<PAGE>
PROSPECTUS
Berger Institutional Products Trust (the "Trust") is an open-end management
investment company. The Trust currently consists of the four diversified series
or portfolios named below (individually referred to as a "Fund"). Each Fund has
its own investment objective and policies. Shares of the Funds are not offered
directly to the public, but are sold only in connection with investment in and
payments under variable annuity contracts and variable life insurance contracts
(collectively "variable insurance contracts") issued by life insurance companies
("Participating Insurance Companies"), as well as to certain qualified
retirement plans.
BERGER IPT - SMALL COMPANY GROWTH FUND - The investment objective of the Berger
IPT - Small Company Growth Fund is capital appreciation. In pursuit of that
goal, the Fund invests primarily in small companies (market capitalizations of
less than $1 billion at the time of initial purchase) with the potential for
rapid earnings growth that either occupy a dominant position in an emerging
industry or have a growing market share in a larger, fragmented industry.
BERGER IPT - 100 FUND - The investment objective of the Berger IPT - 100 Fund is
long-term capital appreciation. The Fund pursues its goal by primarily
investing in common stocks of established companies regardless of the company's
size. The Fund's investment manager seeks companies it believes have good
earnings growth potential.
BERGER/BIAM IPT - INTERNATIONAL FUND - The investment objective of the
Berger/BIAM IPT - International Fund is long-term capital appreciation. The Fund
pursues its goal by investing in a portfolio consisting primarily of common
stocks of well-established foreign companies. The investment manager first
identifies economic and business themes that it believes provide a favorable
framework for selecting stocks. Using fundamental analysis, the investment
manager then selects individual companies best positioned to take advantage of
opportunities presented by these themes.
BERGER IPT - GROWTH AND INCOME FUND - The primary investment objective of the
Berger IPT - Growth and Income Fund is capital appreciation. A secondary
objective is to provide a moderate level of current income. To pursue these
goals, the Fund invests primarily in securities of well-established, growing
companies that have demonstrated a pattern of earnings growth and stability and
are also expected to provide current income.
This Prospectus concisely sets forth information about each of the Funds
that a prospective purchaser of a variable insurance contract or plan
participant should consider before purchasing a variable contract, allocating
contract values to one or more of the Funds or selecting one of the Funds as an
investment option under a qualified plan. It should be read carefully in
conjunction with any separate account prospectus of the specific insurance
product ("Separate Account Prospectus") or qualified plan documents that
accompany this Prospectus and retained for future reference. Additional
information about the Funds has been filed with the Securities and Exchange
Commission. A copy of the Statement of Additional Information, dated May 1,
1998, as it may be amended or supplemented from time to time, is incorporated by
reference into this Prospectus in its entirety and is available upon request
without charge by writing the Berger Funds, c/o Berger Associates, Inc., P.O.
Box 5005, Denver, CO 80217, or call 1-303-329-0200 or 1-800-706-0539 or by
writing or calling a Participating Insurance Company.
INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK (INCLUDING BANK OF IRELAND). SHARES OF THE FUNDS ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUNDS IS
SUBJECT TO INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
DATED MAY 1, 1998
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1. Fee Tables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Condensed Financial Information . . . . . . . . . . . . . . . . . . . . . . . .2
3. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4. Investment Objectives and Policies and Risk Factors . . . . . . . . . . . . . .7
5. Portfolio Turnover. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. Management and Investment Advice. . . . . . . . . . . . . . . . . . . . . . . 13
7. Expenses of the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. How to Purchase and Redeem Shares in the Funds. . . . . . . . . . . . . . . . 17
9. How the Net Asset Value Is Determined . . . . . . . . . . . . . . . . . . . . 17
10. Income Dividends, Capital Gains Distributions and Tax Treatment . . . . . . . 18
11. Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12. Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
-i-
<PAGE>
1. FEE TABLES
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO ALL FOUR FUNDS)
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Maximum Sales Load Imposed on Purchases 0%
- ---------------------------------------------------------------------------
Maximum Sales Load Imposed on Reinvested Dividends 0%
- ---------------------------------------------------------------------------
Deferred Sales Load 0%
- ---------------------------------------------------------------------------
Redemption Fees 0%
- ---------------------------------------------------------------------------
Exchange Fee 0%
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
INVESTMENT TOTAL FUND
ADVISORY FEE OPERATING
(AFTER WAIVERS EXPENSES (AFTER
AND OTHER WAIVERS AND
REIMBURSEMENTS)^ EXPENSES* REIMBURSEMENTS)^
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Berger IPT - 100 Fund .00% 1.00% 1.00%
- ---------------------------------------------------------------------------
Berger IPT - Growth and Income .00% 1.00% 1.00%
Fund
- ---------------------------------------------------------------------------
Berger IPT - Small Company .00% 1.15% 1.15%
Growth Fund
- ---------------------------------------------------------------------------
Berger/BIAM IPT - .00% 1.20% 1.20%
International Fund
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
^ The Funds' investment advisors have voluntarily agreed to waive their
advisory fees and have voluntarily reimbursed the Funds for additional
expenses to the extent that normal operating expenses in any fiscal year,
including the investment advisory fee but excluding brokerage commissions,
interest, taxes and extraordinary expenses, of each of the Berger IPT - 100
Fund and the Berger IPT - Growth and Income Fund exceed 1.00%, the normal
operating expenses in any fiscal year of the Berger IPT -Small Company
Growth Fund exceed 1.15% and the normal operating expenses in any fiscal
year of the Berger/BIAM IPT - International Fund exceed 1.20%, of the
respective Fund's average daily net assets. Absent the voluntary waiver
and reimbursement, the Investment Advisory Fee for the Berger IPT - 100
Fund, Berger IPT - Growth and Income Fund, the Berger IPT - Small Company
Growth Fund and the Berger/BIAM IPT - International Fund would have been
0.75%, 0.75%, 0.90% and 0.90%, respectively, and their Total Fund Operating
Expenses would have been 9.18%, 9.62%, 5.81% and 3.83%, respectively.
* Other Expenses primarily include transfer agency fees, shareholder report
expenses, registration fees and custodian fees.
EXAMPLES
You would pay the following expenses on a $1,000 investment, assuming 5%
annual return, and assuming redemption at the end of each time period:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Berger IPT - 100 Fund $10 $32 $55 $122
- ---------------------------------------------------------------------------
Berger IPT - Growth and Income $10 $32 $55 $122
Fund
- ---------------------------------------------------------------------------
Berger IPT - Small Company $12 $37 $63 $140
Growth Fund
- ---------------------------------------------------------------------------
Berger/BIAM IPT - International $12* $38* $66* $145*
Fund
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
* Based on estimated expenses for the Fund's first year of operations.
-1-
<PAGE>
THE EXPENSES SET FORTH IN THE PRECEDING TABLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY
BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
The purpose of the preceding tables is to assist the investor in
understanding the various costs and expenses that an investor in any of the
Funds will bear directly or indirectly. THE TABLES AND EXAMPLE ABOVE DO NOT
REFLECT THE DEDUCTION OF ANY APPLICABLE CHARGES OR EXPENSES ATTRIBUTABLE TO
VARIABLE INSURANCE CONTRACTS OR QUALIFIED PLANS INVESTED IN THE FUNDS.
PROSPECTIVE INVESTORS SHOULD REFER TO THE APPLICABLE SEPARATE ACCOUNT PROSPECTUS
OR QUALIFIED PLAN DOCUMENTS THAT ACCOMPANY THIS PROSPECTUS FOR INFORMATION
PERTAINING TO SUCH CONTRACT CHARGES AND EXPENSES. The Funds' expenses are
described in greater detail under "Management and Investment Advice" and
"Expenses of the Funds."
2. CONDENSED FINANCIAL INFORMATION
Following are tables setting forth certain financial highlights of each
Fund. The information has been audited by Price Waterhouse LLP, independent
accountants, whose report thereon is incorporated by reference from the Funds'
1997 Annual Report into the Statement of Additional Information. Additional
performance information is contained in the Funds' most recent Annual Report
dated December 31, 1997, which may be obtained upon request and without charge
by calling the Funds at 1-800-706-0539 or by calling a Participating Insurance
Company.
-2-
<PAGE>
BERGER IPT - 100 FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR A SHARE
OUTSTANDING
THROUGHOUT THE YEAR
ENDED DECEMBER 31,
----------------------
1997 1996*
-------- -------
<S> <C> <C>
Net asset value, beginning of period . . . . . . . . . $ 10.39 $10.00
---------- --------
Income (loss) from investment operations:
Net investment income (loss) . . . . . . . . . . . .01 .03
Net realized and unrealized gains (losses) on
securities . . . . . . . . . . . . . . . . . 1.39 .36
---------- --------
Total from investment operations . . . . . . . . . . . 1.40 .39
---------- --------
Less distributions:
Dividends (from net investment income) . . . . . . (.04) 0.00
Distributions (from capital gains) . . . . . . . . (.64) 0.00
---------- --------
Total distributions . . . . . . . . . . . . . . . . . . (.68) 0.00
---------- --------
Net asset value, end of period . . . . . . . . . . . . $ 11.11 $ 10.39
---------- --------
---------- --------
Total Return(1) . . . . . . . . . . . . . . . . . . . . 13.76% 3.90%(4)
Ratios/Supplemental Data:
Net assets, end of period . . . . . . . . . . . . . . $1,233,892 $331,296
Net expense ratio to average net assets . . . . . . . . .88% .93%(2)
Ratio of net income (loss) to average net assets. . . . .51% .50%(2)
Gross expenses to average net assets(3) . . . . . . . . 9.18% 7.69%(2)
Portfolio turnover rate. . . . . . . . . . . . . . . . 246% 56%(4)
Average commission rate. . . . . . . . . . . . . . . . $ 0.0600 $ .0590
</TABLE>
* For the period May 1, 1996 (commencement of operations) to December 31,
1996.
(1) Total return does not reflect expenses that apply to related variable
insurance contracts. Had variable contract charges been included, total
return would have been lower.
(2) Annualized.
(3) During the period, certain expenses were reduced as a result of voluntary
fee reductions, expense reimbursements and/or earnings credits. If such
reductions had not occurred, the ratios would have been as indicated. Gross
expenses and net expenses do not include the deduction of any charges or
expenses attributable to any particular variable insurance contract.
(4) Based on operations for the period shown and accordingly, is not
representative of a full year.
-3-
<PAGE>
BERGER IPT - GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR A SHARE
OUTSTANDING
THROUGHOUT THE YEAR
ENDED DECEMBER 31,
----------------------
1997 1996*
---------- --------
<S> <C>
Net asset value, beginning of period . . . . . . . . . $ 11.14 $ 10.00
---------- --------
Income (loss) from investment operations:
Net investment income (loss) . . . . . . . . . . . .01 .10
Net realized and unrealized gains (losses) on
securities . . . . . . . . . . . . . . . . . 2.75 1.04
---------- --------
Total from investment operations . . . . . . . . . . . 2.76 1.14
---------- --------
Less distributions:
Dividends (from net investment income) . . . . . . (.10) .00
Distributions (from capital gains) . . . . . . . . (.39) .00
Distributions in excess of capital gains . . . . . (.02) .00
---------- --------
Total distributions . . . . . . . . . . . . . . . . . . (.51) .00
---------- --------
Net asset value, end of period . . . . . . . . . . . . $ 13.39 $ 11.14
---------- --------
---------- --------
Total Return(1) . . . . . . . . . . . . . . . . . . . . 24.99% 11.40%(4)
Ratios/Supplemental Data:
Net assets, end of period . . . . . . . . . . . . . . $1,501,118 $344,373
Net expense ratio to average net assets . . . . . . . . .87% .94%(2)
Ratio of net income (loss) to average net assets . . . 1.39% 1.80%(2)
Gross expenses to average net assets(3) . . . . . . . . 9.62% 7.70%(2)
Portfolio turnover rate . . . . . . . . . . . . . . . . 215% 60%(4)
Average commission rate . . . . . . . . . . . . . . . . $ 0.0605 $ 0.0756
</TABLE>
* For the period May 1, 1996 (commencement of operations) to December 31,
1996.
(1) Total return does not reflect expenses that apply to related variable
insurance contracts. Had variable contract charges been included, total
return would have been lower.
(2) Annualized.
(3) During the period, certain expenses were reduced as a result of voluntary
fee reductions, expense reimbursements and/or earnings credits. If such
reductions had not occurred, the ratios would have been as indicated.
Gross expenses and net expenses do not include the deduction of any charges
or expenses attributable to any particular variable insurance contract.
(4) Based on operations for the period shown and accordingly, is not
representative of a full year.
-4-
<PAGE>
BERGER IPT - SMALL COMPANY GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR A SHARE
OUTSTANDING
THROUGHOUT THE YEAR
ENDED DECEMBER 31,
----------------------
1997 1996*
----------- --------
<S> <C>
Net asset value, beginning of period . . . . . . . . . $ 9.95 $ 10.00
----------- ---------
Income (loss) from investment operations:
Net investment income (loss) . . . . . . . . . . 0.00(5) .01
Net realized and unrealized gains (losses) on
securities . . . . . . . . . . . . . . . . . 2.11 (.06)
----------- ---------
Total from investment operations . . . . . . . . . . . 2.11 (.05)
----------- ---------
Less distributions:
Dividends (from net investment income) . . . . . - 0.00
Distributions (from capital gains) . . . . . . . - 0.00
----------- ---------
Total distributions . . . . . . . . . . . . . . . . . - 0.00
----------- ---------
Net asset value, end of period . . . . . . . . . . . . $ 12.06 $ 9.95
----------- ---------
----------- ---------
Total Return(1) . . . . . . . . . . . . . . . . . . . . 21.21% (.50)%(4)
Ratios/Supplemental Data:
Net assets, end of period . . . . . . . . . . . . . . $2,719,559 $291,362
Net expense ratio to average net assets. . . . . . . . 1.06% .95%(2)
Ratio of net income (loss) to average net assets . . . .05% .14%(2)
Gross expenses to average net assets(3). . . . . . . . 5.81% 8.57%(2)
Portfolio turnover rate . . . . . . . . . . . . . . . 194% 80%(4)
Average commission rate . . . . . . . . . . . . . . . $ 0.0601 $0.0391
</TABLE>
* For the period May 1, 1996 (commencement of operations) to December 31,
1996.
(1) Total return does not reflect expenses that apply to related variable
insurance contracts. Had variable contract charges been included, total
return would have been lower.
(2) Annualized.
(3) During the period, certain expenses were reduced as a result of voluntary
fee reductions, expense reimbursements and/or earnings credits. If such
reductions had not occurred, the ratios would have been as indicated.
Gross expenses and net expenses do not include the deduction of any charges
or expenses attributable to any particular variable insurance contract.
(4) Based on operations for the period shown and accordingly, is not
representative of a full year.
(5) Net investment income was less than $0.01 per share.
-5-
<PAGE>
BERGER/BIAM IPT - INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT THE PERIOD
ENDED DECEMBER 31,
-----------------------
1997*
-----------
<S> <C>
Net asset value, beginning of period . . . . . . . . $ 10.00
-----------
Income (loss) from investment operations:
Net investment income (loss) . . . . . . . . . .05
Net realized and unrealized gains (losses) on
securities . . . . . . . . . . . . . . . . (.26)
----------
Total from investment operations. . . . . . . . . . . (.21)
----------
Less distributions:
Dividends (from net investment income) . . . . 0.00
Distributions (from capital gains) . . . . . . 0.00
----------
Total distributions . . . . . . . . . . . . . . . . . 0.00
----------
Net asset value, end of period. . . . . . . . . . . . $ 9.79
----------
----------
Total Return(1) . . . . . . . . . . . . . . . . . . . (2.10)%(4)
Ratios/Supplemental Data:
Net assets, end of period . . . . . . . . . . . . . $2,705,831
Net expense ratio to average net assets . . . . . . .98%(2)
Ratio of net income (loss) to average net assets . . .86%(2)
Gross expenses to average net assets(3). . . . . . . 3.83%(2)
Portfolio turnover rate. . . . . . . . . . . . . . . 14%(4)
Average commission rate . . . . . . . . . . . . . . $ 0.0220
</TABLE>
* For the period May 1, 1997 (commencement of operations) to December 31,
1997.
(1) Total return does not reflect expenses that apply to related variable
insurance contracts. Had variable contract charges been included,
total return would have been lower.
(2) Annualized.
(3) During the period, certain expenses were reduced as a result of
voluntary fee reductions, expense reimbursements and/or earnings credits.
If such reductions had not occurred, the ratios would have been as
indicated. Gross expenses and net expenses do not include the deduction
of any charges or expenses attributable to any particular variable
insurance contract.
(4) Based on operations for the period shown and accordingly, is not
representative of a full year.
-6-
<PAGE>
3. INTRODUCTION
The Funds are all diversified portfolios or series of the Berger
Institutional Products Trust, a management investment company. The Funds sell
and redeem their shares at net asset value without any sales charges,
commissions or redemption fees. Sales charges for variable insurance contracts
are described in the accompanying Separate Account Prospectuses relating to
those contracts. Each variable insurance contract involves fees and expenses
not described in this Prospectus. Certain Funds may not be available in
connection with a particular contract or plan and certain contracts or plans may
limit allocations among the Funds. See the accompanying Separate Account
Prospectuses or qualified retirement plan documents for information regarding
contract fees and expenses and any restrictions on purchases or allocations.
This Prospectus describes the securities offered by each of the Funds.
Because the Funds have many of the same officers and trustees and have similar
investment restrictions and investment privileges, the Funds believe you will
find this combined Prospectus useful and informative in understanding the
important features of the Funds and their similarities and differences.
4. INVESTMENT OBJECTIVES AND POLICIES AND RISK FACTORS
Each of the Funds is a separate series of the Berger Institutional Products
Trust, with its own portfolio of securities selected to achieve its particular
investment objective. Since the shares of the Funds primarily represent an
investment in common stocks, the net asset value of each Fund will reflect
changes in the market value of the securities held in that Fund's portfolio, and
the value of a Fund share will therefore go up and down.
The Funds have the same investment objectives and follow substantially the
same investment strategies and policies as those of certain publicly-offered
investment companies managed by the same investment advisors (the "Berger retail
funds"). The Berger IPT - 100 Fund corresponds to the Berger 100
Fund-Registered Trademark-. The Berger IPT - Growth and Income Fund corresponds
to the Berger Growth and Income Fund. The Berger IPT - Small Company Growth
Fund corresponds to the Berger Small Company Growth Fund-Registered Trademark-.
The Berger/BIAM IPT -International Fund corresponds to the Berger/BIAM
International Fund. As described below under "Management and Investment
Advice," the same persons who serve as portfolio managers of the Funds also
serve as portfolio managers of the corresponding Berger retail funds.
Although it is anticipated that each Fund and its corresponding retail fund
will hold similar securities selections, their investment results are expected
to differ. In particular, differences in asset size and in cash flow resulting
from purchases and redemption of Fund shares may result in different security
selections, differences in the relative weightings of securities or differences
in the prices paid for particular portfolio holdings. Expenses and expense
limitations of each Fund and its corresponding retail fund are expected to
differ. The variable insurance contract owner will also bear various insurance
contract fees and expenses and should refer to the accompanying Separate Account
Prospectus for a summary of those fees and expenses.
BERGER IPT - 100 FUND. The investment objective of the Berger IPT - 100
Fund is long-term capital appreciation. The Fund pursues its goal by primarily
investing in common stocks of established companies regardless of the company's
size. The Fund's investment manager seeks companies it believes have good
earnings growth potential. The Fund does not invest to provide current income.
The Fund's investment manager generally looks for companies with:
- Potential to increase earnings consistently and which reinvest their
profits rather than pay dividends
- Reasonably priced securities and which are well-positioned in growing,
under-penetrated or fragmented industries or sectors
- Strong, capable management teams and conservatively financed balance
sheets.
The Fund primarily invests in common stocks. The Fund may sometimes take
substantial positions in convertible securities, preferred stocks, corporate
bonds, government securities or other short-term investments. The Fund may also
invest in foreign securities.
-7-
<PAGE>
Because the Fund primarily invests in common stocks, its NAV will fluctuate
in response to stock market movements. In addition, the Fund may invest in
certain securities with unique risks, such as small company and foreign
securities. Also, the Fund's investments may become focused in a small number
of business sectors.
BERGER IPT - GROWTH AND INCOME FUND. The primary investment objective of
the Berger IPT-Growth and Income Fund is capital appreciation. A secondary
objective is to provide a moderate level of current income. To pursue these
goals, the Fund invests primarily in securities of well-established, growing
companies that have demonstrated a pattern of earnings growth and stability and
are also expected to provide current income.
The Fund's investment manager generally looks for companies with:
- Competitive products and services and a successful orientation to global
markets
- Higher than average rate of earnings growth with somewhat lower dividend
yields
- Strong, capable management teams and conservatively financed balance
sheets.
The Fund primarily invests in common stocks and other securities with
equity features, such as convertible securities and preferred stocks. Common
stocks of companies with mid-sized to large market capitalizations usually
constitute a majority of the Fund's investments, although it may also invest in
smaller companies when valuations are attractive. The Fund may also buy foreign
securities, corporate bonds, government securities or other short-term
investments.
Because the Fund invests for growth and current income, its NAV will
fluctuate in response to stock market and interest rate movements. When
interest rates are low, income distributions to Fund shareholders may be reduced
or eliminated. The Fund may invest up to 20% of its assets in convertible
securities rated below investment grade (BB or lower by S&P, Ba or lower by
Moody's). In addition, the Fund may invest in certain securities with unique
risks, such as foreign and small company securities.
BERGER IPT - SMALL COMPANY GROWTH FUND. The investment objective of the
Berger IPT - Small Company Growth Fund is capital appreciation. In pursuit of
that goal, the Fund invests primarily in small companies with the potential for
rapid earnings growth that either occupy a dominant position in an emerging
industry or have a growing market share in a larger, fragmented industry. The
Fund does not invest to provide current income.
The Fund's investment manager generally looks for companies with:
- Strong entrepreneurial managements with proven track records
- A catalyst for rapid earnings growth, such as new products, ideas or
entering new markets
- Relatively strong balance sheets.
The Fund primarily invests in common stocks of small companies and other
securities with equity features, such as convertible securities, preferred
stocks, warrants and rights. Under normal circumstances, the Fund invests at
least 65% of its assets in equity securities of companies with market
capitalizations of less than $1 billion at the time of initial purchase. The
balance of the Fund may be invested in larger companies, government securities
or other short-term investments.
The Fund's NAV may be more volatile than that of funds primarily invested
in stocks of larger companies. Smaller companies may pose greater risk due to
narrow product lines, limited financial resources, less depth in management or a
limited trading market for their stocks. The Fund's investments are often
focused in a small number of business sectors. In addition, the Fund may invest
in certain securities with unique risks, such as securities of companies with
limited operating histories and foreign securities.
The Fund may be of interest to you if you are comfortable with
above-average risk and intend to make an investment commitment over the long
term. The Fund is not intended to be a complete investment program on its
own, but may serve to diversify other types of investments in your portfolio.
-8-
<PAGE>
BERGER/BIAM IPT - INTERNATIONAL FUND. The Fund's investment objective is
long-term capital appreciation. The Fund pursues its goal by investing in a
portfolio consisting primarily of common stocks of well-established foreign
companies. The Fund considers a company to be foreign if the principal
securities trading market for its equity securities is located outside the U.S.
or it is organized under the laws of, and has a principal office in, a country
other than the U.S. The Fund's investment manager first identifies economic and
business themes that it believes provide a favorable framework for selecting
stocks. Using fundamental analysis, the investment manager then selects
individual companies best positioned to take advantage of opportunities
presented by these themes. The Fund does not invest to provide current income,
although some income may be produced while managing the Fund.
The Fund's investment manager generally looks for companies with:
- Securities that are fundamentally undervalued relative to their long-term
prospective earnings growth rates, their historic valuation levels and
their competitors
- Business operations predominantly in well-regulated and more stable foreign
markets
- Substantial size and liquidity, strong balance sheets, proven management
and diversified earnings.
The Fund invests primarily in common stocks with 65% of its total assets in
securities of companies located in at least five different countries outside the
United States. Recently, the Fund has been weighted toward countries in Western
Europe, Australia and the Far East. However, it may also invest in other
foreign countries, including developing countries. A majority of the Fund's
assets are invested in mid-sized to large capitalization companies. The Fund
currently considers mid-sized to large market capitalizations to be those in
excess of $1 billion. The Fund may also take positions in convertible
securities, preferred stocks, corporate bonds and short-and long-term foreign or
U.S. government securities.
There are additional risks with investing in foreign countries, especially
in developing countries -- specifically, economic, currency, information,
political and transaction risks. As a result of these additional risks, the
Fund may be more volatile than a domestic stock fund. The Fund's investments
are often focused in a small number of business sectors. In addition, the Fund
may invest in certain securities with unique risks, such as forward foreign
currency contracts. The Fund is not intended to be a complete investment
program on its own, but may serve to diversify other types of investments in an
investor's portfolio.
* * *
The investment objective of each of the Berger IPT - 100 Fund, the Berger
IPT - Small Company Growth Fund and the Berger/BIAM IPT - International Fund,
and the primary investment objective of the Berger IPT -Growth and Income Fund,
is considered fundamental, meaning that it cannot be changed without a
shareholders' vote. The secondary investment objective of the Berger IPT -
Growth and Income Fund is not considered fundamental, and therefore may be
changed in the future by action of the directors without shareholder vote.
However, the Berger IPT -Growth and Income Fund will not change its secondary
investment objective without giving its shareholders such notice as may be
required by law. If the Berger IPT - Growth and Income Fund changes its
secondary investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that any of the Funds' investment
objectives will be realized.
When the Fund's advisor believes market conditions warrant a temporary
defensive position, the Berger IPT - 100 Fund, the Berger IPT - Growth and
Income Fund and the Berger IPT - Small Company Growth Fund may each increase its
investment in government securities and other short-term interest-bearing
securities without regard to the Fund's otherwise applicable investment
restrictions, policies or normal investment emphasis. During this period, it
may be more difficult for the Fund to achieve its investment objective.
Following is additional information about some of the other specific types of
securities and other instruments in which the Funds may invest.
FOREIGN SECURITIES. Investments in foreign securities involve some risks
that are different from the risks of investing in securities of U.S. issuers,
such as the risk of adverse political, social, diplomatic and economic
developments and, with respect to certain countries, the possibility of
expropriation, taxes imposed by foreign countries or limitations on the removal
of monies or other assets of a Fund. Moreover, the economies of individual
foreign countries will vary in comparison to the U.S. economy in such respects
as growth of gross domestic product, rate of inflation, capital
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reinvestment, resources, self-sufficiency and balance of payments position.
Securities of some foreign companies, particularly those in developing
countries, are less liquid and more volatile than securities of comparable
domestic companies. Investing in the securities of developing countries may
involve exposure to economic structures that are less diverse and mature, and
to political systems that can be expected to have less stability than
developed countries. A Fund's investments may include American Depositary
Receipts (ADRs). The Funds may also invest in European Depositary Receipts
(EDRs) which are similar to ADRs, in bearer form, designed for use in the
European securities markets, and in Global Depositary Receipts (GDRs). Some
of the companies in which a Fund may invest may be considered passive foreign
investment companies (PFICs), which are described in greater detail in the
Statement of Additional Information.
There also may be less publicly available information about foreign issuers
and securities than domestic issuers and securities, and foreign issuers
generally are not subject to accounting, auditing and financial reporting
standards, requirements and practices comparable to those applicable to domestic
issuers. Also, there is generally less government supervision and regulation of
exchanges, brokers, financial institutions and issuers in foreign countries than
there is in the U.S. Foreign financial markets typically have substantially
less volume than U.S. markets. Foreign markets also have different clearance
and settlement procedures and, in certain markets, delays or other factors could
make it difficult to effect transactions, potentially causing a Fund to
experience losses or miss investment opportunities.
Costs associated with transactions in foreign securities are generally
higher than with transactions in U.S. securities. A Fund will incur greater
costs in maintaining assets in foreign jurisdictions and in buying and selling
foreign securities generally, resulting in part from converting foreign
currencies into U.S. dollars. In addition, a Fund might have greater difficulty
taking appropriate legal action with respect to foreign investments in non-U.S.
courts than with respect to domestic issuers in U.S. courts, which may heighten
the risk of possible losses through the holding of securities by custodians and
securities depositories in foreign countries.
Since the Funds may invest in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the value of the investments in its portfolio and the
unrealized appreciation or depreciation of investments insofar as U.S. investors
are concerned. If the foreign currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate of the foreign currency
against the U.S. dollar would adversely affect the dollar value of the foreign
securities. Foreign currency exchange rates are determined by forces of supply
and demand on the foreign exchange markets, which are in turn affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation and other factors.
SECTOR FOCUS. A significant portion of some of the Funds' assets may be
invested in a relatively small number of related industries. However, none of
the Funds will concentrate 25% or more of its total assets in any one industry.
Sector focus may increase both market risk (share price volatility) and
liquidity risk.
SECURITIES OF SMALLER COMPANIES. All of the Funds may invest in, and the
portfolio of the Berger IPT - Small Company Growth Fund will be weighted toward,
securities of companies with small- or mid-sized market capitalizations. Market
capitalization is defined as total current market value of a company's
outstanding common stock. Investments in companies with smaller market
capitalizations may involve greater risks and price volatility (that is, more
abrupt or erratic price movements) than investments in larger, more mature
companies since smaller companies may be at an earlier stage of development and
may have limited product lines, reduced market liquidity for their shares,
limited financial resources or less depth in management than larger or more
established companies. Smaller companies also may be less significant factors
within their industries and may have difficulty withstanding competition from
larger companies. While smaller companies may be subject to these additional
risks, they may also realize more substantial growth than larger or more
established companies.
HEDGING TRANSACTIONS. Each Fund except the Berger/BIAM IPT - International
Fund is authorized to make limited use of certain types of futures, forwards and
options, but only for the purpose of hedging, that is, protecting against the
risk of market movements that may adversely affect the value of a Fund's
securities or the price of securities that a Fund is considering purchasing.
The Berger/BIAM IPT - International Fund is authorized to make limited use only
of forward contracts for the same purpose. Although a hedging transaction may,
for example, partially protect a Fund from a decline in the value of a
particular security or its portfolio generally, hedging may also limit the
Fund's
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opportunity to profit from favorable price movements, and the cost of the
transaction will reduce the potential return on the security or the
portfolio. In addition, futures, forwards and options contracts do not
eliminate fluctuations in the prices of the underlying securities a Fund owns
or intends to acquire. Following is a summary of the futures, forwards and
options which the Funds may utilize, provided that no more than 5% of a
Fund's net assets at the time of purchase may be utilized as initial margins
for financial futures transactions and premiums for options.
Financial futures and forwards are contracts on financial instruments
(such as securities, securities indices and foreign currencies) that obligate
the holder to take or make future delivery of a specified quantity of the
underlying financial instrument. Futures are exchange traded instruments
that may be physically settled or settled with cash or by entering into an
offsetting transaction, while forwards are privately negotiated and
contemplate actual delivery of the underlying financial instrument (usually a
foreign currency). An option gives the holder the right, but not the
obligation, to purchase or sell something (such as a security or a futures
contract) at a specified price at any time until the expiration date. An
option on a securities index is similar, except that upon exercise,
settlement is made in cash rather than in specific securities. Securities
options may be either exchange-traded or privately negotiated, whereas
options on futures contracts are always exchange-traded. Each Fund may only
write call options (that is, issue options that obligate the Fund to deliver
if the option is exercised by the holder) that are "covered" and only up to
25% of a Fund's total assets. A call option is considered "covered" if a
Fund already owns the security on which the option is written or, in the case
of an option written on a securities index, if a Fund owns a portfolio of
securities believed likely to substantially replicate movement of the index.
Use of these instruments by a Fund involves the potential for a loss
that may exceed the amount of initial margin the Fund would be permitted to
commit to the contracts under its investment limitation, or in the case of a
call option written by a Fund, may exceed the premium received for the
option. However, each Fund will be permitted to use such instruments for
hedging purposes only, and only if the aggregate amount of its obligations
under these contracts does not exceed the total market value of the assets
the Fund is attempting to hedge, such as a portion or all of its exposure to
equity securities or its holding in a specific foreign currency. To help
ensure that each Fund will be able to meet its obligations under its futures
and forward contracts and its obligations under options written by that Fund,
each Fund will be required to maintain liquid assets in a segregated account
with its custodian bank or to set aside portfolio securities to "cover" its
position in these contracts.
The principal risks of the Funds utilizing futures transactions, forward
contracts and/or options are: (a) losses resulting from market movements not
anticipated by the Funds; (b) possible imperfect correlation between
movements in the prices of futures, forwards and options and movements in the
prices of the securities or currencies hedged or used to cover such
positions; (c) lack of assurance that a liquid secondary market will exist
for any particular futures or options at any particular time, and possible
exchange-imposed price fluctuation limits, either of which may make it
difficult or impossible to close a position when so desired; (d) lack of
assurance that the counter party to a forward contract would be willing to
negotiate an offset or termination of the contract when so desired; and (e)
the need for additional information and skills beyond those required for the
management of a portfolio of traditional securities. In addition, when a
Fund enters into an over-the-counter contract with a counterparty, the Fund
will assume counterparty credit risk, that is, the risk that the counterparty
will fail to perform its obligations, in which case the Fund could be worse
off than if the contract had not been entered into.
Although they currently have no intention of doing so, the trustees of
the Berger/BIAM IPT - International Fund may, without shareholder approval,
authorize the Fund to invest in certain types of other instruments for
hedging purposes, such as financial futures and options. Appropriate notice
to shareholders will be provided of any intention to commence investing in
such instruments. Additional detail concerning the Funds' transactions in
forwards, futures and options and the risks of such investments can be found
in the Statement of Additional Information.
