Because investments in foreign securities will usually involve currencies of foreign countries, and
because the Funds may hold foreign currencies, the value of the assets of the Funds as measured in U.S. dollars may be affected favorably or unfavorably by changes in foreign currency exchange rates and exchange control regulations, and the Funds
may incur costs in connection with conversions between various currencies. Although the Funds value their assets daily in terms of U.S. dollars, they do not intend to convert their holdings of foreign
22
currencies into U.S. dollars on a daily basis. The Funds will do so from time to time, and investors should be aware of the costs of currency
conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based
on the difference (the “spread”) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the Funds at one rate, while offering a lesser rate of exchange should the
Funds desire to resell that currency to the dealer.
The Funds will conduct their foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward foreign currency exchange contracts or purchasing or writing put or call options on foreign
currencies.
INVESTMENTS IN THE SHARES OF OTHER INVESTMENT COMPANIES
To a limited extent, each Fund may purchase securities of other investment companies including certain exchange-traded funds. Marsico
Capital does not expect the Funds to invest more that 5% of their total assets in shares issued by other investment companies and, in no instance, will such investments exceed the levels set forth in Section 12(d)(1)(A) of the 1940 Act. Marsico
Capital anticipates investing in shares of other investment companies primarily as a means to invest cash in Funds consisting of short-term money market instruments and U.S. government securities. To the extent that the Funds invest in other
investment companies, the Funds may incur duplicate investment advisory and other fees.
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TRUSTEES AND OFFICERS OF THE FUNDS
The Board of Trustees oversees the management of the
Trust and elects its officers. Each Board member serves until his successor is elected and qualified or until his resignation, death or removal. Officers serve a term of one year and are elected annually by the Board members. The Trust’s
officers are responsible for the day-to-day operation of the Trust. Information pertaining to the Trustees and the executive officers of the Trust is set forth below.
INTERESTED TRUSTEES*
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Name, Address and Age
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Position(s) Held with the Trust
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Term of Office and Length of Time Served
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Principal Occupation(s)
During
the Past Five Years
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Number of Funds in Fund Complex Overseen by Trustee
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Other Directorships Held by Trustee
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Thomas F. Marsico
1
1200 17th Street
Suite 1300
Denver, CO 80202
DOB: 1955
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Trustee, President and Chief Executive Officer
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Since December 1997
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Chief Executive Officer, Marsico Capital Management, LLC (September 1997 – present); Executive Vice President, Janus Capital Corp. (1986 –
1997)
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4
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None
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J. Jeffrey Riggs
2
8400 East Prentice Avenue
Suite 1310
Englewood, CO 80111
DOB: 1953
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Trustee
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Since December 1997
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President, Essex Financial Group, Inc. (commercial mortgage bank) (more than five years); Principal, Metropolitan Homes, Inc. (January 1992 – 2000);
Principal, Baron Properties, LLC (January 1997 – Present).
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4
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None
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1
|
|
Mr. Thomas Marsico is considered an Interested Trustee of the Trust because of his affiliation with Marsico Capital Management, LLC. Mr. Thomas Marsico and Mr.
Christopher Marsico are brothers.
|
|
2
|
|
The Trust treats Mr. Riggs as an Interested Trustee due to a business relationship with Mr. Thomas Marsico whereby Mr. Marsico has invested personal assets in
certain partnerships for which Mr. Riggs acts as principal.
|
|
*
|
|
Trustees who are “interested persons” of the Funds, as defined in the Investment Company Act of 1940, as amended, (the “1940 Act”).
|
NON-INTERESTED TRUSTEES
|
Name, Address and Age
|
|
Position(s) Held with the Trust
|
|
Term of Office and Length of Time Served
|
|
Principal Occupation(s)
During
The Past Five Years
|
|
Number of Funds in Fund Complex Overseen
by Trustee
|
|
Other Directorships Held by Trustee
|
|
Rono Dutta
1200 17th Street
Suite 1300
Denver, CO 80202
DOB: 1951
|
|
Trustee
|
|
Since August 1998
|
|
President, United Airlines (1999–September 2002); Senior Vice President–Planning, United Airlines (1994 – 1999); other positions with United
Airlines (1985 – 1994); previously, Manager for planning, Bell & Howell, and Management Consultant, Booz, Allen and Hamilton.
|
|
4
|
|
None
|
|
|
|
Walter A. Koelbel, Jr.
5291 Yale Circle
Denver, CO 80222
DOB: 1952
|
|
Trustee
|
|
Since December 1997
|
|
President, and other positions, Koelbel and Company (Real Estate Development Company) (December 1976 – present).
|
|
4
|
|
None
|
24
|
Larry A. Mizel
1
Suite 900
3600 South Yosemite Street
Denver, CO 80237
DOB: 1942
|
|
Trustee
|
|
Since December 1997
|
|
President, M.D.C. Holdings, Inc. (homebuilding and mortgage banking) (March 1996 – present); Chairman and Chief Executive Officer, M.D.C. Holdings, Inc.
(More than five years).
|
|
4
|
|
M.D.C. Holdings, Inc.
|
|
|
|
Federico Peña
1225 17th Street
Denver, CO 80202
DOB: 1947
|
|
Trustee
|
|
Since February 1999
|
|
Managing Director, Vestar Capital Partners, (August 1998 – present); Secretary, U.S. Department of Energy (March 1997 – July 1998); Secretary, U.S.
Department of Transportation (January 1993 – February 1997).
|
|
4
|
|
Principal Financial Group, Inc.
Sonic Corp.
|
|
|
|
Michael D. Rierson
4202 East Fowler Aveue
ADM 214
Tampa, FL 33620
DOB: 1952
|
|
Trustee
|
|
Since November 1998
|
|
Vice President of University Advancement, University of South Florida (May 2001–present); Vice President, University Advancement at University of Miami
(September 1998 – March 2001); Associate Dean, Kenan-Flagler Business School at University of North Carolina at Chapel Hill (November 1993 – September 1998); Various positions at Duke University, Durham, N.C. (October 1983 – November
1993).
|
|
4
|
|
None
|
|
|
|
Joseph T. Willett
1200 17th Street
Suite 1300
Denver, CO 80202
DOB: 1955
|
|
Trustee
|
|
Since November 2002
|
|
Chief Operating Officer, Merrill Lynch Europe (1998-2002); Chief Financial Officer, Merrill Lynch & Co., Inc. (1993-1998).
|
|
4
|
|
Merrill Lynch Capital Markets Bank Limited (Ireland)
|
|
1
|
|
Mr. Larry Mizel and Mssrs. Thomas and Christopher Marsico each hold indirect interests in a company involved in foreign debt acquisition. The approximate amount
of Mr. Mizel’s interest, as of November 18, 2002, was $600,000.
|
OFFICERS
|
Name, Address and Age
|
|
Position(s) Held with the Trust
|
|
Term of Office and Length of Time Served
|
|
Principal Occupation(s)
During
the Past Five Years
|
|
Number of Funds in Fund Complex Overseen by Trustee
|
|
Other Directorships Held by Trustee
|
|
|
|
Christopher J. Marsico
1
1200 17th Street
Suite 1300
Denver, CO 80202
DOB: 1961
|
|
Vice President and Treasurer
|
|
Since September 2002
|
|
President, Marsico Capital Management, LLC (July 2002-Present); Chief Operations Officer, Marsico Capital Management, LLC (September 1997-July 2002); Vice
President, US West (1988-September 1997).
|
|
N/A
|
|
N/A
|
|
|
|
Mary L. Watson
1200 17th Street
Suite 1300
Denver, CO 80202
DOB: 1969
|
|
Vice President and Secretary
|
|
Since September 2002
|
|
Chief Operations Officer, Marsico Capital Management, LLC (July 2002 – Present); Vice President of Client Services, Marsico Capital Management, LLC
(September 1997-Present); Vice Presidnet of Institutional Services and other positions, Janus Capital (1986-September 1997);
|
|
N/A
|
|
N/A
|
|
|
|
Sander M. Bieber
1775 Eye Street, N.W.
Washington, D.C. 20005
DOB: 1950
|
|
Assistant Secretary
|
|
Since December 1997
|
|
Partner, Dechert (law firm) (more than five years).
|
|
N/A
|
|
N/A
|
|
1
|
|
Mr. Thomas Marsico and Mr. Christopher Marsico are brothers.
|
25
BOARD OF TRUSTEES
The Board of Trustees oversees the Funds and the Adviser. The Committees of the Board include the Audit Committee, Nominating Committee
and Valuation Committee.
