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A fund prospectus is a document that contains details of the fund's objectives, investment strategies, risks, performance, distribution policy, fees and expenses, and fund management. This is the primary method of providing potential investors with information about a fund as required by the US SEC.
For purposes of this competition, all funds will have the following Prospectus:
Fund Objective
The objective of this fund is to produce a positive return on investment, exceeding the return on the S&P 500 Index for a similar investment period.
Investment Strategy
The fund is a "long only", "value" fund that employs no leverage.
The fund will be restricted by following investment criteria:
- "Long" Positions - The fund is not allowed to take "short" positions at any time. A short position is created by selling shares of a company that the fund does not already own.
- Equities - The fund is not allowed to purchase any other type of financial instrument or security except common stock.
- Investment Pool - The fund will only invest in the common equity of companies that are active members of the S&P 500 Index.
Risks & Risk Management Policy
The fund's Risk Management Policy sets forth guidelines governing the Portfolio Manager and her/his team with regard to certain types of risks inherent in investments in of this type, in an effort to mitigate these risks to the extent possible. Some of these risks include:
- Cash Position Limit - The Fund will maintain a positive cash balance at all times. A negative cash balance will imply that the fund is "borrowing" from the broker and therefore "leveraging" the fund's assets. Adding leverage to a fund increases its risk by increasing its volatility - i.e., by apmplifying its true profits or losses.
- Sector-Level Concentration Risk - This is the risk of having too much of the fund's assets invested in any single sector. For purposes of this compeition "sectors" will be defined by the Standard & Poors Global Industry Classification System or "GICS". Establishing and maintaining a reasonable single sector risk limit will prevent the fund from suffering a catastrophic loss in the event any sector loses a significant amount of value as certain sectors performance tend to vary with the cycle of the economy.
- Single-Position Concentration Risk - This is the risk of having too much of the fund's assets invested in any single position (investment in a company's equity). Establishing and maintaining a reasonable single position risk limit will prevent the fund from suffering a catastrophic loss in the event any company loses a significant amount of value or declares bankruptcy.
Subscriptions
The investors in the funds participating in this competition may contact AFA staff at any time and request to "subscribe" for new or additional shares in your fund. In which case, AFA staff will contact your president and inform him/her of the subscribtion, which will be in increments of $10,000 as presribed in your fund's Prospectus.
The investor may request a Skype meeting with the fund's management team prior to finalizing his/her decision to invest additional dollars into your fund. If an investor requests such a meeting, AFA staff will coordinate with the fund's management team and the investor to arrange and facilitate the Skype meeting. All additional subscriptions will be documented and added to your fund's principal balance by AFA staff.
Redemptions
The investors in the funds participating in this competition may contact AFA staff at any time and request to "redeem" their shares in your fund. In which case, AFA staff will contact your president and inform him/her of the redemption, which for purposes of this competition will be limited to the amount of the investor's original investment.
The investor may request a Skype meeting with the fund's management team prior to finalizing his/her decision to redeem (withdraw) his/her money from your fund. If an investor requests such a meeting, AFA staff will coordinate with the fund's management team and the investor to arrange and facilitate the Skype meeting. All additional redemptions will be documented and subtracted to your fund's principal balance by AFA staff.
Performance Reporting
The fund's performance will be reported to investors monthly by AFA Staff after receipt of the Chapter Monthly Progress Report .
Investment Advisor:
The fund's investment advisor will be the AFA-Mililani Management Company, LLC
Fund Management Team
The fund will be managed by:
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