CONVERTIBLE SECURITIES. Each Fund may also purchase debt or equity
securities which are convertible into common stock when the Fund's advisor
or sub-advisor believes they offer the potential for a higher total return
than nonconvertible securities. While fixed income securities generally
have a priority claim on a corporation's assets over that of common stock,
some of the convertible securities which the Funds may hold are high-yield/
high-risk securities that are subject to special risks, including the risk
of default in interest or principal payments which could result in a loss
of income to the Funds or a decline in the market value of the securities.
Convertible securities often display a degree of market price volatility
that is comparable to common stocks. The credit risk associated with
convertible securities generally is reflected by their ratings assigned
by organizations such as Moody's Investors Service, Inc., and Standard
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<PAGE>
& Poor's Corporation, or a similar determination of creditworthiness by the
advisor or sub-advisor. The Funds have no pre-established minimum quality
standards for convertible securities and may invest in convertible securities
of any quality, including lower rated or unrated securities. However, none
of the Funds will invest in any security in default at the time of purchase
or in any nonconvertible debt securities rated below investment grade, and
each Fund will invest less than 20% of the market value of its assets at the
time of purchase in convertible securities rated below investment grade. If
convertible securities purchased by a Fund are downgraded following purchase,
or if other circumstances cause 20% or more of a Fund's assets to be invested
in convertible securities rated below investment grade, the trustees of the
Trust, in consultation with the advisor or sub-advisor will determine what
action, if any, is appropriate in light of all relevant circumstances. For a
further discussion of debt security ratings, see Appendix A to the Statement
of Additional Information.
SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. Each of the
Funds may invest in securities of companies with limited operating histories.
The Funds consider these to be securities of companies with a record of less
than three years' continuous operation, even including the operations of any
predecessors and parents. (These are sometimes referred to as "unseasoned
issuers.") These companies by their nature have only a limited operating
history which can be used for evaluating the company's growth prospects. As
a result, investment decisions for these securities may place a greater
emphasis on current or planned product lines and the reputation and
experience of the company's management and less emphasis on fundamental
valuation factors than would be the case for more mature companies. In
addition, many of these companies may also be small companies and involve the
risks and price volatility associated with smaller companies. The Berger
IPT - 100 Fund and the Berger IPT - Growth and Income Fund each may invest up
to 5% of their total assets in such securities.
ZEROS/STRIPS. The Berger IPT - 100 Fund and the Berger IPT - Growth and
Income Fund may each invest in zero coupon bonds or in "strips." Zero coupon
bonds do not make regular interest payments; rather, they are sold at a
discount from face value. Principal and accreted discount (representing
interest accrued but not paid) are paid at maturity. "Strips" are debt
securities that are stripped of their interest coupon after the securities
are issued, but otherwise are comparable to zero coupon bonds. The market
values of "strips" and zero coupon bonds generally fluctuate in response to
changes in interest rates to a greater degree than do interest-paying
securities of comparable term and quality. None of the Funds will invest in
mortgage-backed or other asset-backed securities.
LENDING PORTFOLIO SECURITIES. Each Fund may lend its portfolio
securities to qualified institutional investors such as brokers, dealers or
other financial organizations. This practice permits a Fund to earn income,
which, in turn, can be invested in additional securities to pursue the Fund's
investment objective. Loans of securities by a Fund will be collateralized by
cash, letters of credit, or securities issued or guaranteed by the U.S.
Government or its agencies. The collateral will equal at least 100% of the
current market value of the loaned securities, marked-to-market on a daily
basis. A Fund bears a risk of loss in the event that the other party to a
securities lending transaction defaults on its obligations and the Fund is
delayed in or prevented from exercising its rights to dispose of the
collateral, including the risk of a possible decline in the value of the
collateral securities during the period in which the Fund seeks to assert
these rights, the risk of incurring expenses associated with asserting these
rights, and the risk of losing all or a part of the income from the
transaction. None of the Funds will lend any security if, as a result of
such loan, the aggregate value of securities then on loan would exceed
33-1/3% of the market value of the Fund's total assets.
ILLIQUID SECURITIES. Each Fund is authorized to invest in securities
which are illiquid or not readily marketable because they are subject to
restrictions on their resale ("restricted securities") or because, based upon
their nature or the market for such securities, no ready market is available.
However, none of the Funds may purchase any security, the purchase of which
would cause the Fund to invest more than 15% of its net assets, measured at
the time of purchase, in illiquid securities. If securities become illiquid
following purchase or other circumstances cause more than 15% of a Fund's net
assets to be invested in illiquid securities, the trustees of the Trust, in
consultation with the advisor or sub-advisor, will determine what action, if
any, is appropriate in light of all relevant circumstances. Repurchase
agreements maturing in more than seven days will be considered as illiquid
for purposes of this restriction. Certain restricted securities, such as
Rule 144A securities, may be treated as liquid under this restriction if a
determination is made that such securities are readily marketable.
Investments in illiquid securities involve certain risks to the extent that a
Fund may be unable to dispose of such a security at the time desired or at a
reasonable price or, in some cases, may be unable to dispose of it at all.
In addition, in order to resell a restricted security, a Fund might have to
incur the potentially substantial expense and delay associated with effecting
registration.
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INVESTMENT RESTRICTIONS
In addition to its investment objective, each Fund has adopted a number
of restrictions on its investments and other activities that may not be
changed without shareholder approval. For example, neither the Berger IPT -
100 Fund nor the Berger IPT - Growth and Income Fund may purchase securities
of any issuer (except U.S. Government securities) if, immediately after and
as a result of such purchase, the value of such Fund's holdings in the
securities of that issuer exceeds 5% of the value of its total assets or it
owns more than 10% of the outstanding voting securities or of any class of
securities of such issuer. The Berger/BIAM IPT - International Fund is
similarly restricted with respect to 100% of its total assets, although this
restriction may be reduced to apply to 75% or more of its total assets
without a shareholder vote. The Berger IPT - Small Company Growth Fund is
similarly restricted with respect to 75% of its total assets.
Further, neither the Berger IPT - 100 Fund nor the Berger IPT - Growth
and Income Fund may borrow in excess of 5% of its total assets or pledge
assets taken at market value to an extent greater than 10% of its total
assets taken at cost (and no borrowing may be undertaken except from banks as
a temporary measure for extraordinary or emergency purposes), subject to
certain exclusions, and neither may make loans (except that each Fund may
enter into repurchase agreements and may lend portfolio securities in
accordance with the Fund's investment policies). Neither the Berger IPT -
Small Company Growth Fund nor the Berger/BIAM IPT - International Fund may
borrow money, except borrowing undertaken from banks for temporary or
emergency purposes in amounts not to exceed 25% of the market value of its
total assets (including the amount borrowed), and none may make loans (except
that a Fund may enter into repurchase agreements and may lend portfolio
securities in accordance with the Fund's investment policies). None of the
Funds may invest in any one industry more than 25% of the value of its total
assets at the time of investment, nor invest in commodities, except, only for
the purpose of hedging, in certain futures, forwards and/or options as
specified in greater detail above and in the Statement of Additional
Information.
Also, none of the Funds currently intends to make short sales of
securities, and none of the Funds intends to purchase or sell securities on a
when-issued or delayed delivery basis if as a result, more than 5% of its
assets are invested in such securities, although these restrictions may be
changed without shareholder approval. For more detail about the Funds'
investment restrictions, see the Statement of Additional Information.
5. PORTFOLIO TURNOVER
In pursuit of each Fund's investment objective, management continuously
monitors the Fund's investments and makes portfolio changes whenever changes
in the markets, industry trends or the outlook for any portfolio security
indicate to them that the objective could be better achieved by investment in
another security, regardless of portfolio turnover. In addition, portfolio
turnover may increase as a result of large amounts of purchases and
redemptions of shares of a Fund due to economic, market or other factors that
are not within the control of management. The annual portfolio turnover
rates of the Funds may at times exceed 100%. Higher portfolio turnover
would necessarily result in correspondingly higher brokerage costs for the
Funds. The portfolio turnover rates are shown in the tables in Section 2.
6. MANAGEMENT AND INVESTMENT ADVICE
The Funds are supervised by trustees who are responsible for major
decisions about the Funds' policies and overall Fund oversight. The trustees
hire the companies that run day-to-day Fund operations, such as the
investment advisor, administrator, transfer agent and custodian. For more
information about Fund trustees and officers, see the Statement of Additional
Information.
The investment advisor to each of the Funds except the Berger/BIAM
IPT - International Fund is Berger Associates, Inc. ("Berger Associates"), 210
University Boulevard, Suite 900, Denver, CO 80206. Berger Associates
furnishes continuous advice and recommendations to each of those Funds
regarding securities to be purchased and sold by the Fund. Berger
Associates, therefore, formulates a continuing program for management of the
assets of each Fund consistent with the investment objectives and policies
established by the trustees of the Trust. Berger Associates also provides
office space for each Fund and pays the salaries, fees and expenses of all
Fund officers and trustees of the Funds who are interested persons of Berger
Associates. Berger Associates serves as investment advisor or sub-advisor to
mutual funds and other institutional investors, and had assets under
management of $3.6 billion as of December 31, 1997.
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<PAGE>
Berger Associates is a wholly-owned subsidiary of Kansas City Southern
Industries, Inc. ("KCSI"). KCSI is a publicly traded holding company with
principal operations in rail transportation, through its subsidiary The
Kansas City Southern Railway Company, and financial asset management
businesses. KCSI also owns approximately 41% of the outstanding shares of
DST Systems, Inc. ("DST"), a publicly traded information and transaction
processing company which also acts as the Funds' sub-transfer agent.
Patrick S. Adams, Senior Vice President of Berger Associates, has been
the portfolio manager for the Berger IPT - 100 Fund since February 1997.
Since February 1997, he also has managed the Berger IPT - Growth and Income
Fund. Mr. Adams has co-managed the Berger IPT - Growth and Income Fund,
along with Berger Associates Vice President Sheila J. Ohlsson since October
1997. The portfolio managers are responsible for the investments of their
Funds, including the day-to-day investment decisions for these Funds.
Mr. Adams joined Berger Associates in February 1997, where he serves as
portfolio manager for the Berger IPT - 100 Fund, the retail Berger 100 Fund
and Berger Select Fund, co-manager for the Berger IPT -Growth and Income
Fund, the retail Berger Growth and Income Fund and Berger Balanced Fund, and
portfolio manager for other institutional investors. Mr. Adams previously
served as Senior Vice President with Zurich Kemper Investments, Inc., from
June 1996 to January 1997, where he was portfolio manager of the Kemper
Growth Fund. Mr. Adams served as Portfolio Manager with Founders Asset
Management, Inc., from March 1993 to May 1996, where he managed the Founders
Blue Chip Growth Fund and the Founders Balanced Fund. Prior to that, Mr.
Adams served in various positions with First of America Investment Corp. for
over three years, including as Senior Portfolio Manager/Senior Analyst from
January 1992 to February 1993, during which time he managed the Parkstone
Equity Fund.
Ms. Ohlsson joined Berger Associates in 1991, where she currently serves
as Vice President and co-portfolio manager, along with Patrick Adams, for the
Berger IPT - Growth and Income Fund and the retail Berger Growth and Income
Fund. Previously, Ms. Ohlsson served as Senior Analyst/Portfolio Manager
(February 1997 to October 1997) and Analyst (September 1991 to February 1997)
with Berger Associates.
William R. Keithler is the President and portfolio manager of the
Berger IPT - Small Company Growth Fund and is primarily responsible for the
investments of the Fund, including the day-to-day investment decisions for
the Fund. Mr. Keithler assumed management of the Fund at its inception. Mr.
Keithler also serves as President and portfolio manager for the Berger Small
Company Growth Fund and the Berger New Generation Fund.
Mr. Keithler joined Berger Associates in December 1993 and serves as
Senior Vice President-Investment Management. Previously, he was employed by
INVESCO Trust Company, Denver, Colorado, as Senior Vice President (January
1993 to December 1993), Vice President (January 1991 to January 1993) and
Portfolio Manager (January 1988 to January 1991). During his seven years
with INVESCO, Mr. Keithler was portfolio manager of several mutual funds,
including the INVESCO Dynamics Fund and INVESCO Emerging Growth Fund. From
1982 to 1986, Mr. Keithler was Vice President and portfolio manager with
First Trust St. Paul, in St. Paul, Minnesota.
The investment advisor to the Berger/BIAM IPT - International Fund is
BBOI Worldwide LLC ("BBOI Worldwide"), 210 University Boulevard, Denver, CO
80206. BBOI Worldwide oversees, evaluates and monitors the investment
advisory services provided to the Fund by the Fund's sub-advisor and is
responsible for furnishing administrative services to the Fund, such as
coordinating certain matters relating to the operations of the Fund and
monitoring the Fund's compliance with all applicable federal and state
securities laws.
BBOI Worldwide is a Delaware limited liability company formed in 1996.
Since BBOI Worldwide was only recently formed, it has only limited prior
experience as an investment advisor. However, BBOI Worldwide is a joint
venture between Berger Associates and Bank of Ireland Asset Management (U.S.)
Limited ("BIAM"), the sub-advisor to the Fund, which have both been in the
investment advisory business for many years.
Berger Associates and BIAM each own a 50% membership interest in BBOI
Worldwide and each have an equal number of representatives on BBOI
Worldwide's Board of Managers. Berger Associates' role in the joint venture
is to provide administrative services and BIAM's role is to provide
international and global investment management expertise. Agreement of
representatives of both Berger Associates and BIAM is required for all
significant management decisions for BBOI Worldwide.
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Since its founding in 1966, Bank of Ireland's investment management
group has become recognized among international and global investment
managers, serving clients in Europe, the United States, Canada, Australia and
South Africa. BIAM, the sub-advisor to the Berger/BIAM IPT - International
Fund, is an indirect wholly-owned subsidiary of Bank of Ireland. Bank of
Ireland, founded in 1783, is a publicly traded, diversified financial
services group with business operations worldwide. Bank of Ireland provides
investment management services through a network of related companies,
including BIAM which serves primarily institutional clients in the United
States and Canada. Bank of Ireland and its affiliates managed assets for
clients worldwide in excess of $25 billion as of September 30, 1997.
As permitted in its Investment Advisory Agreement with the Berger/BIAM
IPT - International Fund, BBOI Worldwide has, since the inception of the
Fund, delegated day-to-day portfolio management responsibility to BIAM, as
the sub-advisor. As sub-advisor, BIAM manages the investments in the Fund
and determines what securities and other investments will be purchased,
retained, sold or loaned, consistent with the investment objective and
policies established by the trustees of the Trust. BIAM serves as investment
advisor or sub-advisor to pension and profit-sharing plans and other
institutional investors and mutual funds. BIAM also acts as sub-advisor for
and is responsible for the day-to-day portfolio management of the Berger/BIAM
International Portfolio. BIAM's main offices are at 26 Fitzwilliam Place,
Dublin 2, Ireland. BIAM maintains a representative office at 20 Horseneck
Lane, Greenwich, CT 06830.
All investment decisions made for the Berger/BIAM IPT - International
Fund by its sub-advisor are made by a team of BIAM investment personnel. No
one individual is primarily responsible for making the day-to-day investment
decisions for the Fund. Most of the investment professionals at BIAM have
been with BIAM at least 10 years.
Bank of Ireland or its affiliates may have deposit, loan or other
commercial or investment banking relationships with the issuers of securities
which may be purchased by the Berger/BIAM IPT - International Fund, including
outstanding loans to such issuers which could be repaid in whole or in part
with the proceeds of securities purchased by the Fund. Federal law prohibits
the sub-advisor, in making investment decisions, from using material
non-public information in its possession or in the possession of any of its
affiliates. In addition, in making investment decisions for the Fund, BIAM
will not take into consideration whether an issuer of securities proposed for
purchase or sale by the Fund is a customer of Bank of Ireland or its
affiliates.
Under their Investment Advisory Agreements, the Berger IPT - 100 Fund
and the Berger IPT - Growth and Income Fund each have agreed to compensate
Berger Associates for its investment advisory services to the Fund by the
payment of a fee at the annual rate of .75 of 1% (0.75%) of the average daily
net assets of the Fund. Under the Investment Advisory Agreement for the
Berger IPT - Small Company Growth Fund, Berger Associates is compensated for
its investment advisory services to that Fund by the payment of a fee at the
annual rate of .9 of 1% (0.90%) of the average daily net assets of the Fund.
Under its Investment Advisory Agreement with BBOI Worldwide, the Berger/BIAM
IPT - International Fund compensates BBOI Worldwide for its investment
advisory services by the payment of a fee at the annual rate of .9 of 1%
(0.90%) of the average daily net assets of the Fund. The Berger/BIAM IPT -
International Fund pays no fees directly to BIAM, the sub-advisor. Under a
Sub-Advisory Agreement with BBOI Worldwide, BIAM receives from BBOI Worldwide
a fee at the annual rate of .4 of 1% (0.40%) of the average daily net assets
of the Berger/BIAM IPT - International Fund. During certain periods, BIAM
may voluntarily waive all or a portion of its fee under the Sub-Advisory
Agreement, which will not affect the fee paid by the Fund to the BBOI
Worldwide.
From time to time, Berger Associates or BBOI Worldwide may compensate
Participating Insurance Companies or other companies for providing a variety
of administrative services (such as record keeping and accounting) and
investor support services (such as responding to inquiries and preparing
mailings to shareholders) to Participating Insurance Companies and their
customers who have allocated contract amounts to the Funds. This
compensation, which may be paid as a per account fee or as a percentage of
the average daily net assets invested in the Funds by the compensated
Participating Insurance Company, depending on the nature, extent and quality
of the services provided, will be paid from Berger Associates' or BBOI's own
resources and not from the assets of the Funds.
Participating Insurance Companies may also be authorized by the Funds to
accept on their behalf purchase and redemption requests that are received in
good order. Subject to Fund approval, certain of these companies may be
authorized to designate other entities to accept purchase and redemption
orders on behalf of the Funds.
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7. EXPENSES OF THE FUNDS
Each of the Funds has appointed Investors Fiduciary Trust Company
("IFTC") as its record keeping and pricing agent to calculate the daily net
asset value of such Fund and to perform certain accounting and record keeping
functions required by the Fund. In addition, IFTC also serves as the Funds'
custodian, transfer agent and dividend disbursing agent. IFTC has engaged
DST as sub-agent to provide transfer agency and dividend disbursing services
for the Funds. As noted in the preceding section, approximately 41% of the
outstanding shares of DST are owned by KCSI.
For custodian, record keeping and pricing services, each Fund pays fees
to IFTC based on a percentage of its assets, subject to certain minimums.
Each Fund also pays a monthly fee based primarily on the number of accounts
maintained on behalf of the Fund for transfer agency and dividend disbursing
services, which fees are paid by the Funds to IFTC and in turn passed through
to DST as sub-agent. In addition, the Funds reimburse IFTC and DST for
certain out-of-pocket expenses.
The trustees of each of the Funds have authorized portfolio transactions
to be placed on an agency basis through DST Securities, Inc. ("DSTS"), a
wholly-owned broker-dealer subsidiary of DST. When transactions for a Fund
are effected through DSTS, the commission received by DSTS is credited
against, and thereby reduces, certain operating expenses that the Fund would
otherwise be obligated to pay. No portion of the commission is retained by
DSTS.
In addition, under a separate Administrative Services Agreement with
each Fund except the Berger/BIAM IPT - International Fund, Berger Associates
performs certain administrative and record keeping services not otherwise
performed by IFTC, including the preparation of financial statements and
reports to be filed with regulatory authorities. Each of those Funds pays
Berger Associates a fee at the annual rate of 1/100 of 1% (0.01%) of its
average daily net assets for such services. Under a separate Administrative
Services Agreement with the Berger/BIAM IPT - International Fund, BBOI
Worldwide performs administrative and record keeping services for the Fund
and the Fund pays BBOI Worldwide a fee at the annual rate of 1/100 of 1%
(0.01%) of its average daily net assets. Under a Sub-Administration
Agreement between the BBOI Worldwide and Berger Associates, Berger Associates
has been delegated all of BBOI Worldwide's duties under the Administrative
Services Agreement and BBOI Worldwide's administrative duties under the
Investment Advisory Agreement for the Berger/BIAM IPT - International Fund.
For its services under the Sub-Administration Agreement, BBOI Worldwide pays
Berger Associates a fee of .2 of 1% (0.20%) of the average daily net assets
of the Berger/BIAM IPT - International Fund. During certain periods, Berger
Associates may voluntarily waive all or a portion of its fee from BBOI
Worldwide, which will not affect the fee paid by the Fund to BBOI Worldwide
under the Administrative Services Agreement or the advisory fee paid to BBOI
Worldwide under the Investment Advisory Agreement. Each of the Funds also
incurs other expenses, including accounting, administrative and legal
expenses.
Berger Associates has voluntarily agreed to waive its advisory fee and
expects to voluntarily reimburse the Funds for additional expenses to the
extent that normal operating expenses in any fiscal year, including the
investment advisory fee but excluding brokerage commissions, interest, taxes
and extraordinary expenses, of each of the Berger IPT - 100 Fund and the
Berger IPT - Growth and Income Fund exceed 1.00%, and the normal operating
expenses in any fiscal year of the Berger IPT - Small Company Growth Fund
exceed 1.15%, of the respective Fund's average daily net assets. BBOI
Worldwide has voluntarily agreed to waive its advisory fee and expects to
voluntarily reimburse the Fund for additional expenses to the extent that
normal operating expenses in any fiscal year, including the investment
advisory fee but excluding brokerage commissions, interest, taxes and
extraordinary expenses, of the Berger/BIAM IPT - International Fund exceed
1.20% of that Fund's average daily net assets.
DISTRIBUTOR
The distributor (principal underwriter) of each Fund's shares is Berger
Distributors, Inc. (the "Distributor"), 210 University Boulevard, Suite 900,
Denver, CO 80206. The Distributor may be reimbursed by Berger Associates for
its costs in distributing the Funds' shares. The Distributor is a
wholly-owned subsidiary of Berger Associates, and certain officers of the
Trust are officers or directors of the Distributor.
- 16 -
<PAGE>
8. HOW TO PURCHASE AND REDEEM SHARES IN THE FUNDS
Shares of the Funds are sold by the Funds on a continuous basis to
separate accounts of Participating Insurance Companies or to qualified plans.
Investors may not purchase or redeem shares of the Funds directly, but only
through variable insurance contracts offered through the separate accounts of
Participating Insurance Companies or through qualified retirement plans. You
should refer to the applicable Separate Account Prospectus or your plan
documents for information on how to purchase or surrender a contract, make
partial withdrawals of contract values, allocate contract values to one or
more of the Funds, change existing allocations among investment alternatives,
including the Funds, or select specific Funds as investment options for a
qualified plan. No sales charge is imposed upon the purchase or redemption
of shares of the Funds. Sales charges for the variable insurance contracts
or qualified plans are described in the relevant Separate Account
Prospectuses or plan documents.
Fund shares are purchased or redeemed at the net asset value per share
next computed after receipt of a purchase or redemption order by a Fund, its
authorized agent or its designee. Payment for redeemed shares generally will
be made within three business days following the date of the request for
redemption. However, payment may be postponed under unusual circumstances,
such as when normal trading is not taking place on the New York Stock
Exchange, an emergency as defined by the Securities and Exchange Commission
exists, or as permitted by the Securities and Exchange Commission.
9. HOW THE NET ASSET VALUE IS DETERMINED
The price of each Fund's shares is based on the net asset value of that
Fund, which is determined at the close of the regular trading session of the
New York Stock Exchange (the "Exchange") (normally 4:00 p.m., New York time)
each day that the Exchange is open.
The per share net asset value of each Fund is determined by dividing
the total value of its securities and other assets, less liabilities, by the
total number of shares outstanding. In determining net asset value,
securities are valued at market value or, if market quotations are not
readily available, may be valued at their fair value determined in good faith
pursuant to consistently applied procedures established by the trustees.
Money market instruments maturing within 60 days are valued at amortized
cost, which approximates market value. All assets and liabilities initially
expressed in terms of non-U.S. dollar currencies are translated into U.S.
dollars at the prevailing market rates as quoted by one or more banks or
dealers shortly before the close of the Exchange. See the Statement of
Additional Information for more detailed information.
Generally, trading in foreign securities markets is substantially
completed each day at various times prior to the close of the Exchange. The
values of foreign securities used in computing the net asset value of the
shares of the Fund are determined as of the earlier of such market close or
the closing time of the Exchange. Occasionally, events affecting the value
of such securities may occur between the times at which they are determined
and the close of the Exchange, or when the foreign market on which such
securities trade is closed but the Exchange is open, 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 may be valued at their fair value as determined in good faith
pursuant to consistently applied procedures established by the trustees.
A Fund's securities may be listed primarily on foreign exchanges or
over-the-counter dealer markets which may trade on days when the Exchange is
closed (such as customary U.S. holidays) and the Fund's net asset value is
not calculated. As a result, the net asset value of a Fund may be
significantly affected by such trading on days when shareholders cannot
purchase or redeem shares of the Fund.
Since none of the Funds imposes any front end sales load or redemption
fee, both the purchase price and the redemption price of a Fund share are the
same and will be equal to the next calculated net asset value of a share of
that Fund.
- 17 -
<PAGE>
10. INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT
Each of the Funds intends to declare dividends representing the Fund's
net investment income annually, normally in December. It is also the present
policy of each Fund to distribute annually all of its net realized capital
gains.
All dividends and capital gains distributions paid by a Fund will be
automatically reinvested in shares of that Fund at the net asset value on the
ex-dividend date unless an election is made on behalf of a separate account
or qualified plan to receive distributions in cash.
Each of the Funds intends to qualify to be treated as a separate
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If they so qualify and meet certain
minimum distribution requirements, the Funds generally will not be liable for
Federal income tax on the amount of their earnings that are timely
distributed. In addition, each Fund intends to qualify under the
diversification requirements of Code Section 817(h) relating to insurance
company separate accounts. By meeting these and other requirements, the
Participating Insurance Companies, rather than the owners of the variable
insurance contracts, should be subject to tax on distributions received with
respect to Fund shares. The tax treatment of distributions made to a
Participating Insurance Company will depend on the Participating Insurance
Company's tax status. Participating Insurance Companies should consult their
own tax advisors concerning whether such distributions are subject to Federal
income tax if retained as part of contract reserves. For further information
concerning Federal income tax consequences for the owners of variable
insurance contracts and qualified plan participants, consult the appropriate
Separate Account Prospectus or plan documents.
11. ADDITIONAL INFORMATION
The Funds are each separate series or portfolios established under the
Trust, a Delaware business trust organized on October 17, 1995. The Trust is
authorized to issue an unlimited number of shares of beneficial interest in
series or portfolios. The series comprising the Berger IPT - 100 Fund, the
Berger IPT - Growth and Income Fund and the Berger IPT - Small Company Growth
Fund were established under the Trust in October 1995. The series comprising
the Berger/BIAM IPT - International Fund was established under the Trust in
March 1997. Currently, these four series are the only series established
under the Trust, although others may be added in the future. Shares of each
Fund are fully paid and non-assessable when issued. Each share has a par
value of $.01. All shares issued by a Fund participate equally in dividends
and other distributions by the Fund, and in the residual assets of the Fund
in the event of its liquidation.
The separate accounts of the Participating Insurance Companies and the
trustees of the qualified plans invested in the Funds, rather than individual
contract owners or plan participants, are the shareholders of the Funds.
However, each Participating Insurance Company or qualified plan will vote
such shares as required by law and interpretations thereof, as amended or
changed from time to time. Under current law, a Participating Insurance
Company is required to request voting instructions from its contract owners
and must vote Fund shares held by each of its separate accounts in proportion
to the voting instructions received. Additional information about voting
procedures is contained in the applicable Separate Account Prospectuses.
Shareholders of each Fund generally vote separately on matters relating
to that Fund, although they will vote together with the holders of all other
series of the Trust in the election of trustees of the Trust and on all
matters relating to the Trust as a whole. Each full share of each Fund has
one vote. Shares of each Fund have non-cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
trustees can elect 100% of the trustees if they choose to do so and, in such
event, the holders of the remaining less than 50% of the shares voting for
the election of trustees will not be able to elect any person or persons as
trustees. None of the Funds is required to hold annual shareholder meetings
unless required by the Investment Company Act of 1940 or other applicable law
or unless called by the trustees.
If shareholders owning at least 10% of the outstanding shares of the
Trust so request, a special shareholders' meeting will be held for the
purpose of considering the removal of a trustee of the Trust. Special
meetings will be held for other purposes if the holders of at least 25% of
the outstanding shares of the Trust so request. Subject to certain
limitations, the Funds will facilitate appropriate communications by
shareholders desiring to call a special meeting for the purpose of
considering the removal of a trustee.
- 18 -
<PAGE>
Each Fund sells its shares only to certain qualified retirement plans
and to variable annuity and variable life insurance separate accounts of
insurance companies that are unaffiliated with Berger Associates and BBOI
Worldwide and that may be unaffiliated with one another. The Funds currently
do not foresee any disadvantages to policy owners arising out of the fact
that each Fund offers its shares to such entities. Nevertheless, the
trustees intend to monitor events in order to identify any material
irreconcilable conflicts that may arise and to determine what action, if any,
should be taken in response to such conflicts. If a conflict occurs, the
trustees may require one or more insurance company separate accounts or plans
to withdraw its investments in one or more of the Funds and to substitute
shares of another Fund. As a result, a Fund may be forced to sell securities
at disadvantageous prices. In addition, the trustees may refuse to sell
shares of any Fund to any separate account or qualified plan or may suspend
or terminate the offering of shares of any Fund if such action is required by
law or regulatory authority or is deemed by the Fund to be in the best
interests of the shareholders of the Fund.
The Funds' transfer agent and dividend disbursing agent is Investors
Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas City, MO
64105. IFTC has engaged DST Systems, Inc. ("DST"), P.O. Box 419958, Kansas
City, MO 64141, as sub-agent to provide transfer agency and dividend
disbursing services for the Funds.
Owners of variable insurance contracts and qualified plan administrators
will receive annual and semiannual reports including the financial statements
of the Funds in which contract values or qualified plan assets are invested.
Each report will show the investments owned by each Fund and the market
values thereof, as well as other information about the Funds and their
operations.
The Glass-Steagall Act prohibits a depository institution and certain
affiliates from underwriting or distributing most securities and from
affiliating with businesses engaged in certain similar activities. BIAM
believes that it may perform the services for the Berger/BIAM IPT
- -International Fund contemplated by this Prospectus consistent with the
Glass-Steagall Act and other applicable banking laws and regulations.
However, future changes in either Federal or state statutes and regulations
concerning the permissible activities of banks and their affiliates, as well
as future judicial or administrative decisions or interpretations of present
and future statutes and regulations, might prevent BIAM from continuing to
perform those services for that Fund. If the circumstances described above
should change, the trustees of the Trust would review the relationships with
BIAM and consider taking all actions appropriate under the circumstances.
12. PERFORMANCE
From time to time in advertisements, the Funds may discuss their
performance ratings as published by recognized mutual fund statistical
services, such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., or Morningstar, Inc., or Value Line Investment Survey or
by publications of general interest such as THE WALL STREET JOURNAL,
INVESTOR'S BUSINESS DAILY, MONEY, BARRON'S, FINANCIAL WORLD or KIPLINGER'S
PERSONAL FINANCE MAGAZINE. In addition, the Funds may compare their
performance to that of recognized broad-based securities market indices,
including the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, the Russell 2000 Stock Index, the Standard & Poor's 400 Mid-Cap
Index, the Standard & Poor's 600 Small Cap Index, the Morgan Stanley Capital
International EAFE (Europe, Australasia, Far East) Index, the Dow Jones World
Index, the Nasdaq Composite Index or the Lehman Brothers Intermediate Term
Government/Corporate Bond Index, or more narrowly-based or blended indices
which reflect the market sectors in which that Fund invests.
The total return of each Fund is calculated for any specified period of
time by assuming the purchase of shares of the Fund at the net asset value at
the beginning of the period. Each dividend or other distribution paid by the
Fund is assumed to have been reinvested at the net asset value on the
reinvestment date. The total number of shares then owned as a result of this
process is valued at the net asset value at the end of the period. The
percentage increase is determined by subtracting the initial value of the
investment from the ending value and dividing the remainder by the initial
value.
Each Fund's total return reflects the Fund's performance over a stated
period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same total return if
the Fund's performance had been constant over the entire period. Total
return figures are based on the overall change in value of a hypothetical
investment in each Fund. Because average annual total returns for more than
one year tend to smooth out variations in a Fund's return, investors should
recognize that such figures are not the same as actual year-by-year results.
- 19 -
<PAGE>
A Fund's total return includes the effect of deducting that Fund's
expenses, but does not include any charges and expenses attributable to a
particular variable insurance contract or qualified plan. Because shares of
the Funds can be purchased only through a variable insurance contract or
qualified plan, the Funds' total return data should be reviewed along with
the description of charges and expenses contained in the applicable Separate
Account Prospectus or plan documents. Total return for a Fund must always be
accompanied by, and reviewed with, comparable total return data for an
associated variable annuity separate account, or information identifying the
charges and expenses attributable to the variable life insurance contract or
plan that are not reflected in the Fund's total return.
Any performance figures for the Funds are based upon historical results
and do not guarantee future performance. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
Each Fund has the same investment objective and follows similar
investment strategies as a Berger retail fund. The Berger retail funds have
the same investment advisor (and, as to the Berger/BIAM IPT - International
Fund, the same sub-advisor) as the corresponding Funds offered under this
Prospectus. As described under "Management and Investment Advice," the same
persons who serve as portfolio managers of the Funds also serve as portfolio
managers of the corresponding Berger retail funds.
Set forth in the tables below is total return data for each of the
Funds, where available. Also set forth is total return information for each
of the corresponding Berger retail funds, calculated as described above.