The purpose of the Audit Committee, which meets on a regular basis, not less than
annually, is (1) to oversee the Trust’s financial reporting and internal accounting controls and (2) to act as a liaison between the Trust’s independent auditors and the full Board of Trustees. The members of the Audit Committee include
Rono Dutta, Walter A. Koelbel, Jr., Federico Peña, Michael D. Rierson, J. Jeffrey Riggs and Joseph T. Willett (who replaced Theodore S. Halaby on 11/14/02). There were two Audit Committee meetings held during the fiscal year ended September
30, 2002.
The purpose of the Nominating Committee is: (1) to evaluate the qualifications of candidates and make
nominations for independent trustee membership on the Board; (2) to nominate members of committees of the Board and periodically review committee assignments; and (3) to make recommendations to the Board concerning the responsibilities or
establishment of Board committees. The members of the Nominating Committee include Rono Dutta, Walter A. Koelbel, Jr., Federico Peña and Michael D. Rierson. There were four Nominating Committee meetings held during the fiscal year ended
September 30, 2002.
The purpose of the Valuation Committee is to oversee the implementation of the Trust’s
valuation procedures and to make fair value determinations on behalf of the Board as specified in the valuation procedures. The members of the Valuation Committee include Thomas F. Marsico and any one available Independent Trustee. The Committee
meets on an as needed basis to establish prices of securities for which market quotations are not readily available or the prices of which are not often readily determinable pursuant to the Funds’ valuation procedures. Meetings may be held in
person or by telephone conference call. The Valuation Committee did not convene during the fiscal year ended September 30, 2002.
For the year ended December 31, 2002, the dollar range of equity securities owned beneficially by each Trustee in the Funds and in any registered investment companies overseen by the Trustee within the same family of investment
companies as the Trust is as follows:
INTERESTED TRUSTEES
|
Name of Trustee
|
|
Dollar Range of Equity Securities in the Trust
|
|
Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen By Trustee in Family of
Investment Companies
|
|
Thomas F. Marsico
|
|
|
|
|
|
J. Jeffrey Riggs
|
|
|
|
|
26
NON-INTERESTED TRUSTEES
|
Name of Trustee
|
|
Dollar Range in Equity Securities in the Trust
|
|
Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen By Trustee in Family of
Investment Companies
|
|
Rono Dutta
|
|
|
|
|
|
Walter A. Koelbel, Jr.
|
|
|
|
|
|
Larry A. Mizel
|
|
|
|
|
|
Federico Peña
|
|
|
|
|
|
Michael D. Rierson
|
|
|
|
|
|
Joseph T. Willett
|
|
|
|
|
COMPENSATION RECEIVED FROM FUNDS
FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2002
|
|
|
Aggregate Compensation From the Funds
|
|
|
Pension or Retirement Benefits Accrued As Part of Funds’ Expenses
|
|
Estimated Annual Benefits Upon Retirement
|
|
Total Compensation From Funds
|
|
Thomas F. Marsico
|
|
$
|
0
|
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
J. Jeffrey Riggs
(1)
|
|
$
|
(2
|
)
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Rono Dutta
(1)
|
|
$
|
(2
|
)
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Theodore S. Halaby
(3)
|
|
$
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Walter A. Koelbel, Jr.
(1)
|
|
$
|
(2
|
)
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Larry A. Mizel
(1)
|
|
$
|
(2
|
)
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Federico Peña
|
|
$
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Michael D. Rierson
(1)
|
|
$
|
(2
|
)
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Joseph T. Willett
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Participant in the Marsico Deferred Fee Plan (the “Plan”).
|
|
(2)
|
|
Consists of $ ,
$ , $ , $ and
$ allocated on behalf of Messrs. Riggs, Dutta, Koelbel, Mizel and Rierson, respectively, pursuant to the Plan.
|
|
(3)
|
|
Mr. Halaby resigned from the Board of Trustees effective August 19, 2002.
|
|
(4)
|
|
Mr. Willett joined the Board of Trustees effective November 14, 2002.
|
The Trustees of the Funds who are officers or employees of the investment adviser receive no remuneration from the Funds. Each of the other Trustees (the “Independent Trustees”) is paid an
annual retainer of $28,000 and a fee of $3,000 for each meeting attended and is reimbursed for the expenses of attending meetings. The Trust adopted a deferred compensation plan in February 2000 pursuant to which the Independent Trustees may elect
to defer part or all of the fees earned by them for serving as Trustees of the Trust.
27
As of December 31, 2002, the Trustees and Executive Officers of the Trust owned approximately
% of the outstanding shares of the Focus Fund, % of the outstanding shares of the Growth Fund,
% of the outstanding shares of the 21st Century Fund and % of the outstanding shares of the International
Opportunities Fund.
In connection with the re-approval of the Funds’ Investment Advisory Agreements, the Trustees, including those
Trustees who are not “interested persons” (as the term is defined in the 1940 Act), requested and received from the Adviser, and reviewed, a wide variety of information. In re-approving the agreements, and in evaluating the fairness of the
compensation to be paid by each Fund, the Trustees took into account principally the nature, quality and extent of the services performed by the Adviser, in relation to fees received under the agreements. The Trustees considered the quality of the
personnel, resources, operations, financial condition and investment advisory capabilities, methodologies and performance of the Adviser. The Trustees also considered other factors, including the performance of comparable funds in terms of
investment objectives, types of securities purchased and asset size, among other factors, the fees and expenses borne by those funds, the costs to the Adviser of providing the services, and the profitability of the relationship with the Funds. In
addition, the Trustees considered the brokerage services received by the Funds. These factors were considered by the Trustees at large, and also were considered by the independent Trustees meeting separately. Based on this review, it was the
judgment of the Trustees and the independent Trustees that re-approval of the agreements was in the interests of the Funds and their shareholders.
Share Ownership of the Funds
The following
table sets forth the information concerning beneficial and record ownership as of December 31, 2002, of the Fund’s shares by each person who owned of record, or who was known by the Fund to own beneficially, more than 5% of the voting
securities of any Fund.
|
Name and Address
of Shareholder
|
|
Fund
|
|
Shares Owned
|
|
Percentage of Outstanding Shares
|
|
Charles Schwab & Co., Inc.
1
|
|
Focus Fund
|
|
___________
|
|
%
|
|
101 Montgomery Street,
|
|
Growth Fund
|
|
___________
|
|
%
|
|
San Francisco, CA 94104
|
|
21st Century Fund
|
|
___________
|
|
%
|
|
|
|
International
Opportunities Fund
|
|
___________
|
|
%
|
|
|
|
National Financial
|
|
Focus Fund
|
|
___________
|
|
%
|
|
Services Corp (Fidelity)
1
|
|
Growth Fund
|
|
___________
|
|
%
|
|
200 Liberty Street
|
|
21st Century Fund
|
|
___________
|
|
%
|
|
One World Financial Center
|
|
|
|
|
|
|
|
New York, NY 10008
|
|
|
|
|
|
|
|
|
|
Thomas F. Marsico
|
|
21st Century Fund
|
|
___________
|
|
%
|
|
1200 17th Street
|
|
International
|
|
|
|
|
28
|
Suite 1300
|
|
Opportunities Fund
|
|
________
|
|
%
|
|
Denver, Colorado 80202
|
|
|
|
|
|
|
|
|
|
James A. Hillary
|
|
21st Century Fund
|
|
________
|
|
%
|
|
1200 17th Street
|
|
|
|
|
|
|
|
Suite 1300
|
|
|
|
|
|
|
|
Denver, Colorado 80202
|
|
|
|
|
|
|
|
1
|
|
The Trust’s shares sold through broker-dealer intermediaries that establish single, omnibus accounts with t he Trust’s transfer agent. The beneficial
owners of these shares, however, are the individual investors who maintain accounts within these broker-dealer intermediaries.
|
Mr. Thomas Marsico is a control person of the International Opportunities Fund due to his ownership of more than 25% of that Fund’s voting securities. As a result, Mr. Marsico will be able to
affect the outcome of matters presented for a vote of the Fund’s shareholders.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY
AGREEMENT. The Adviser of the Funds is Marsico Capital Management, LLC. Under the terms of the Advisory Agreement, Marsico Capital furnishes overall investment management for the Funds, provides research and credit analysis,
oversees the purchase and sales of portfolio securities, maintains books and records with respect to the Funds’ securities transactions and provides periodic and special reports to the Board of Trustees as required.