Investors should not consider the performance data for the corresponding
Berger retail funds as a substitute for the performance of the Funds offered
under this Prospectus, nor as an indication of the past or future performance
of the Funds. The performance figures below reflect the deduction of the
historical fees and expenses paid by the Berger retail funds, and not those
paid or to be paid by these Funds. The figures also do not reflect the
deduction of charges or expenses attributable to variable insurance contracts
or qualified plans invested in the Funds. As discussed above, investors
should refer to the applicable Separate Account Prospectus or qualified plan
documents accompanying this Prospectus for information pertaining to such
contract charges and expenses. Each Fund and its corresponding Berger retail
fund will be managed separately and the investments and investment results
are expected to differ. In particular, differences in asset size and in cash
flow resulting from purchases and redemption of Fund shares may result in
different security selections, differences in the relative weightings of
securities or differences in the prices paid for particular portfolio
holdings.
The following tables show, where available, the average annualized total
returns for each Fund and for its corresponding Berger retail fund for the
one-, five- and ten-year periods ended December 31, 1997, and, for the period
from inception (or for the relevant Funds, immediately prior to Berger
Associates assuming the duties as the investment advisor on September 30,
1974) through December 31, 1997. Performance data for the Funds reflect fee
waivers and expense reimbursements by the Funds' advisor, without which
performance would be lower.
BERGER IPT - 100 FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Berger IPT - 100 Fund Berger 100 Fund^
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Since Inception of the Berger IPT - 100 Fund (5/1/96) 10.53% 9.70%
- ----------------------------------------------------------------------------------------------------
1-year 13.76% 13.57%
- ----------------------------------------------------------------------------------------------------
5-year N/A 12.13%
- ----------------------------------------------------------------------------------------------------
10-year N/A 17.86%*
- ----------------------------------------------------------------------------------------------------
Since Inception of the Berger 100 Fund (9/30/74) N/A 15.01%*
- ----------------------------------------------------------------------------------------------------
</TABLE>
^ As of December 31, 1997, the retail Berger 100 Fund had assets of
approximately $1,719,000,000.
* Since the 12b-1 fees applicable to the Berger 100 Fund did not take effect
until June 19, 1990, the performance figures do not reflect the deduction of the
12b-1 fees for the full length of the ten-year and longer periods shown.
- 20 -
<PAGE>
BERGER IPT - GROWTH AND INCOME FUND
<TABLE>
- ----------------------------------------------------------------------------------------------------
Berger IPT - Berger
Growth and Income Fund Growth and Income Fund^
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Since Inception of the Berger IPT - 21.93% 19.16%
Growth and Income Fund (5/1/96)
- ----------------------------------------------------------------------------------------------------
1-year 24.99% 22.70%
- ----------------------------------------------------------------------------------------------------
5-year N/A 14.58%
- ----------------------------------------------------------------------------------------------------
10-year N/A 14.54%*
- ----------------------------------------------------------------------------------------------------
Since Inception of the Berger N/A 14.08%*
Growth and Income Fund (9/30/74)
- ----------------------------------------------------------------------------------------------------
</TABLE>
^ As of December 31, 1997, the retail Berger Growth and Income Fund had assets
of approximately $340,000,000.
* Since the 12b-1 fees applicable to the Berger Growth and Income Fund did not
take effect until June 19, 1990, the performance figures do not reflect the
deduction of the 12b-1 fees for the full length of the ten-year and longer
periods shown.
BERGER IPT - SMALL COMPANY GROWTH FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Berger IPT - Berger
Small Company Small Company
Growth Fund Growth Fund^
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Since Inception of the Berger IPT - 11.87% 8.47%
Small Company Growth Fund (5/1/96)
- ----------------------------------------------------------------------------------------------------
1-year 21.21% 16.16%
- ----------------------------------------------------------------------------------------------------
3-year N/A 21.98%
- ----------------------------------------------------------------------------------------------------
Since Inception of the Berger Small N/A 19.81%
Company Growth Fund (12/30/93)
- ----------------------------------------------------------------------------------------------------
</TABLE>
^ As of December 31, 1997, the retail Berger Small Company Growth Fund had
assets of approximately $784,000,000.
- 21 -
<PAGE>
BERGER/BIAM IPT - INTERNATIONAL FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Berger/BIAM IPT - Berger/BIAM
International Fund International
Fund^+
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Since Inception of the Berger/BIAM (2.10)% * 2.90% *
IPT - International Fund (5/1/97)
- ----------------------------------------------------------------------------------------------------
1-year N/A 2.90%
- ----------------------------------------------------------------------------------------------------
5-year N/A 12.74%
- ----------------------------------------------------------------------------------------------------
Since Inception of the Berger/BIAM N/A 12.29%
International Fund (7/31/89)
- ----------------------------------------------------------------------------------------------------
</TABLE>
^ As of December 31, 1997, the retail Berger/BIAM International Fund had
assets of approximately $17,000,000.
+ Total returns for the Berger/BIAM International Fund in part reflect the
performance of a similarly managed, unregistered pool of assets transferred
into the Fund before the Fund commenced operations on October 11, 1996,
adjusted to reflect any increased expenses associated with operating the
Fund. If the pool had been registered as an investment company under the
Investment Company Act of 1940, its performance might have been adversely
affected.
* Not annualized.
13. SHAREHOLDER INQUIRIES
Shareholders with questions should write to the Berger Funds, c/o
Berger Associates, Inc., P.O. Box 5005, Denver, CO 80217, or call
1-303-329-0200 or 1-800-706-0539, or contact a Participating Insurance
Company.
- 22 -
<PAGE>
PROSPECTUS
Berger Institutional Products Trust (the "Trust") is an open-end
management investment company. The Trust currently consists of four
diversified series or portfolios, one of which is the Berger IPT - Small
Company Growth Fund (the "Fund"). Shares of the Fund are not offered
directly to the public, but are sold only in connection with investment in
and payments under variable annuity contracts and variable life insurance
contracts (collectively "variable insurance contracts") issued by life
insurance companies ("Participating Insurance Companies"), as well as to
certain qualified retirement plans.
The investment objective of the Berger IPT - Small Company Growth Fund
is capital appreciation. In pursuit of that goal, the Fund invests primarily
in small companies (market capitalizations of less than $1 billion at the
time of initial purchase) with the potential for rapid earnings growth that
either occupy a dominant position in an emerging industry or have a growing
market share in a larger, fragmented industry.
This Prospectus concisely sets forth information about the Fund that a
prospective purchaser of a variable insurance contract or plan participant
should consider before purchasing a variable contract, allocating contract
values to the Fund or selecting the Fund as an investment option under a
qualified plan. It should be read carefully in conjunction with any separate
account prospectus of the specific insurance product ("Separate Account
Prospectus") or qualified plan documents that accompany this Prospectus and
retained for future reference. Additional information about the Fund has
been filed with the Securities and Exchange Commission. A copy of the
Statement of Additional Information, dated May 1, 1998, as it may be amended
or supplemented from time to time, is incorporated by reference into this
Prospectus in its entirety and is available upon request without charge by
writing the Berger Funds, c/o Berger Associates, Inc., P.O. Box 5005, Denver,
CO 80217, or call 1-303-329-0200 or 1-800-706-0539 or by writing or calling a
Participating Insurance Company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
DATED MAY 1, 1998
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. Fee Table................................................................. 1
2. Condensed Financial Information........................................... 2
3. Introduction.............................................................. 4
4. Investment Objective and Policies and Risk Factors........................ 4
5. Portfolio Turnover........................................................ 8
6. Management and Investment Advice.......................................... 8
7. Expenses of the Fund...................................................... 9
8. How to Purchase and Redeem Shares in the Fund............................. 10
9. How the Net Asset Value Is Determined..................................... 10
10. Income Dividends, Capital Gains Distributions and Tax Treatment........... 11
11. Additional Information.................................................... 11
12. Performance............................................................... 12
</TABLE>
-i-
<PAGE>
1. FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases 0%
-------------------------------------------------------------------------
Maximum Sales Load Imposed on Reinvested Dividends 0%
-------------------------------------------------------------------------
Deferred Sales Load 0%
-------------------------------------------------------------------------
Redemption Fees 0%
-------------------------------------------------------------------------
Exchange Fee 0%
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
Investment Total Fund
Advisory Fee Operating
(after waivers Expenses (after
and Other waivers and
reimbursements)^ Expenses* reimbursements)^
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Berger IPT - Small Company .00% 1.15% 1.15%
Growth Fund
</TABLE>
^ The Fund's investment advisor has voluntarily agreed to waive its advisory
fee and has voluntarily reimbursed the Fund for additional expenses to the
extent that normal operating expenses in any fiscal year, including the
investment advisory fee but excluding brokerage commissions, interest,
taxes and extraordinary expenses, of the Fund exceed 1.15% of the Fund's
average daily net assets. Absent the voluntary waiver and reimbursement,
the Investment Advisory Fee for the Fund would have been 0.90% and the
Total Fund Operating Expenses would have been 5.81%.
* Other Expenses primarily include transfer agency fees, shareholder report
expenses, registration fees and custodian fees.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming 5%
annual return, and assuming redemption at the end of each time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Berger IPT - Small Company
Growth Fund $12 $37 $63 $140
</TABLE>
-1-
<PAGE>
THE EXPENSES SET FORTH IN THE PRECEDING TABLES SHOULD NOT BE CONSIDERED
A REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
The purpose of the preceding tables is to assist the investor in
understanding the various costs and expenses that an investor in any of the
Funds will bear directly or indirectly. THE TABLES AND EXAMPLE ABOVE DO NOT
REFLECT THE DEDUCTION OF ANY APPLICABLE CHARGES OR EXPENSES ATTRIBUTABLE TO
VARIABLE INSURANCE CONTRACTS OR QUALIFIED PLANS INVESTED IN THE FUND.
PROSPECTIVE INVESTORS SHOULD REFER TO THE APPLICABLE SEPARATE ACCOUNT
PROSPECTUS OR QUALIFIED PLAN DOCUMENTS THAT ACCOMPANY THIS PROSPECTUS FOR
INFORMATION PERTAINING TO SUCH CONTRACT CHARGES AND EXPENSES. The Fund's
expenses are described in greater detail under "Management and Investment
Advice" and "Expenses of the Fund."
2. CONDENSED FINANCIAL INFORMATION
Following is a table setting forth certain financial highlights of the
Fund. The information has been audited by Price Waterhouse LLP, independent
accountants, whose report thereon is incorporated by reference from the
Fund's 1997 Annual Report into the Statement of Additional Information.
Additional performance information is contained in the Fund's most recent
Annual Report dated December 31, 1997, which may be obtained upon request and
without charge by calling the Fund at 1-800-706-0539 or by calling a
Participating Insurance Company.
-2-
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For a Share Outstanding
Throughout the Year
Ended December 31,
-----------------------
1997 1996*
---------- ----------
<S> <C> <C>
Net asset value, beginning of period............... $ 9.95 $10.00
------- ------
Income (loss) from investment operations:
Net investment income (loss).................. 0.00(5) .01
Net realized and unrealized gains (losses) on
securities................................ 2.11 (.06)
------- ------
Total from investment operations................... 2.11 (.05)
------- ------
Less distributions:
Dividends (from net investment income)........ - 0.00
Distributions (from capital gains)............ - 0.00
------- ------
Total distributions................................ - 0.00
------- ------
Net asset value, end of period..................... $ 12.06 $ 9.95
------- ------
------- ------
Total Return(1).................................... 21.21% (.50)%(4)
Ratios/Supplemental Data:
Net assets, end of period.......................... $2,719,559 $291,362
Net expense ratio to average net assets............ 1.06% .95%(2)
Ratio of net income (loss) to average net assets... .05% .14%(2)
Gross expenses to average net assets(3)............ 5.81% 8.57%(2)
Portfolio turnover rate............................ 194% 80%(4)
Average commission rate............................ $0.0601 $0.0391
</TABLE>
* For the period May 1, 1996 (commencement of operations) to December 31,
1996.
(1) Total return does not reflect expenses that apply to related variable
insurance contracts. Had variable contract charges been included, total
return would have been lower.
(2) Annualized.
(3) During the period, certain expenses were reduced as a result of voluntary
fee reductions, expense reimbursements and/or earnings credits. If such
reductions had not occurred, the ratios would have been as indicated.
Gross expenses and net expenses do not include the deduction of any
charges or expenses attributable to any particular variable insurance
contract.
(4) Based on operations for the period shown and accordingly, is not
representative of a full year.
(5) Net investment income was less than $0.01 per share.
-3-
<PAGE>
3. INTRODUCTION
The Fund is a diversified portfolio or series of the Trust, a management
investment company. The Fund sells and redeems its shares at net asset value
without any sales charges, commissions or redemption fees. Sales charges for
variable insurance contracts are described in the accompanying Separate
Account Prospectus relating to those contracts. Each variable insurance
contract involves fees and expenses not described in this Prospectus. See
the accompanying Separate Account Prospectus or qualified retirement plan
documents for information regarding contract fees and expenses and any
restrictions on purchases or allocations. This Prospectus describes the
securities offered by the Fund.
4. INVESTMENT OBJECTIVE AND POLICIES AND RISK FACTORS
The Fund is a separate series of the Trust, with its own portfolio of
securities selected to achieve its particular investment objective. Since
the shares of the Fund primarily represent an investment in common stocks,
the net asset value of the Fund will reflect changes in the market value of
the securities held in the Fund's portfolio, and the value of a Fund share
will therefore go up and down.
The Fund has the same investment objective and follows substantially the
same investment strategies and policies as that of a certain publicly-offered
investment company managed by the same investment advisor, the Berger Small
Company Growth Fund-Registered Trademark- (the "Berger retail fund"). As
described below under "Management and Investment Advice," the same person who
serves as the portfolio manager of the Fund also serves as portfolio manager
of the Berger retail fund.
Although it is anticipated that the Fund and the Berger retail fund will
hold similar securities selections, their investment results are expected to
differ. In particular, differences in asset size and in cash flow resulting
from purchases and redemption of Fund shares may result in different security
selections, differences in the relative weightings of securities or
differences in the prices paid for particular portfolio holdings. Expenses
and expense limitations of the Fund and the Berger retail fund are expected
to differ. The variable insurance contract owner will also bear various
insurance contract fees and expenses and should refer to the accompanying
Separate Account Prospectus for a summary of those fees and expenses.
The investment objective of the Fund is capital appreciation. In
pursuit of that goal, the Fund invests primarily in small companies with the
potential for rapid earnings growth that either occupy a dominant position in
an emerging industry or have a growing market share in a larger, fragmented
industry. The Fund does not invest to provide current income.
The Fund's investment manager generally looks for companies with:
- Strong entrepreneurial managements with proven track records
- A catalyst for rapid earnings growth, such as new products, ideas or
entering new markets
- Relatively strong balance sheets.
The Fund primarily invests in common stocks of small companies and other
securities with equity features, such as convertible securities, preferred
stocks, warrants and rights. Under normal circumstances, the Fund invests at
least 65% of its assets in equity securities of companies with market
capitalizations of less than $1 billion at the time of initial purchase. The
balance of the Fund may be invested in larger companies, government
securities or other short-term investments.
The Fund's NAV may be more volatile than that of funds primarily
invested in stocks of larger companies. Smaller companies may pose greater
risk due to narrow product lines, limited financial resources, less depth in
management or a limited trading market for their stocks. The Fund's
investments are often focused in a small number of business sectors. In
addition, the Fund may invest in certain securities with unique risks, such
as securities of companies with limited operating histories and foreign
securities.
The Fund may be of interest to you if you are comfortable with
above-average risk and intend to make an investment commitment over the long
term. The Fund is not intended to be a complete investment program on its
own, but may serve to diversify other types of investments in your portfolio.
-4-
<PAGE>
* * *
The investment objective of the Fund is considered fundamental, meaning
that it cannot be changed without a shareholders' vote. There can be no
assurance that the Fund's investment objective will be realized.
When the Fund's advisor believes market conditions warrant a temporary
defensive position, the Fund may increase its investment in government
securities and other short-term interest-bearing securities without regard to
the Fund's otherwise applicable investment restrictions, policies or normal
investment emphasis. During this period, it may be more difficult for the
Fund to achieve its investment objective. Following is additional
information about some of the other specific types of securities and other
instruments in which the Fund may invest.
FOREIGN SECURITIES. Investments in foreign securities involve some
risks that are different from the risks of investing in securities of U.S.
issuers, such as the risk of adverse political, social, diplomatic and
economic developments and, with respect to certain countries, the possibility
of expropriation, taxes imposed by foreign countries or limitations on the
removal of monies or other assets of the Fund. Moreover, the economies of
individual foreign countries will vary in comparison to the U.S. economy in
such respects as growth of gross domestic product, rate of inflation, capital
reinvestment, resources, self-sufficiency and balance of payments position.
Securities of some foreign companies, particularly those in developing
countries, are less liquid and more volatile than securities of comparable
domestic companies. Investing in the securities of developing countries may
involve exposure to economic structures that are less diverse and mature, and
to political systems that can be expected to have less stability than
developed countries. The Fund's investments may include American Depositary
Receipts (ADRs). The Fund may also invest in European Depositary Receipts
(EDRs) which are similar to ADRs, in bearer form, designed for use in the
European securities markets, and in Global Depositary Receipts (GDRs). Some
of the companies in which the Fund may invest may be considered passive
foreign investment companies (PFICs), which are described in greater detail
in the Statement of Additional Information.
There also may be less publicly available information about foreign
issuers and securities than domestic issuers and securities, and foreign
issuers generally are not subject to accounting, auditing and financial
reporting standards, requirements and practices comparable to those
applicable to domestic issuers. Also, there is generally less government
supervision and regulation of exchanges, brokers, financial institutions and
issuers in foreign countries than there is in the U.S. Foreign financial
markets typically have substantially less volume than U.S. markets. Foreign
markets also have different clearance and settlement procedures and, in
certain markets, delays or other factors could make it difficult to effect
transactions, potentially causing the Fund to experience losses or miss
investment opportunities.
Costs associated with transactions in foreign securities are generally
higher than with transactions in U.S. securities. The Fund will incur
greater costs in maintaining assets in foreign jurisdictions and in buying
and selling foreign securities generally, resulting in part from converting
foreign currencies into U.S. dollars. In addition, the Fund might have
greater difficulty taking appropriate legal action with respect to foreign
investments in non-U.S. courts than with respect to domestic issuers in U.S.
courts, which may heighten the risk of possible losses through the holding of
securities by custodians and securities depositories in foreign countries.
Since the Fund may invest in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the value of the investments in its portfolio and the
unrealized appreciation or depreciation of investments insofar as U.S.
investors are concerned. If the foreign currency in which a security is
denominated appreciates against the U.S. dollar, the dollar value of the
security will increase. Conversely, a decline in the exchange rate of the
foreign currency against the U.S. dollar would adversely affect the dollar
value of the foreign securities. Foreign currency exchange rates are
determined by forces of supply and demand on the foreign exchange markets,
which are in turn affected by the international balance of payments and other
economic and financial conditions, government intervention, speculation and
other factors.
SECTOR FOCUS. A significant portion of some of the Fund's assets may be
invested in a relatively small number of related industries. However, the
Fund will not concentrate 25% or more of its total assets in any one
industry. Sector focus may increase both market risk (share price volatility)
and liquidity risk.
-5-
<PAGE>
SECURITIES OF SMALLER COMPANIES. The portfolio of the Fund will be
weighted toward securities of companies with small- or mid-sized market
capitalizations. Market capitalization is defined as total current market
value of a company's outstanding common stock. Investments in companies with
smaller market capitalizations may involve greater risks and price volatility
(that is, more abrupt or erratic price movements) than investments in larger,
more mature companies since smaller companies may be at an earlier stage of
development and may have limited product lines, reduced market liquidity for
their shares, limited financial resources or less depth in management than
larger or more established companies. Smaller companies also may be less
significant factors within their industries and may have difficulty
withstanding competition from larger companies. While smaller companies may
be subject to these additional risks, they may also realize more substantial
growth than larger or more established companies.
HEDGING TRANSACTIONS. The Fund is authorized to make limited use of
certain types of futures, forwards and options, but only for the purpose of
hedging, that is, protecting against the risk of market movements that may
adversely affect the value of the Fund's securities or the price of
securities that the Fund is considering purchasing. Although a hedging
transaction may, for example, partially protect the Fund from a decline in
the value of a particular security or its portfolio generally, hedging may
also limit the Fund's opportunity to profit from favorable price movements,
and the cost of the transaction will reduce the potential return on the
security or the portfolio. In addition, futures, forwards and options
contracts do not eliminate fluctuations in the prices of the underlying
securities the Fund owns or intends to acquire. Following is a summary of
the futures, forwards and options which the Fund may utilize, provided that
no more than 5% of the Fund's net assets at the time of purchase may be
utilized as initial margins for financial futures transactions and premiums
for options.
Financial futures and forwards are contracts on financial instruments
(such as securities, securities indices and foreign currencies) that obligate
the holder to take or make future delivery of a specified quantity of the
underlying financial instrument. Futures are exchange traded instruments
that may be physically settled or settled with cash or by entering into an
offsetting transaction, while forwards are privately negotiated and
contemplate actual delivery of the underlying financial instrument (usually a
foreign currency). An option gives the holder the right, but not the
obligation, to purchase or sell something (such as a security or a futures
contract) at a specified price at any time until the expiration date. An
option on a securities index is similar, except that upon exercise,
settlement is made in cash rather than in specific securities. Securities
options may be either exchange-traded or privately negotiated, whereas
options on futures contracts are always exchange-traded. The Fund may only
write call options (that is, issue options that obligate the Fund to deliver
if the option is exercised by the holder) that are "covered" and only up to
25% of the Fund's total assets. A call option is considered "covered" if the
Fund already owns the security on which the option is written or, in the case
of an option written on a securities index, if the Fund owns a portfolio of
securities believed likely to substantially replicate movement of the index.
Use of these instruments by the Fund involves the potential for a loss
that may exceed the amount of initial margin the Fund would be permitted to
commit to the contracts under its investment limitation, or in the case of a
call option written by the Fund, may exceed the premium received for the
option. However, the Fund will be permitted to use such instruments for
hedging purposes only, and only if the aggregate amount of its obligations
under these contracts does not exceed the total market value of the assets
the Fund is attempting to hedge, such as a portion or all of its exposure to
equity securities or its holding in a specific foreign currency. To help
ensure that the Fund will be able to meet its obligations under its futures
and forward contracts and its obligations under options written by the Fund,
the Fund will be required to maintain liquid assets in a segregated account
with its custodian bank or to set aside portfolio securities to "cover" its
position in these contracts.
The principal risks of the Fund utilizing futures transactions, forward
contracts and/or options are: (a) losses resulting from market movements not
anticipated by the Fund; (b) possible imperfect correlation between movements
in the prices of futures, forwards and options and movements in the prices of
the securities or currencies hedged or used to cover such positions; (c) lack
of assurance that a liquid secondary market will exist for any particular
futures or options at any particular time, and possible exchange-imposed
price fluctuation limits, either of which may make it difficult or impossible
to close a position when so desired; (d) lack of assurance that the counter
party to a forward contract would be willing to negotiate an offset or
termination of the contract when so desired; and (e) the need for additional
information and skills beyond those required for the management of a
portfolio of traditional securities. In addition, when the Fund enters into
an over-the-counter contract with a counterparty, the Fund will assume
counterparty
-6-
<PAGE>
credit risk, that is, the risk that the counterparty will fail to perform its
obligations, in which case the Fund could be worse off than if the contract
had not been entered into.
Additional detail concerning the Fund's transactions in forwards,
futures and options and the risks of such investments can be found in the
Statement of Additional Information.
CONVERTIBLE SECURITIES. The Fund may also purchase debt or equity
securities which are convertible into common stock when the Fund's advisor
believes they offer the potential for a higher total return than
nonconvertible securities. While fixed income securities generally have a
priority claim on a corporation's assets over that of common stock, some of
the convertible securities which the Fund may hold are high-yield/high-risk
securities that are subject to special risks, including the risk of default
in interest or principal payments which could result in a loss of income to
the Fund or a decline in the market value of the securities. Convertible
securities often display a degree of market price volatility that is
comparable to common stocks. The credit risk associated with convertible
securities generally is reflected by their ratings assigned by organizations
such as Moody's Investors Service, Inc., and Standard & Poor's Corporation,
or a similar determination of creditworthiness by the advisor. The Fund has
no pre-established minimum quality standards for convertible securities and
may invest in convertible securities of any quality, including lower rated or
unrated securities. However, the Fund will not invest in any security in
default at the time of purchase or in any nonconvertible debt securities
rated below investment grade, and the Fund will invest less than 20% of the
market value of its assets at the time of purchase in convertible securities
rated below investment grade. If convertible securities purchased by the
Fund are downgraded following purchase, or if other circumstances cause 20%
or more of the Fund's assets to be invested in convertible securities rated
below investment grade, the trustees of the Trust, in consultation with the
advisor will determine what action, if any, is appropriate in light of all
relevant circumstances. For a further discussion of debt security ratings,
see Appendix A to the Statement of Additional Information.
SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. The Fund may
invest in securities of companies with limited operating histories. The Fund
considers these to be securities of companies with a record of less than
three years' continuous operation, even including the operations of any
predecessors and parents. (These are sometimes referred to as "unseasoned
issuers.") These companies by their nature have only a limited operating
history which can be used for evaluating the company's growth prospects. As
a result, investment decisions for these securities may place a greater
emphasis on current or planned product lines and the reputation and
experience of the company's management and less emphasis on fundamental
valuation factors than would be the case for more mature companies. In
addition, many of these companies may also be small companies and involve the
risks and price volatility associated with smaller companies.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio
securities to qualified institutional investors such as brokers, dealers or
other financial organizations. This practice permits the Fund to earn
income, which, in turn, can be invested in additional securities to pursue
the Fund's investment objective. Loans of securities by a Fund will be
collateralized by cash, letters of credit, or securities issued or guaranteed
by the U.S. Government or its agencies. The collateral will equal at least
100% of the current market value of the loaned securities, marked-to-market
on a daily basis. The Fund bears a risk of loss in the event that the other
party to a securities lending transaction defaults on its obligations and the
Fund is delayed in or prevented from exercising its rights to dispose of the
collateral, including the risk of a possible decline in the value of the
collateral securities during the period in which the Fund seeks to assert
these rights, the risk of incurring expenses associated with asserting these
rights, and the risk of losing all or a part of the income from the
transaction. The Fund will not lend any security if, as a result of such
loan, the aggregate value of securities then on loan would exceed 33-1/3% of
the market value of the Fund's total assets.
ILLIQUID SECURITIES. The Fund is authorized to invest in securities
which are illiquid or not readily marketable because they are subject to
restrictions on their resale ("restricted securities") or because, based upon
their nature or the market for such securities, no ready market is available.
However, the Fund may not purchase any security, the purchase of which would
cause the Fund to invest more than 15% of its net assets, measured at the
time of purchase, in illiquid securities. If securities become illiquid
following purchase or other circumstances cause more than 15% of the Fund's
net assets to be invested in illiquid securities, the trustees of the Trust,
in consultation with the advisor, will determine what action, if any, is
appropriate in light of all relevant circumstances. Repurchase agreements
maturing in more than seven days will be considered as illiquid for purposes
of this restriction. Certain restricted securities, such as Rule 144A
securities, may be treated as liquid under this restriction if a
determination is made that such securities are readily
-7-
<PAGE>
marketable. Investments in illiquid securities involve certain risks to the
extent that the Fund may be unable to dispose of such a security at the time
desired or at a reasonable price or, in some cases, may be unable to dispose
of it at all. In addition, in order to resell a restricted security, the
Fund might have to incur the potentially substantial expense and delay
associated with effecting registration.
INVESTMENT RESTRICTIONS
In addition to its investment objective, the Fund has adopted a number
of restrictions on its investments and other activities that may not be
changed without shareholder approval. For example, the Fund, as to 75% of
its total assets, may not purchase securities of any issuer (except U.S.
Government securities) if, immediately after and as a result of such
purchase, the value of such Fund's holdings in the securities of that issuer
exceeds 5% of the value of its total assets or it owns more than 10% of the
outstanding voting securities or of any class of securities of such issuer.
Further, the Fund may not borrow money, except borrowing undertaken from
banks for temporary or emergency purposes in amounts not to exceed 25% of the
market value of its total assets (including the amount borrowed). Nor may
the Fund make loans (except that the Fund may enter into repurchase
agreements and may lend portfolio securities in accordance with the Fund's
investment policies). In addition, the Fund may not invest in any one
industry more than 25% of the value of its total assets at the time of
investment, nor invest in commodities, except, only for the purpose of
hedging, in certain futures, forwards and/or options as specified in greater
detail above and in the Statement of Additional Information.
Also, the Fund does not currently intend to make short sales of
securities, and the Fund does not intend to purchase or sell securities on a
when-issued or delayed delivery basis if as a result, more than 5% of its
assets are invested in such securities, although these restrictions may be
changed without shareholder approval. For more detail about the Fund's
investment restrictions, see the Statement of Additional Information.
5. PORTFOLIO TURNOVER
In pursuit of the Fund's investment objective, management continuously
monitors the Fund's investments and makes portfolio changes whenever changes
in the markets, industry trends or the outlook for any portfolio security
indicate to them that the objective could be better achieved by investment in
another security, regardless of portfolio turnover. In addition, portfolio
turnover may increase as a result of large amounts of purchases and
redemptions of shares of the Fund due to economic, market or other factors
that are not within the control of management. The annual portfolio turnover
rates of the Fund may at times exceed 100%. Higher portfolio turnover would
necessarily result in correspondingly higher brokerage costs for the Fund.
The portfolio turnover rates are shown in the tables in Section 2.
6. MANAGEMENT AND INVESTMENT ADVICE
The Fund is supervised by trustees who are responsible for major
decisions about the Fund's policies and overall Fund oversight. The trustees
hire the companies that run day-to-day Fund operations, such as the
investment advisor, administrator, transfer agent and custodian. For more
information about Fund trustees and officers, see the Statement of Additional
Information.
The investment advisor to the Fund is Berger Associates, Inc. ("Berger
Associates"), 210 University Boulevard, Suite 900, Denver, CO 80206. Berger
Associates furnishes continuous advice and recommendations to the Fund
regarding securities to be purchased and sold by the Fund. Berger
Associates, therefore, formulates a continuing program for management of the
assets of the Fund consistent with the investment objectives and policies
established by the trustees of the Trust. Berger Associates also provides
office space for the Fund and pays the salaries, fees and expenses of all
Fund officers and trustees of the Fund who are interested persons of Berger
Associates. Berger Associates serves as investment advisor to mutual funds
and other institutional investors, and had assets under management of $3.6
billion as of December 31, 1997. Berger Associates is a wholly-owned
subsidiary of Kansas City Southern Industries, Inc. ("KCSI"). KCSI is a
publicly traded holding company with principal operations in rail
transportation, through its subsidiary The Kansas City Southern Railway
Company, and financial asset management businesses. KCSI also owns
approximately 41% of the outstanding shares of DST Systems, Inc. ("DST"), a
publicly traded information and transaction processing company which also
acts as the Funds' sub-transfer agent.
-8-
<PAGE>
William R. Keithler is the President and portfolio manager of the Fund
and is primarily responsible for the investments of the Fund, including the
day-to-day investment decisions for the Fund. Mr. Keithler assumed
management of the Fund at its inception. Mr. Keithler also serves as
President and portfolio manager for the Berger Small Company Growth Fund and
the Berger New Generation Fund.
Mr. Keithler joined Berger Associates in December 1993 and serves as
Senior Vice President-Investment Management. Previously, he was employed by
INVESCO Trust Company, Denver, Colorado, as Senior Vice President (January
1993 to December 1993), Vice President (January 1991 to January 1993) and
Portfolio Manager (January 1988 to January 1991). During his seven years
with INVESCO, Mr. Keithler was portfolio manager of several mutual funds,
including the INVESCO Dynamics Fund and INVESCO Emerging Growth Fund. From
1982 to 1986, Mr. Keithler was Vice President and portfolio manager with
First Trust St. Paul, in St. Paul, Minnesota.
Under the Investment Advisory Agreement for the Fund, Berger Associates
is compensated for its investment advisory services to the Fund by the
payment of a fee at the annual rate of .9 of 1% (0.90%) of the average daily
net assets of the Fund.
From time to time, Berger Associates may compensate Participating
Insurance Companies or other companies for providing a variety of
administrative services (such as record keeping and accounting) and investor
support services (such as responding to inquiries and preparing mailings to
shareholders) to Participating Insurance Companies and their customers who
have allocated contract amounts to the Fund. This compensation, which may be
paid as a per account fee or as a percentage of the average daily net assets
invested in the Fund by the compensated Participating Insurance Company,
depending on the nature, extent and quality of the services provided, will be
paid from Berger Associates' own resources and not from the assets of the
Fund.
Participating Insurance Companies may also be authorized by the Fund to
accept on their behalf purchase and redemption requests that are received in
good order. Subject to Fund approval, certain of these companies may be
authorized to designate other entities to accept purchase and redemption
orders on behalf of the Fund.
7. EXPENSES OF THE FUND
The Fund has appointed Investors Fiduciary Trust Company ("IFTC") as
its record keeping and pricing agent to calculate the daily net asset value
of the Fund and to perform certain accounting and record keeping functions
required by the Fund. In addition, IFTC also serves as the Fund's custodian,
transfer agent and dividend disbursing agent. IFTC has engaged DST as
sub-agent to provide transfer agency and dividend disbursing services for the
Fund. As noted in the preceding section, approximately 41% of the
outstanding shares of DST are owned by KCSI.
For custodian, record keeping and pricing services, the Fund pays fees
to IFTC based on a percentage of its assets, subject to certain minimums.
The Fund also pays a monthly fee based primarily on the number of accounts
maintained on behalf of the Fund for transfer agency and dividend disbursing
services, which fees are paid by the Fund to IFTC and in turn passed through
to DST as sub-agent. In addition, the Fund reimburses IFTC and DST for
certain out-of-pocket expenses.
The trustees of the Fund have authorized portfolio transactions to be
placed on an agency basis through DST Securities, Inc. ("DSTS"), a
wholly-owned broker-dealer subsidiary of DST. When transactions for the Fund
are effected through DSTS, the commission received by DSTS is credited
against, and thereby reduces, certain operating expenses that the Fund would
otherwise be obligated to pay. No portion of the commission is retained by
DSTS.
In addition, under a separate Administrative Services Agreement with the
Fund Berger Associates performs certain administrative and record keeping
services not otherwise performed by IFTC, including the preparation of
financial statements and reports to be filed with regulatory authorities.
The Fund pays Berger Associates a fee at the annual rate of 1/100 of 1%
(0.01%) of its average daily net assets for such services. The Fund also
incurs other expenses, including accounting, administrative and legal
expenses.
Berger Associates has voluntarily agreed to waive its advisory fee and
expects to voluntarily reimburse the Fund for additional expenses to the
extent that normal operating expenses in any fiscal year, including the
investment advisory
-9-
<PAGE>
fee but excluding brokerage commissions, interest, taxes and extraordinary
expenses, exceed 1.15% of the Fund's average daily net assets.
DISTRIBUTOR
The distributor (principal underwriter) of the Fund's shares is Berger
Distributors, Inc. (the "Distributor"), 210 University Boulevard, Suite 900,
Denver, CO 80206. The Distributor may be reimbursed by Berger Associates for
its costs in distributing the Fund's shares. The Distributor is a
wholly-owned subsidiary of Berger Associates, and certain officers of the
Trust are officers or directors of the Distributor.
8. HOW TO PURCHASE AND REDEEM SHARES IN THE FUND
Shares of the Fund are sold by the Fund on a continuous basis to
separate accounts of Participating Insurance Companies or to qualified plans.
Investors may not purchase or redeem shares of the Fund directly, but only
through variable insurance contracts offered through the separate accounts of
Participating Insurance Companies or through qualified retirement plans. You
should refer to the applicable Separate Account Prospectus or your plan
documents for information on how to purchase or surrender a contract, make
partial withdrawals of contract values, allocate contract values to the Fund,
change existing allocations among investment alternatives, including the
Fund, or select the Fund as an investment option for a qualified plan. No
sales charge is imposed upon the purchase or redemption of shares of the
Funds. Sales charges for the variable insurance contracts or qualified plans
are described in the relevant Separate Account Prospectus or plan documents.
Fund shares are purchased or redeemed at the net asset value per share
next computed after receipt of a purchase or redemption order by a Fund, its
authorized agent or its designee. Payment for redeemed shares generally will
be made within three business days following the date of the request for
redemption. However, payment may be postponed under unusual circumstances,
such as when normal trading is not taking place on the New York Stock
Exchange, an emergency as defined by the Securities and Exchange Commission
exists, or as permitted by the Securities and Exchange Commission.
9. HOW THE NET ASSET VALUE IS DETERMINED
The price of the Fund's shares is based on the net asset value of the
Fund, which is determined at the close of the regular trading session of the
New York Stock Exchange (the "Exchange") (normally 4:00 p.m., New York time)
each day that the Exchange is open.
The per share net asset value of the Fund is determined by dividing the
total value of its securities and other assets, less liabilities, by the
total number of shares outstanding. In determining net asset value,
securities are valued at market value or, if market quotations are not
readily available, may be valued at their fair value determined in good faith
pursuant to consistently applied procedures established by the trustees.
Money market instruments maturing within 60 days are valued at amortized
cost, which approximates market value. All assets and liabilities initially
expressed in terms of non-U.S. dollar currencies are translated into U.S.
dollars at the prevailing market rates as quoted by one or more banks or
dealers shortly before the close of the Exchange. See the Statement of
Additional Information for more detailed information.
Generally, trading in foreign securities markets is substantially
completed each day at various times prior to the close of the Exchange. The
values of foreign securities used in computing the net asset value of the
shares of the Fund are determined as of the earlier of such market close or
the closing time of the Exchange. Occasionally, events affecting the value
of such securities may occur between the times at which they are determined
and the close of the Exchange, or when the foreign market on which such
securities trade is closed but the Exchange is open, 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 may be valued at their fair value as determined in good faith
pursuant to consistently applied procedures established by the trustees.
The Fund's securities may be listed primarily on foreign exchanges or
over-the-counter dealer markets which may trade on days when the Exchange is
closed (such as customary U.S. holidays) and the Fund's net asset value is
not
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<PAGE>
calculated. As a result, the net asset value of the Fund may be
significantly affected by such trading on days when shareholders cannot
purchase or redeem shares of the Fund.
Since the Fund does not impose any front end sales load or redemption
fee, both the purchase price and the redemption price of a Fund share are the
same and will be equal to the next calculated net asset value of a share of
the Fund.
10. INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT
The Fund intends to declare dividends representing the Fund's net
investment income annually, normally in December. It is also the present
policy of the Fund to distribute annually all of its net realized capital
gains.
All dividends and capital gains distributions paid by the Fund will be
automatically reinvested in shares of the Fund at the net asset value on the
ex-dividend date unless an election is made on behalf of a separate account
or qualified plan to receive distributions in cash.
The Fund intends to qualify to be treated as a separate regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). If it so qualifies and meets certain minimum
distribution requirements, the Fund generally will not be liable for Federal
income tax on the amount of its earnings that are timely distributed. In
addition, the Fund intends to qualify under the diversification requirements
of Code Section 817(h) relating to insurance company separate accounts. By
meeting these and other requirements, the Participating Insurance Companies,
rather than the owners of the variable insurance contracts, should be subject
to tax on distributions received with respect to Fund shares. The tax
treatment of distributions made to a Participating Insurance Company will
depend on the Participating Insurance Company's tax status. Participating
Insurance Companies should consult their own tax advisors concerning whether
such distributions are subject to Federal income tax if retained as part of
contract reserves. For further information concerning Federal income tax
consequences for the owners of variable insurance contracts and qualified
plan participants, consult the appropriate Separate Account Prospectus or
plan documents.
11. ADDITIONAL INFORMATION
The Fund is a separate series or portfolio established under the Trust,
a Delaware business trust organized on October 17, 1995. The Trust is
authorized to issue an unlimited number of shares of beneficial interest in
series or portfolios. The series comprising the Fund was established under
the Trust in October 1995. Currently, there are four series, including the
Fund, established under the Trust, although others may be added in the
future. Shares of the Fund are fully paid and non-assessable when issued.
Each share has a par value of $.01. All shares issued by the Fund
participate equally in dividends and other distributions by the Fund, and in
the residual assets of the Fund in the event of its liquidation.
The separate accounts of the Participating Insurance Companies and the
trustees of the qualified plans invested in the Fund, rather than individual
contract owners or plan participants, are the shareholders of the Fund.
However, each Participating Insurance Company or qualified plan will vote
such shares as required by law and interpretations thereof, as amended or
changed from time to time. Under current law, a Participating Insurance
Company is required to request voting instructions from its contract owners
and must vote Fund shares held by each of its separate accounts in proportion
to the voting instructions received. Additional information about voting
procedures is contained in the applicable Separate Account Prospectuses.
Shareholders of the Fund generally vote separately on matters relating
to the Fund, although they will vote together with the holders of all other
series of the Trust in the election of trustees of the Trust and on all
matters relating to the Trust as a whole. Each full share of the Fund has
one vote. Shares of the Fund have non-cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
trustees can elect 100% of the trustees if they choose to do so and, in such
event, the holders of the remaining less than 50% of the shares voting for
the election of trustees will not be able to elect any person or persons as
trustees. The Fund is not required to hold annual shareholder meetings
unless required by the Investment Company Act of 1940 or other applicable law
or unless called by the trustees.
-11-
<PAGE>
If shareholders owning at least 10% of the outstanding shares of the
Trust so request, a special shareholders' meeting will be held for the
purpose of considering the removal of a trustee of the Trust. Special
meetings will be held for other purposes if the holders of at least 25% of
the outstanding shares of the Trust so request. Subject to certain
limitations, the Fund will facilitate appropriate communications by
shareholders desiring to call a special meeting for the purpose of
considering the removal of a trustee.
The Fund sells its shares only to certain qualified retirement plans and
to variable annuity and variable life insurance separate accounts of
insurance companies that are unaffiliated with Berger Associates and that may
be unaffiliated with one another. The Fund currently does not foresee any
disadvantages to policy owners arising out of the fact that the Fund offers
its shares to such entities. Nevertheless, the trustees intend to monitor
events in order to identify any material irreconcilable conflicts that may
arise and to determine what action, if any, should be taken in response to
such conflicts. If a conflict occurs, the trustees may require one or more
insurance company separate accounts or plans to withdraw its investments in
the Fund and to substitute shares of another fund. As a result, the Fund may
be forced to sell securities at disadvantageous prices. In addition, the
trustees may refuse to sell shares of the Fund to any separate account or
qualified plan or may suspend or terminate the offering of shares of the Fund
if such action is required by law or regulatory authority or is deemed by the
Fund to be in the best interests of the shareholders of the Fund.
The Fund's transfer agent and dividend disbursing agent is Investors
Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas City, MO
64105. IFTC has engaged DST Systems, Inc. ("DST"), P.O. Box 419958, Kansas
City, MO 64141, as sub-agent to provide transfer agency and dividend
disbursing services for the Fund.
Owners of variable insurance contracts and qualified plan administrators
will receive annual and semiannual reports including the financial statements
of the Fund in which contract values or qualified plan assets are invested.
Each report will show the investments owned by the Fund and the market values
thereof, as well as other information about the Fund and its operations.
12. PERFORMANCE
From time to time in advertisements, the Fund may discuss its
performance ratings as published by recognized mutual fund statistical
services, such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., or Morningstar, Inc., or Value Line Investment Survey or
by publications of general interest such as THE WALL STREET JOURNAL,
INVESTOR'S BUSINESS DAILY, MONEY, BARRON'S, FINANCIAL WORLD or KIPLINGER'S
PERSONAL FINANCE MAGAZINE. In addition, the Fund may compare its performance
to that of recognized broad-based securities market indices, including the
Standard & Poor's 500 Stock Index, the Dow Jones Industrial Average, the
Russell 2000 Stock Index, the Standard & Poor's 400 Mid-Cap Index, the
Standard & Poor's 600 Small Cap Index, the Morgan Stanley Capital
International EAFE (Europe, Australasia, Far East) Index, the Dow Jones World
Index, the Nasdaq Composite Index or the Lehman Brothers Intermediate Term
Government/Corporate Bond Index, or more narrowly-based or blended indices
which reflect the market sectors in which that Fund invests.
The total return of the Fund is calculated for any specified period of
time by assuming the purchase of shares of the Fund at the net asset value at
the beginning of the period. Each dividend or other distribution paid by the
Fund is assumed to have been reinvested at the net asset value on the
reinvestment date. The total number of shares then owned as a result of this
process is valued at the net asset value at the end of the period. The
percentage increase is determined by subtracting the initial value of the
investment from the ending value and dividing the remainder by the initial
value.
The Fund's total return reflects the Fund's performance over a stated
period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same total return if
the Fund's performance had been constant over the entire period. Total
return figures are based on the overall change in value of a hypothetical
investment in the Fund. Because average annual total returns for more than
one year tend to smooth out variations in the Fund's return, investors should
recognize that such figures are not the same as actual year-by-year results.
The Fund's total return includes the effect of deducting the Fund's
expenses, but does not include any charges and expenses attributable to a
particular variable insurance contract or qualified plan. Because shares of
the Fund can
-12-
<PAGE>
be purchased only through a variable insurance contract or qualified plan,
the Funds' total return data should be reviewed along with the description of
charges and expenses contained in the applicable Separate Account Prospectus
or plan documents. Total return for the Fund must always be accompanied by,
and reviewed with, comparable total return data for an associated variable
annuity separate account, or information identifying the charges and expenses
attributable to the variable life insurance contract or plan that are not
reflected in the Fund's total return.
Any performance figures for the Fund are based upon historical results
and do not guarantee future performance. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
The Fund has the same investment objective and follows similar
investment strategies as the Berger retail fund. The Berger retail fund has
the same investment advisor as the Fund offered under this Prospectus. As
described under "Management and Investment Advice," the same person who
serves as portfolio manager of the Fund also serves as portfolio manager of
the Berger retail fund.
Set forth in the table below is total return data for the Fund, where
available. Also set forth is total return information for the Berger retail
fund, calculated as described above. Investors should not consider the
performance data for the Berger retail fund as a substitute for the
performance of the Fund offered under this Prospectus, nor as an indication
of the past or future performance of the Fund. The performance figures below
reflect the deduction of the historical fees and expenses paid by the Berger
retail funds, and not those paid or to be paid by the Fund. The figures also
do not reflect the deduction of charges or expenses attributable to variable
insurance contracts or qualified plans invested in the Fund. As discussed
above, investors should refer to the applicable Separate Account Prospectus
or qualified plan documents accompanying this Prospectus for information
pertaining to such contract charges and expenses. The Fund and the Berger
retail fund will be managed separately and the investments and investment
results are expected to differ. In particular, differences in asset size and
in cash flow resulting from purchases and redemption of Fund shares may
result in different security selections, differences in the relative
weightings of securities or differences in the prices paid for particular
portfolio holdings.
The following table shows, where available, the average annualized total
returns for the Fund and for the Berger retail fund for the one-, five- and
ten-year periods ended December 31, 1997, and, for the period from inception
through December 31, 1997. Performance data for the Fund reflects fee
waivers and expense reimbursements by the Fund's advisor, without which
performance would be lower.
<TABLE>
<CAPTION>
Berger IPT - Berger
Small Company Small Company
Growth Fund Growth Fund^
- -------------------------------------------------------------------------------
<S> <C> <C>
Since Inception of the Berger IPT - 11.87% 8.47%
Small Company Growth Fund (5/1/96)
------------------------------------------------------------------------------
1-year 21.21% 16.16%
------------------------------------------------------------------------------
3-year N/A 21.98%
------------------------------------------------------------------------------
Since Inception of the Berger Small N/A 19.81%
Company Growth Fund (12/30/93)
</TABLE>
^ As of December 31, 1997, the retail Berger Small Company Growth Fund had
assets of approximately $784,000,000.
13. SHAREHOLDER INQUIRIES
Shareholders with questions should write to the Berger Funds, c/o
Berger Associates, Inc., P.O. Box 5005, Denver, CO 80217, or call
1-303-329-0200 or 1-800-706-0539, or contact a Participating Insurance
Company.
-13-
<PAGE>
PROSPECTUS
Berger Institutional Products Trust (the "Trust") is an open-end management
investment company. The Trust currently consists of four diversified series or
portfolios, one of which is the Berger/BIAM IPT - International Fund (the
"Fund"). The Fund has its own investment objective and policies. Shares of the
Fund are not offered directly to the public, but are sold only in connection
with investment in and payments under variable annuity contracts and variable
life insurance contracts (collectively "variable insurance contracts") issued by
life insurance companies ("Participating Insurance Companies"), as well as to
certain qualified retirement plans.
The investment objective of the Berger/BIAM IPT - International Fund is
long-term capital appreciation. The Fund pursues its goal by investing in a
portfolio consisting primarily of common stocks of well-established foreign
companies. The investment manager first identifies economic and business themes
that it believes provide a favorable framework for selecting stocks. Using
fundamental analysis, the investment manager then selects individual companies
best positioned to take advantage of opportunities presented by these themes.
This Prospectus concisely sets forth information about the Fund that a
prospective purchaser of a variable insurance contract or plan participant
should consider before purchasing a variable contract, allocating contract
values to the Fund or selecting the Fund as an investment option under a
qualified plan. It should be read carefully in conjunction with any separate
account prospectus of the specific insurance product ("Separate Account
Prospectus") or qualified plan documents that accompany this Prospectus and
retained for future reference. Additional information about the Fund has
been filed with the Securities and Exchange Commission. A copy of the
Statement of Additional Information, dated May 1, 1998, as it may be amended
or supplemented from time to time, is incorporated by reference into this
Prospectus in its entirety and is available upon request without charge by
writing the Berger Funds, c/o Berger Associates, Inc., P.O. Box 5005, Denver,
CO 80217, or call 1-303-329-0200 or 1-800-706-0539 or by writing or calling a
Participating Insurance Company.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK (INCLUDING BANK OF IRELAND). SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND IS
SUBJECT TO INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
DATED MAY 1, 1998
<PAGE>
Table of Contents
Section Page
- ------- ----
1. Fee Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Condensed Financial Information . . . . . . . . . . . . . . . . . . 2
3. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Investment Objective and Policies and Risk Factors. . . . . . . . . 4
5. Portfolio Turnover. . . . . . . . . . . . . . . . . . . . . . . . . 8
6. Management and Investment Advice. . . . . . . . . . . . . . . . . . 8
7. Expenses of the Fund. . . . . . . . . . . . . . . . . . . . . . . . 10
8. How to Purchase and Redeem Shares in the Fund . . . . . . . . . . . 10
9. How the Net Asset Value Is Determined . . . . . . . . . . . . . . . 11
10. Income Dividends, Capital Gains Distributions and Tax Treatment . . 11
11. Additional Information. . . . . . . . . . . . . . . . . . . . . . . 12
12. Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
- i -
<PAGE>
1. FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases 0%
- -------------------------------------------------------------------------
Maximum Sales Load Imposed on Reinvested Dividends 0%
- -------------------------------------------------------------------------
Deferred Sales Load 0%
- -------------------------------------------------------------------------
Redemption Fees 0%
- -------------------------------------------------------------------------
Exchange Fee 0%
- -------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
INVESTMENT TOTAL FUND
ADVISORY FEE OPERATING
(AFTER WAIVERS EXPENSES (AFTER
AND OTHER WAIVERS AND
REIMBURSEMENTS)^ EXPENSES* REIMBURSEMENTS)^
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Berger/BIAM IPT - .00% 1.20% 1.20%
International Fund
</TABLE>
^ The Fund's investment advisor has voluntarily agreed to waive its advisory
fees and has voluntarily reimbursed the Fund for additional expenses to the
extent that normal operating expenses in any fiscal year, including the
investment advisory fee but excluding brokerage commissions, interest,
taxes and extraordinary expenses, of the Fund exceed 1.20% of the Fund's
average daily net assets. Absent the voluntary waiver and reimbursement,
the Investment Advisory Fee for the Fund would have been 0.90%, and the
Total Fund Operating Expenses would have been 3.83%.
* Other Expenses primarily include transfer agency fees, shareholder report
expenses, registration fees and custodian fees.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming 5%
annual return, and assuming redemption at the end of each time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Berger/BIAM IPT - International Fund $12* $38* $66* $145*
</TABLE>
* Based on estimated expenses for the Fund's first year of operations.
-1-
<PAGE>
THE EXPENSES SET FORTH IN THE PRECEDING TABLES SHOULD NOT BE CONSIDERED
A REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
The purpose of the preceding tables is to assist the investor in
understanding the various costs and expenses that an investor in any of the
Funds will bear directly or indirectly. THE TABLES AND EXAMPLE ABOVE DO NOT
REFLECT THE DEDUCTION OF ANY APPLICABLE CHARGES OR EXPENSES ATTRIBUTABLE TO
VARIABLE INSURANCE CONTRACTS OR QUALIFIED PLANS INVESTED IN THE FUND.
PROSPECTIVE INVESTORS SHOULD REFER TO THE APPLICABLE SEPARATE ACCOUNT
PROSPECTUS OR QUALIFIED PLAN DOCUMENTS THAT ACCOMPANY THIS PROSPECTUS FOR
INFORMATION PERTAINING TO SUCH CONTRACT CHARGES AND EXPENSES. The Fund's
expenses are described in greater detail under "Management and Investment
Advice" and "Expenses of the Fund."
2. CONDENSED FINANCIAL INFORMATION
Following is a table setting forth certain financial highlights of the
Fund. The information has been audited by Price Waterhouse LLP, independent
accountants, whose report thereon is incorporated by reference from the Funds'
1997 Annual Report into the Statement of Additional Information. Additional
performance information is contained in the Fund's most recent Annual Report
dated December 31, 1997, which may be obtained upon request and without charge
by calling the Fund at 1-800-706-0539 or by calling a Participating Insurance
Company.
-2-
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT THE PERIOD
ENDED DECEMBER 31,
-----------------------
1997*
-----
<S> <C>
Net asset value, beginning of period . . . . . . . . $ 10.00
----------
Income (loss) from investment operations:
Net investment income (loss) . . . . . . . . . .05
Net realized and unrealized gains (losses) on
securities . . . . . . . . . . . . . . . . (.26)
----------
Total from investment operations . . . . . . . . . . (.21)
----------
Less distributions:
Dividends (from net investment income) . . . . 0.00
Distributions (from capital gains) . . . . . . 0.00
----------
Total distributions . . . . . . . . . . . . . . . . 0.00
----------
Net asset value, end of period . . . . . . . . . . . $ 9.79
----------
----------
Total Return(1) . . . . . . . . . . . . . . . . . . (2.10)%(4)
Ratios/Supplemental Data:
Net assets, end of period . . . . . . . . . . . . . $2,705,831
Net expense ratio to average net assets . . . . . . .98%(2)
Ratio of net income (loss) to average net assets . . .86%(2)
Gross expenses to average net assets(3) . . . . . . 3.83%(2)
Portfolio turnover rate . . . . . . . . . . . . . . 14%(4)
Average commission rate . . . . . . . . . . . . . . $ 0.0220
</TABLE>
* For the period May 1, 1997 (commencement of operations) to December 31,
1997.
(1). Total return does not reflect expenses that apply to related variable
insurance contracts. Had variable contract charges been included, total
return would have been lower.
(2). Annualized.
(3). During the period, certain expenses were reduced as a result of
voluntary fee reductions, expense reimbursements and/or earnings credits. If
such reductions had not occurred, the ratios would have been as indicated.
Gross expenses and net expenses do not include the deduction of any charges
or expenses attributable to any particular variable insurance contract.
(4). Based on operations for the period shown and accordingly, is not
representative of a full year.
-3-
<PAGE>
3. INTRODUCTION
The Fund is a diversified portfolio or series of the Trust, a management
investment company. The Fund sells and redeems its shares at net asset value
without any sales charges, commissions or redemption fees. Sales charges for
variable insurance contracts are described in the accompanying Separate Account
Prospectus relating to those contracts. Each variable insurance contract
involves fees and expenses not described in this Prospectus. See the
accompanying Separate Account Prospectuses or qualified retirement plan
documents for information regarding contract fees and expenses and any
restrictions on purchases or allocations. This Prospectus describes the
securities offered by the Fund.
4. INVESTMENT OBJECTIVE AND POLICIES AND RISK FACTORS
The Fund is a separate series of the Trust, with its own portfolio of
securities selected to achieve its particular investment objective. Since the
shares of the Fund primarily represent an investment in common stocks, the net
asset value of the Fund will reflect changes in the market value of the
securities held in the Fund's portfolio, and the value of a Fund share will
therefore go up and down.
The Fund has the same investment objective and follows substantially the
same investment strategies and policies as that of a certain publicly-offered
investment company managed by the same investment advisor, the Berger/BIAM
International Fund (the "Berger retail fund"). As described below under
"Management and Investment Advice," the same persons who serve as the portfolio
managers of the Fund also serve as portfolio managers of the Berger retail fund.
Although it is anticipated that the Fund and the Berger retail fund will
hold similar securities selections, their investment results are expected to
differ. In particular, differences in asset size and in cash flow resulting
from purchases and redemption of Fund shares may result in different security
selections, differences in the relative weightings of securities or differences
in the prices paid for particular portfolio holdings. Expenses and expense
limitations of the Fund and the Berger retail fund are expected to differ. The
variable insurance contract owner will also bear various insurance contract fees
and expenses and should refer to the accompanying Separate Account Prospectus
for a summary of those fees and expenses.
The Fund's investment objective is long-term capital appreciation. The Fund
pursues its goal by investing in a portfolio consisting primarily of common
stocks of well-established foreign companies. The Fund considers a company to
be foreign if the principal securities trading market for its equity securities
is located outside the U.S. or it is organized under the laws of, and has a
principal office in, a country other than the U.S. The Fund's investment
manager first identifies economic and business themes that it believes provide a
favorable framework for selecting stocks. Using fundamental analysis, the
investment manager then selects individual companies best positioned to take
advantage of opportunities presented by these themes. The Fund does not invest
to provide current income, although some income may be produced while managing
the Fund.
The Fund's investment manager generally looks for companies with:
- -- Securities that are fundamentally undervalued relative to their
long-term prospective earnings growth rates, their historic valuation
levels and their competitors
- -- Business operations predominantly in well-regulated and more stable
foreign markets
- -- Substantial size and liquidity, strong balance sheets, proven management
and diversified earnings.
The Fund invests primarily in common stocks with 65% of its total assets in
securities of companies located in at least five different countries outside the
United States. Recently, the Fund has been weighted toward countries in Western
Europe, Australia and the Far East. However, it may also invest in other
foreign countries, including developing countries. A majority of the Fund's
assets are invested in mid-sized to large capitalization companies. The Fund
currently considers mid-sized to large market capitalizations to be those in
excess of $1 billion. The Fund may also take positions in convertible
securities, preferred stocks, corporate bonds and short-and long-term foreign or
U.S. government securities.
There are additional risks with investing in foreign countries,
especially in developing countries -- specifically, economic, currency,
information, political and transaction risks. As a result of these additional
risks, the Fund may be
-4-
<PAGE>
more volatile than a domestic stock fund. The Fund's investments are often
focused in a small number of business sectors. In addition, the Fund may
invest in certain securities with unique risks, such as forward foreign
currency contracts. The Fund is not intended to be a complete investment
program on its own, but may serve to diversify other types of investments in
an investor's portfolio.
* * *
The investment objective of the Fund is considered fundamental, meaning
that it cannot be changed without a shareholders' vote. There can be no
assurance that the Fund's investment objective will be realized.
FOREIGN SECURITIES. Investments in foreign securities involve some risks
that are different from the risks of investing in securities of U.S. issuers,
such as the risk of adverse political, social, diplomatic and economic
developments and, with respect to certain countries, the possibility of
expropriation, taxes imposed by foreign countries or limitations on the removal
of monies or other assets of the Fund. Moreover, the economies of individual
foreign countries will vary in comparison to the U.S. economy in such respects
as growth of gross domestic product, rate of inflation, capital reinvestment,
resources, self-sufficiency and balance of payments position. Securities of
some foreign companies, particularly those in developing countries, are less
liquid and more volatile than securities of comparable domestic companies.
Investing in the securities of developing countries may involve exposure to
economic structures that are less diverse and mature, and to political systems
that can be expected to have less stability than developed countries. The
Fund's investments may include American Depositary Receipts (ADRs). The Fund
may also invest in European Depositary Receipts (EDRs) which are similar to
ADRs, in bearer form, designed for use in the European securities markets, and
in Global Depositary Receipts (GDRs). Some of the companies in which the Fund
may invest may be considered passive foreign investment companies (PFICs), which
are described in greater detail in the Statement of Additional Information.
There also may be less publicly available information about foreign issuers
and securities than domestic issuers and securities, and foreign issuers
generally are not subject to accounting, auditing and financial reporting
standards, requirements and practices comparable to those applicable to domestic
issuers. Also, there is generally less government supervision and regulation of
exchanges, brokers, financial institutions and issuers in foreign countries than
there is in the U.S. Foreign financial markets typically have substantially
less volume than U.S. markets. Foreign markets also have different clearance
and settlement procedures and, in certain markets, delays or other factors could
make it difficult to effect transactions, potentially causing the Fund to
experience losses or miss investment opportunities.
Costs associated with transactions in foreign securities are generally
higher than with transactions in U.S. securities. The Fund will incur greater
costs in maintaining assets in foreign jurisdictions and in buying and selling
foreign securities generally, resulting in part from converting foreign
currencies into U.S. dollars. In addition, the Fund might have greater
difficulty taking appropriate legal action with respect to foreign investments
in non-U.S. courts than with respect to domestic issuers in U.S. courts, which
may heighten the risk of possible losses through the holding of securities by
custodians and securities depositories in foreign countries.
Since the Fund may invest in securities denominated or quoted in currencies
other than the U.S. dollar, changes in foreign currency exchange rates will
affect the value of the investments in its portfolio and the unrealized
appreciation or depreciation of investments insofar as U.S. investors are
concerned. If the foreign currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate of the foreign currency
against the U.S. dollar would adversely affect the dollar value of the foreign
securities. Foreign currency exchange rates are determined by forces of supply
and demand on the foreign exchange markets, which are in turn affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation and other factors.
SECTOR FOCUS. A significant portion of some of the Fund's assets may be
invested in a relatively small number of related industries. However, the Fund
will not concentrate 25% or more of its total assets in any one industry.
Sector focus may increase both market risk (share price volatility) and
liquidity risk.
SECURITIES OF SMALLER COMPANIES. The Fund may invest in securities of
companies with small- or mid-sized market capitalizations. Market
capitalization is defined as total current market value of a company's
outstanding
-5-
<PAGE>
common stock. Investments in companies with smaller market capitalizations
may involve greater risks and price volatility (that is, more abrupt or
erratic price movements) than investments in larger, more mature companies
since smaller companies may be at an earlier stage of development and may
have limited product lines, reduced market liquidity for their shares,
limited financial resources or less depth in management than larger or more
established companies. Smaller companies also may be less significant
factors within their industries and may have difficulty withstanding
competition from larger companies. While smaller companies may be subject to
these additional risks, they may also realize more substantial growth than
larger or more established companies.
HEDGING TRANSACTIONS. The Fund is authorized to make limited use of
forward contracts for the purpose of hedging, that is, protecting against the
risk of market movements that may adversely affect the value of the Fund's
securities or the price of securities that the Fund is considering purchasing.
Following is a summary of the forwards which the Funds may utilize.
Forward contracts are obligations between two parties to exchange
particular goods or instruments (such as foreign currencies) at a set price on a
future date. The Fund currently intends that it will use forward contracts only
for hedging purposes and that it may enter into forward foreign currency
exchange contracts, provided the aggregate value of all outstanding contracts
does not exceed the value of the assets the Fund is attempting to hedge.
Although a hedging transaction may partially protect the Fund from a decline in
the foreign exchange price of a particular security or its portfolio generally,
hedging may also limit the potential return to the Fund due to positive foreign
exchange movements, and the cost of the transaction will reduce the potential
return on the security or the portfolio. In addition, forward foreign currency
exchange contracts do not eliminate fluctuations in the prices of the underlying
securities the Fund owns or intends to acquire.
The Fund will generally enter into forward foreign currency exchange
contracts either with respect to specific transactions or with respect to the
Fund's security positions. For example, the Fund may enter into a forward
contract in order to fix the price (in terms of a specified currency, which may
be U.S. dollars or a foreign currency) for securities it has agreed to buy or
sell or is considering buying or selling. Further, when the sub-Advisor
believes that a particular foreign currency in which some or all of the Fund's
investments are denominated may decline compared to the U.S. dollar, the Fund
may enter into a forward contract to sell the currency that is expected to
decline (or another currency which acts as a proxy for that currency). However,
the Fund will be permitted to make such investments for hedging purposes only,
and only if the aggregate amount of its obligations under these contracts does
not exceed the total market value of the assets the Fund is attempting to hedge,
such as a portion or all of its securities denominated in a specific foreign
currency. To ensure that the Fund will be able to meet its obligations under
its forward foreign currency exchange contracts, the Fund will be required to
place liquid assets in a segregated account with its custodian bank or to set
aside securities to "cover" its commitments in these contracts.
Forward foreign currency exchange contacts are privately negotiated (i.e.,
over-the-counter) and the parties may agree to offset or terminate the contract
before its maturity or may hold the contract to maturity and complete the
contemplated delivery of the underlying foreign currency. Transactions in
forward foreign currency exchange contracts by the Fund involve the potential
for a loss that may exceed the amount of commitment the Fund would be permitted
to make in those contracts under its investment limitations. The principal
risks of the Fund's use of forward foreign currency exchange contracts are:
(a) losses resulting from currency market movements not anticipated by the Fund;
(b) possible imperfect correlation between movements in the prices of forward
contracts and movements in the spot (i.e., cash) prices of the currencies hedged
or used to cover such positions; (c) lack of assurance that the Fund will be
able to enter into an offset or termination of the contract at any particular
time; and (d) the need for additional information and skills beyond those
required for the management of a fund of traditional securities. In addition,
when the Fund enters into an over-the-counter contract with a counterparty, the
Fund will assume counterparty credit risk, that is, the risk that the
counterparty will fail to perform its obligations, in which case the Fund could
be worse off than if the contract had not been entered into.
Although they currently have no intention of doing so, the trustees of the
Fund may, without shareholder approval, authorize the Fund to invest in certain
types of other instruments for hedging purposes, such as financial futures and
options. Appropriate notice to shareholders will be provided of any intention
to commence investing in such instruments. Additional detail concerning the
Fund's transactions in forwards and the risks of such investments can be found
in the Statement of Additional Information.