For the advisory services provided and expenses assumed by it, the Adviser has agreed to a fee from each Fund, computed daily and payable
monthly, at an annual rate of 0.85% of average daily net assets. For the years ended September 30, 2000, September 30, 2001 and September 30, 2002, the Adviser earned the following amounts:
|
|
|
Fiscal Year Ended
September
30, 2000
|
|
|
Fiscal Year Ended
September
30, 2001
|
|
|
Fiscal Year Ended
September 30, 2002
|
|
|
Focus Fund
|
|
$
|
25,072,345
|
|
|
$
|
16,995,192
|
|
|
$
|
|
|
|
Growth Fund
|
|
|
8,433,013
|
|
|
|
6,270,661
|
|
|
$
|
|
|
|
21st Century Fund
|
|
|
756,499
|
1
|
|
|
839,218
|
2
|
|
$
|
|
3
|
|
International Opportunities Fund
|
|
|
29,690
|
1
|
|
|
173,402
|
2
|
|
$
|
|
3
|
|
(1)
|
|
During the fiscal year ended September 30, 2000, the Adviser waived fees for the 21st Century Fund and the International Opportunities Fund totaling $179,028
and $29,690 respectively.
|
|
(2)
|
|
During the fiscal year ended September 30, 2001, the Adviser waived fees for the 21st Century Fund and the International Opportunities Fund totaling $69,297 and
$173,402, respectively.
|
|
(3)
|
|
During the fiscal year ended September 30, 2002, the Adviser waived fees for the 21st Century Fund and the International Opportunities Fund totaling
$ and $ , respectively.
|
29
The Investment Advisory Agreement, with respect to each Fund, will continue in
effect for a period of two years from its effective date, unless a period of shorter duration is agreed to by the Trust and the Adviser. If not sooner terminated, the Advisory Agreement will continue in effect for successive one year periods
thereafter, provided that each continuance is specifically approved annually by (a) the vote of a majority of the Board of Trustees who are not parties to the Advisory Agreement or interested persons (as defined in the 1940 Act), cast in person at a
meeting called for the purpose of voting on approval, and (b) either (i) with respect to a Fund, the vote of a majority of the outstanding voting securities of that Fund, or (ii) the vote of a majority of the Board of Trustees. The Advisory
Agreement is terminable by vote of the Board of Trustees, or with respect to a Fund, by the holders of a majority of the outstanding voting securities of that Fund, at any time without penalty, on 60 days’ written notice to the Adviser. The
Adviser may also terminate its advisory relationship with a Fund without penalty on 90 days’ written notice to the Trust. The Advisory Agreement terminates automatically in the event of its assignment (as defined in the 1940 Act). As described
in the Prospectus, the Adviser has agreed to limit the total expenses of each Fund (excluding interest, taxes, brokerage and extraordinary expenses) to an annual rate of 1.60% for the Focus Fund and International Opportunities Fund and to an annual
rate of 1.50% for the Growth Fund and the 21st Century Fund. Pursuant to this agreement, each Fund will reimburse the Adviser for any fee waivers or expense reimbursements made by the Adviser, provided that any such reimbursements made by a Fund to
the Adviser will not cause the Fund’s expense limitation to exceed the amounts set forth above and the reimbursement is made within three years after the year in which the Adviser incurred the expense. This contract may only be changed by the
Funds’ Board of Trustees.
Bank of America Corporation, either individually or through its subsidiaries, owns
100% of Marsico Capital. Bank of America Corporation, a Delaware corporation, is a bank holding company and a financial holding company headquartered in Charlotte, North Carolina.
ADMINISTRATION AGREEMENT. Pursuant to an Administration Agreement (the “Administration Agreement”), UMB Fund Services, Inc. (the
“Administrator”), 803 W. Michigan Street, Suite A, Milwaukee, WI, 53202, prepares and files all federal income and excise tax returns and state income tax returns (other than those required to be made by the Trust’s Custodian or
Transfer Agent), oversees the Trust’s insurance relationships, prepares securities registration compliance filings pursuant to state securities laws, compiles data for and prepares required notices and reports to the Securities and Exchange
Commission, prepares financial statements for annual and semiannual reports to investors, monitors compliance with the Funds’ investment policies and restrictions, prepares and monitors the Funds’ expense accruals and causes all
appropriate expenses to be paid from Fund assets, monitors the Funds’ status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, maintains and/or coordinates with the other service providers the
maintenance of the accounts, books and other documents required pursuant to Rule 31a-1 under the 1940 Act and generally assists in the Trust’s administrative operations. The Administrator is an affiliate of the Funds’ distributor. The
Administrator, at its own expense and without reimbursement from the Trust, furnishes office space and all necessary office facilities, equipment, supplies and clerical and executive personnel for performing the services required to be performed by
it under the Administration Agreement. For the foregoing, the Administrator receives from the Funds a fee, computed daily and payable monthly, based on the Funds’ average net assets at an annual rate beginning at 0.12% (0.13% for the
International Opportunities Fund) and decreasing as the assets
30
of each Fund reach certain levels, subject to a minimum fee of $45,000 ($50,000 for the International Opportunities Fund) per Fund. For the
years ended September 30, 2000, September 30, 2001 and September 30, 2002, the Administrator earned fees under the Administration Agreement as follows:
|
|
|
Fiscal Year Ended
September 30, 2000
|
|
Fiscal Year Ended
September 30, 2001
|
|
Fiscal Year Ended
September 30, 2002
|
|
Focus Fund
|
|
$
|
337,630
|
|
$
|
247,472
|
|
$
|
|
|
Growth Fund
|
|
|
217,009
|
|
|
183,772
|
|
$
|
|
|
21st Century Fund
|
|
|
66,372
|
|
|
89,239
|
|
$
|
|
|
International Opportunities Fund
|
|
|
12,323
|
|
|
49,620
|
|
$
|
|
The Trust pays all of its own expenses, including without
limitation, the cost of preparing and printing its registration statements required under the Securities Act of 1933 and the 1940 Act and any amendments thereto, the expense of registering its shares with the Securities and Exchange Commission and
in the various states, advisory and administration fees, costs of organization and maintenance of corporate existence, the printing and distribution costs of prospectuses mailed to existing investors, reports to investors, reports to government
authorities and proxy statements, costs of meetings of shareholders, fees paid to trustees who are not interested persons of the Adviser, interest charges, taxes, legal expenses, association membership dues, auditing services, insurance premiums,
brokerage commissions and expenses in connection with portfolio transactions, fees and expenses of the custodian of the Trust’s assets, charges of securities pricing services, printing and mailing expenses and charges and expenses of dividend
disbursing agents, accounting services and stock transfer agents.
The Funds have adopted a Distribution and Service Plan (the
“Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Funds in connection with the distribution of their shares at an annual rate, as determined from time-to-time by the Board of Trustees, or up to 0.25% of
the Funds’ average daily net assets. Payments may be made by the Funds under the Plan for the purpose of financing any activity primarily intended to result in the sales of shares of the Funds as determined by the Board of Trustees. Such
activities typically include advertising; compensation for sales and sales marketing activities of Financial Service Agents and others, such as dealers or distributors; shareholder account servicing; production and dissemination of prospectuses and
sales and marketing materials; and capital or other expenses of associated equipment, rent, salaries, bonuses, interest and other overhead. To the extent any activity is one which the Funds may finance without a Plan, the Funds may also make
payments to finance such activity outside of the Plan and not subject to its limitations. Payments under the Plan are not tied exclusively to actual distribution and service expenses, and the payments may exceed distribution and service expenses
actually incurred.
31
For the fiscal year ended September 30, 2002, the following 12b-1 payments were
made under the Plan:
|
|
|
Focus Fund
|
|
Growth Fund
|
|
21st Century Fund
|
|
International Opportunities Fund
|
|
Advertising
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Printing and Mailing of Prospectuses to other than current shareholders
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Compensation to Underwriters
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Compensation to Broker-Dealers
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Other*
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Total
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
*
|
|
This includes consulting fees, miscellaneous shipping, filing and travel expenses, and storage of printed items.
|
Administration of the Plan is regulated by Rule 12b-1 under the 1940 Act, which includes requirements that the Board of Trustees receive
and review at least quarterly reports concerning the nature and qualification of expenses which are made, that the Board of Trustees approve all agreements implementing the Plan and that the Plan may be continued from year-to-year only if the Board
of Trustees concludes at least annually that continuation of the Plan is likely to benefit shareholders.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Trustees, decisions
to buy and sell securities for the Funds and negotiation of their brokerage commission rates are made by the Adviser. Transactions on United States stock exchanges involve the payment by the Funds of negotiated brokerage commissions. There is
generally no stated commission in the case of securities traded in the over-the-counter market but the price paid by the Funds usually includes an undisclosed dealer commission or mark-up. In certain instances, the Funds may make purchases of
underwritten issues at prices which include underwriting fees.