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CONVERTIBLE SECURITIES. The Fund may also purchase debt or equity
securities which are convertible into common stock when the Fund's
sub-advisor believes they offer the potential for a higher total return than
nonconvertible securities. While fixed income securities generally have a
priority claim on a corporation's assets over that of common stock, some of
the convertible securities which the Fund may hold are high-yield/high-risk
securities that are subject to special risks, including the risk of default
in interest or principal payments which could result in a loss of income to
the Fund or a decline in the market value of the securities. Convertible
securities often display a degree of market price volatility that is
comparable to common stocks. The credit risk associated with convertible
securities generally is reflected by their ratings assigned by organizations
such as Moody's Investors Service, Inc., and Standard & Poor's Corporation,
or a similar determination of creditworthiness by the sub-advisor. The Fund
has no pre-established minimum quality standards for convertible securities
and may invest in convertible securities of any quality, including lower
rated or unrated securities. However, the Fund will not invest in any
security in default at the time of purchase or in any nonconvertible debt
securities rated below investment grade, and the Fund will invest less than
20% of the market value of its assets at the time of purchase in convertible
securities rated below investment grade. If convertible securities purchased
by the Fund are downgraded following purchase, or if other circumstances
cause 20% or more of the Fund's assets to be invested in convertible
securities rated below investment grade, the trustees of the Trust, in
consultation with the sub-advisor will determine what action, if any, is
appropriate in light of all relevant circumstances. For a further discussion
of debt security ratings, see Appendix A to the Statement of Additional
Information.
SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. The Fund may
invest in securities of companies with limited operating histories. The Fund
considers these to be securities of companies with a record of less than three
years' continuous operation, even including the operations of any predecessors
and parents. (These are sometimes referred to as "unseasoned issuers.") These
companies by their nature have only a limited operating history which can be
used for evaluating the company's growth prospects. As a result, investment
decisions for these securities may place a greater emphasis on current or
planned product lines and the reputation and experience of the company's
management and less emphasis on fundamental valuation factors than would be the
case for more mature companies. In addition, many of these companies may also
be small companies and involve the risks and price volatility associated with
smaller companies.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
to qualified institutional investors such as brokers, dealers or other financial
organizations. This practice permits the Fund to earn income, which, in turn,
can be invested in additional securities to pursue the Fund's investment
objective. Loans of securities by a Fund will be collateralized by cash,
letters of credit, or securities issued or guaranteed by the U.S. Government or
its agencies. The collateral will equal at least 100% of the current market
value of the loaned securities, marked-to-market on a daily basis. The Fund
bears a risk of loss in the event that the other party to a securities lending
transaction defaults on its obligations and the Fund is delayed in or prevented
from exercising its rights to dispose of the collateral, including the risk of a
possible decline in the value of the collateral securities during the period in
which the Fund seeks to assert these rights, the risk of incurring expenses
associated with asserting these rights, and the risk of losing all or a part of
the income from the transaction. The Fund will not lend any security if, as a
result of such loan, the aggregate value of securities then on loan would exceed
33-1/3% of the market value of the Fund's total assets.
ILLIQUID SECURITIES. The Fund is authorized to invest in securities
which are illiquid or not readily marketable because they are subject to
restrictions on their resale ("restricted securities") or because, based upon
their nature or the market for such securities, no ready market is available.
However, the Fund may not purchase any security, the purchase of which would
cause the Fund to invest more than 15% of its net assets, measured at the
time of purchase, in illiquid securities. If securities become illiquid
following purchase or other circumstances cause more than 15% of the Fund's
net assets to be invested in illiquid securities, the trustees of the Trust,
in consultation with the sub-advisor, will determine what action, if any, is
appropriate in light of all relevant circumstances. Repurchase agreements
maturing in more than seven days will be considered as illiquid for purposes
of this restriction. Certain restricted securities, such as Rule 144A
securities, may be treated as liquid under this restriction if a
determination is made that such securities are readily marketable.
Investments in illiquid securities involve certain risks to the extent that
the Fund may be unable to dispose of such a security at the time desired or
at a reasonable price or, in some cases, may be unable to dispose of it at
all. In addition, in order to resell a restricted security, the Fund might
have to incur the potentially substantial expense and delay associated with
effecting registration.
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INVESTMENT RESTRICTIONS
In addition to its investment objective, the Fund has adopted a number of
restrictions on its investments and other activities that may not be changed
without shareholder approval. For example, the Fund may not purchase securities
of any issuer (except U.S. Government securities) if, immediately after and as a
result of such purchase, the value of the Fund's holdings in the securities of
that issuer exceeds 5% of the value of its total assets or it owns more than 10%
of the outstanding voting securities or of any class of securities of such
issuer. This restriction may be reduced to apply to 75% or more of its total
assets without a shareholder vote.
The Fund may not borrow money, except borrowing undertaken from banks for
temporary or emergency purposes in amounts not to exceed 25% of the market value
of its total assets (including the amount borrowed). Nor may the Fund make
loans (except that the Fund may enter into repurchase agreements and may lend
portfolio securities in accordance with the Fund's investment policies). In
addition, the Fund may not invest in any one industry more than 25% of the value
of its total assets at the time of investment, nor invest in commodities,
except, only for the purpose of hedging, in forward foreign currency exchange
contracts as specified in greater detail above and in the Statement of
Additional Information.
Also, the Fund currently does not intend to make short sales of
securities, and the Fund does not intend to purchase or sell securities on a
when-issued or delayed delivery basis if as a result, more than 5% of its assets
are invested in such securities, although these restrictions may be changed
without shareholder approval. For more detail about the Fund's investment
restrictions, see the Statement of Additional Information.
5. PORTFOLIO TURNOVER
In pursuit of the Fund's investment objective, management continuously
monitors the Fund's investments and makes portfolio changes whenever changes in
the markets, industry trends or the outlook for any portfolio security indicate
to them that the objective could be better achieved by investment in another
security, regardless of portfolio turnover. In addition, portfolio turnover may
increase as a result of large amounts of purchases and redemptions of shares of
the Fund due to economic, market or other factors that are not within the
control of management. Higher portfolio turnover would necessarily result in
correspondingly higher brokerage costs for the Fund. The portfolio turnover
rate is shown in the tables in Section 2.
6. MANAGEMENT AND INVESTMENT ADVICE
The Fund is supervised by trustees who are responsible for major decisions
about the Fund's policies and overall Fund oversight. The trustees hire the
companies that run day-to-day Fund operations, such as the investment advisor,
administrator, transfer agent and custodian. For more information about Fund
trustees and officers, see the Statement of Additional Information.
The investment advisor to the Fund is BBOI Worldwide LLC ("BBOI
Worldwide"), 210 University Boulevard, Denver, CO 80206. BBOI Worldwide
oversees, evaluates and monitors the investment advisory services provided to
the Fund by the Fund's sub-advisor and is responsible for furnishing
administrative services to the Fund, such as coordinating certain matters
relating to the operations of the Fund and monitoring the Fund's compliance with
all applicable federal and state securities laws.
BBOI Worldwide is a Delaware limited liability company formed in 1996.
Since BBOI Worldwide was only recently formed, it has only limited prior
experience as an investment advisor. However, BBOI Worldwide is a joint venture
between Berger Associates, Inc. ("Berger Associates") and Bank of Ireland Asset
Management (U.S.) Limited ("BIAM"), the sub-advisor to the Fund, which have both
been in the investment advisory business for many years.
Berger Associates and BIAM each own a 50% membership interest in BBOI
Worldwide and each have an equal number of representatives on BBOI Worldwide's
Board of Managers. Berger Associates' role in the joint venture is to provide
administrative services and BIAM's role is to provide international and global
investment management expertise. Agreement of representatives of both Berger
Associates and BIAM is required for all significant management decisions for
BBOI Worldwide.
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<PAGE>
Since its founding in 1966, Bank of Ireland's investment management group
has become recognized among international and global investment managers,
serving clients in Europe, the United States, Canada, Australia and South
Africa. BIAM, the sub-advisor to the Fund, is an indirect wholly-owned
subsidiary of Bank of Ireland. Bank of Ireland, founded in 1783, is a publicly
traded, diversified financial services group with business operations worldwide.
Bank of Ireland provides investment management services through a network of
related companies, including BIAM which serves primarily institutional clients
in the United States and Canada. Bank of Ireland and its affiliates managed
assets for clients worldwide in excess of $25 billion as of September 30, 1997.
Berger Associates provides office space for the Fund and pays the salaries,
fees and expenses of all Fund officers and trustees of the Fund who are
interested persons of Berger Associates. Berger Associates serves as investment
advisor or sub-advisor to mutual funds and other institutional investors, and
had assets under management of $3.6 billion as of December 31, 1997. Berger
Associates is a wholly-owned subsidiary of Kansas City Southern Industries, Inc.
("KCSI"). KCSI is a publicly traded holding company with principal operations
in rail transportation, through its subsidiary The Kansas City Southern Railway
Company, and financial asset management businesses. KCSI also owns
approximately 41% of the outstanding shares of DST Systems, Inc. ("DST"), a
publicly traded information and transaction processing company which also acts
as the Funds' sub-transfer agent.
As permitted in its Investment Advisory Agreement with the Fund, BBOI
Worldwide has, since the inception of the Fund, delegated day-to-day portfolio
management responsibility to BIAM, as the sub-advisor. As sub-advisor, BIAM
manages the investments in the Fund and determines what securities and other
investments will be purchased, retained, sold or loaned, consistent with the
investment objective and policies established by the trustees of the Trust.
BIAM serves as investment advisor or sub-advisor to pension and profit-sharing
plans and other institutional investors and mutual funds. BIAM also acts as
sub-advisor for and is responsible for the day-to-day portfolio management of
the Berger/BIAM International Portfolio. BIAM's main offices are at 26
Fitzwilliam Place, Dublin 2, Ireland. BIAM maintains a representative office at
20 Horseneck Lane, Greenwich, CT 06830.
All investment decisions made for the Fund by its sub-advisor are made by a
team of BIAM investment personnel. No one individual is primarily responsible
for making the day-to-day investment decisions for the Fund. Most of the
investment professionals at BIAM have been with BIAM at least 10 years.
Bank of Ireland or its affiliates may have deposit, loan or other
commercial or investment banking relationships with the issuers of securities
which may be purchased by the Fund, including outstanding loans to such issuers
which could be repaid in whole or in part with the proceeds of securities
purchased by the Fund. Federal law prohibits the sub-advisor, in making
investment decisions, from using material non-public information in its
possession or in the possession of any of its affiliates. In addition, in
making investment decisions for the Fund, BIAM will not take into consideration
whether an issuer of securities proposed for purchase or sale by the Fund is a
customer of Bank of Ireland or its affiliates.
Under its Investment Advisory Agreement with BBOI Worldwide, the Fund
compensates BBOI Worldwide for its investment advisory services by the payment
of a fee at the annual rate of .9 of 1% (0.90%) of the average daily net assets
of the Fund. The Fund pays no fees directly to BIAM, the sub-advisor. Under a
Sub-Advisory Agreement with BBOI Worldwide, BIAM receives from BBOI Worldwide a
fee at the annual rate of .4 of 1% (0.40%) of the average daily net assets of
the Fund. During certain periods, BIAM may voluntarily waive all or a portion
of its fee under the Sub-Advisory Agreement, which will not affect the fee paid
by the Fund to the BBOI Worldwide.
From time to time, Berger Associates or BBOI Worldwide may compensate
Participating Insurance Companies or other companies for providing a variety of
administrative services (such as record keeping and accounting) and investor
support services (such as responding to inquiries and preparing mailings to
shareholders) to Participating Insurance Companies and their customers who have
allocated contract amounts to the Fund. This compensation, which may be paid as
a per account fee or as a percentage of the average daily net assets invested in
the Fund by the compensated Participating Insurance Company, depending on the
nature, extent and quality of the services provided, will be paid from Berger
Associates' or BBOI's own resources and not from the assets of the Fund.
Participating Insurance Companies may also be authorized by the Fund to
accept on their behalf purchase and redemption requests that are received in
good order. Subject to Fund approval, certain of these companies may be
authorized to designate other entities to accept purchase and redemption orders
on behalf of the Fund.
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7. EXPENSES OF THE FUND
The Fund has appointed Investors Fiduciary Trust Company ("IFTC") as its
record keeping and pricing agent to calculate the daily net asset value of the
Fund and to perform certain accounting and record keeping functions required by
the Fund. In addition, IFTC also serves as the Fund's custodian, transfer agent
and dividend disbursing agent. IFTC has engaged DST as sub-agent to provide
transfer agency and dividend disbursing services for the Fund. As noted in the
preceding section, approximately 41% of the outstanding shares of DST are owned
by KCSI.
For custodian, record keeping and pricing services, the Fund pays fees
to IFTC based on a percentage of its assets, subject to certain minimums.
The Fund also pays a monthly fee based primarily on the number of accounts
maintained on behalf of the Fund for transfer agency and dividend disbursing
services, which fees are paid by the Funds to IFTC and in turn passed through
to DST as sub-agent. In addition, the Fund reimburses IFTC and DST for
certain out-of-pocket expenses.
Under a separate Administrative Services Agreement with the Fund, BBOI
Worldwide performs administrative and record keeping services for the Fund and
the Fund pays BBOI Worldwide a fee at the annual rate of 1/100 of 1% (0.01%) of
its average daily net assets. Under a Sub-Administration Agreement between the
BBOI Worldwide and Berger Associates, Berger Associates has been delegated all
of BBOI Worldwide's duties under the Administrative Services Agreement and BBOI
Worldwide's administrative duties under the Investment Advisory Agreement for
the Fund. For its services under the Sub-Administration Agreement, BBOI
Worldwide pays Berger Associates a fee of .2 of 1% (0.20%) of the average daily
net assets of the Fund. During certain periods, Berger Associates may
voluntarily waive all or a portion of its fee from BBOI Worldwide, which will
not affect the fee paid by the Fund to BBOI Worldwide under the Administrative
Services Agreement or the advisory fee paid to BBOI Worldwide under the
Investment Advisory Agreement. The Fund also incurs other expenses, including
accounting, administrative and legal expenses.
BBOI Worldwide has voluntarily agreed to waive its advisory fee and expects
to voluntarily reimburse the Fund for additional expenses to the extent that
normal operating expenses in any fiscal year, including the investment advisory
fee but excluding brokerage commissions, interest, taxes and extraordinary
expenses, exceed 1.20% of the Fund's average daily net assets.
DISTRIBUTOR
The distributor (principal underwriter) of the Fund's shares is Berger
Distributors, Inc. (the "Distributor"), 210 University Boulevard, Suite 900,
Denver, CO 80206. The Distributor may be reimbursed by Berger Associates for
its costs in distributing the Fund's shares. The Distributor is a wholly-owned
subsidiary of Berger Associates, and certain officers of the Trust are officers
or directors of the Distributor.
8. HOW TO PURCHASE AND REDEEM SHARES IN THE FUND
Shares of the Fund are sold by the Fund on a continuous basis to separate
accounts of Participating Insurance Companies or to qualified retirement plans.
Investors may not purchase or redeem shares of the Fund directly, but only
through variable insurance contracts offered through the separate accounts of
Participating Insurance Companies or through qualified retirement plans. You
should refer to the applicable Separate Account Prospectus or your plan
documents for information on how to purchase or surrender a contract, make
partial withdrawals of contract values, allocate contract values to the Fund,
change existing allocations among investment alternatives, including the Fund,
or select the Fund as investment an option for a qualified plan. No sales
charge is imposed upon the purchase or redemption of shares of the Fund. Sales
charges for the variable insurance contracts or qualified plans are described in
the relevant Separate Account Prospectus or plan documents.
Fund shares are purchased or redeemed at the net asset value per share next
computed after receipt of a purchase or redemption order by a Fund, its
authorized agent or its designee. Payment for redeemed shares generally will be
made within three business days following the date of the request for
redemption. However, payment may be postponed under unusual circumstances, such
as when normal trading is not taking place on the New York Stock Exchange, an
emergency as defined by the Securities and Exchange Commission exists, or as
permitted by the Securities and Exchange Commission.
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9. HOW THE NET ASSET VALUE IS DETERMINED
The price of the Fund's shares is based on the net asset value of the
Fund, which is determined at the close of the regular trading session of the
New York Stock Exchange (the "Exchange") (normally 4:00 p.m., New York time)
each day that the Exchange is open.
The per share net asset value of the Fund is determined by dividing the
total value of its securities and other assets, less liabilities, by the
total number of shares outstanding. In determining net asset value,
securities are valued at market value or, if market quotations are not
readily available, may be valued at their fair value determined in good faith
pursuant to consistently applied procedures established by the trustees.
Money market instruments maturing within 60 days are valued at amortized
cost, which approximates market value. All assets and liabilities initially
expressed in terms of non-U.S. dollar currencies are translated into U.S.
dollars at the prevailing market rates as quoted by one or more banks or
dealers shortly before the close of the Exchange. See the Statement of
Additional Information for more detailed information.
Generally, trading in foreign securities markets is substantially
completed each day at various times prior to the close of the Exchange. The
values of foreign securities used in computing the net asset value of the
shares of the Fund are determined as of the earlier of such market close or
the closing time of the Exchange. Occasionally, events affecting the value
of such securities may occur between the times at which they are determined
and the close of the Exchange, or when the foreign market on which such
securities trade is closed but the Exchange is open, 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 may be valued at their fair value as determined in good faith
pursuant to consistently applied procedures established by the trustees.
The Fund's securities may be listed primarily on foreign exchanges or
over-the-counter dealer markets which may trade on days when the Exchange is
closed (such as customary U.S. holidays) and the Fund's net asset value is
not calculated. As a result, the net asset value of the Fund may be
significantly affected by such trading on days when shareholders cannot
purchase or redeem shares of the Fund.
Since the Fund does not impose any front end sales load or redemption fee,
both the purchase price and the redemption price of a Fund share are the same
and will be equal to the next calculated net asset value of a share of the Fund.
10. INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT
The Fund intends to declare dividends representing the Fund's net
investment income annually, normally in December. It is also the present policy
of the Fund to distribute annually all of its net realized capital gains.
All dividends and capital gains distributions paid by the Fund will be
automatically reinvested in shares of the Fund at the net asset value on the
ex-dividend date unless an election is made on behalf of a separate account
or qualified plan to receive distributions in cash.
The Fund intends to qualify to be treated as a separate regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). If it so qualifies and meets certain minimum
distribution requirements, the Fund generally will not be liable for Federal
income tax on the amount of its earnings that are timely distributed. In
addition, the Fund intends to qualify under the diversification requirements
of Code Section 817(h) relating to insurance company separate accounts. By
meeting these and other requirements, the Participating Insurance Companies,
rather than the owners of the variable insurance contracts, should be subject
to tax on distributions received with respect to Fund shares. The tax
treatment of distributions made to a Participating Insurance Company will
depend on the Participating Insurance Company's tax status. Participating
Insurance Companies should consult their own tax advisors concerning whether
such distributions are subject to Federal income tax if retained as part of
contract reserves. For further information concerning Federal income tax
consequences for the owners of variable insurance contracts and qualified
plan participants, consult the appropriate Separate Account Prospectus or
plan documents.
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11. ADDITIONAL INFORMATION
The Fund is a separate series or portfolio established under the Trust, a
Delaware business trust organized on October 17, 1995. The Trust is authorized
to issue an unlimited number of shares of beneficial interest in series or
portfolios. The series comprising the Fund was established under the Trust in
March 1997. Currently, there are four series, including the Fund, established
under the Trust, although others may be added in the future. Shares of the Fund
are fully paid and non-assessable when issued. Each share has a par value of
$.01. All shares issued by the Fund participate equally in dividends and other
distributions by the Fund, and in the residual assets of the Fund in the event
of its liquidation.
The separate accounts of the Participating Insurance Companies and the
trustees of the qualified plans invested in the Fund, rather than individual
contract owners or plan participants, are the shareholders of the Fund.
However, each Participating Insurance Company or qualified plan will vote such
shares as required by law and interpretations thereof, as amended or changed
from time to time. Under current law, a Participating Insurance Company is
required to request voting instructions from its contract owners and must vote
Fund shares held by each of its separate accounts in proportion to the voting
instructions received. Additional information about voting procedures is
contained in the applicable Separate Account Prospectuses.
Shareholders of the Fund generally vote separately on matters relating to
the Fund, although they will vote together with the holders of all other series
of the Trust in the election of trustees of the Trust and on all matters
relating to the Trust as a whole. Each full share of each Fund has one vote.
Shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of trustees can
elect 100% of the trustees if they choose to do so and, in such event, the
holders of the remaining less than 50% of the shares voting for the election of
trustees will not be able to elect any person or persons as trustees. The Fund
is not required to hold annual shareholder meetings unless required by the
Investment Company Act of 1940 or other applicable law or unless called by the
trustees.
If shareholders owning at least 10% of the outstanding shares of the Trust
so request, a special shareholders' meeting will be held for the purpose of
considering the removal of a trustee of the Trust. Special meetings will be
held for other purposes if the holders of at least 25% of the outstanding shares
of the Trust so request. Subject to certain limitations, the Fund will
facilitate appropriate communications by shareholders desiring to call a special
meeting for the purpose of considering the removal of a trustee.
The Fund sells its shares only to certain qualified retirement plans and to
variable annuity and variable life insurance separate accounts of insurance
companies that are unaffiliated with Berger Associates and BBOI Worldwide and
that may be unaffiliated with one another. The Funds currently does not foresee
any disadvantages to policy owners arising out of the fact that the Fund offers
its shares to such entities. Nevertheless, the trustees intend to monitor
events in order to identify any material irreconcilable conflicts that may arise
and to determine what action, if any, should be taken in response to such
conflicts. If a conflict occurs, the trustees may require one or more insurance
company separate accounts or plans to withdraw its investments in the Fund and
to substitute shares of another fund. As a result, the Fund may be forced to
sell securities at disadvantageous prices. In addition, the trustees may refuse
to sell shares of the Fund to any separate account or qualified plan or may
suspend or terminate the offering of shares of the Fund if such action is
required by law or regulatory authority or is deemed by the Fund to be in the
best interests of the shareholders of the Fund.
The Fund's transfer agent and dividend disbursing agent is Investors
Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas City, MO 64105.
IFTC has engaged DST Systems, Inc. ("DST"), P.O. Box 419958, Kansas City, MO
64141, as sub-agent to provide transfer agency and dividend disbursing services
for the Fund.
Owners of variable insurance contracts and qualified plan administrators
will receive annual and semiannual reports including the financial statements of
the Fund in which contract values or qualified plan assets are invested. Each
report will show the investments owned by the Fund and the market values
thereof, as well as other information about the Fund and its operations.
The Glass-Steagall Act prohibits a depository institution and certain
affiliates from underwriting or distributing most securities and from
affiliating with businesses engaged in certain similar activities. BIAM
believes that it may
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perform the services for the Berger/BIAM IPT-International Fund contemplated
by this Prospectus consistent with the Glass-Steagall Act and other
applicable banking laws and regulations. However, future changes in either
Federal or state statutes and regulations concerning the permissible
activities of banks and their affiliates, as well as future judicial or
administrative decisions or interpretations of present and future statutes
and regulations, might prevent BIAM from continuing to perform those services
for that Fund. If the circumstances described above should change, the
trustees of the Trust would review the relationships with BIAM and consider
taking all actions appropriate under the circumstances.
12. PERFORMANCE
From time to time in advertisements, the Fund may discuss its performance
ratings as published by recognized mutual fund statistical services, such as
Lipper Analytical Services, Inc., CDA Investment Technologies, Inc., or
Morningstar, Inc., or Value Line Investment Survey or by publications of general
interest such as THE WALL STREET JOURNAL, INVESTOR'S BUSINESS DAILY, MONEY,
BARRON'S, FINANCIAL WORLD or KIPLINGER'S PERSONAL FINANCE MAGAZINE. In
addition, the Fund may compare its performance to that of recognized broad-based
securities market indices, including the Standard & Poor's 500 Stock Index, the
Dow Jones Industrial Average, the Russell 2000 Stock Index, the Standard &
Poor's 400 Mid-Cap Index, the Standard & Poor's 600 Small Cap Index, the Morgan
Stanley Capital International EAFE (Europe, Australasia, Far East) Index, the
Dow Jones World Index, the Nasdaq Composite Index or the Lehman Brothers
Intermediate Term Government/Corporate Bond Index, or more narrowly-based or
blended indices which reflect the market sectors in which that Fund invests.
The total return of the Fund is calculated for any specified period of
time by assuming the purchase of shares of the Fund at the net asset value at
the beginning of the period. Each dividend or other distribution paid by the
Fund is assumed to have been reinvested at the net asset value on the
reinvestment date. The total number of shares then owned as a result of this
process is valued at the net asset value at the end of the period. The
percentage increase is determined by subtracting the initial value of the
investment from the ending value and dividing the remainder by the initial
value.
The Fund's total return reflects the Fund's performance over a stated
period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same total return if the
Fund's performance had been constant over the entire period. Total return
figures are based on the overall change in value of a hypothetical investment in
the Fund. Because average annual total returns for more than one year tend to
smooth out variations in the Fund's return, investors should recognize that such
figures are not the same as actual year-by-year results.
The Fund's total return includes the effect of deducting the Fund's
expenses, but does not include any charges and expenses attributable to a
particular variable insurance contract or qualified plan. Because shares of the
Funds can be purchased only through a variable insurance contract or qualified
plan, the Funds' total return data should be reviewed along with the description
of charges and expenses contained in the applicable Separate Account Prospectus
or plan documents. Total return for the Fund must always be accompanied by, and
reviewed with, comparable total return data for an associated variable annuity
separate account, or information identifying the charges and expenses
attributable to the variable life insurance contract or plan that are not
reflected in the Fund's total return.
Any performance figures for the Fund are based upon historical results and
do not guarantee future performance. The investment return and principal value
of an investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
The Fund has the same investment objective and follows similar
investment strategies as a Berger retail fund. The Berger retail fund has
the same sub-advisor as the Fund offered under this Prospectus. As described
under "Management and Investment Advice," the same persons who serve as
portfolio managers of the Fund also serve as portfolio managers of the Berger
retail fund.
Set forth in the table below is total return data for the Fund, where
available. Also set forth is total return information for the Berger retail
fund, calculated as described above. Investors should not consider the
performance data for the Berger retail fund as a substitute for the performance
of the Fund offered under this Prospectus, nor as an indication of the past or
future performance of the Fund. The performance figures below reflect the
deduction of the historical fees and expenses paid by the Berger retail funds,
and not those paid or to be paid by the Fund. The figures
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<PAGE>
also do not reflect the deduction of charges or expenses attributable to
variable insurance contracts or qualified plans invested in the Fund. As
discussed above, investors should refer to the applicable Separate Account
Prospectus or qualified plan documents accompanying this Prospectus for
information pertaining to such contract charges and expenses. The Fund and
the Berger retail fund will be managed separately and the investments and
investment results are expected to differ. In particular, differences in
asset size and in cash flow resulting from purchases and redemption of Fund
shares may result in different security selections, differences in the
relative weightings of securities or differences in the prices paid for
particular portfolio holdings.
The following table shows, where available, the average annualized total
returns for the Fund and for the Berger retail fund for the one-, five- and
ten-year periods ended December 31, 1997, and, for the period from inception
through December 31, 1997. Performance data for the Fund reflects fee
waivers and expense reimbursements by the Fund's advisor, without which
performance would be lower.
<TABLE>
<CAPTION>
BERGER/BIAM
BERGER/BIAM IPT - INTERNATIONAL
INTERNATIONAL FUND FUND^+
- -------------------------------------------------------------------------
<S> <C> <C>
Since Inception of the (2.10)% * 2.90% *
Berger/BIAM IPT -
International Fund
(5/1/97)
- -------------------------------------------------------------------------
1-year N/A 2.90%
- -------------------------------------------------------------------------
5-year N/A 12.74%
- -------------------------------------------------------------------------
Since Inception of the N/A 12.29%
Berger/BIAM International
Fund (7/31/89)
</TABLE>
^ As of December 31, 1997, the retail Berger/BIAM International Fund had assets
of approximately $17,000,000.
+ Total returns for the Berger/BIAM International Fund in part reflect the
performance of a similarly managed, unregistered pool of assets transferred into
the Fund before the Fund commenced operations on October 11, 1996, adjusted to
reflect any increased expenses associated with operating the Fund. If the pool
had been registered as an investment company under the Investment Company Act of
1940, its performance might have been adversely affected.
* Not annualized.
13. SHAREHOLDER INQUIRIES
Shareholders with questions should write to the Berger Funds, c/o Berger
Associates, Inc., P.O. Box 5005, Denver, CO 80217, or call 1-303-329-0200 or
1-800-706-0539, or contact a Participating Insurance Company.
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<PAGE>
BERGER INSTITUTIONAL PRODUCTS TRUST
STATEMENT OF ADDITIONAL INFORMATION
Berger Institutional Products Trust (the "Trust") is an open-end management
investment company. The Trust currently consists of the four diversified series
or portfolios named below (individually referred to as a "Fund"). Each Fund has
its own investment objective and policies. Shares of the Funds are not offered
directly to the public, but are sold only in connection with investment in and
payments under variable annuity contracts and variable life insurance contracts
(collectively "variable insurance contracts") issued by life insurance companies
("Participating Insurance Companies"), as well as to certain qualified
retirement plans.
BERGER IPT - SMALL COMPANY GROWTH FUND - The investment objective of the Berger
IPT - Small Company Growth Fund is capital appreciation. In pursuit of that
goal, the Fund invests primarily in small companies (market capitalizations of
less than $1 billion at the time of initial purchase) with the potential for
rapid earnings growth that either occupy a dominant position in an emerging
industry or have a growing market share in a larger, fragmented industry.
BERGER IPT - 100 FUND - The investment objective of the Berger IPT - 100 Fund is
long-term capital appreciation. The Fund pursues its goal by primarily
investing in common stocks of established companies regardless of the company's
size. The Fund's investment manager seeks companies it believes have good
earnings growth potential.
BERGER/BIAM IPT - INTERNATIONAL FUND - The investment objective of the
Berger/BIAM IPT - International Fund is long-term capital appreciation. The Fund
pursues its goal by investing in a portfolio consisting primarily of common
stocks of well-established foreign companies. The investment manager first
identifies economic and business themes that it believes provide a favorable
framework for selecting stocks. Using fundamental analysis, the investment
manager then selects individual companies best positioned to take advantage of
opportunities presented by these themes.
BERGER IPT - GROWTH AND INCOME FUND - The primary investment objective of the
Berger IPT - Growth and Income Fund is capital appreciation. A secondary
objective is to provide a moderate level of current income. To pursue these
goals, the Fund invests primarily in securities of well-established, growing
companies that have demonstrated a pattern of earnings growth and stability and
are also expected to provide current income.
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus describing the Funds, dated May 1,
1998, as it may be amended or supplemented from time to time, which may be
obtained by writing the Funds at P.O. Box 5005, Denver, Colorado 80217,
calling 1-800-706-0539, or by contacting a Participating Insurance Company.
MAY 1, 1998
<PAGE>
TABLE OF CONTENTS
&
CROSS-REFERENCES TO PROSPECTUS
<TABLE>
<CAPTION>
CROSS-REFERENCES TO
RELATED DISCLOSURES
TABLE OF CONTENTS IN PROSPECTUS
----------------- -------------------
<C> <S> <C>
Introduction Section 3
1. Portfolio Policies of the Funds Section 3, 4, 5
2. Investment Restrictions Section 4
3. Management of the Funds Section 6
4. Investment Advisors and Sub-Advisor Section 6
5. Expenses of the Funds Section 7
6. Brokerage Policy Section 7
7. How to Purchase and Redeem Shares in Section 8
the Funds
8. Suspension of Redemption Rights Section 8
9. How the Net Asset Value is Section 9
Determined
10. Income Dividends, Capital Gains Section 10
Distributions and Tax Treatment
11. Performance Information Section 12
12. Additional Information Section 11
Financial Statements
</TABLE>
<PAGE>
INTRODUCTION
The Funds are diversified portfolios or series of the Berger Institutional
Products Trust, a management investment company. The investment objective of
both the Berger IPT - 100 Fund and the Berger/BIAM IPT - International Fund is
long-term capital appreciation. The primary investment objective of the Berger
IPT - Growth and Income Fund is capital appreciation, and its secondary
objective is to provide a moderate level of current income. The investment
objective of the Berger IPT - Small Company Growth Fund is capital appreciation.
1. PORTFOLIO POLICIES OF THE FUNDS
The Prospectus discusses the investment objective of each of the Funds and
the policies to be employed to achieve that objective. This section contains
supplemental information concerning the types of securities and other
instruments in which the Funds may invest, the investment policies and portfolio
strategies that the Funds may utilize and certain risks attendant to those
investments, policies and strategies.
COMMON AND PREFERRED STOCKS. Stocks represent shares of ownership in a
company. Generally, preferred stock has a specified dividend and ranks after
bonds and before common stocks in its claim on income for dividend payments and
on assets should the company be liquidated. After other claims are satisfied,
common stockholders participate in company profits on a pro-rata basis. Profits
may be paid out in dividends or reinvested in the company to help it grow.
Increases and decreases in earnings are usually reflected in a company's stock
price, so common stocks generally have the greatest appreciation and
depreciation potential of all corporate securities. While most preferred stocks
pay dividends, any of the Funds may purchase preferred stock where the issuer
has omitted, or is in danger of omitting, payment of its dividends. Such
investments would be made primarily for their capital appreciation potential.
All investments in stocks are subject to market risk, meaning that their prices
may move up and down with the general stock market, and that such movements
might reduce their value.
DEBT SECURITIES. Debt securities (such as bonds or debentures) are
fixed-income securities which bear interest and are issued by corporations or
governments. The issuer has a contractual obligation to pay interest at a
stated rate on specific dates and to repay principal on a specific maturity
date. In addition to market risk, debt securities are generally subject to
two other kinds of risk: credit risk and interest rate risk. Credit risk
refers to the ability of the issuer to meet interest or principal payments as
they come due. The lower the rating given a security by a rating service
(such as Moody's Investor Service ("Moody's") and Standard & Poor's ("S&P")),
the greater the credit risk the rating service perceives with respect to that
security. None of the Funds will purchase any nonconvertible securities
rated below investment grade (Ba or lower by Moody's, BB or lower by S&P).