In selecting a broker to execute each particular
transaction, the Adviser takes a variety of factors into consideration, which may include, without limitation: the best net price available; the reliability, integrity and financial condition of the broker; the size of the order and difficulty in
executing it; the use of brokerage credits to reduce service fees as contemplated in a board approved program, and the value of the expected contribution of the broker to the investment performance of the Funds on a continuing basis. Accordingly,
the cost of the brokerage commissions to the Funds in any transaction may be greater than that available from other brokers if the difference is reasonably justified by other
32
aspects of the portfolio execution services offered. For example, the Adviser will consider the research and investment services provided by
brokers or dealers who effect or are parties to portfolio transactions of the Funds or the Adviser’s other clients. Such research and investment services include statistical and economic data, research reports on particular companies and
industries, assistance in contacting particular companies, and research software, among other things. Subject to such policies and procedures as the Trustees may determine, the Adviser shall not be deemed to have acted unlawfully or to have breached
any duty solely by reason of its having caused the Funds to pay a broker that provides brokerage or research services to the investment adviser an amount of commission for effecting a portfolio investment transaction in excess of the amount another
broker would have charged for effecting that transaction, if the investment adviser determines in good faith that such amount of commission was reasonable in relation to the value of the research service provided by such broker viewed in terms of
either that particular transaction or the investment adviser’s ongoing responsibilities with respect to the Funds and other accounts advised by the investment adviser.
Research and investment information is provided by these and other brokers at no cost to the Adviser and is available for the benefit of other accounts advised by the
investment adviser and its affiliates, and not all of the information will be used in connection with the Funds. While this information may be useful in varying degrees and may tend to reduce the Adviser’s expenses, it is not possible to
estimate its value and in the opinion of the Adviser it does not reduce the Adviser’s expenses in a determinable amount. The extent to which the Adviser makes use of statistical, research and other services furnished by brokers is considered by
the investment adviser in the allocation of brokerage business but there is no formula by which such business is allocated. The Adviser does so in accordance with its judgment of the best interests of the Funds and their shareholders.
For the years ended September 30, 2000, September 30, 2001 and September 30, 2002, the Funds paid the following commissions to
brokers:
|
|
|
Fiscal Year
Ended
September 30,
2000
|
|
Fiscal Year
Ended
September 30,
2001
|
|
Fiscal Year
Ended
September 30,
2002
|
|
Focus Fund
|
|
$
|
6,910,538
|
|
$
|
4,288,060
|
|
$
|
|
Growth Fund
|
|
|
1,783,280
|
|
|
1,357,995
|
|
$
|
|
21st Century Fund
|
|
|
634,336
|
|
|
532,046
|
|
$
|
|
International Opportunities Fund
|
|
|
83,876
|
|
|
378,137
|
|
$
|
Banc of America Securities is an affiliate of Marsico Capital and
is designated as an introductory broker on certain Fund transactions. For the years ended September 30, 2000, September 30, 2001 and September 30, 2002, the Funds paid the following brokerage commissions to Banc of America Securities:
33
|
|
|
Fiscal Year
Ended
September 30,
2000
|
|
Fiscal Year
Ended
September 30,
2001
|
|
Fiscal Year
Ended
September 30,
2002
|
|
Focus Fund
|
|
$
|
419,280
|
|
$
|
658,063
|
|
$
|
|
Growth Fund
|
|
|
87,007
|
|
|
197,042
|
|
$
|
|
21st Century Fund
|
|
|
9,902
|
|
|
17,418
|
|
$
|
|
International Opportunities Fund
|
|
|
0
|
|
|
0
|
|
$
|
The percentage of the Funds’ aggregate brokerage commissions
paid to Banc of America Securities for the fiscal year ended September 30, 2002 were % for the Focus Fund,
% for the Growth Fund, % for the 21st Century Fund and
% for the International Opportunities Fund. The percentage of the Funds aggregate brokerage commissions paid to Banc of America Securities for the fiscal year ended September
30, 2001 were 15.35% for the Focus Fund, 14.51% for the Growth Fund, 3.27% for the 21st Century Fund and 0% for the International Opportunities Fund. The percentage of the Funds aggregate dollar amount of transactions involving the payment of
commissions effected through Banc of America Securities for the fiscal year ended September 30, 2002 were % for the Focus Fund,
% for the Growth Fund, % for the 21st Century Fund and
% for the International Opportunities Fund. The percentage of the Funds aggregate dollar amount of transactions involving the payment of commissions effected through Banc of
America Securities for the fiscal year ended September 30, 2001 were 15.04% for the Focus Fund, 14.01% for the Growth Fund, 3.29% for the 21st Century Fund and 0% for the International Opportunities Fund. The Funds did not pay any commissions to
brokers who were affiliated with UMB Distribution Services, LLC or any affiliated person thereof.
During the
fiscal year ending September 30, 2002, the Funds directed brokerage transactions to brokers because of research services provided. The amount of such transactions and related commissions were as follows: for the Focus Fund,
$ in research commissions and $ in research commission transactions; for the Growth Fund,
$ in research commissions and $ in research commission transactions; for the 21st Century Fund,
$ in research commissions and $ in research transactions; and for the International Opportunities Fund,
$ in research commissions and $ in research commission transactions.
The following information is provided with respect to the Funds’ “regular broker-dealers.” The term “regular
broker-dealers” means generally, as of September 30, 2002, any of the ten brokers or dealers who, for the fiscal year ended September 30, 2002, (1) received the greatest dollar amount of brokerage commissions from the Funds, (2) engaged as
principal in the largest dollar amount of portfolio transactions for the Funds, or (3) sold the largest dollar amount of securities of the Funds.
34
The chart below identifies each Fund’s “regular broker-dealers”
the securities of which were purchased by a Fund during the fiscal year ended September 30, 2002 and the value of each Fund’s holdings of such securities as of September 30, 2002. Where a value is listed as zero, the Fund no longer held any
securities of the indicated broker-dealer.
|
Regular Brokers
|
|
Focus Fund
|
|
Growth Fund
|
|
21st Century Fund
|
|
International Opportunities Fund
|
|
Rueters Group PLC
|
|
|
|
|
|
|
|
|
|
AXA SA
|
|
|
|
|
|
|
|
|
|
Deutsche Bank AG
|
|
|
|
|
|
|
|
|
|
Goldman Sachs Group
|
|
|
|
|
|
|
|
|
|
JP Morgan Chase & Co.
|
|
|
|
|
|
|
|
|
|
Lehman Brothers
|
|
|
|
|
|
|
|
|
|
Merrill Lynch & Co.
|
|
|
|
|
|
|
|
|
|
Morgan Stanley Dean Witter
|
|
|
|
|
|
|
|
|
|
Citigroup
|
|
|
|
|
|
|
|
|
|
UBS AG
|
|
|
|
|
|
|
|
|
From time to time, quotations of the Funds’ performance may
be included in advertisements, sales literature or reports to shareholders or prospective investors. These performance figures are calculated in the following manner.
AVERAGE ANNUAL TOTAL RETURN
Average annual total return is the average annual compounded
rate of return for periods of one year, five years and ten years, all ended on the last day of a recent calendar quarter. Average annual total return quotations reflect changes in the price of a Fund’s shares and assume that all dividends and
capital gains distributions during the respective periods were reinvested in Fund shares. Average annual total return (before taxes) is calculated by computing the average annual compounded rates of return of a hypothetical investment over such
periods, according to the following formula (average annual total return is then expressed as a percentage):
P(1+T)
n
= ERV
Where:
T = average annual total return
P = a hypothetical initial investment of $1,000
n = number of years
35
ERV = ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the designated time period.
It should be noted that average annual total return is based on historical earnings and is not intended to indicate future performance. Average annual total
return for the Fund will vary based on changes in market conditions and the level of the Fund’s expenses.
Based on the foregoing, the average annual total returns (before taxes) for the Funds for the one-year, five-year and since-inception periods, ended September
30, 2002 were as follows:
Average Annual Total Returns
For periods ended September 30, 2002
|
|
|
One Year
|
|
|
Five Years
|
|
|
Since Inception
|
|
|
Focus Fund (Inception 12/31/97)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
|
Growth Fund (Inception 12/31/97)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
|
21st Century Fund (Inception 2/1/00)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
|
International Opportunities Fund (Inception 6/30/00)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
The average annual
total return (after taxes on distributions) will be calculated according to the following formula:
P(1 + T)n =
ATV
D
Where:
P = a hypothetical initial payment of $1, 000,
T = average annual total return (after taxes on distributions),
n = number of years, and
ATV
D
= the ending value of a hypothetical $1,000 payment made at the beginning of the designated time period, after taxes on
fund distributions but not after taxes on redemption.
36
Based on the foregoing, the
average annual total returns (after taxes on distributions) for the Funds for the one-year, five-year and since-inception periods ended September 30, 2002 were as follows:
Average Annual Total Returns – After
Taxes on Distributions
For periods ended September 30, 2002
|
|
|
One Year
|
|
|
Five Years
|
|
|
Since Inception
|
|
|
Focus Fund (Inception 12/31/97)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
|
Growth Fund (Inception 12/31/97)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
|
21st Century Fund (Inception 2/1/00)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
|
International Opportunities Fund (Inception 6/30/00)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
The average annual
total return (after taxes on distributions and redemptions) will be calculated according to the following formula:
P(1+T)n = ATV
DR
Where:
P = a hypothetical initial payment of $1,000,
T = average annual total return (after taxes on distributions and
redemption),
n = number of years, and
ATV
DR
= the ending value of a hypothetical $1,000 payment made at
the beginning of the designated time period, after taxes on distributions and redemption.
Based on the foregoing, the average annual total returns (after taxes on distributions
and redemptions) for the Funds for the one-year, five-year and since–inception periods ended September 30, 2002 were as follows:
Average Annual Total Returns – After
Taxes on Distributions and Redemptions
For periods ended September 30, 2002
|
|
|
One Year
|
|
|
Five Years
|
|
|
Since Inception
|
|
|
Focus Fund (Inception 12/31/97)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
|
Growth Fund (Inception 12/31/97)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
|
21st Century Fund (Inception 2/1/00)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
|
International Opportunities Fund (Inception 6/30/00)
|
|
____
|
%
|
|
____
|
%
|
|
____
|
%
|
37
In connection with communicating its average annual total return to current or
prospective shareholders, the Funds also may compare these figures to the performance of other mutual funds tracked by mutual fund rating services or to unmanaged indices which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
COMPARISON OF PORTFOLIO PERFORMANCE
Comparison of the quoted non-standardized performance of various investments is valid only if performance is
calculated in the same manner. Since there are different methods of calculating performance, investors should consider the effect of the methods used to calculate performance when comparing performance of a Fund with performance quoted with respect
to other investment companies or types of investments.
In connection with communicating its performance to
current or prospective shareholders, a Fund also may compare these figures to the performance of unmanaged indices which may assume reinvestment of dividends or interest but generally do not reflect deductions for administrative and management
costs. Examples include, but are not limited to the Dow Jones Industrial Average, the Consumer Price Index, Standard & Poor’s 500 Composite Stock Price Index (S&P 500), the NASDAQ Composite Index, the Russell 2000 Index, the Wilshire
5000 Index, and the Morgan Stanley Capital International EAFE Index.
From time to time, in advertising, marketing
and other Fund literature, the performance of a Fund may be compared to the performance of broad groups of mutual funds with similar investment goals, or other groups of mutual funds, as tracked by independent organizations such as Investment
Company Data, Inc., Lipper Inc., Thompson Financial Research, Morningstar, Inc., Value Line Mutual Fund Survey and other independent organizations. When these organizations’ tracking results are used to compare the Funds to other funds with
similar goals, a Fund will be compared to the appropriate fund category, that is, by fund objective and portfolio holdings or the appropriate volatility grouping, where volatility is a measure of a Fund’s risk. From time to time, the average
price-earnings ratio and other attributes of a Fund’s or the model portfolio’s securities, may be compared to the average price-earnings ratio and other attributes of the securities that comprise the S&P 500 Index. The Funds may also
quote mutual fund ratings prepared by independent services or financial or industry publications.
Statistical and
other information, as provided by the Social Security Administration, may be used in marketing materials pertaining to retirement planning in order to estimate future payouts of social security benefits. Estimates may be used on demographic and
economic data.
Marketing and other Fund literature may include a description of the potential risks and rewards
associated with an investment in a Fund. The description may include a “risk/return spectrum” which compares a Fund to broad categories of funds, such as money market, bond or equity funds, in terms of potential risks and returns. Money
market funds are designed to maintain a constant $1.00 share price and have a fluctuating yield. Share price, yield and total return of a bond fund will fluctuate. The share price and return of an equity fund also will fluctuate. The description may
also compare a Fund to bank products, such as certificates of
38
deposit. Unlike mutual funds, certificates of deposit are insured up to $100,000 by the U.S. government and offer a fixed rate of return.
Risk/return spectrums also may depict funds that invest in both domestic and foreign securities or a combination
of bond and equity securities.
The Funds may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an investor invests a fixed dollar amount in a Fund at periodic intervals, thereby purchasing fewer shares when prices are high and more shares when prices are low. While such a
strategy does not assure a profit or guard against loss in a declining market, the investor’s average cost per share can be lower than if fixed numbers of shares are purchased at the same intervals. In evaluating such a plan, investors should
consider their ability to continue purchasing shares during periods of low price levels.
The Funds may include
discussions or illustrations of general principles of investing, investment management techniques, economic and political conditions, the relationship between sectors of the economy and the economy as a whole, the effects of inflation and historical
performance of various asset classes, the effects of compounding, and tax and retirement planning. The Funds may also include discussions of investments in the Funds by employees of the Funds and the Adviser.
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Funds and the purchase, ownership, and disposition of Fund shares. This discussion does not purport to be complete or to deal with all aspects of federal income taxation that may be relevant to shareholders in light of their
particular circumstances. This discussion is based upon present provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of
which are subject to change, which change may be retroactive. Prospective investors should consult their own tax advisors with regard to the federal tax consequences of the purchase, ownership, or disposition of Fund shares, as well as the tax
consequences arising under the laws of any state, foreign country, or other taxing jurisdiction.
Each Fund
intends to qualify as a regulated investment company under Subchapter M of the Code. Accordingly, each Fund generally must, among other things, (a) derive in each taxable year at least 90% of its gross income from dividends, interest, payments with
respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock, securities or currencies; and (b)
diversify its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the market value of its assets is represented by cash, U.S. Government securities, the securities of other regulated investment companies and other securities,
with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund’s total assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of
its total assets is invested in the securities of any one issuer (other than U.S. Government securities and the securities of other regulated investment companies).
39
As a regulated investment company, a Fund generally will not be subject to U.S.
federal income tax on income and gains that it distributes to shareholders, if at least 90% of each Fund’s investment company taxable income (which includes, among other items, dividends, interest and the excess of any net short-term capital
gains over net long-term capital losses) for the taxable year is distributed. Each Fund intends to distribute substantially all of such income.
Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% excise tax at the Fund level. To avoid the tax, each Fund must
distribute during each calendar year an amount equal to the sum of (1) at least 98% of its ordinary income (not taking into account any capital gains or losses) for the calendar year, (2) at least 98% of its capital gains in excess of its capital
losses (adjusted for certain ordinary losses) for a one-year period generally ending on October 31 of the calendar year, and (3) all ordinary income and capital gains for previous years that were not distributed during such years. To avoid
application of the excise tax, each Fund intends to make distributions in accordance with the calendar year distribution requirement.
A distribution will be treated as paid on December 31 of the current calendar year if it is declared by a Fund in October, November or December of that year with a record date in such a month and paid by that Fund during
January of the following year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received.
DISTRIBUTIONS. Distributions of investment company taxable income are taxable to a U.S. shareholder as ordinary
income, whether paid in cash or shares. Dividends paid by a Fund to a corporate shareholder, to the extent such dividends are attributable to dividends received from U.S. corporations by a Fund, may qualify for the dividends received deduction.
However, the revised alternative minimum tax applicable to corporations may reduce the value of the dividends received deduction. Distributions of net capital gains (the excess of net long-term capital gains over net short-term capital losses), if
any, designated by a Fund as capital gain dividends, are taxable to shareholders at the applicable mid-term or long-term capital gains rate, whether paid in cash or in shares, regardless of how long the shareholder has held a Fund’s shares, and
they are not eligible for the dividends received deduction. Shareholders will be notified annually as to the U.S. federal tax status of distributions, and shareholders receiving distributions in the form of newly issued shares will receive a report
as to the net asset value of the shares received.
If the net asset value of shares is reduced below a
shareholder’s cost as a result of a distribution by a Fund, such distribution generally will be taxable even though it represents a return of invested capital. Investors should be careful to consider the tax implications of buying shares of a
Fund just prior to a distribution. The price of shares purchased at this time may reflect the amount of the forthcoming distribution. Those purchasing just prior to a distribution will receive a distribution which generally will be taxable to them.