In cases where the ratings assigned by more than one rating agency differ,
the Funds will consider the security as rated in the higher category. If
nonconvertible securities purchased by a Fund are downgraded to below
investment grade following purchase, the trustees of the Fund, in
consultation with the Fund's advisor or sub-advisor, will determine what
action, if any, is appropriate in light of all relevant circumstances. For a
further discussion of debt security ratings, see Appendix A to this Statement
of Additional Information.
Interest rate risk refers to the fact that the value of fixed-income
securities (like debt securities) generally fluctuate in response to changes in
interest rates. A decrease in interest rates will generally result in an
increase in the price of fixed-income securities held by a Fund. Conversely,
during periods of rising interest rates, the value of fixed-income securities
held by a Fund will generally decline. Longer-term securities are generally
more sensitive to interest rate changes and are more volatile than shorter-term
securities, but they generally offer higher yields to compensate investors for
the associated risks.
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<PAGE>
FOREIGN SECURITIES. Investments in foreign securities involve some risks
that are different from the risks of investing in securities of U.S. issuers,
such as the risk of adverse political, social, diplomatic and economic
developments and, with respect to certain countries, the possibility of
expropriation, taxes imposed by foreign countries or limitations on the removal
of monies or other assets of a Fund. Moreover, the economies of individual
foreign countries will vary in comparison to the U.S. economy in such respects
as growth of gross domestic product, rate of inflation, capital reinvestment,
resources, self-sufficiency and balance of payments position. Securities of
some foreign companies, particularly those in developing countries, are less
liquid and more volatile than securities of comparable domestic companies.
Investing in the securities of developing countries may involve exposure to
economic structures that are less diverse and mature, and to political systems
that can be expected to have less stability than developed countries. A Fund's
investments may include American Depositary Receipts (ADRs). The Funds may also
invest in European Depositary Receipts (EDRs) which are similar to ADRs, in
bearer form, designed for use in the European securities markets, and in Global
Depositary Receipts (GDRs). Some of the companies in which a Fund may invest
may be considered passive foreign investment companies (PFICs), which are
described in greater detail below.
There also may be less publicly available information about foreign issuers
and securities than domestic issuers and securities, and foreign issuers
generally are not subject to accounting, auditing and financial reporting
standards, requirements and practices comparable to those applicable to domestic
issuers. Also, there is generally less government supervision and regulation of
exchanges, brokers, financial institutions and issuers in foreign countries than
there is in the U.S. Foreign financial markets typically have substantially less
volume than U.S. markets. Foreign markets also have different clearance and
settlement procedures and, in certain markets, delays or other factors could
make it difficult to effect transactions, potentially causing a Fund to
experience losses or miss investment opportunities.
Costs associated with transactions in foreign securities are generally
higher than with transactions in U.S. securities. A Fund will incur greater
costs in maintaining assets in foreign jurisdictions and in buying and selling
foreign securities generally, resulting in part from converting foreign
currencies into U.S. dollars. In addition, a Fund might have greater difficulty
taking appropriate legal action with respect to foreign investments in non-U.S.
courts than with respect to domestic issuers in U.S. courts, which may heighten
the risk of possible losses through the holding of securities by custodians and
securities depositories in foreign countries.
Since the Funds may invest in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the value of the investments in its portfolio and the
unrealized appreciation or depreciation of investments insofar as U.S. investors
are concerned. If the foreign currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate of the foreign currency
against the U.S. dollar would adversely affect the dollar value of the foreign
securities. Foreign currency exchange rates are determined by forces of supply
and demand on the foreign exchange markets, which are in turn affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation and other factors.
PASSIVE FOREIGN INVESTMENT COMPANIES (PFICs). The Funds may purchase the
securities of certain foreign investment funds or trusts considered Passive
Foreign Investment Companies (PFICs) under U.S. tax laws. In addition to
bearing their proportionate share of the Fund's expenses (management fees and
operating expenses), shareholders will also indirectly bear similar expenses of
such PFIC. PFIC investments also may be subject to less favorable U.S. tax
treatment.
SECTOR FOCUS. A significant portion of some of the Funds' assets may be
invested in a relatively small number of related industries. However, none of
the Funds will concentrate 25% or more of its total assets in any one industry.
Sector focus may increase both market risk (share price volatility) and
liquidity risk.
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<PAGE>
SECURITIES OF SMALLER COMPANIES. All of the Funds may invest in, and the
portfolio of the Berger IPT - Small Company Growth Fund will be weighted toward,
securities of companies with small- or mid-sized market capitalizations. Market
capitalization is defined as total current market value of a company's
outstanding common stock. Investments in companies with smaller market
capitalizations may involve greater risks and price volatility (that is, more
abrupt or erratic price movements) than investments in larger, more mature
companies since smaller companies may be at an earlier stage of development and
may have limited product lines, reduced market liquidity for their shares,
limited financial resources or less depth in management than larger or more
established companies. Smaller companies also may be less significant factors
within their industries and may have difficulty withstanding competition from
larger companies. While smaller companies may be subject to these additional
risks, they may also realize more substantial growth than larger or more
established companies.
HEDGING TRANSACTIONS. As described in the Prospectus, each Fund except the
Berger/BIAM IPT - International Fund is authorized to make limited use of
certain types of futures, forwards and options, but only for the purpose of
hedging, that is, protecting against market risk due to market movements that
may adversely affect the value of a Fund's securities or the price of securities
that a Fund is considering purchasing. Currently, the Berger IPT -International
Fund is authorized to invest only in forward contracts for hedging purposes and
is not permitted to invest in futures or options. If the trustees ever
authorize the Berger/BIAM IPT - International Fund to invest in futures or
options, such investments would be permitted solely for hedging purposes, and
the Fund would not be permitted to invest more than 5% of its net assets at the
time of purchase in initial margins for financial futures transactions and
premiums for options. In addition, the advisor or sub-advisor for the
Berger/BIAM IPT - International Fund may be required to obtain bank regulatory
approval before the Fund engages in futures and options transactions. The
following information about the Funds' hedging transactions using futures,
forwards and options should be read to exclude the Berger/BIAM IPT -
International Fund, except to the extent the information relates to forward
contracts.
The utilization of futures, forwards and options is also subject to
policies and procedures which may be established by the trustees from time to
time. A hedging transaction may partially protect a Fund from a decline in the
value of a particular security or its portfolio generally, although hedging may
also limit a Fund's opportunity to profit from favorable price movements, and
the cost of the transaction will reduce the potential return on the security or
the portfolio. Use of these instruments by a Fund involves the potential for a
loss that may exceed the amount of initial margin the Fund would be permitted to
commit to the contracts under its investment limitation, or in the case of a
call option written by the Fund, may exceed the premium received for the option.
However, a Fund is permitted to use such instruments for hedging purposes only,
and only if the aggregate amount of its obligations under these contracts does
not exceed the total market value of the assets the Fund is attempting to hedge,
such as a portion or all of its exposure to equity securities or its holding in
a specific foreign currency. To help ensure that the Fund will be able to meet
its obligations under its futures and forward contracts and its obligations
under options written by that Fund, the Fund will be required to maintain liquid
assets in a segregated account with its custodian bank or to set aside portfolio
securities to "cover" its position in these contracts.
The principal risks of a Fund utilizing futures transactions, forward
contracts and options are: (a) losses resulting from market movements not
anticipated by the Fund; (b) possible imperfect correlation between movements
in the prices of futures, forwards and options and movements in the prices of
the securities or currencies hedged or used to cover such positions; (c) lack
of assurance that a liquid secondary market will exist for any particular
futures or options at any particular time, and possible exchange-imposed
price fluctuation limits, either of which may make it difficult or impossible
to close a position when so desired; (d) lack of assurance that the counter
party to a forward contract would be willing to negotiate an offset or
termination of the contract when so desired; and (e) the need for additional
information and skills beyond those required for the management of a
portfolio of traditional securities. In addition, when the Fund enters into
an over-the-counter contract with a
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<PAGE>
counterparty, the Fund will assume counterparty credit risk, that is, the
risk that the counterparty will fail to perform its obligations, in which
case the Fund could be worse off than if the contract had not been entered
into.
Following is additional information concerning the futures, forwards and
options which the Funds may utilize, provided that no more than 5% of the Fund's
net assets at the time the contract is entered into may be used for initial
margins for financial futures transactions and premiums paid for the purchase of
options. In addition, a Fund may only write call options that are covered and
only up to 25% of the Fund's total assets. The following information should be
read in conjunction with the information concerning the Funds' use of futures,
forwards and options and the risks of such instruments contained in the
Prospectus.
FUTURES CONTRACTS. Financial futures contracts are exchange-traded
contracts on financial instruments (such as securities and foreign currencies)
and securities indices that obligate the holder to take or make delivery of a
specified quantity of the underlying financial instrument, or the cash value of
an index, at a future date. Although futures contracts by their terms call for
the delivery or acquisition of the underlying instruments or a cash payment
based on the mark-to-market value of the underlying instruments, in most cases
the contractual obligation will be offset before the delivery date by buying (in
the case of an obligation to sell) or selling (in the case of an obligation to
buy) an identical futures contract. Such a transaction cancels the original
obligation to make or take delivery of the instruments.
Each Fund may enter into contracts for the purchase or sale for future
delivery of financial instruments, such as securities and foreign currencies, or
contracts based on financial indices including indices of U.S. Government
securities, foreign government securities or equity securities. U.S. futures
contracts are traded on exchanges which have been designated "contract markets"
by the Commodity Futures Trading Commission ("CFTC") and must be executed
through a futures commission merchant (an "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.
Both the buyer and seller are required to deposit "initial margin" for the
benefit of the FCM when a futures 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 other
liquid assets. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments to the other
party to settle the change in value on a daily basis. Initial and variation
margin payments are similar to good faith deposits or performance bonds or
party-to-party payments resulting from daily changes in the value of the
contract, unlike margin extended by a securities broker, and would be released
or credited to the Funds upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Unlike margin extended by a
securities broker, initial and variation margin payments do not constitute
purchasing securities on margin for purposes of each Fund's investment
limitations. The Funds will incur brokerage fees when they buy or sell futures
contracts.
In the event of the bankruptcy of the FCM that holds margin on behalf of a
Fund, the Fund may be entitled to return of margin owed to the Fund only in
proportion to the amount received by the FCM's other customers. Each Fund will
attempt to minimize the risk by careful monitoring of the creditworthiness of
the FCMs with which the Fund does business and by depositing margin payments in
a segregated account with the Fund's custodian for the benefit of the FCM when
practical or otherwise required by law.
Each Fund intends to comply with guidelines of eligibility for exclusion
from the definition of the term "commodity pool operator" with the CFTC and the
National Futures Association, which regulate trading in the futures markets.
Accordingly, the Fund will not enter into any futures
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<PAGE>
contract or option on a futures contract if, as a result, the aggregate
initial margin and premiums required to establish such positions would exceed
5% of the Fund's net assets.
Although each Fund would hold cash and liquid assets in a segregated
account with a mark-to-market value sufficient to cover the Fund's open futures
obligations, the segregated assets would be available to the Fund immediately
upon closing out the futures position.
The acquisition or sale of a futures contract may occur, for example, when
a Fund is considering purchasing or holds equity securities and seeks to protect
itself from fluctuations in prices without buying or selling those securities.
For example, if prices were expected to decrease, the Fund might sell equity
index futures contracts, thereby hoping to offset a potential decline in the
value of equity securities in the portfolio by a corresponding increase in the
value of the futures contract position held by the Fund and thereby preventing
the Fund's net asset value from declining as much as it otherwise would have. A
Fund also could protect against potential price declines by selling portfolio
securities and investing in money market instruments. However, the use of
futures contracts as a hedging technique allows the Funds to maintain a
defensive position without having to sell portfolio securities.
Similarly, when prices of equity securities are expected to increase,
futures contracts may be bought to attempt to hedge against the possibility of
having to buy equity securities at higher prices. This technique is sometimes
known as an anticipatory hedge. Since the fluctuations in the value of futures
contracts should be similar to those of equity securities, a Fund could take
advantage of the potential rise in the value of equity securities without buying
them until the market has stabilized. At that time, the futures contracts could
be liquidated and the Fund could buy equity securities on the cash market.
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. 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 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
the foregoing distortions, a correct forecast of general price trends by the
Funds still may not result in a successful use of futures.
Futures contracts entail additional risks. Although each Fund believes
that use of such contracts will benefit the Fund, if the Fund's investment
judgment is incorrect, the Fund's overall performance could be worse than if the
Fund had not entered into futures contracts. For example, if the Fund has
hedged against the effects of a possible decrease in prices of securities held
in the Fund's portfolio and prices increase instead, the Fund will lose part or
all of the benefit of the increased value of these securities because of
offsetting losses in the Fund's futures positions. In addition, if the 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 the Fund. Although the
buyer of an option cannot lose more than the amount of the premium plus related
transaction costs, a buyer or seller of futures contracts could lose amounts
substantially in excess of any initial margin deposits made, due to the
potential for adverse price movements resulting in additional variation margin
being required by such positions. However, each Fund intends to monitor its
investments closely and will attempt to close its positions when the risk of
loss to the Fund becomes unacceptably high.
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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 the 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 the 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 such factors 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 may also
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 the Fund's other
investments.
Because futures contracts are generally settled within a day from the date
they are closed out, compared with a longer settlement period for most types of
securities, the futures markets can provide superior liquidity to the securities
markets. Nevertheless, there is no assurance 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 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, a Fund's access
to other assets held to cover its futures positions also could be impaired.
OPTIONS ON FUTURES CONTRACTS. Each Fund may buy and write options on
futures contracts for hedging purposes. An option on a futures contract gives
the Funds 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, a Fund may buy a call
option on a futures contract to hedge against a market advance, and a Fund might
buy a put option on a futures contract to hedge against a market decline.
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 call 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 the
Fund's portfolio holdings. If a call option a Fund has written is exercised,
the Fund will incur a loss which will be reduced by the amount of the premium it
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received. Depending on the degree of correlation between 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 the Fund's
portfolio against the risk of falling prices.
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 FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward contract is a
privately negotiated 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 invoice amount
for the assets at the time of delivery. The Funds currently intend that they
will only use forward contracts or commitments for hedging purposes and will
only use forward foreign currency exchange contracts, although the Funds may
enter into additional forms of forward contracts or commitments in the future
if they become available and advisable in light of the Funds' objectives and
investment policies. Forward contracts generally are negotiated in an
interbank market conducted directly between traders (usually large commercial
banks) and their customers. Unlike futures contracts, which are standardized
exchange-traded contracts, forward contracts can be specifically drawn to
meet the needs of the 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 the 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) on a specified date. 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 (in terms of a specified currency)
for securities it has agreed to buy or sell ("transaction hedge"). A Fund also
may hedge some or all of its investments denominated in foreign currency against
a decline in the value of that currency (or a proxy currency whose price
movements are expected to have a high degree of correlation with the currency
being hedged) relative to the U.S. dollar by entering into forward currency
contracts to sell an amount of that currency approximating the value of some or
all of its portfolio securities denominated in that currency ("position hedge")
or by participating in futures contracts (or options on such futures) 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").
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 limits 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. Unforeseen changes in currency prices may result in poorer
overall performance for a Fund than if it had not entered into such contracts.
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The Funds will cover outstanding forward currency contracts by maintaining
liquid portfolio securities denominated in 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 liquid assets having a value equal to
the aggregate amount of such Fund's commitments under forward contracts entered
into. If the value of the securities used to cover a position or the value of
segregated assets declines, the Fund must find alternative cover or segregate
additional cash or liquid assets on a daily basis so that the value of the
covered and segregated assets will be equal to the amount of a Fund's
commitments with respect to such contracts.
While forward contracts are not currently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contracts. In such
event, the Funds' ability to utilize forward contracts may be restricted. 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.
In addition, when a Fund enters into a privately negotiated forward contract
with a counter party, the Fund assumes counter party credit risk, that is, the
risk that the counter party will fail to perform its obligations, in which case
the Fund could be worse off than if the contract had not been entered into.
Unlike many exchange-traded futures contracts and options on futures, there are
no daily price fluctuation limits with respect to forward contracts and other
negotiated or over-the-counter instruments, and with respect to those contracts,
adverse market movements could therefore continue to an unlimited extent over a
period of time. However, each Fund intends to monitor its investments closely
and will attempt to renegotiate or close its positions when the risk of loss to
the Fund becomes unacceptably high.
OPTIONS ON SECURITIES AND SECURITIES INDICES. A Fund may buy or sell put
or call options and write covered call options on securities that are traded on
United States or foreign securities exchanges or over-the-counter. Buying an
option involves the risk that, during the option period, the price of the
underlying security will not increase (in the case of a call) to above the
exercise price, or will not decrease (in the case of a put) to below the
exercise price, in which case the option will expire without being exercised and
the holder would lose the amount of the premium. Writing a call option involves
the risk of an increase in the market value of the underlying security, in which
case the option could be exercised and the underlying security would then be
sold by a Fund to the option holder at a lower price than its current market
value and the Fund's potential for capital appreciation on the security would be
limited to the exercise price. Moreover, when a Fund writes a call option on a
securities index, the Fund bears the risk of loss resulting from imperfect
correlation between movements in the price of the index and the price of the
securities set aside to cover such position. Although they entitle the holder
to buy equity securities, call options to purchase equity securities do not
entitle the holder to dividends or voting rights with respect to the underlying
securities, nor do they represent any rights in the assets of the issuer of
those securities.
A call option written by a Fund is "covered" if the 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 its 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 the Fund in liquid assets in a segregated account
with its custodian.
The writer of a call option may have no control when the underlying
securities must be sold. 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.
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The writer of an exchange-traded call 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. If a Fund desires to sell a particular security from the
Fund's portfolio on which the Fund has written a call option, the Fund will
effect a closing transaction prior to or concurrent with the sale of the
security. However, a writer may not effect a closing purchase transaction after
being notified of the exercise of an option. An investor who is the holder of
an exchange-traded 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.
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; the 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 less than the
premium paid to buy the option. Because increases in the market price of a call
option will generally 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 the Fund.
An option position may be closed out only where there exists a secondary
market for an option of the same series. If a secondary market does not exist,
it might not be possible to effect closing transactions in particular options
with the result that a 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 the Fund delivers the underlying security
upon exercise. Reasons for the absence of a liquid secondary market may include
the following: (i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national securities exchange on
which the option is traded ("Exchange") on opening or closing transactions or
both, (iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may 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.
In addition, when a Fund enters into an over-the-counter option contract
with a counter party, the Fund assumes counter party credit risk, that is, the
risk that the counter party will fail to perform its obligations, in which case
the Fund could be worse off than if the contract had not been entered into.
An option on a securities index is similar to an option on a security
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, on exercise of the option, an amount of cash if the closing level of
the securities index on which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
A Fund may buy call options on securities or securities indices to hedge
against an increase in the price of a security or securities that the Fund may
buy in the future. The premium paid for the call option plus any transaction
costs will reduce the benefit, if any, realized by a Fund upon exercise of the
option, and, unless the price of the underlying security or index rises
sufficiently, the option may expire and become worthless to the Fund. A Fund
may buy put options to hedge against
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a decline in the value of a security or its portfolio. The premium paid for
the put option plus any transaction costs will reduce the benefit, if any,
realized by a Fund upon exercise of the option, and, unless the price of the
underlying security or index declines sufficiently, the option may expire and
become worthless to the Fund.
An example of a hedging transaction using an index option would be if a
Fund were to purchase a put on a stock index, in order to protect the Fund
against a decline in the value of all securities held by it to the extent
that the stock index moves in a similar pattern to the prices of the
securities held. While the correlation between stock indices and price
movements of the stocks in which the Funds will generally invest may be
imperfect, the Funds expect, nonetheless, that the use of put options that
relate to such indices will, in certain circumstances, protect against
declines in values of specific portfolio securities or a Fund's portfolio
generally. Although the purchase of a put option may partially protect a
Fund from a decline in the value of a particular security or its portfolio
generally, the cost of a put will reduce the potential return on the security
or the portfolio.
CONVERTIBLE SECURITIES. Each Fund may also purchase debt or equity
securities which are convertible into common stock when the Fund's advisor or
sub-advisor believes they offer the potential for a higher total return than
nonconvertible securities. While fixed-income securities generally have a
priority claim on a corporation's assets over that of common stock, some of
the convertible securities which the Funds may hold are high-yield/high-risk
securities that are subject to special risks, including the risk of default
in interest or principal payments which could result in a loss of income to
the Funds or a decline in the market value of the securities. Convertible
securities often display a degree of market price volatility that is
comparable to common stocks. The credit risk associated with convertible
securities generally is reflected by their ratings assigned by organizations
such as Moody's Investors Service, Inc., and Standard & Poor's Corporation,
or a similar determination of creditworthiness by the advisor or sub-advisor.
The Funds have no pre-established minimum quality standards for convertible
securities and may invest in convertible securities of any quality, including
lower rated or unrated securities. However, none of the Funds will invest in
any security in default at the time of purchase or in any nonconvertible debt
securities rated below investment grade, and each Fund will invest less than
20% of the market value of its assets at the time of purchase in convertible
securities rated below investment grade. If convertible securities purchased
by a Fund are downgraded following purchase, or if other circumstances cause
20% or more of a Fund's assets to be invested in convertible securities rated
below investment grade, the trustees of the Trust, in consultation with the
advisor or sub-advisor will determine what action, if any, is appropriate in
light of all relevant circumstances. For a further discussion of debt
security ratings, see Appendix A to this Statement of Additional Information.
SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. Each of the
Funds may invest in securities of companies with limited operating histories.
The Funds consider these to be securities of companies with a record of less
than three years' continuous operation, even including the operations of any
predecessors and parents. (These are sometimes referred to as "unseasoned
issuers.") These companies by their nature have only a limited operating
history which can be used for evaluating the company's growth prospects. As
a result, investment decisions for these securities may place a greater
emphasis on current or planned product lines and the reputation and
experience of the company's management and less emphasis on fundamental
valuation factors than would be the case for more mature companies. In
addition, many of these companies may also be small companies and involve the
risks and price volatility associated with smaller companies. The Berger IPT
- - 100 Fund and the Berger IPT - Growth and Income Fund each may invest up to
5% of their total assets in such securities.
ZEROS/STRIPS. The Berger IPT - 100 Fund and the Berger IPT - Growth and
Income Fund may each invest in zero coupon bonds or in "strips." Zero coupon
bonds do not make regular interest payments; rather, they are sold at a
discount from face value. Principal and accreted discount (representing
interest accrued but not paid) are paid at maturity. "Strips" are debt
securities that are
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stripped of their interest coupon after the securities are issued, but
otherwise are comparable to zero coupon bonds. The market values of "strips"
and zero coupon bonds generally fluctuate in response to changes in interest
rates to a greater degree than do interest-paying securities of comparable
term and quality. None of the Funds will invest in mortgage-backed or other
asset-backed securities.
LENDING OF SECURITIES. As discussed in the Prospectus, each Fund may
lend its securities to qualified institutional investors who need to borrow
securities in order to complete certain transactions, such as covering short
sales, avoiding failures to deliver securities, or completing arbitrage
operations. By lending its securities, a Fund will be attempting to generate
income through the receipt of interest on the loan which, in turn, can be
invested in additional securities to pursue the Fund's investment objective.
Any gain or loss in the market price of the securities loaned that might
occur during the term of the loan would be for the account of a Fund. A Fund
may lend its portfolio securities to qualified brokers, dealers, banks or
other financial institutions, so long as the terms, the structure and the
aggregate amount of such loans are not inconsistent with the Investment
Company Act of 1940, or the Rules and Regulations or interpretations of the
Securities and Exchange Commission (the "Commission") thereunder, which
currently require that (a) the borrower pledge and maintain with the Fund
collateral consisting of cash, an irrevocable letter of credit or securities
issued or guaranteed by the United States government having a value at all
times not less than 100% of the value of the securities loaned, (b) the
borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the
loan be made subject to termination by the Fund at any time and (d) the Fund
receive reasonable interest on the loan, which interest may include the
Fund's investing cash collateral in interest bearing short-term investments,
and (e) the Fund receive all dividends and distributions on the loaned
securities and any increase in the market value of the loaned securities.
A Fund bears a risk of loss in the event that the other party to a
securities lending transaction defaults on its obligations and the Fund is
delayed in or prevented from exercising its rights to dispose of the
collateral, including the risk of a possible decline in the value of the
collateral securities during the period in which the Fund seeks to assert
these rights, the risk of incurring expenses associated with asserting these
rights and the risk of losing all or a part of the income from the
transaction. None of the Funds will lend its portfolio securities if, as a
result, the aggregate value of such loans would exceed 33-1/3% of the value
of the Fund's total assets. Loan arrangements made by a Fund will comply
with all other applicable regulatory requirements, including the rules of the
New York Stock Exchange, which rules presently require the borrower, after
notice, to redeliver the securities within the normal settlement time of
three business days. All relevant facts and circumstances, including
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review
by the Fund's trustees.
ILLIQUID AND RESTRICTED SECURITIES. Each of the Funds is authorized to
invest in securities which are illiquid or not readily marketable because
they are subject to restrictions on their resale ("restricted securities") or
because, based upon their nature or the market for such securities, no ready
market is available. However, none of the Funds will purchase any such
security, the purchase of which would cause the Fund to invest more than 15%
of its net assets, measured at the time of purchase, in illiquid securities.
Investments in illiquid securities involve certain risks to the extent that a
Fund may be unable to dispose of such a security at the time desired or at a
reasonable price or, in some cases, may be unable to dispose of it at all.
In addition, in order to resell a restricted security, a Fund might have to
incur the potentially substantial expense and delay associated with effecting
registration. If securities become illiquid following purchase or other
circumstances cause more than 15% of a Fund's net assets to be invested in
illiquid securities, the trustees of that Fund, in consultation with the
Fund's advisor or sub-advisor, will determine what action, if any, is
appropriate in light of all relevant circumstances.
Repurchase agreements maturing in more than seven days will be
considered as illiquid for purposes of this restriction. Pursuant to
guidelines established by the trustees, the Funds' advisor
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or sub-advisor will determine whether securities eligible for resale to
qualified institutional buyers pursuant to SEC Rule 144A under the Securities
Act of 1933 should be treated as illiquid investments considering, among
other things, the following factors: (1) the frequency of trades and quotes
for the security; (2) the number of dealers wanting to purchase or sell the
security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of the
transfer). The liquidity of a Fund's investments in Rule 144A securities
could be impaired if qualified institutional buyers become uninterested in
purchasing these securities.
REPURCHASE AGREEMENTS. As discussed in the Prospectus, each Fund may
invest in repurchase agreements with various financial organizations,
including commercial banks, registered broker-dealers and registered
government securities dealers. A repurchase agreement is an agreement under
which a Fund acquires a debt security (generally a debt security issued or
guaranteed by the U.S. government or an agency thereof, a banker's acceptance
or a certificate of deposit) from a commercial bank, broker or dealer,
subject to resale to the seller at an agreed upon price and date (normally,
the next business day). A repurchase agreement may be considered a loan
collateralized by securities. The resale price reflects an agreed upon
interest rate effective for the period the instrument is held by a Fund and
is unrelated to the interest rate on the underlying instrument. In these
transactions, the securities acquired by a Fund (including accrued interest
earned thereon) must have a total value equal to or in excess of the value of
the repurchase agreement and are held by the Fund's custodian bank until
repurchased. In addition, the trustees will establish guidelines and
standards for review by the investment advisor or sub-advisor of the
creditworthiness of any bank, broker or dealer party to a repurchase
agreement with a Fund. None of the Funds will enter into a repurchase
agreement maturing in more than seven days if as a result more than 15% of
the Fund's total assets would be invested in such repurchase agreements and
other illiquid securities.
These transactions must be fully collateralized at all times by debt
securities (generally a security issued or guaranteed by the U.S. Government
or an agency thereof, a banker's acceptance or a certificate of deposit), but
involve certain risks, such as credit risk to a Fund if the other party
defaults on its obligation and the Fund is delayed or prevented from
liquidating the collateral. For example, if the other party to the agreement
defaults on its obligation to repurchase the underlying security at a time
when the value of the security has declined, a Fund may incur a loss upon
disposition of the security. If the other party to the agreement becomes
insolvent and subject to liquidation or reorganization under the Bankruptcy
Code or other laws, a court may determine that the underlying security is
collateral for a loan by a Fund not within the control of the Fund and
therefore the realization by the Fund on such collateral may automatically be
stayed and delayed. Further, it is possible that a Fund may not be able to
substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement. The Funds expect
that these risks can be controlled through careful monitoring procedures.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Fund may purchase and
sell securities on a when-issued or delayed delivery basis. However, none of
the Funds currently intends to purchase or sell securities on a when-issued
or delayed delivery basis, if as a result more than 5% of its total assets
taken at market value at the time of purchase would be invested in such
securities. When-issued or delayed delivery transactions arise when
securities (normally, equity obligations of issuers eligible for investment
by a Fund) are purchased or sold by the Fund with payment and delivery taking
place in the future in order to secure what is considered to be an
advantageous price or yield. However, the yield available on a comparable
security when delivery takes place may vary from the yield on the security at
the time that the when-issued or delayed delivery transaction was entered
into. Any failure to consummate a when-issued or delayed delivery
transaction may result in a Fund missing the opportunity of obtaining a price
or yield considered to be advantageous. When-issued and delayed delivery
transactions may generally be expected to settle within one month from the
date the
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transactions are entered into, but in no event later than 90 days. However,
no payment or delivery is made by a Fund until it receives delivery or
payment from the other party to the transaction.
When a Fund purchases securities on a when-issued basis, it will
maintain in a segregated account with its custodian cash, U.S. government
securities or other liquid assets having an aggregate value equal to the
amount of such purchase commitments, until payment is made. If necessary,
additional assets will be placed in the account daily so that the value of
the account will equal or exceed the amount of the Fund's purchase
commitments.
SHORT SALES. Each Fund other than the Berger/BIAM IPT - International
Fund currently is only permitted to engage in short sales if, at the time of
the short sale, the Fund owns or has the right to acquire an equivalent kind
and amount of the security being sold short at no additional cost (i.e.,
short sales "against the box").
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. To make delivery to the purchaser, the executing broker borrows the
securities being sold short on behalf of the seller. While the short
position is maintained, the seller collateralizes its obligation to deliver
the securities sold short in an amount equal to the proceeds of the short
sale plus an additional margin amount established by the Board of Governors
of the Federal Reserve. If a Fund engages in a short sale, the collateral
account will be maintained by the Fund's custodian. While the short sale is
open, the Fund will maintain in a segregated custodial account an amount of
securities convertible into or exchangeable for such equivalent securities at
no additional cost. These securities would constitute the Fund's long
position.
Historically, a Fund could have made a short sale, as described above,
when it wanted to sell a security it owned at a current attractive price, but
also wished to defer recognition of gain or loss for Federal income tax
purposes and for purposes of satisfying certain tests applicable to regulated
investment companies under the Internal Revenue Code. However, recent
federal tax legislation eliminated the ability to defer recognition of gain
or loss in short sales against the box and accordingly, it is not anticipated
that any of the Funds will be engaging in these transactions unless there are
further legislative changes.
TEMPORARY DEFENSIVE MEASURES. Each of the Funds (except the Berger/BIAM
IPT -International Fund) may increase its investment in government securities,
and other short-term, interest-bearing securities without regard to the Fund's
otherwise applicable percentage limits, policies or its normal investment
emphasis when its advisor or sub-advisor believes market conditions warrant a
temporary defensive position. Taking larger positions in such short-term
investments may serve as a means of preserving capital in unfavorable market
conditions. During these periods, a Fund may not participate in stock or bond
market advances or declines to the same extent that it would if the Fund
remained more fully invested in stocks and bonds and it may be more difficult
for the Fund to achieve its investment objective.
PORTFOLIO TURNOVER. The portfolio turnover rates of each of the Funds
are shown in the tables under Financial Highlights in Section 2 of the
Prospectus. The annual portfolio turnover rates of the Funds may at times
exceed 100%. A 100% annual turnover rate results, for example, if the
equivalent of all of the securities in the Fund's portfolio are replaced in a
period of one year. The Funds anticipate that their portfolio turnover rates
in future years may exceed 100%, and investment changes will be made whenever
management deems them appropriate even if this results in a higher portfolio
turnover rate. In addition, portfolio turnover may increase as a result of
large amounts of purchases and redemptions of shares of the Funds due to
economic, market or other factors that are not within the control of
management.
Higher portfolio turnover will necessarily result in correspondingly
higher brokerage costs for the Funds. The Funds' brokerage policy is
discussed further under Section 6 Brokerage
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Policy, and additional information concerning income taxes is located under
Section 10 Income Dividends, Capital Gains Distributions and Tax Treatment.
2. INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental and non-fundamental
restrictions on its investments and other activities. Fundamental
restrictions may not be changed without the approval of (i) 67% or more of
the voting securities of the Fund present at a meeting of shareholders
thereof if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy, or (ii) more than 50% of the outstanding
voting securities of the Fund. Non-fundamental restrictions may be changed
in the future by action of the directors or trustees without shareholder
vote.
BERGER IPT - 100 FUND AND BERGER IPT - GROWTH AND INCOME FUND
The following fundamental restrictions apply to each of the Berger IPT -
100 Fund and the Berger IPT - Growth and Income Fund. A Fund may not:
1. Purchase the securities of any one issuer (except U.S. Government
securities) if immediately after and as a result of such purchase (a) 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 or (b) the Fund owns more than 10% of
the outstanding voting securities or of any class of securities of such
issuer.
2. Purchase securities of any company with a record of less than three
years' continuous operation (including that of predecessors) if such purchase
would cause the Fund's investments in all such companies taken at cost to
exceed 5% of the value of the Fund's total assets.
3. Invest in any one industry more than 25% of the value of its total
assets at the time of such investment.
4. Make loans, except that the Fund may enter into repurchase
agreements and may lend portfolio securities in accordance with the Fund's
investment policies. The Fund does not, for this purpose, consider the
purchase of all or a portion of an issue of publicly distributed bonds, bank
loan participation agreements, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the purchase is
made upon the original issuance of the securities, to be the making of a loan.