FUND INVESTMENTS.
ORIGINAL ISSUE DISCOUNT. Certain debt securities acquired by the Funds may be treated as debt securities that were originally issued at a discount.
Original issue discount can
40
generally be defined as the difference between the price at which a security was issued and its stated redemption price at maturity. Although no
cash income is actually received by a Fund, original issue discount that accrues on a debt security in a given year generally is treated for federal income tax purposes as interest and, therefore, such income would be subject to the distribution
requirements applicable to regulated investment companies.
MARKET DISCOUNT. Some debt
securities may be purchased by the Funds at a discount that exceeds the original issue discount on such debt securities, if any. This additional discount represents market discount for federal income tax purposes. The gain realized on the
disposition of any taxable debt security having market discount generally will be treated as ordinary income to the extent it does not exceed the accrued market discount on such debt security. Generally, market discount accrues on a daily basis for
each day the debt security is held by a Fund at a constant rate over the time remaining to the debt security’s maturity or, at the election of a Fund, at a constant yield to maturity which takes into account the semi-annual compounding of
interest.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS; STRADDLES. A
Fund’s transactions in foreign currencies, forward contracts, options and futures contracts (including options and futures contracts on foreign currencies) will be subject to special provisions of the Code that, among other things, may affect
the character of gains and losses realized by the Fund (i.e., may affect whether gains or losses are ordinary or capital), accelerate recognition of income to the Fund, defer Fund losses, and affect the determination of whether capital gains and
losses are characterized as long-term or short-term capital gains or losses. These rules could therefore, in turn, affect the character, amount, and timing of distributions to shareholders. These provisions also may 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 its
distribution requirements for relief from income and excise taxes. Each Fund will monitor its transactions and may make such tax elections as Fund management deems appropriate with respect to foreign currency, options, futures contracts, forward
contracts, or hedged investments. The Funds’ status as regulated investment companies may limit their transactions involving foreign currency, futures, options, and forward contracts.
Certain transactions undertaken by a Fund may result in “straddles” for federal income tax purposes. The straddle rules may affect the character of gains (or
losses) realized by a Fund, and losses realized by the Fund on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the
losses are realized. In addition, certain carrying charges (including interest expense) associated with positions in a straddle may be required to be capitalized rather than deducted currently. Certain elections that a Fund may make with respect to
its straddle positions may also affect the amount, character and timing of the recognition of gains or losses from the affected positions.
Under certain circumstances, the Fund may recognize gain from a constructive sale of an “appreciated financial position” it holds if it enters into a short sale, forward contract or other transaction that
substantially reduces the risk of loss with respect to the appreciated position. In that event, the Fund would be treated as if it had sold and immediately repurchased the property
41
and would be taxed on any gain (but not loss) from the constructive sale. The character of gain from a constructive sale w.ould depend upon the
Fund’s holding period in the property. Loss from a constructive sale would be recognized when the property was subsequently disposed of, and its character would depend on the Fund’s holding period and the application of various loss
deferral provisions of the Code. Constructive sale treatment does not apply to transactions closed in the 90-day period ending with the 30th day after the close of the taxable year, if certain conditions are met.
CURRENCY FLUCTUATIONS— “SECTION 988” GAINS OR LOSSES. Each Fund will maintain accounts and calculate
income by reference to the U.S. dollar for U.S. federal income tax purposes. Some of a Fund’s investments will be maintained and income therefrom calculated by reference to certain foreign currencies, and such calculations will not necessarily
correspond to the Fund’s distributable income and capital gains for U.S. federal income tax purposes as a result of fluctuations in currency exchange rates. Furthermore, exchange control regulations may restrict the ability of a Fund to
repatriate investment income or the proceeds of sales of securities. These restrictions and limitations may limit a Fund’s ability to make sufficient distributions to satisfy the 90% distribution requirement for qualification as a regulated
investment company. Even if a fund so qualified, these restrictions could inhibit its ability to distribute all of its income in order to be fully relieved of tax liability.
Gains or losses attributable to fluctuations in exchange rates which occur between the time a Fund accrues income or other receivables (including dividends) or accrues
expenses or other liabilities denominated in a foreign currency and the time a Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of some investments,
including debt securities and certain forward contracts denominated in a foreign currency, gains or losses attributable to fluctuations in the value of the foreign currency between the date of the acquisition of the security or other instrument and
the date of disposition also are treated as ordinary gain or loss. These gains and losses, referred to under the Code as “section 988” gains or losses, increase or decrease the amount of the Funds’ investment company taxable income
available to be distributed to its shareholders as ordinary income. If section 988 losses exceed other investment company taxable income during a taxable year, a Fund would not be able to make any ordinary dividend distributions, or distributions
made before the losses were realized would be recharacterized as a return of capital to shareholders, or, in some cases, as capital gain, rather than as an ordinary dividend.
CONSTRUCTIVE SALES. Under certain circumstances, a Fund may recognize gain from a constructive sale of an “appreciated financial position”
it holds if it enters into a short sale, forward contract or other transaction that substantially reduces the risk of loss with respect to the appreciated position. In that event, the Fund would be treated as if it had sold and immediately
repurchased the property and would be taxed on any gain (but not loss) from the constructive sale. The character of gain from a constructive sale would depend upon the Fund’s holding period in the property. Loss from a constructive sale would
be recognized when the property was subsequently disposed of, and its character would depend on the Fund’s holding period and the application of various loss deferral provisions of the Code. Constructive sale treatment does not apply to certain
transactions if such transaction is closed before the end of the 30
th
day after the close of the
Fund’s taxable year and the Fund holds the appreciated financial
42
position throughout the 60-day period beginning on the date such transaction was closed, if certain conditions are met.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Fund may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies (“PFICs”). In general, a foreign corporation is classified as a PFIC if at least one-half of its assets constitute investment-type assets, or 75% or more of its gross income
is investment-type income. If the Fund receives a so-called “excess distribution” with respect to PFIC stock, the Fund itself may be subject to a tax on a portion of the excess distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the PFIC rules, an excess distribution is treated as having been realized ratably over the period during which the Fund held the PFIC shares. The Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated to prior Fund taxable years and an interest factor will be added to the tax, as if the tax had been payable in such prior taxable years. Certain distributions from a PFIC as well as
gain from the sale of PFIC shares are treated as excess distributions. Excess distributions are characterized as ordinary income even though, absent application of the PFIC rules, certain distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment with respect to PFIC shares. Under an election that
currently is available in some circumstances, the Fund generally would be required to include in its gross income its share of the earnings of a PFIC on a current basis, regardless of whether distributions were received from the PFIC in a given year
If this election were made, the special rules, discussed above, relating to the taxation of excess distributions, would not apply. In addition, another election would involve marking to market the Fund’s PFIC shares at the end of each taxable
year, with the result that unrealized gains would be treated as though they were realized and reported as ordinary income. Any mark-to-market losses and any loss from an actual disposition of Fund shares would be deductible as ordinary losses to the
extent of any net mark-to-market gains included in income in prior years.
Because the application of the PFIC
rules may affect, among other things, the character of gains, the amount of gain or loss and the timing of the recognition of income with respect to PFIC shares, as well as subject the Fund itself to tax on certain income from PFIC shares, the
amount that must be distributed to shareholders, and which will be taxed to shareholders as ordinary income or long-term capital gains, may be increased or decreased substantially as compared to a fund that did not invest in PFIC shares.
FOREIGN TAXES. Each Fund may be subject to certain taxes imposed by the countries in which
it invests or operates. If a Fund qualifies as a regulated investment company and if more than 50% of the value of the Fund’s total assets at the close of any taxable year consists of stocks or securities of foreign corporations, the Fund may
elect, for U.S. federal income tax purposes, to treat any foreign taxes paid by the Fund that qualify as income or similar taxes under U.S. income tax principles as having been paid by the Fund’s shareholders. For any year for which a Fund
makes such an election, each shareholder will be required to include in its gross income an amount equal to its allocable share of such taxes paid by the Fund and the shareholders will be entitled, subject to certain limitations, to credit their
portions of these amounts against their U.S. federal income tax liability, if any, or to deduct their portions from their U.S. taxable income, if any. No deduction for foreign taxes may be claimed by individuals
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who do not itemize deductions. In any year in which it elects to “pass through” foreign taxes to shareholders, a Fund will notify
shareholders within 60 days after the close of the Fund’s taxable year of the amount of such taxes and the sources of its income. It is unlikely that any Fund other than the International Opportunities Fund will be able to make such an
election.
Generally, a credit for foreign taxes paid or accrued is subject to the limitation that it may not
exceed the shareholder’s U.S. tax attributable to his or her total foreign source taxable income. For this purpose, the source of a Fund’s income flows through to its shareholders. With respect to each Fund gains from the sale of
securities may have to be treated as derived from U.S. sources and certain currency fluctuation gains, including Section 988 gains (defined above), may have to be treated as derived from U.S. sources. The limitation of the foreign tax credit is
applied separately to foreign source passive income, including foreign source passive income received from the Fund. Shareholders may be unable to claim a credit for the full amount of their proportionate share of the foreign taxes paid by the
relevant Fund. The foreign tax credit can be applied to offset no more than 90% of the alternative minimum tax imposed on corporations and individuals.
The foregoing is only a general description of the foreign tax credit. Because the application of the credit depends on the particular circumstances of each shareholder, shareholders are advised to
contact their tax advisors.
DISPOSITION OF SHARES. Upon a redemption, sale or exchange of
shares of a Fund, a shareholder will realize a taxable gain or loss depending upon the amount realized and the shareholder’s basis in the shares. A gain or loss will be treated as capital gain or loss if the shares are capital assets in the
shareholder’s hands and generally will be long-term or short-term, depending upon the shareholder’s holding period for the shares. Any loss realized on a redemption, sale or exchange will be disallowed to the extent the shares disposed of
are replaced (including through reinvestment of dividends) within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of. In such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a shareholder on the disposition of a Fund’s shares held by the shareholder for six months or less will be treated for tax purposes as a long-term capital loss to the extent of any distributions of capital
gain dividends received or treated as having been received by the shareholder with respect to such shares.
BACKUP
WITHHOLDING. The Funds will be required to report to the Internal Revenue Service (the “IRS”) all distributions and gross proceeds from the redemption of the Funds’ shares, except in the case of certain exempt
shareholders. All distributions and proceeds from the redemption of a Fund’s shares will be subject to withholding of federal income tax at a rate of 30% (in 2002 and 2003) (“backup withholding”) in the case of non-exempt shareholders
if (1) the shareholder fails to furnish the Funds with and to certify the shareholder’s correct taxpayer identification number or social security number, (2) the IRS notifies the shareholder or the Funds that the shareholder has failed to
report properly certain interest and dividend income to the IRS and to respond to notices to that effect, or (3) when required to do so, the shareholder fails to certify that he or she is not subject to backup withholding. If the withholding
provisions are applicable, any such distributions or proceeds, whether reinvested in additional shares or taken in cash, will be reduced by the amounts required to be withheld.
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OTHER TAXATION. Distributions may also be subject to
additional state, local and foreign taxes depending on each shareholder’s particular situation. Non- U.S. shareholders may be subject to U.S. tax rules that differ significantly from those summarized above. This discussion does not address all
of the tax consequences applicable to the Funds or shareholders, and shareholders are advised to consult their own tax advisors with respect to the particular tax consequences to them of an investment in a Fund.
Shares are purchased at their net asset value per share. Each Fund
calculates its net asset value (NAV) as follows:
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NAV Per Share:
|
|
(Value of Fund Assets)-(Fund Liabilities)
|
|
|
|
Number of Outstanding Shares
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Net asset value is determined as of the end of trading hours on the NYSE (currently 4:00
p.m. New York City time) on days that the NYSE is open.
A security listed or traded on a recognized stock
exchange or quoted on NASDAQ is valued at its last sale price prior to the time when assets are valued on the principal exchange on which the security is traded or on NASDAQ. If no sale is reported at that time the most current bid price will be
used. All other securities for which over-the-counter market quotations are readily available are valued at the most current bid price. Where quotations are not readily available, the Funds’ investments are valued at fair value as determined by
management and approved in good faith by the Trustees. Debt securities which will mature in more than 60 days are valued at prices furnished by a pricing service approved by the Trustees subject to review and determination of the appropriate price
by Marsico Capital, whenever a furnished price is significantly different from the previous day’s furnished price. Securities which will mature in 60 days or less are valued at amortized cost, which approximates market value.
Generally, trading in foreign securities, as well as U.S. Government securities and certain cash equivalents and repurchase
agreements, is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the shares of the Funds are determined as of such times. Foreign currency
exchange rates are also generally determined prior to the close of the NYSE. Occasionally, events affecting the value of such securities and such exchange rates may occur between the times at which they are determined and at the close of the NYSE,
which will not be reflected in the computation of net asset value. If during such periods, events occur which materially affect the value of such securities, the securities will be valued at their fair market value as determined by management and
approved in good faith by the Trustees.
For purposes of determining the net asset value per share of each Fund,
all assets and liabilities initially expressed in foreign currencies will be converted into United States dollars at the mean between the bid and offer prices of such currencies against United States dollars furnished by a pricing service approved
by the Trustees.
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A Fund’s net asset value per share will be calculated separately from the
per share net asset value of any other fund of the Trust. “Assets belonging to” a fund consist of the consideration received upon the issuance of shares of the particular fund together with all net investment income, earnings, profits,
realized gains/losses and proceeds derived from the investment thereof, including any proceeds from the sale of such investments, any funds or payments derived from any reinvestment of such proceeds, and a portion of any general assets of the Trust
not belonging to a particular series. Each fund will be charged with the direct liabilities of that fund and with a share of the general liabilities of the Trust’s funds. Subject to the provisions of the Charter, determinations by the Trustees
as to the direct and allocable expenses, and the allocable portion of any general assets, with respect to a particular fund are conclusive.
DESCRIPTION OF SHARES. The Trust is an open-end
management investment company organized as a Delaware Business Trust on October 1, 1997. The Trust’s Trust Instrument authorizes the Board of Trustees to issue an unlimited number of shares of beneficial interest. Each share of the Funds has
equal voting, dividend, distribution and liquidation rights.
Shares of the Trust have no preemptive rights and
only such conversion or exchange rights as the Board may grant in its discretion. When issued for payment as described in the Prospectus, the Trust’s shares will be fully paid and non-assessable.
Shareholders are entitled to one vote for each full share held, and fractional votes for fractional shares held, and will vote in the
aggregate and not by class or series except as otherwise required by the 1940 Act or applicable Delaware law.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted to the holders of the outstanding voting securities of an investment company such as the Trust shall not be deemed to have been effectively acted upon
unless approved by a majority of the outstanding shares of each fund affected by the matter. A fund is affected by a matter unless it is clear that the interests of each Fund in the matter are substantially identical or that the matter does not
affect any interest of the Fund. Under Rule 18f-2 the approval of an investment advisory agreement or 12b-1 distribution plan or any change in a fundamental investment policy would be effectively acted upon with respect to a fund only if approved by
a majority of the outstanding shares of such Fund. However, the rule also provides that the ratification of independent accountants, the approval of principal underwriting contracts and the election of directors may be effectively acted upon by
shareholders of the Trust voting without regard to particular funds. Notwithstanding any provision of Delaware law requiring for any purpose the concurrence of a proportion greater than a majority of all votes entitled to be cast at a meeting at
which a quorum is present, the affirmative vote of the holders of a majority of the total number of shares of the Trust outstanding (or of a class or series of the Trust, as applicable) will be effective, except to the extent otherwise required by
the 1940 Act and rules thereunder. In addition, the Trust Instrument provides that, to the extent consistent with Delaware law and other applicable law, the By-Laws may provide for authorization to be given by the affirmative vote of the holders of
less than a majority of the total number of shares of the Trust outstanding (or of a class or series).
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If requested to do so by the holders of at least 10% of the Trust’s
outstanding shares, the Trust will call a meeting of shareholders for the purpose of voting upon the question of removal of a Trustee, and to assist in communications with other shareholders as required by Section 16(c) of the 1940 Act.
HOW TO BUY AND SELL SHARES
The right of redemption may be suspended, or the date of
payment postponed beyond the normal seven-day period by the Funds, under the following conditions authorized by the 1940 Act: (1) for any period (a) during which the New York Stock Exchange is closed, other than customary weekend or holiday
closings, or (b) during which trading on the New York Stock Exchange is restricted; (2) for any period during which an emergency exists as a result of which (a) disposal by the Fund of securities owned by it is not reasonably practical, or (b) it is
not reasonably practical for a Fund to determine the fair value of its net assets; and (3) for such other periods as the Securities and Exchange Commission may by order permit for the protection of the Fund’s shareholders.
The value of shares of a Fund on redemption may be more or less than the shareholder’s cost, depending upon the market
value of that Fund’s assets at the time. Shareholders should note that if a loss has been realized on the sale of shares of a Fund, the loss may be disallowed for tax purposes if shares of the same Fund are purchased within (before or after) 30
days of the sale.