5. Borrow in excess of 5% of the value of its total assets, or pledge,
mortgage, or hypothecate its assets taken at market value to an extent
greater than 10% of the Fund's total assets taken at cost (and no borrowing
may be undertaken except from banks as a temporary measure for extraordinary
or emergency purposes). This limitation shall not prohibit or restrict short
sales or deposits of assets to margin or guarantee positions in futures,
options or forward contracts, or the segregation of assets in connection with
any of such transactions.
6. Purchase or retain the securities of any issuer if those officers
and trustees of the Fund or its investment advisor owning individually more
than 1/2 of 1% of the securities of such issuer together own more than 5% of
the securities of such issuer.
7. Purchase the securities of any other investment company, except by
purchase in the open market involving no commission or profit to a sponsor or
dealer (other than the customary broker's commission).
8. Act as a securities underwriter (except to the extent the Fund may
be deemed an underwriter under the Securities Act of 1933 in disposing of a
security) or invest in real estate (although it may purchase shares of a real
estate investment trust), or invest in commodities or
-14-
<PAGE>
commodity contracts except, only for the purpose of hedging, (i) financial
futures transactions, including futures contracts on securities, securities
indices and foreign currencies, and options on any such futures, (ii) forward
foreign currency exchange contracts and other forward commitments and (iii)
securities index put or call options.
9. Participate on a joint or joint and several basis in any securities
trading account.
10. Invest in companies for the purposes of exercising control of
management.
In applying the industry concentration investment restriction (no. 3
above), the Funds use the industry groups used in the Data Monitor Portfolio
Monitoring System of William O'Neil & Co. Incorporated. Further, in
implementing that restriction, each Fund intends not to invest in any one
industry 25% or more of the value of its total assets at the time of such
investment.
The trustees have adopted additional non-fundamental investment
restrictions for each of the Berger IPT - 100 Fund and the Berger IPT -
Growth and Income Fund. These limitations may be changed by the trustees
without a shareholder vote. The non-fundamental investment restrictions
include the following:
1. Only for the purpose of hedging, the Fund may purchase and sell
financial futures, forward foreign currency exchange contracts and put and
call options, but no more than 5% of the Fund's net assets at the time of
purchase may be invested in initial margins for financial futures
transactions and premiums for options. The Fund may only write call options
that are covered and only up to 25% of the Fund's total assets.
2. The Fund may not purchase or sell securities on a when-issued or
delayed delivery basis, if as a result more than 5% of its total assets taken
at market value at the time of purchase would be invested in such securities.
3. The Fund may not purchase any security, including any repurchase
agreement maturing in more than seven days, which is not readily marketable,
if more than 15% of the net assets of the Fund, taken at market value at the
time of purchase would be invested in such securities.
4. The Fund may not purchase securities on margin from a broker or
dealer, except that the Fund may obtain such short-term credits as may be
necessary for the clearance of transactions, and may not make short sales of
securities, except that the Fund may make short sales if, at the time of the
short sale, the Fund owns or has the right to acquire an equivalent kind and
amount of the security being sold short at no additional cost (i.e., short
sales "against the box"). This limitation shall not prohibit or restrict the
Fund from entering into futures, forwards and options contracts or from
making margin payments and other deposits in connection therewith.
BERGER IPT - SMALL COMPANY GROWTH FUND
The following fundamental restrictions apply to the Berger IPT - Small
Company Growth Fund. The Fund may not:
1. With respect to 75% of the Fund's total assets, purchase the
securities of any one issuer (except U.S. government securities) if
immediately after and as a result of such purchase (a) 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 or (b) the Fund owns more than 10% of the
outstanding voting securities of such issuer.
2. Invest in any one industry (other than U.S. government securities)
more than 25% of the value of its total assets at the time of such investment.
-15-
<PAGE>
3. Borrow money, except from banks for temporary or emergency purposes
in amounts not to exceed 25% of the Fund's total assets (including the amount
borrowed) taken at market value, nor pledge, mortgage or hypothecate its
assets, except to secure permitted indebtedness and then only if such
pledging, mortgaging or hypothecating does not exceed 25% of the Fund's total
assets taken at market value. When borrowings exceed 5% of the Fund's total
assets, the Fund will not purchase portfolio securities.
4. Act as a securities underwriter (except to the extent the Fund may
be deemed an underwriter under the Securities Act of 1933 in disposing of a
security), issue senior securities (except to the extent permitted under the
Investment Company Act of 1940), invest in real estate (although it may
purchase shares of a real estate investment trust), or invest in commodities
or commodity contracts except financial futures transactions, futures
contracts on securities and securities indices and options on such futures,
forward foreign currency exchange contracts, forward commitments or
securities index put or call options.
5. Make loans, except that the Fund may enter into repurchase
agreements and may lend portfolio securities in accordance with the Fund's
investment policies. The Fund does not, for this purpose, consider the
purchase of all or a portion of an issue of publicly distributed bonds, bank
loan participation agreements, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the purchase is
made upon the original issuance of the securities, to be the making of a loan.
In applying the industry concentration investment restriction (no. 2
above), the Fund uses the industry groups used in the Data Monitor Portfolio
Monitoring System of William O'Neil & Co. Incorporated. Further, in
implementing that restriction, the Fund intends not to invest in any one
industry 25% or more of the value of its total assets at the time of such
investment.
The trustees have adopted additional non-fundamental investment
restrictions for the Berger IPT - Small Company Growth Fund. These
limitations may be changed by the trustees without a shareholder vote. The
non-fundamental investment restrictions include the following:
1. The Fund may not purchase securities on margin from a broker or
dealer, except that the Fund may obtain such short-term credits as may be
necessary for the clearance of transactions, and may not make short sales of
securities, except that the Fund may make short sales if, at the time of the
short sale, the Fund owns or has the right to acquire an equivalent kind and
amount of the security being sold short at no additional cost (i.e., short
sales "against the box"). This limitation shall not prohibit or restrict the
Fund from entering into futures, forwards and options contracts or from
making margin payments and other deposits in connection therewith.
2. The Fund may not purchase the securities of any other investment
company, except by purchase in the open market involving no commission or
profit to a sponsor or dealer (other than the customary broker's commission).
3. The Fund may not invest in companies for the purposes of exercising
control of management.
4. The Fund may not purchase any security, including any repurchase
agreement maturing in more than seven days, which is not readily marketable,
if more than 15% of the net assets of the Fund, taken at market value at the
time of purchase would be invested in such securities.
5. Only for the purpose of hedging, the Fund may purchase and sell
financial futures, forward foreign currency exchange contracts and put and
call options, but no more than 5% of the Fund's net assets at the time of
purchase may be invested in initial margins for financial futures
-16-
<PAGE>
transactions and premiums for options. The Fund may only write call options
that are covered and only up to 25% of the Fund's total assets.
6. The Fund may not purchase or sell securities on a when-issued or
delayed delivery basis, if as a result more than 5% of its total assets taken
at market value at the time of purchase would be invested in such securities.
BERGER/BIAM IPT - INTERNATIONAL FUND
The following fundamental restrictions apply to the Berger/BIAM IPT
- -International Fund. The Fund may not:
1. With respect to 75% of the Fund's total assets, purchase the
securities of any one issuer (except U.S. government securities) if
immediately after and as a result of such purchase (a) 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 or (b) the Fund owns more than 10% of the
outstanding voting securities of such issuer.
2. Invest in any one industry (other than U.S. government securities)
25% or more of the value of its total assets at the time of such investment.
3. Borrow money, except from banks for temporary or emergency purposes
in amounts not to exceed 25% of the Fund's total assets (including the amount
borrowed) taken at market value, nor pledge, mortgage or hypothecate its
assets, except to secure permitted indebtedness and then only if such
pledging, mortgaging or hypothecating does not exceed 25% of the Fund's total
assets taken at market value. When borrowings exceed 5% of the Fund's total
assets, the Fund will not purchase portfolio securities.
4. Act as a securities underwriter (except to the extent the Fund may
be deemed an underwriter under the Securities Act of 1933 in disposing of a
security), issue senior securities (except to the extent permitted under the
Investment Company Act of 1940), invest in real estate (although it may
purchase shares of a real estate investment trust), or invest in commodities
or commodity contracts except financial futures transactions, futures
contracts on securities and securities indices and options on such futures,
forward foreign currency exchange contracts, forward commitments or
securities index put or call options.
5. Make loans, except that the Fund may enter into repurchase
agreements and may lend portfolio securities in accordance with the Fund's
investment policies. The Fund does not, for this purpose, consider the
purchase of all or a portion of an issue of publicly distributed bonds, bank
loan participation agreements, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the purchase is
made upon the original issuance of the securities, to be the making of a loan.
In applying the industry concentration investment restriction (no. 2
above), the Fund uses the industry groups designated by the Financial Times
World Index Service.
The trustees have adopted additional non-fundamental investment
restrictions for the Berger/BIAM IPT - International Fund. These limitations
may be changed by the trustees without a shareholder vote. The
non-fundamental investment restrictions include the following:
1. With respect to 100% of the Fund's total assets, the Fund may not
purchase the securities of any one issuer (except U.S. government securities)
if immediately after and as a result of such purchase (a) the value of the
holdings of the Fund in the securities of such issuer exceeds 5%
-17-
<PAGE>
of the value of the Fund's total assets or (b) the Fund owns more than 10% of
the outstanding voting securities of such issuer.
2. The Fund may not purchase securities on margin from a broker or
dealer, except that the Fund may obtain such short-term credits as may be
necessary for the clearance of transactions, and may not make short sales of
securities. This limitation shall not prohibit or restrict the Fund from
entering into futures, forwards and options contracts or from making margin
payments and other deposits in connection therewith.
3. The Fund may not purchase the securities of any other investment
company, except by purchase in the open market involving no commission or
profit to a sponsor or dealer (other than the customary broker's commission).
4. The Fund may not invest in companies for the purposes of exercising
control of management.
5. The Fund may not purchase any security, including any repurchase
agreement maturing in more than seven days, which is not readily marketable, if
more than 15% of the net assets of the Fund, taken at market value at the time
of purchase would be invested in such securities.
6. The Fund may not enter into any futures, forwards or options, except
that only for the purpose of hedging, the Fund may enter into forward foreign
currency exchange contracts with stated contract values of up to the value of
the Fund's assets.
7. The Fund may not purchase or sell securities on a when-issued or
delayed delivery basis, if as a result more than 5% of its net assets taken at
market value at the time of purchase would be invested in such securities.
On behalf of the Trust, an undertaking has been given to the State of
California Department of Insurance that limits borrowings of each Fund (to
the extent such borrowings are allowed by the Fund's investment policies) to
10% of the Fund's total assets, except that a Fund may borrow up to 25% of
its total assets when such borrowing is necessary to meet Fund redemptions.
In addition, the undertaking to the State of California Department of
Insurance requires each Fund when investing in foreign securities (to the
extent consistent with the Fund's investment policies) to invest in a minimum
of five different foreign countries, provided that this minimum may be
reduced to four when foreign country investments comprise less than 80% of
the Fund's assets, to three when less than 60% of such assets, to two when
less than 40% of such assets, or to one when less than 20% of such assets.
Additionally, no more than 20% of a Fund's assets may be invested in
securities of issuers located in any one foreign country, except that a Fund
may have an additional 15% of its assets in securities of issuers located in
any one of the following countries: Australia, Canada, France, Japan, the
United Kingdom or Germany.
3. MANAGEMENT OF THE FUNDS
The same trustees and most of the same executive officers serve each of
the Funds. They are listed below, together with information which includes
their principal occupations during the past five years and other principal
business affiliations.
MICHAEL OWEN, 412 Reid Hall, Montana State University, Bozeman, MT 59717,
age 61. Since 1994, Dean, and from 1989 to 1994, a member of the
Finance faculty, of the College of Business, Montana State
University. Self-employed as a financial and management consultant,
and in real estate development. Formerly (1976-1989), Chairman and
Chief Executive Officer of Royal Gold, Inc. (mining). Chairman of
the Board of Berger 100 Fund and
-18-
<PAGE>
Berger Growth and Income Fund. Chairman of the Trustees of Berger
Investment Portfolio Trust, Berger Institutional Products Trust,
Berger/BIAM Worldwide Funds Trust, Berger/BIAM Worldwide Portfolios
Trust and Berger Omni Investment Trust.
* GERARD M. LAVIN, 210 University Boulevard, Suite 900, Denver, CO 80206,
age 55. President and a Trustee of Berger Institutional Products
Trust since its inception in October 1995. President and a director
of the Berger 100 Fund and the Berger Growth and Income Fund since
February 1997. President and a trustee of Berger/BIAM Worldwide
Portfolios Trust and Berger/BIAM Worldwide Funds Trust since their
inception in May 1996. President and a trustee of Berger Investment
Portfolio Trust and Berger Omni Investment Trust since February 1997.
President and a director since April 1995 of Berger Associates.
Member and Chairman of the Board of Managers and Co-Chief Executive
Officer on the Management Committee of BBOI Worldwide LLC since
November 1996. President and a director of West Side Investments,
Inc. (investments), a wholly-owned subsidiary of DST Systems, Inc.
since February 1998. Formerly, a Vice President of DST Systems, Inc.
(data processing) from July 1995 to February 1998; President and Chief
Executive Officer of Investors Fiduciary Trust Company (banking) from
February 1992 to March 1995; and Chief Operating Officer of SunAmerica
Asset Management Co. (money management) from January 1990 to February
1992.
DENNIS E. BALDWIN, 3481 South Race Street, Englewood, CO 80110, age 69.
President, Baldwin Financial Counseling. Formerly (1978-1990), Vice
President and Denver Office Manager of Merrill Lynch Capital Markets.
Director of Berger 100 Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
* WILLIAM M. B. BERGER, 210 University Boulevard, Suite 900, Denver, CO
80206, age 72. Trustee of Berger Institutional Products Trust since
its inception in October 1995. Director and, formerly, President
(1974-1994) of Berger 100 Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust since its inception in
August 1993 (Chairman of the Trustees through November 1994). Trustee
of Berger/BIAM Worldwide Funds Trust and Berger/BIAM Worldwide
Portfolios Trust since their inception in May 1996. Trustee of Berger
Omni Investment Trust since February 1997. Chairman (since 1994) and
a Director (since 1973) and, formerly, President (1973-1994) of Berger
Associates.
LOUIS R. BINDNER, 1075 South Fox, Denver, CO 80223, age 72. President,
Climate Engineering, Inc. (building environmental systems). Director
of Berger 100 Fund and Berger Growth and Income Fund. Trustee of
Berger Investment Portfolio Trust, Berger Institutional Products
Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM Worldwide
Portfolios Trust and Berger Omni Investment Trust.
KATHERINE A. CATTANACH, 384 South Ogden, Denver, CO 80209, age 53.
Managing Principal, Sovereign Financial Services, Inc. (investment
consulting firm). Formerly (1981-1988), Executive Vice President,
Captiva Corporation, Denver, Colorado (private investment management
firm). Ph.D. in Finance (Arizona State University); Chartered
Financial Analyst (CFA). Director of Berger 100 Fund and Berger
Growth and Income Fund. Trustee of Berger Investment Portfolio Trust,
Berger Institutional Products Trust, Berger/BIAM Worldwide Funds
Trust, Berger/BIAM Worldwide Portfolios Trust and Berger Omni
Investment Trust.
PAUL R. KNAPP, 33 North LaSalle Street, Suite 1900, Chicago, IL 60602,
age 52. Since 1991, Chairman, President, Chief Executive Officer
and a director of Catalyst Institute (international public policy
research organization focused primarily on financial markets and
institutions). Since September 1997, President, Chief Executive
Officer and a director of DST Catalyst, Inc. (international financial
markets consulting, software and computer services company). Prior
-19-
<PAGE>
thereto (1991 - September 1997), Chairman, President, Chief
Executive Officer and a director of Catalyst Consulting
(international financial institutions business consulting firm).
Prior thereto (1988-1991), President, Chief Executive Officer
and a director of Kessler Asher Group (brokerage, clearing and
trading firm). Director of Berger 100 Fund and Berger Growth and
Income Fund. Trustee of Berger Investment Portfolio Trust, Berger
Institutional Products Trust, Berger/BIAM Worldwide Funds Trust,
Berger/BIAM Worldwide Portfolios Trust and Berger Omni Investment
Trust.
HARRY T. LEWIS, JR., 370 17th Street, Suite 3560, Denver, CO 80202, age
65. Self-employed as a private investor. Formerly (1981-1988),
Senior Vice President, Rocky Mountain Region, of Dain Bosworth
Incorporated and member of that firm's Management Committee. Director
of J.D. Edwards & Co. (computer software company) since 1995.
Director of Berger 100 Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
WILLIAM SINCLAIRE, 3049 S. Perry Park Road, Sedalia, CO 80135, age 69.
President, Sinclaire Cattle Co., and private investor. Director of
Berger 100 Fund and Berger Growth and Income Fund. Trustee of Berger
Investment Portfolio Trust, Berger Institutional Products Trust,
Berger/BIAM Worldwide Funds Trust, Berger/BIAM Worldwide Portfolios
Trust and Berger Omni Investment Trust.
* PATRICK S. ADAMS, 210 University Boulevard, Suite 900, Denver, CO 80206,
age 37. President and Portfolio Manager of the Berger IPT - 100 Fund
and President and Co-Portfolio Manager of the Berger IPT - Growth and
Income Fund since February 1997. Executive Vice President and
Portfolio Manager of the Berger 100 Fund and Executive Vice President
and Co-Portfolio Manager of the Berger Growth and Income Fund since
February 1997. President and co-portfolio manager of the Berger
Balanced Fund since its inception in August 1997. President and
portfolio manager of the Berger Select Fund since November 1997.
Senior Vice President of Berger Associates since February 1997.
Formerly, Senior Vice President from June 1996 to January 1997 with
Zurich Kemper Investments, Inc.; Portfolio Manager from March 1993 to
May 1996 with Founders Asset Management, Inc.; research analyst and
portfolio manager from January 1990 to January 1992 and Senior
Portfolio Manager/Senior Analyst from January 1992 to February 1993
with First of America Investment Corp.; and Portfolio Manager from
August 1985 to December 1989 with Capital Management Group - Star
Bank.
* WILLIAM R. KEITHLER, 210 University Boulevard, Suite 900, Denver,
CO 80206, age 45. President and Portfolio Manager of the Berger IPT
- Small Company Growth Fund since its inception in October 1995.
President since November 1994 (formerly, Vice President from December
1993 to November 1994) and Portfolio Manager since its inception in
December 1993 of the Berger Small Company Growth Fund. President and
Portfolio Manager of the Berger New Generation Fund since its
inception in December 1995. Senior Vice President-Investment
Management (since January 1997) and Vice President-Investment
Management (December 1993 to January 1997) of Berger Associates.
Formerly, Senior Vice President (January 1993 to December 1993), Vice
President (January 1991 to January 1993) and Portfolio Manager
(January 1988 to January 1991) of INVESCO Trust Company (investment
management).
* SHEILA J. OHLSSON, 210 University Boulevard, Suite 900, Denver, CO 80206,
age 32. Co-portfolio manager of the Berger Growth and Income Fund and
the Berger IPT - Growth and Income Fund since October 1997. Vice
President (since October 1997), Senior Analyst/Portfolio Manager
(February 1997 to October 1997) and Analyst (September 1991 to
February 1997) with Berger Associates.
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<PAGE>
* KEVIN R. FAY, 210 University Boulevard, Suite 900, Denver, CO 80206, age
42. Vice President, Secretary and Treasurer of Berger Institutional
Products Trust since its inception in October 1995, of Berger 100 Fund
and Berger Growth and Income Fund since October 1991, of Berger
Investment Portfolio Trust since its inception in August 1993, of
Berger/BIAM Worldwide Funds Trust and Berger/BIAM Worldwide Portfolios
Trust since their inception in May 1996, and of Berger Omni Investment
Trust since February 1997. Also, Senior Vice President-Finance and
Administration (since January 1997), Vice President-Finance and
Administration (September 1991 to January 1997), Secretary and
Treasurer (since September 1991) of Berger Associates, and a director
of Berger Distributors, Inc., since its inception in May 1996.
Formerly, Financial Consultant (registered representative) with
Neidiger Tucker Bruner, Inc. (broker-dealer) (October 1989 to
September 1991)and Financial Consultant with Merrill Lynch, Pierce,
Fenner & Smith, Inc. (October 1985 to October 1989).
________________
* Interested person (as defined in the Investment Company Act of 1940) of each
Fund and of its advisor or sub-advisor.
The trustees of the Trust have adopted a trustee retirement age of 75
years.
TRUSTEE COMPENSATION
The officers of the Funds receive no compensation from the Funds. However,
trustees of the Funds who are not interested persons of Berger Associates are
compensated for their services according to a fee schedule, allocated among the
Funds. Neither the officers of the Funds nor the trustees receive any form of
pension or retirement benefit compensation from the Funds.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended December 31, 1997, for each trustee of the Trust,
for their service as a director or trustee of each of the Funds and of some or
all of the other Berger Funds.
<TABLE>
<CAPTION>
NAME AND POSITION WITH AGGREGATE COMPENSATION FROM
BERGER FUNDS
- -------------------------------------------------------------------------------------------------------------
BERGER BERGER BERGER ALL
IPT - IPT - IPT - BERGER/BIAM - BERGER
100 GROWTH SMALL IPT FUNDS(1)
FUND AND COMPANY INTERNATIONAL
INCOME GROWTH FUND
FUND FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dennis E. Baldwin(2) $ 52 $ 51 $ 59 $ 70 $ 47,000
William M.B. Berger(2),(4) $ 0 $ 0 $ 0 $ 0 $ 0
Louis R. Bindner(2) $ 48 $ 48 $ 55 $ 66 $ 44,000
Katherine A. Cattanach(2) $ 52 $ 51 $ 59 $ 70 $ 47,000
Lucy Black Creighton(2),(5) $ 48 $ 47 $ 54 $ 65 $ 43,400
Paul R. Knapp(2) $ 49 $ 48 $ 57 $ 70 $ 45,200
Gerard M. Lavin(2),(3),(4) $ 0 $ 0 $ 0 $ 0 $ 0
Harry T. Lewis(2) $ 50 $ 50 $ 57 $ 64 $ 45,200
Michael Owen(2) $ 55 $ 54 $ 67 $ 78 $ 57,000
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
William Sinclaire(2) $ 48 $ 48 $ 55 $ 66 $ 44,000
</TABLE>
(1) For the period covered by this table, the Berger Funds included the Berger
100 Fund, the Berger Growth and Income Fund, the Berger Investment Portfolio
Trust (five series), the Berger Institutional Products Trust (four series), the
Berger/BIAM Worldwide Portfolios Trust (one series), the Berger/BIAM Worldwide
Funds Trust (three series) and the Berger Omni Investment Trust (with one
series, added to the Berger Funds in February 1997). Of the aggregate amounts
shown for each trustee, the following amounts were deferred under applicable
deferred compensation plans: Dennis E. Baldwin $37,165; Louis R. Bindner
$18,582; Katherine A. Cattanach $45,967; Lucy Black Creighton $33,967; Michael
Owen $8,364; William Sinclaire $21,516.
(2) Director of Berger 100 Fund and Berger Growth and Income Fund. Trustee of
Berger Investment Portfolio Trust, Berger Institutional Products Trust,
Berger/BIAM Worldwide Fund Trust, Berger/BIAM Worldwide Portfolios Trust and
Berger Omni Investment Trust.
(3) President of Berger 100 Fund, Berger Growth and Income Fund, Berger
Investment Portfolio Trust, Berger Institutional Products Trust, Berger/BIAM
Worldwide Funds Trust, Berger/BIAM Worldwide Portfolios Trust and Berger Omni
Investment Trust.
(4) Interested person of Berger Associates.
(5) Resigned as a director and trustee effective November 1997.
Trustees may elect to defer receipt of all or a portion of their fees
pursuant to a fee deferral plan adopted by the Berger Institutional Products
Trust. Under the plan, deferred fees are credited to an account and adjusted
thereafter to reflect the investment experience of whichever of the Berger Funds
(or approved money market funds) is designated by the trustees for this purpose.
Pursuant to an SEC exemptive order, the Trust is permitted to purchase shares of
the designated funds in order to offset its obligation to the trustees
participating in the plan. Purchases made pursuant to the plan are excepted
from any otherwise applicable investment restriction limiting the purchase of
securities of any other investment company. The Trust's obligation to make
payments of deferred fees under the plan is a general obligation of the Trust.
As of the date of this Statement of Additional Information, the officers
and trustees of the Trust as a group did not own of record or beneficially any
shares of any of the Funds of the Berger Institutional Products Trust.
4. INVESTMENT ADVISORS AND SUB-ADVISOR
Berger Associates is the investment advisor to each Fund except the
Berger/BIAM IPT - International Fund, to which BBOI Worldwide LLC ("BBOI
Worldwide") is the investment advisor and Bank of Ireland Asset Management
(U.S.) Limited ("BIAM") is the sub-advisor.
Berger Associates is a wholly-owned subsidiary of Kansas City Southern
Industries, Inc. ("KCSI"). KCSI is a publicly traded holding company with
principal operations in rail transportation, through its subsidiary The Kansas
City Southern Railway Company, and financial asset management businesses. KCSI
also owns approximately 41% of the outstanding shares of DST Systems, Inc.
("DST"), a publicly traded information and transaction processing company which
also acts as the Funds' sub-transfer agent.
BBOI Worldwide is a Delaware limited liability company formed in 1996.
Berger Associates and BIAM each own a 50% membership interest in BBOI Worldwide
and each have an equal number of representatives on its Board of Managers.
Berger Associates' role in the joint venture is to provide administrative
services, and BIAM's role is to provide international and global investment
management expertise. Agreement of representatives of both Berger Associates
and BIAM is required for all significant management decisions for BBOI
Worldwide. BIAM is an indirect wholly-owned subsidiary of Bank of Ireland, a
publicly traded, diversified financial services group with business operations
worldwide.
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<PAGE>
INVESTMENT ADVISORY AGREEMENTS AND SUB-ADVISORY AGREEMENT
The current Investment Advisory Agreements for the Berger IPT - 100 Fund,
the Berger IPT - Growth and Income Fund and the Berger IPT - Small Company
Growth Fund will continue in effect until the last day of April, 1999, and
thereafter from year to year if such continuation is specifically approved at
least annually by the trustees or by vote of a majority of the outstanding
shares of the Fund and in either case by vote of a majority of the trustees who
are not "interested persons" (as that term is defined in the 1940 Act) of the
Fund or Berger Associates. The current Investment Advisory Agreement for the
Berger/BIAM IPT - International Fund will continue in effect until the last day
of April, 1999, and thereafter from year to year if continuation is approved as
set out above. Each Agreement is subject to termination by the Fund or the
advisor on 60 days' written notice, and terminates automatically in the event of
its assignment.
The Sub-Advisory Agreement between BBOI Worldwide and BIAM with respect to
the Berger/BIAM IPT - International Fund will continue in effect until April
1999, and thereafter from year to year if such continuation is specifically
approved at least annually by the trustees or by vote of a majority of the
outstanding shares of the Fund and in either case by vote of a majority of the
trustees of the Trust who are not "interested persons" (as that term is defined
in the Investment Company Act of 1940) of the Fund or BBOI Worldwide or BIAM.
The Sub-Advisory Agreement is subject to termination by the Fund, BBOI Worldwide
or BIAM on 60 days' written notice, and terminates automatically in the event of
its assignment and in the event of termination of the Investment Advisory
Agreement between the Trust and BBOI Worldwide with respect to the Berger/BIAM
IPT - International Fund.
TRADE ALLOCATIONS
Investment decisions for the Funds and other accounts advised by Berger
Associates and BIAM are made independently with a view to achieving each of
their respective investment objectives and after consideration of such factors
as their current holdings, availability of cash for investment and the size of
their investments generally. However, certain investments may be appropriate
for a Fund and one or more such accounts. If a Fund and other accounts advised
by Berger Associates or BIAM are contemporaneously engaged in the purchase or
sale of the same security, the orders may be aggregated and/or the transactions
averaged as to price and allocated equitably to the Fund and each participating
account. While in some cases, this policy might adversely affect the price paid
or received by a Fund or other participating accounts, or the size of the
position obtained or liquidated, Berger Associates and BIAM will aggregate
orders if it believes that coordination of orders and the ability to participate
in volume transactions will result in the best overall combination of net price
and execution.
RESTRICTIONS ON PERSONAL TRADING
Berger Associates permits its directors, officers, employees and other
access persons (as defined below) of Berger Associates ("covered persons") to
purchase and sell securities for their own accounts in accordance with
provisions governing personal investing in Berger Associates' Code of Ethics.
The Code requires all covered persons to conduct their personal securities
transactions in a manner which does not operate adversely to the interests of
the Funds or Berger Associates' other advisory clients. Directors and officers
of Berger Associates (including those who also serve as directors or trustees of
the Berger Funds), investment personnel and other designated covered persons
deemed to have access to current trading information ("access persons") are
required to pre-clear all transactions in securities not otherwise exempt under
the Code. Requests for authority to trade will be denied pre-clearance when,
among other reasons, the proposed personal transaction would be contrary to the
provisions of the Code or would be deemed to adversely affect any transaction
then known to be under consideration for or currently being effected on behalf
of any client account, including the Funds.
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<PAGE>
In addition to the pre-clearance requirements described above, the Code
subjects those covered persons deemed to be access persons to various trading
restrictions and reporting obligations. All reportable transactions are
reviewed for compliance with Berger Associates' Code. Those covered persons
also may be required under certain circumstances to forfeit their profits made
from personal trading. The Code is administered by Berger Associates and the
provisions of the Code are subject to interpretation by and exceptions
authorized by its board of directors.
BBOI Worldwide has adopted a Code of Ethics covering all board members,
officers, employees and other access persons of BBOI Worldwide who are not also
covered by an approved Code of Ethics of an affiliated person who is an
investment advisor. At present, there are no persons who would be covered by
BBOI Worldwide's Code of Ethics who are not also covered by the Code of Ethics
of Berger Associates or BIAM, which are both investment advisors affiliated with
BBOI Worldwide. BBOI Worldwide's Code is substantially similar to the Code of
Ethics adopted by Berger Associates (described above).
BIAM has also adopted a Code of Ethics which restricts its officers,
employees and other staff from personal trading in specified circumstances,
including among others prohibiting participation in initial public offerings,
prohibiting dealing in a security for the seven days before and after any trade
in that security on behalf of clients, prohibiting trading in a security while
an order is pending for any client on that same security, and requiring profits
from short-term trading in securities (purchase and sale within a 60-day period)
to be forfeited. In addition, staff of BIAM must report all of their personal
holdings in securities annually and must disclose their holdings in any private
company if an investment in that same company is being considered for clients.
Staff of BIAM are required to pre-clear all transactions in securities not
otherwise exempt under the Code of Ethics and must instruct their broker to
provide BIAM with duplicate confirmations of all such personal trades.
5. EXPENSES OF THE FUNDS
Under their Investment Advisory Agreements, the Berger IPT - 100 Fund and
the Berger IPT - Growth and Income Fund have each agreed to compensate Berger
Associates for its investment advisory services to the Fund by the payment of a
fee at the annual rate of .75 of 1% (0.75%) of the average daily net assets of
the Fund. The fee is accrued daily and payable monthly.
Under the Investment Advisory Agreement for the Berger IPT - Small Company
Growth Fund, Berger Associates is compensated for its investment advisory
services to the Fund by the payment of a fee at the annual rate of .9 of 1%
(0.90%) of the average daily net assets of the Fund. The fee is accrued daily
and payable monthly.
Under the Investment Advisory Agreement for the Berger/BIAM IPT -
International Fund, BBOI Worldwide is compensated for its investment advisory
services to the Fund by the payment of a fee at the annual rate of .9 of 1%
(0.90%) of the average daily net assets of the Fund. The fee is accrued daily
and payable monthly.
Under the Sub-Advisory Agreement between BBOI Worldwide and BIAM for the
Berger/BIAM IPT - International Fund, BBOI Worldwide has delegated day-to-day
portfolio management responsibility for the Fund to BIAM. The Fund pays no
fees directly to BIAM. BIAM receives from BBOI Worldwide a fee at the annual
rate of .4 of 1% (0.40%) of the average daily net assets of the Fund. During
certain periods, BIAM may voluntarily waive all or a portion of its fee under
the Sub-Advisory Agreement, which will not affect the fee paid by the Fund to
BBOI Worldwide.
In addition to paying an investment advisory fee to its advisor, each
Fund pays all of its expenses not assumed by its advisor, including but not
limited to, custodian and transfer agent fees, legal and accounting expenses,
administrative and record keeping expenses, interest charges, federal and
state taxes, costs of share certificates, expenses of shareholders' meetings,
compensation of trustees who are not interested persons of the advisor or
sub-advisor, expenses of printing and
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<PAGE>
distributing reports to shareholders and federal and state administrative
agencies, and all expenses incurred in connection with the execution of its
portfolio transactions, including brokerage commissions on purchases and
sales of portfolio securities, which are considered a cost of securities of
each Fund. Each Fund also pays all expenses incurred in complying with all
federal and state laws and the laws of any foreign country applicable to the
issue, offer or sale of shares of the Fund, including, but not limited to,
all costs involved in preparing and printing prospectuses for shareholders of
the Funds.
Each of the Funds has appointed Investors Fiduciary Trust Company ("IFTC")
as its record keeping and pricing agent. In addition, IFTC also serves as the
Funds' custodian, transfer agent and dividend disbursing agent. IFTC has
engaged DST as sub-agent to provide transfer agency and dividend disbursing
services for the Funds. As noted in the previous section, approximately 41% of
the outstanding shares of DST are owned by KCSI. The addresses and telephone
numbers for DST set forth in the Prospectus and this Statement of Additional
Information should be used for correspondence with the transfer agent.