The International Opportunities Fund will impose a redemption fee of 2.00% of the total
redemption amount (calculated at market value) if you sell or exchange your shares after holding them for three months or less.
It is possible that conditions may exist in the future which would, in the opinion of the Board of Trustees, make it undesirable for the Funds to pay for redemptions in cash. In such cases the Board may authorize payment to be made
in portfolio securities of the Funds. However, the Funds are obligated under the 1940 Act to redeem for cash all shares presented for redemption by any one shareholder up to $250,000 (or 1% of a Fund’s net assets if that is less) in any 90-day
period. Securities delivered in payment of redemptions are valued at the same value assigned to them in computing the net asset value per share. Shareholders receiving such securities generally will incur brokerage costs on their sales.
Any redemption or transfer of ownership request for corporate accounts will require the following written
documentation:
1. A written Letter of Instruction signed by the required number of
authorized officers, along with their respective positions. For redemption requests in excess of $50,000, the written request must be signature guaranteed. Signature guarantees can be obtained from most banks, credit unions or savings associations,
or from broker/dealers, national securities exchanges, registered securities associations or clearing agencies deemed eligible by the Securities and Exchange Commission. Notaries public cannot provide signature guarantees.
2. A certified Corporate Resolution that states the date the Resolution was adopted and who is empowered to act,
transfer or sell assets on behalf of the corporation.
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3. If the Corporate Resolution is more than 60 days old
from the date of the transaction request, a Certificate of Incumbency from the Corporate Secretary which specifically states that the officer or officers named in the resolution have the authority to act on the account. The Certificate of Incumbency
must be dated within 60 days of the requested transaction. If the Corporate Resolution confers authority on officers by title and not by name, the Certificate of Incumbency must name the officer(s) and their title(s).
When redeeming shares from the Money Market Fund, if you redeem less than all of the balance of your account, your redemption proceeds
will exclude accrued and unpaid income through the date of the redemption. When redeeming your entire balance from the Money Market Fund, accrued income will be paid separately when the income is collected and paid from the Money Market Fund, at the
end of the month.
AUTOMATIC INVESTMENT PLAN. The Funds offer an Automatic Investment Plan
whereby an investor may automatically purchase shares of the Funds on a regular basis ($50 minimum per transaction). Under the Automatic Investment Plan, an investor’s designated bank or other financial institution debits a pre-authorized
amount on the investor’s account each designated period and applies the amount to the purchase of a Fund’s shares. The Automatic Investment Plan must be implemented with a financial institution that is a member of the Automated Clearing
House (ACH). Also, the designated Fund must have a currently effective registration in those states in which it is required. You may enroll in the Automatic Investment Plan by completing the appropriate section of the Account Application. If you
wish to establish an Automatic Investment Plan after your account has been opened, please contact the Transfer Agent at 1-888-860-8686.
Automatic Investment Plan transactions are scheduled for the 5th, 10th, 15th, and 20th of every month. Transactions also may be scheduled monthly, quarterly, semi-annually or annually. No service fee is currently charged by
the Funds for participation in the Automatic Investment Plan. A $20 fee will be imposed by the Funds if sufficient funds are not available in your account or your account has been closed at the time of the automatic transaction and your purchase
will be canceled. You will also be responsible for any losses suffered by the Funds as a result. You may adopt the Automatic Investment Plan at the time the account is opened by completing the appropriate section of the Account Application. Changes
to bank information must be made in writing and signed by all registered holders of the account with signatures guaranteed. A full redemption of all funds from your account will automatically discontinue Automatic Investment Plan privileges.
Termination instructions must be received by the Funds five business days prior to the effective date of termination.
SYSTEMATIC WITHDRAWAL PLAN. The Funds offer a Systematic Withdrawal Plan which allows you to designate that a fixed amount ($100 minimum per transaction limited to those shareholders with a balance of $10,000
or greater upon commencement of participation in the Systematic Withdrawal Plan) be distributed to you at regular intervals. The redemption takes place on the 5th, 10th, 15th, or 20th of the month but if the day you designate falls on a Saturday,
Sunday, or legal holiday, the distribution shall be made on the prior business day. Any changes made to the distribution information must be made in writing and signed by each registered holder of the account with signatures guaranteed.
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The Systematic Withdrawal Plan may be terminated by you at any time without
charge or penalty, and the Funds reserve the right to terminate or modify the Systematic Withdrawal Plan upon 60 days’ written notice. Withdrawals involve redemption of funds and may result in a gain or loss for federal income tax purposes. An
application for participation in the Systematic Withdrawal Plan may be obtained from the Transfer Agent by calling 1-888-860-8686.
RETIREMENT PLANS. The Funds offer retirement plans that may allow investors to shelter some of their income from taxes. Descriptions of the plans, application forms, as well as descriptions of
applicable service fees and certain limitations on contributions and withdrawals, are available by calling the Transfer Agent at 1-888-860-8686.
As explained in the Prospectus, the Trust offers an exchange program
whereby shares of any Marsico Fund may be exchanged for shares of another Marsico Fund that is available for investment at any time. In addition, shareholders may exchange all or a portion of their investment from each Fund for Marsico shares of
Nations Cash Reserves Fund, as described in the Prospectus.
UMB Fund Services, Inc., the Funds’ transfer agent, receives a service fee from the Nations Cash Reserves Fund at the annual rate of 0.25 of 1% of the average daily net asset value of the shares
of the Funds exchanged into the Marsico shares of Nations Cash Reserves Fund. UMB Fund Services, Inc. is an affiliate of the Funds’ distributor.
The financial statements of the Funds appearing in the Annual Report
to Shareholders for the year ended September 30, 2002 have been audited by PricewaterhouseCoopers LLP, independent accountants. Such financial statements are incorporated herein by reference.
DISTRIBUTION
The Trust has entered into
a distribution agreement with UMB Distribution Services, LLC (the “Distributor”). Under the agreement, the Distributor serves as each Fund’s principal underwriter and acts as exclusive agent for the Funds in selling their shares to
the public. For the marketing and distribution services provided, the Funds pay the Distributor a fee at the annual rate beginning at 0.02% of each Fund’s average daily net assets and decreasing as the assets of each Fund reach certain asset
levels, subject to a minimum annual fee of $25,000 per Fund. These fees are limited to 0.25% of each Fund’s average daily net assets. If the fees exceed 0.25% of each Fund’s average daily net assets, none of Funds will pay the difference.
Any amount in excess of 0.25% will be borne by Marsico Capital, and not charged to the Funds thereafter. The Distributor is an affiliate of the Funds’ administrator and transfer agent.
During the year ended September 30, 2000, the Distributor earned as compensation $237,227 from the Focus Fund, $112,551 from the Growth Fund, $17,799 from the 21st Century
Fund and $6,284 from the International Opportunities Fund. During the year ended September
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30, 2001, the Distributor earned as compensation $129,989 from the Focus Fund, $86,891 from the Growth
Fund, $25,000 from the 21st Century Fund and $25,000 from the International Opportunities Fund. During the year ended September 30, 2002, the Distributor earned as compensation
$ from the Focus Fund, $ from the Growth Fund,
$ from the 21st Century Fund and $ from the International Opportunities Fund.
Certain officers and directors of Marsico Capital are also officers and trustees of the Trust.
The Trust, the Adviser and the Distributor have adopted Codes of Ethics
governing personal trading activities of all officers, trustees and employees of the Trust, all officers, principals and employees of the Adviser, and all directors, officers and general partners of the Distributor. Under the Trust’s and
Adviser’s Codes, these persons are generally restricted from purchasing common stocks and certain other securities. Under the Distributors Code, the personal trading of such persons is subject to certain restrictions. The Trust, Adviser and
Distributor have developed procedures for administration of their respective Codes.
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Investment Adviser
Marsico Capital Management, LLC, 1200 17th Street, Suite 1300, Denver, CO 80202
Administrator
UMB Fund Services, Inc., 803
W. Michigan Street, Suite A, Milwaukee, WI, 53233
Counsel
Dechert, 1775 Eye St., NW, Washington DC 20006-2401
Custodian
State Street Bank and Trust
Company, 225 Franklin Street, Boston, MA 02110
Independent Accountants
PricewaterhouseCoopers LLP, 1670 Broadway, Suite 1000, Denver, CO 80202
Transfer and Dividend Disbursing Agent
UMB
Fund Services, Inc., 803 W. Michigan Street, Suite A,
Milwaukee, WI, 53233
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