As record keeping and pricing agent, IFTC calculates the daily net asset
value of each of the Funds and performs certain accounting and record keeping
functions required by the Funds. Each Fund pays IFTC a monthly base fee plus an
asset-based fee. IFTC is also reimbursed for certain out-of-pocket expenses.
IFTC, as custodian, and its subcustodians have custody and provide for the
safekeeping of the Funds' securities and cash, and receive and remit the income
thereon as directed by the management of the Funds. The custodian and
subcustodians do not perform any managerial or policy-making functions for the
Funds. For its services as custodian, IFTC receives an asset-based fee plus
certain transaction fees and out-of-pocket expenses.
As transfer agent and dividend disbursing agent, IFTC (through DST, as
sub-agent) maintains all shareholder accounts of record; assists in mailing
all reports, proxies and other information to the Funds' shareholders;
calculates the amount of, and delivers to the Funds' shareholders, proceeds
representing all dividends and distributions; and performs other related
services. For these services, IFTC receives a base fee of $600 per month and
an annual fee of $14.00 per open Fund shareholder account, subject to preset
volume discounts, plus certain transaction fees and fees for closed accounts,
and is reimbursed for out-of-pocket expenses, which fees in turn are passed
through to DST as sub-agent.
All of IFTC's fees are subject to reduction pursuant to an agreed formula
for certain earnings credits on the cash balances of the Funds. Earnings
credits received by each Fund can be found on the Fund's Statement of Operations
in the Annual Report incorporated by reference into this Statement of Additional
Information.
The trustees of each of the Funds have authorized portfolio transactions
to be placed on an agency basis through DST Securities, Inc. ("DSTS"), a
wholly-owned broker-dealer subsidiary of DST. When transactions for a Fund
are effected through DSTS, the commission received by DSTS is credited
against, and thereby reduces, certain operating expenses that the Fund would
otherwise be obligated to pay. No portion of the commission is retained by
DSTS. See Section 6 Brokerage Policy for further information concerning the
expenses reduced as a result of these arrangements.
In addition, under a separate Administrative Services Agreement with each
Fund except the Berger/BIAM IPT - International Fund, Berger Associates performs
certain administrative and record keeping services not otherwise performed by
IFTC, including the preparation of financial statements and reports to be filed
with regulatory authorities. Each of those Funds pays Berger Associates a fee
at the annual rate of 1/100 of 1% (0.01%) of its average daily net assets for
such services. Under an Administrative Services Agreement with the Berger/BIAM
IPT - International Fund, BBOI Worldwide performs similar administrative and
record keeping services and the Fund pays BBOI Worldwide a fee at the annual
rate of 1/100 of 1% (0.01%) of its average daily net assets. These
administrative services fees are in addition to the investment advisory fees
paid by each Fund under its Investment
-25-
<PAGE>
Advisory Agreement. The administrative services fees may be changed by the
trustees without shareholder approval.
Under a Sub-Administration Agreement between the BBOI Worldwide and Berger
Associates, Berger Associates has been delegated all of BBOI Worldwide's duties
under the Administrative Services Agreement and BBOI Worldwide's administrative
duties under the Investment Advisory Agreement for the Berger/BIAM IPT -
International Fund. For its services under the Sub-Administration Agreement,
BBOI Worldwide pays Berger Associates a fee of .2 of 1% (0.20%) of the average
daily net assets of the Berger/BIAM IPT - International Fund. During certain
periods, Berger Associates may voluntarily waive all or a portion of its fee
from BBOI Worldwide, which will not affect the fee paid by the Fund to BBOI
Worldwide under the Administrative Services Agreement or the advisory fee paid
to BBOI Worldwide under the Investment Advisory Agreement.
Berger Associates has voluntarily agreed to waive its advisory fee to the
extent that normal operating expenses in any fiscal year, including the
management fee but excluding brokerage commissions, interest, taxes and
extraordinary expenses, of each of the Berger IPT - 100 Fund and the Berger IPT
- - Growth and Income Fund exceed 1.00%, and the normal operating expenses in any
fiscal year of the Berger IPT - Small Company Growth Fund exceed 1.15%, of the
respective Fund's average daily net assets. BBOI Worldwide has voluntarily
agreed to waive its advisory fee to the extent that normal operating expenses in
any fiscal year, including the investment advisory fee but excluding brokerage
commissions, interest, taxes and extraordinary expenses, of the Berger/BIAM IPT
- -International Fund exceed 1.20% of that Fund's average daily net assets.
The following tables show the cost to each Fund of the advisory fee and the
fees for the administrative services for the period shown and the amounts of
expenses waived and reimbursed to each Fund.
BERGER IPT - 100 FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED INVESTMENT ADMINISTRATIVE ADVISORY FEE TOTAL
DECEMBER 31, ADVISORY FEE SERVICE FEE WAIVER AND
EXPENSE
REIMBURSEMENTS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 $5,119 $ 68 $(55,910) $ 0
1996* $1,393 $ 19 $(12,453) $ 0
</TABLE>
* Covers period May 1, 1996 (date operations commenced) to December 31, 1996.
BERGER IPT - GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED INVESTMENT ADMINISTRATIVE ADVISORY FEE TOTAL
DECEMBER 31, ADVISORY FEE SERVICE FEE WAIVER AND
EXPENSE
REIMBURSEMENTS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 $4,872 $ 58 $(56,020) $ 0
1996* $1,350 $ 17 $(12,091) $ 0
</TABLE>
* Covers period May 1, 1996 (date operations commenced) to December 31, 1996.
-26-
<PAGE>
BERGER IPT - SMALL COMPANY GROWTH FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED INVESTMENT ADMINISTRATIVE ADVISORY FEE TOTAL
DECEMBER 31, ADVISORY FEE SERVICE FEE WAIVER AND
EXPENSE
REIMBURSEMENTS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 $11,890 $131 $(61,554) $ 0
1996* $ 1,620 $ 17 $(13,415) $ 0
</TABLE>
* Covers period May 1, 1996 (date operations commenced) to December 31, 1996.
BERGER/BIAM IPT - INTERNATIONAL FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED INVESTMENT ADMINISTRATIVE ADVISORY FEE TOTAL
DECEMBER 31, ADVISORY FEE SERVICE FEE WAIVER AND
EXPENSE
REIMBURSEMENTS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997* $13,368 $148 $(39,083) $ 0
</TABLE>
* Covers period May 1, 1997 (date operations commenced) to December 31, 1997.
From time to time, Berger Associates or BBOI Worldwide may compensate
Participating Insurance Companies or their affiliates whose customers hold
shares of the Funds for providing a variety of administrative services (such as
record keeping and accounting) and investor support services (such as responding
to inquiries and preparing mailings to shareholders). This compensation, which
may be paid as a per account fee or as a percentage of the average daily net
assets invested in the Funds by the compensated Participating Insurance Company,
depending on the nature, extent and quality of the services provided, will be
paid from Berger Associates' or BBOI Worldwide's own resources and not from the
assets of the Funds.
DISTRIBUTOR
The distributor (principal underwriter) of the Fund's shares is Berger
Distributors, Inc. (the "Distributor"), 210 University Boulevard, Suite 900,
Denver, CO 80206. The Distributor may be reimbursed by Berger Associates for
its costs in distributing the Funds' shares.
6. BROKERAGE POLICY
Although each Fund retains full control over its own investment policies,
the Funds' advisor (or sub-advisor, in the case of the Berger/BIAM IPT -
International Fund) is authorized to place the portfolio transactions of each
Fund. A report on the placement of brokerage business is given to the trustees
of the Fund every quarter, indicating the brokers with whom Fund portfolio
business was placed and the basis for such placement. The brokerage commissions
paid by the Funds during the past two fiscal years was as follows:
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<PAGE>
BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR
ENDED ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
BERGER IPT - 100 FUND $3,191 $ 535 *
BERGER IPT - GROWTH AND INCOME FUND $2,817 $ 688 *
BERGER IPT - SMALL COMPANY GROWTH FUND $3,118 $ 607 *
BERGER/BIAM IPT - INTERNATIONAL FUND $6,134** N/A
</TABLE>
* Covers period from May 1, 1996 (date operations commenced) to the end of the
Funds' first fiscal year on December 31, 1996.
** Covers period from May 1, 1997 (date operations commenced) to the end of the
Fund's first fiscal year on December 31, 1997.
The Investment Advisory Agreement that each Fund has with its advisor (and
the Sub-Advisory Agreement with the sub-advisor, in the case of the Berger/BIAM
IPT - International Fund) authorizes and directs the advisor (or sub-advisor) to
place portfolio transactions for the Fund only with brokers and dealers who
render satisfactory service in the execution of orders at the most favorable
prices and at reasonable commission rates. However, each Agreement specifically
authorizes the advisor (or sub-advisor) to place such transactions with a broker
with whom it has negotiated a commission that is in excess of the commission
another broker or dealer would have charged for effecting that transaction if
the advisor (or sub-advisor) determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker viewed in terms of either that particular
transaction or the overall responsibilities of the advisor (or sub-advisor).
In accordance with this provision of the Agreements, Berger Associates
places and BIAM may place portfolio brokerage business of each Fund it advises
with brokers who provide useful research services. Such research services
include computerized stock quotation and trading services, fundamental and
technical analysis data and software, broker and other third-party equity
research, computerized stock market and business news services, economic
research and account performance data. During the fiscal year ended December
31, 1997, $27, $46, $39 and $0 of the brokerage commissions paid by the
Berger IPT - 100 Fund, the Berger IPT - Growth and Income Fund, the Berger IPT -
Small Company Growth Fund and the Berger/BIAM IPT - International Fund,
respectively, were paid to brokers who agreed to provide to the Fund selected
research services prepared by the broker or subscribed or paid for by the broker
on behalf of the Fund. Those services included a service used by the
independent trustees of the Funds in reviewing the Investment Advisory
Agreements.
The research services received from brokers are often helpful to Berger
Associates and could be helpful to BIAM in performing its investment advisory
responsibilities to the Funds, but they are not essential, and the availability
of such services from brokers does not reduce the responsibility of Berger
Associates' or BIAM's advisory personnel to analyze and evaluate the securities
in which the Funds invest. The research services obtained as a result of the
Funds' brokerage business also will be useful to Berger Associates or may be
useful to BIAM in making investment decisions for its other advisory accounts,
and, conversely, information obtained by reason of placement of brokerage
business of such other accounts may be used by Berger Associates or BIAM in
rendering investment advice to the Funds. Although such research services may
be deemed to be of value to Berger Associates or BIAM, they are not expected to
decrease the expenses that Berger Associates or BIAM would otherwise incur in
performing its investment advisory services for the Funds nor will the advisory
fees that are
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<PAGE>
received by Berger Associates or BIAM for their services be reduced as a result
of the availability of such research services from brokers.
The trustees of each of the Funds have authorized portfolio transactions
to be placed on an agency basis through DST Securities, Inc. ("DSTS"), a
wholly-owned broker-dealer subsidiary of DST. When transactions for a Fund
are effected through DSTS, the commission received by DSTS is credited
against, and thereby reduces, certain operating expenses that the Fund would
otherwise be obligated to pay. No portion of the commission is retained by
DSTS. DSTS may be considered an affiliate of Berger Associates due to the
ownership interest of KCSI in both DSTS and Berger Associates.
Included in the brokerage commissions paid by the Funds during the fiscal
year ended December 31, 1997, as stated in the preceding table, are the
following amounts paid to DSTS, which served to reduce each Fund's out-of-pocket
expenses as follows:
DSTS COMMISSIONS AND RELATED EXPENSE REDUCTIONS
<TABLE>
<CAPTION>
DSTS REDUCTION DSTS REDUCTION IN
COMMISSIONS PAID IN EXPENSES COMMISSIONS PAID EXPENSES FYE
FYE 12/31/97(2) FYE 12/31/97(1) FYE 12/31/96 12/31/96(1)
---------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
Berger IPT - 100 Fund $ 58 $ 44 $ 8 $ 6
Berger IPT - Growth $ 13 $ 10 $ 0 $ 0
and Income Fund
Berger IPT - Small $ 0 $ 0 $ 0 $ 0
Company Growth Fund
Berger/BIAM IPT - $ 0(3) $ 0 N/A N/A
International Fund
</TABLE>
(1) No portion of the commission is retained by DSTS. Difference between
commissions paid through DSTS and reduction in expenses constitute commissions
paid to an unaffiliated clearing broker.
(2) Constitutes less than 1% of the aggregate brokerage commissions paid by
each of the Funds and less than 1% of the aggregate dollar amount of
transactions placed by each of the Funds.
(3) Covers the period May 1, 1997 (commencement of operations) to December 31,
1997.
The trustees of each Fund have authorized sales by a broker-dealer of
variable insurance contracts that permit allocation of contract values to one
or more of the Funds to be considered as a factor in the selection of
broker-dealers to execute portfolio transactions for the Funds. In placing
portfolio business with such broker-dealers, the advisor or sub-advisor will
seek the best execution of each transaction.
In selecting broker and dealers and in negotiating commissions, the Funds'
advisor or sub-advisor considers a number of factors, including among others:
the advisor's or sub-advisor's knowledge of currently available negotiated
commission rates or prices of securities currently available and other current
transaction costs; the nature of the security being traded; the size and type of
the transaction; the nature and character of the markets for the security to be
purchased or sold; the desired timing of the trade; the activity existing and
expected in the market for the particular security; confidentiality; the quality
of the execution, clearance and settlement services; financial stability of the
broker or dealer; the existence of actual or apparent operational problems of
any broker or dealer; and research products or services provided. The trustees
of the Funds have also authorized sales of shares of the Fund by a broker-dealer
and the recommendations of a broker-dealer to its customers that they purchase
Fund shares to be considered as factors in the selection of broker-dealers to
execute portfolio transactions for the Funds. In addition, payments made by
brokers to a Fund or to other persons on
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<PAGE>
behalf of a Fund for services provided to the Fund for which it would
otherwise be obligated to pay may also be considered. In placing portfolio
business with any such broker or dealer, the advisors and sub-advisors of the
Funds will seek the best execution of each transaction.
7. HOW TO PURCHASE AND REDEEM SHARES IN THE FUNDS
Shares of the Funds are sold by the Funds on a continuous basis to separate
accounts of Participating Insurance Companies or to qualified plans. Investors
may not purchase or redeem shares of the Funds directly, but only through
variable insurance contracts offered through the separate accounts of
Participating Insurance Companies or through qualified retirement plans. You
should refer to the applicable Separate Account Prospectus or your plan
documents for information on how to purchase or surrender a contract, make
partial withdrawals of contract values, allocate contract values to one or more
of the Funds, change existing allocations among investment alternatives,
including the Funds, or select specific Funds as investment options for a
qualified plan. No sales charge is imposed upon the purchase or redemption of
shares of the Funds. Sales charges for the variable insurance contracts or
qualified plans are described in the relevant Separate Account Prospectuses or
plan documents.
Fund shares are purchased or redeemed at the net asset value per share next
computed after receipt of a purchase or redemption order by a Fund, its
authorized agent or its designee. Payment for redeemed shares generally will be
made within three business days following the date of the request for
redemption. However, payment may be postponed under unusual circumstances, such
as when normal trading is not taking place on the New York Stock Exchange, an
emergency as defined by the Securities and Exchange Commission exists, or as
permitted by the Securities and Exchange Commission.
8. SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended for any period during which the
New York Stock Exchange is closed or the Securities and Exchange Commission
determines that trading on the Exchange is restricted, or when there is an
emergency as determined by the Securities and Exchange Commission as a result of
which it is not reasonably practicable for a Fund to dispose of securities owned
by it or to determine the value of its net assets, or for such other period as
the Securities and Exchange Commission may by order permit for the protection of
shareholders of a Fund.
Each Fund intends to redeem its shares only for cash, although it retains
the right to redeem its shares in-kind under unusual circumstances, in order to
protect the interests of the remaining shareholders, by the delivery of
securities selected from its assets at its discretion. If shares are redeemed
in-kind, the redeeming shareholder generally will incur brokerage costs in
converting the assets to cash. The method of valuing securities used to make
redemption in-kind will be the same as the method of valuing portfolio
securities described below.
9. HOW THE NET ASSET VALUE IS DETERMINED
The net asset value of each Fund is determined once daily, at the close of
the regular trading session of the New York Stock Exchange (the "Exchange")
(normally 4:00 p.m., New York time, Monday through Friday) each day that the
Exchange is open. The Exchange is closed and the net asset value of the Funds
is not determined on weekends and on New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day each year. The per share net asset value of
each Fund is determined by dividing the total value of its securities and other
assets, less liabilities, by the total number of shares outstanding.
In determining net asset value, securities listed or traded primarily on
national exchanges, The Nasdaq Stock Market and foreign exchanges are valued at
the last sale price on such markets, or, if such a price is lacking for the
trading period immediately preceding the time of
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<PAGE>
determination, such securities are valued at the mean of their current bid
and asked prices. Securities that are traded in the over-the-counter market
are valued at the mean between their current bid and asked prices. The
market value of individual securities held by each Fund will be determined by
using prices provided by pricing services which provide market prices to
other mutual funds or, as needed, by obtaining market quotations from
independent broker/dealers. Short-term money market securities maturing
within 60 days are valued on the amortized cost basis, which approximates
market value. All assets and liabilities initially expressed in terms of
non-U.S. dollar currencies are translated into U.S. dollars at the prevailing
market rates as quoted by one or more banks or dealers shortly before the
close of the Exchange. Securities and assets for which quotations are not
readily available or are not representative of market value may be valued at
their fair value determined in good faith pursuant to consistently applied
procedures established by the trustees.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of the Exchange. The values of
foreign securities used in computing the net asset value of the shares of a Fund
are determined as of the earlier of such market close or the closing time of the
Exchange. Occasionally, events affecting the value of such securities may occur
between the times at which they are determined and the close of the Exchange, or
when the foreign market on which such securities trade is closed but the
Exchange is open, 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 may be valued at their fair value as
determined in good faith pursuant to consistently applied procedures established
by the trustees.
A Fund's securities may be listed primarily on foreign exchanges or
over-the-counter dealer markets which may trade on days when the Exchange is
closed (such as a customary U.S. holiday) and on which the Fund's net asset
value is not calculated. As a result, the net asset value of a Fund may be
significantly affected by such trading on days when shareholders cannot
purchase or redeem shares of the Fund.
10. INCOME DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAX TREATMENT
Each of the Funds intends to qualify to be treated as a separate regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). If they so qualify and meet certain minimum distribution
requirements, the Funds generally will not be liable for Federal income tax on
the amount of their earnings that are timely distributed. If a Fund distributes
annually less than 98% of its income and gain, under certain circumstances, it
may be subject to a nondeductible excise tax equal to 4% of the shortfall.
Each Fund intends to restrict sales of its shares to Participating
Insurance Companies and qualified plans so as to qualify for "look-through"
treatment under the investment diversification requirements of Code Section
817(h) which apply to certain insurance company separate accounts. Each Fund
also intends to manage its investments in accordance with the diversification
requirements of Code Section 817(h) so that any separate account that holds
shares in any of the Funds as its sole asset will comply with those
requirements. For further information concerning Federal income tax
consequences for the owners of variable insurance contracts and qualified plan
participants, consult the appropriate Separate Account Prospectus or plan
documents.
All dividends or capital gains distributions paid by a Fund will be
automatically reinvested in shares of that Fund at the net asset value on the
ex-dividend date, unless an election is made on behalf of a separate account or
qualified plan to receive distributions in cash. The tax treatment of
distributions made to any shareholder will depend on the shareholder's tax
status.
The amount, timing and character of a Fund's income may be affected by
certain special U.S. tax rules that may apply to foreign or other investments of
a Fund. Any income received by a Fund from foreign investments may also be
subject to foreign income, withholding or other taxes.
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<PAGE>
11. PERFORMANCE INFORMATION
The Prospectus contains a brief description of how total return is
calculated.
Quotations of average annual total return for the Funds will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5 and 10 years (or the life of the
Fund, if shorter). These are the rates of return that would equate the initial
amount invested to the ending redeemable value. These rates of return are
n
calculated pursuant to the following formula: P(1 + T) = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return,
n = the number of years and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the period). All total return figures
reflect the deduction of a proportional share of Fund expenses on an annual
basis, and assume that all dividends and distributions are reinvested when paid.
In conjunction with performance reports, comparative data between a Fund's
performance for a given period and other types of investment vehicles may be
provided. A Fund's performance is based upon amounts available for investment
under variable insurance contracts of Participating Insurance Companies or
available for allocation to a qualified plan account, rather than upon premiums
paid or contributions by contract owners or plan participants. Consequently the
Fund's total return data does not reflect the impact of sales loads (whether
front-load or deferred) or other contract or plan charges deducted from premiums
or from the assets of the separate accounts or qualified plans that invest in
the Fund. Such sales loads and charges may be substantial and may vary widely
among Participating Insurance Companies and qualified plans. Accordingly, the
total return data for the Funds is most useful for comparison with comparable
data for other investment options under the same variable insurance contract or
qualified plan.
Comparisons of the Funds' total returns to those of other investment
vehicles are useful in evaluating the historical portfolio management
performance of the Funds' investment advisor. However, such comparisons should
not be mistaken for comparisons of the returns from the purchase of a variable
insurance contract of a Participating Insurance Company, or investment in a
qualified plan, to the purchase of another investment vehicle. The Funds' total
return data should be reviewed along with comparable total return data for an
associated variable annuity separate account or in conjunction with information
identifying the charges and expenses attributable to the variable life insurance
contract or plan that are not reflected in the Fund's total return data.
AVERAGE ANNUAL TOTAL RETURNS
The average annual total return for each of the Funds for various periods
ending December 31, 1997, are shown on the following table:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FUND 1-YEAR LIFE OF FUND
- ------------------------------------------------------------------------------
<S> <C> <C>
Berger IPT - 100 Fund 13.76% 10.53% (since 5/1/96)
Berger IPT - Growth and Income Fund 24.99% 21.93% (since 5/1/96)
Berger IPT - Small Company Growth Fund 21.21% 11.87% (since 5/1/96)
Berger/BIAM IPT - International Fund N/A (2.10)% (since 5/1/97)
- ------------------------------------------------------------------------------
</TABLE>
12. ADDITIONAL INFORMATION
The Funds are separate series or portfolios established under the Berger
Institutional Products Trust, a Delaware business trust organized under the
Delaware Business Trust Act on October 17, 1995. The Berger IPT - 100 Fund, the
Berger IPT - Growth and Income Fund and the Berger IPT
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- - Small Company Growth Fund were established under the Trust on October 17,
1995. The Berger/BIAM IPT - International Fund was established under the
Trust in April 1997. Currently the Funds are the only series established
under the Trust, although others may be added in the future.
Under Delaware law, shareholders of the Trust will enjoy the same
limitations on personal liability as extended to stockholders of a Delaware
corporation. Further, the Trust Instrument of the Trust provides that no
shareholder shall be personally liable for the debts, liabilities, obligations
and expenses incurred by, contracted for or otherwise existing with respect to,
the Trust or any particular series (fund) of the Trust. However, the principles
of law governing the limitations of liability of beneficiaries of a business
trust have not been authoritatively established as to business trusts organized
under the laws of one jurisdiction but operating or owning property in other
jurisdictions. In states that have adopted legislation containing provisions
comparable to the Delaware Business Trust Act, it is believed that the
limitation of liability of beneficial owners provided by Delaware law should be
respected. In those jurisdictions that have not adopted similar legislative
provisions, it is possible that a court might hold that the shareholders of the
Trust are not entitled to the limitations of liability set forth in Delaware law
or the Trust Instrument and, accordingly, that they may be personally liable for
the obligations of the Trust.
In order to protect shareholders from such potential liability, the Trust
Instrument requires that every written obligation of the Trust or any series
thereof contain a statement to the effect that such obligation may only be
enforced against the assets of the Trust or such series. The Trust Instrument
also provides for indemnification from the assets of the relevant series for all
losses and expenses incurred by any shareholder by reason of being or having
been a shareholder, and that the Trust shall, upon request, assume the defense
of any such claim made against such shareholder for any act or obligation of the
relevant series and satisfy any judgment thereon from the assets of that series.
As a result, the risk of a shareholder of any Fund incurring financial loss
on account of shareholder liability is limited to circumstances in which the
Fund itself would be unable to meet its obligations. The Trust believes that,
in view of the above, the risk of personal liability to shareholders of any of
the Funds is remote. The trustees intend to conduct the operations of the Trust
and the Funds so as to avoid, to the extent possible, liability of shareholders
for liabilities of the Trust or the Funds.
Shares of the Funds have no preemptive rights, and since each Fund has only
one class of securities there are no sinking funds or arrearage provisions which
may affect the rights of the Fund shares. Fund shares have no conversion or
subscription rights. Shares of the Funds may be transferred by endorsement, or
other customary methods, but none of the Funds is bound to recognize any
transfer until it is recorded on its books.
The separate accounts of the Participating Insurance Companies and the
trustees of the qualified plans invested in the Funds, rather than individual
contract owners or plan participants, are the shareholders of the Funds.
However, each Participating Insurance Company or qualified plan will vote such
shares as required by law and interpretations thereof, as amended or changed
from time to time. Under current law, a Participating Insurance Company is
required to request voting instructions from its contract owners and must vote
Fund shares held by each of its separate accounts in proportion to the voting
instructions received. Additional information about voting procedures is
contained in the applicable Separate Account Prospectuses.
Shareholders of each Fund generally vote separately on matters relating to
that Fund, although they will vote together with the holders of all other series
of the Trust in the election of trustees of the Trust and on all matters
relating to the Trust as a whole. Each full share of each Fund has one vote.
Shares of each Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of trustees can
elect 100% of the trustees if they choose to do so and, in such event, the
holders of the remaining shares voting for the election of trustees will not be
able to elect any trustees. None of the Funds is required to hold annual
shareholder
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<PAGE>
meetings unless required by the Investment Company Act of 1940 or other
applicable law or unless called by the trustees.
PRINCIPAL SHAREHOLDERS
As of February 23, 1998, the following shareholders owned of record more
than 5% of the outstanding shares of the Funds:
<TABLE>
<CAPTION>
Name and Address Berger IPT - Berger IPT - Berger IPT - Berger/BIAM
100 Fund Growth and Small IPT -
Income Fund Company International
Growth Fund Fund
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Berger Associates, Inc.(1) 20.3% 21.6% 7.9% --
210 University Blvd. #900
Denver, CO 80206
Great American Reserve 66.7% 78.4% 7.9% 64.9%(2)
Insurance Company
11815 N. Pennsylvania St.
Carmel, IN 46032
First Great-West Life & -- -- 6.5% --
Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Great-West Life & -- -- 69.3% --
Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Ameritas Life Insurance 10.0% -- 6.6% --
Corp. Separate Account
LLVA and Separate
Account LLVL
5900 O Street
Lincoln, NE 68510
Canada Life Insurance -- -- -- 29.5%
Company of America
330 University Avenue SP12
Toronto, Ontario, Canada
M5G1R8
BMA Variable Annuity -- -- -- 5.6%
BMA Tower
P.O. Box 419458
Kansas City, MO 64141- 6458
- --------------------------------------------------------------------------------------
</TABLE>
(1) Berger Associates is a Delaware corporation which provided initial capital
to establish the Trust and each of the Funds. As a result of its current share
ownership, Berger Associates may be deemed to control the Berger/BIAM IPT -
International Fund (see (2) below) and the Trust.
(2) The shares owned of record by Great American Reserve Insurance Company
include shares attributable to a variable annuity contract owned by Berger
Associates, Inc., which constitute 64.4% of the outstanding shares of the Fund.
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<PAGE>
DISTRIBUTION
The Distributor is the principal underwriter of the shares of the Funds.
The Distributor is a registered broker-dealer under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities Dealers, Inc.
The Distributor acts as the agent of the Funds in connection with the sale of
their shares in all states in which the shares are eligible for sale and in
which the Distributor is qualified as a broker-dealer.
The Trust, on behalf of each Fund, and the Distributor are parties to a
Distribution Agreement that continues through April 30, 1999, and thereafter
from year to year if such continuation is specifically approved at least
annually by the trustees or by vote of a majority of the outstanding shares of
the Fund and in either case by vote of a majority of the trustees of the Trust
who are not "interested persons" (as that term is defined in the Investment
Company Act of 1940) of the Trust or the Distributor. The Distribution
Agreement is subject to termination by a Fund or the Distributor on 60 days'
prior written notice, and terminates automatically in the event of its
assignment. Under the Distribution Agreement, the Distributor continuously
offers the shares of the Funds and solicits orders to purchase Fund shares at
net asset value.
YEAR 2000
Mutual funds and businesses around the world depend on smooth functioning
computer systems. Many of those systems need to be modified to distinguish the
difference between the year 1900 and the year 2000. The Adviser, Distributor,
Shareholder Servicing and Transfer Agent, Custodian and certain other service
providers to the Funds have reported that each expects to modify its systems, as
necessary, prior to January 1, 2000 to address the so-called "year 2000
problem." However, there can be no assurance that the problems will be
corrected in all respects and that the Funds' operations and services provided
to shareholders will not be adversely affected.
OTHER INFORMATION
Davis, Graham & Stubbs LLP, 370 Seventeenth Street, Denver, Colorado, acts
as counsel to the Trust and the Funds.
Price Waterhouse LLP, 950 Seventeenth Street, Denver, Colorado, acted as
independent accountants for the Trust and each of the Funds for the fiscal year
ended December 31, 1997.
The Trust has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of 1933, as
amended, with respect to the securities of the Funds, of which this Statement of
Additional Information is a part. If further information is desired with
respect to any of the Funds or such securities, reference is made to the
Registration Statement and the exhibits filed as a part thereof.
FINANCIAL STATEMENTS
The statements of assets and liabilities, including the schedules of
investments, and the related statements of operations for the fiscal year/period
ended December 31, 1997 and of changes in net assets and the financial
highlights for each of the periods indicated for each of the Funds, and the
Report of Independent Accountants thereon dated January 30, 1998, are
incorporated by reference into this Statement of Additional Information from the
Annual Report to Shareholders dated December 31, 1997, for the Funds. A copy of
the 1997 Annual Report is enclosed with this Statement of Additional
Information.
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<PAGE>
APPENDIX A
HIGH-YIELD/HIGH RISK CONVERTIBLE BONDS
Each of the Funds may invest in convertible securities of any quality,
including unrated securities or securities rated below investment grade (Ba or
lower by Moody's, BB or lower by S&P). However, a Fund will not purchase any
security in default at the time of purchase. None of the Funds will invest more
than 20% of the market value of its assets at the time of purchase in
convertible securities rated below investment grade.
Securities rated below investment grade are subject to greater risk that
adverse changes in the financial condition of their issuers or in general
economic conditions, or an unanticipated rise in interest rates, may impair the
ability of their issuers to make payments of interest and principal or
dividends. The market prices of lower grade securities are generally less
sensitive to interest rate changes than higher-rated investments, but more
sensitive to economic changes or individual corporate developments. Periods of
economic uncertainty and change can be expected to result in volatility of
prices of these securities. Lower rated securities also may have less liquid
markets than higher rated securities, and their liquidity as well as their value
may be adversely affected by poor economic conditions. Adverse publicity and
investor perceptions as well as new or proposed laws may also have a negative
impact on the market for high-yield/high-risk bonds. In the event of an
unanticipated default, a Fund will experience a reduction in its income and
could expect a decline in the market value of the securities affected. The
prices of these securities may be more volatile and the markets for them may be
less liquid than those for higher-rated securities.
Unrated securities, while not necessarily of lower quality than rated
securities, may not have as broad a market. Unrated securities will be included
in a Fund's percentage limits for investments rated below investment grade,
unless the Fund's advisor deems such securities to be the equivalent of
investment grade. If securities purchased by a Fund are downgraded following
purchase, or if other circumstances cause the Fund to exceed its percentage
limits on assets invested in securities rated below investment grade, the
director or trustees of the Fund, in consultation with the Fund's advisor, will
determine what action, if any, is appropriate in light of all relevant
circumstances.
Relying in part on ratings assigned by credit agencies in making
investments will not protect a Fund from the risk that the securities will
decline in value, since credit ratings represent evaluations of the safety of
principal, dividend and/or interest payments, and not the market values of such
securities. Moreover, such ratings may not be changed on a timely basis to
reflect subsequent events.
Although the market for high-yield debt securities has been in existence
for many years and from time to time has experienced economic downturns, this
market has involved a significant increase in the use of high-yield debt
securities to fund highly leverage corporate acquisitions and restructurings.
Past experience may not, therefore, provide an accurate indication of future
performance of the high-yield debt securities market, particularly during
periods of economic recession.
Expenses incurred in recovering an investment in a defaulted security may
adversely affect a Fund's net asset value. Moreover, the reduced liquidity of
the secondary market for such securities may adversely affect the market price
of, and the ability of a Fund to value, particular securities at certain times,
thereby making it difficult to make specific valuation determinations.
CORPORATE BOND RATINGS
The ratings of fixed-income securities by Moody's and Standard & Poor's are
a generally accepted measurement of credit risk. However, they are subject to
certain limitations. Ratings are generally based upon historical events and do
not necessarily reflect the future. In addition, there is
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<PAGE>
a period of time between the issuance of a rating and the update of the
rating, during which time a published rating may be inaccurate.
KEY TO MOODY'S CORPORATE RATINGS
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa-Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba-Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during good and bad times over the future. Uncertainty of position
characterizes bonds of this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca-Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
category.
KEY TO STANDARD & POOR'S CORPORATE RATINGS
AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
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<PAGE>
AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC AND C-Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are out-weighed by the large uncertainties or major risk
exposures to adverse conditions.
C1-The rating C1 is reserved for income bonds on which no interest is being
paid.
D-Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
PLUS (+) OR MINUS (-)-The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
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