THE BJURMAN FUNDS
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 2000
(Revised October 10, 2000)
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This Statement of Additional Information dated August 1, 2000 is not a
prospectus but should be read in conjunction with the separate Prospectus
describing shares of the Bjurman Micro-Cap Growth Fund (the "Fund") dated August
1, 2000. The Prospectus may be amended or supplemented from time to time. No
investment in shares should be made without first reading the Prospectus. This
Statement of Additional Information is intended to provide additional
information regarding the activities and operations of the Fund. A copy of the
Prospectus may be obtained without charge from IFS Fund Distributors, Inc. (the
"Underwriter") or George D. Bjurman & Associates (the "Adviser") at the address
and telephone numbers below.
Underwriter: Adviser:
IFS Fund Distributors, Inc. George D. Bjurman & Associates
221 East Fourth Street, Suite 300 10100 Santa Monica Boulevard
Cincinnati, OH 45202 Suite 1200
(800) 227-7264 Los Angeles, CA 90067-4103
(310) 553-6577
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS STATEMENT OF ADDITIONAL INFORMATION OR IN
THE PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST OR ITS DISTRIBUTOR. THE PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
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TABLE OF CONTENTS
PAGE
The Trust and the Fund.........................................................3
Investment Policies and Techniques
Bankers' Acceptances........................................................3
Certificates of Deposits....................................................3
Equity Securities...........................................................3
Foreign Securities..........................................................4
Time Deposits...............................................................4
Borrowing...................................................................4
Loans of Portfolio Securities...............................................4
Illiquid Securities.........................................................5
Repurchase Agreements ......................................................5
Futures.....................................................................5
Other Investments...........................................................5
Investment Restrictions........................................................6
Investment Advisory and Other Services
Investment Adviser .........................................................7
Investment Advisory Agreement...............................................7
Administrator, Transfer Agent and Fund Accountant ..........................7
Underwriter ................................................................8
Trustees and Officers..........................................................9
Compensation Table.........................................................11
Principal Shareholders........................................................11
Net Asset Value...............................................................11
Taxes.........................................................................12
Federal Income Tax.........................................................12
Portfolio Transactions and Brokerage Commissions..............................13
Performance Information
In General.................................................................14
Total Return Calculation...................................................14
Performance and Advertisements ............................................15
Other Information
Limitations on Trustees' Liability.........................................15
Independent Accountants....................................................15
Reports to Shareholders....................................................15
Financial Statements..........................................................16
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THE TRUST AND THE FUND
The Bjurman Family of Funds (the "Trust") is a diversified open-end management
investment company organized as a business trust under the laws of the State of
Delaware pursuant to a Trust Instrument dated September 26, 1996, as amended
February 11, 1997. The Trust is organized to offer separate series of shares and
is currently offering a single series of shares called Bjurman Micro-Cap Growth
Fund (the "Fund"). Each share of the Fund represents an undivided proportionate
interest in the Fund.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest with no par value. Shares of the Fund represent equal proportionate
interests in the assets of the Fund only, and have identical voting, dividend,
redemption, liquidation and other rights. All shares issued are fully paid and
non-assessable, and shareholders have no preemptive or other right to subscribe
to any additional shares. The Fund may add additional classes of shares without
shareholder approval. All accounts will be maintained in book entry form and no
share certificates will be issued.
A shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held). All shares of the Fund participate equally
in regard to dividends, distributions, and liquidations with respect to the
Fund. Shareholders do not have preemptive, conversion or cumulative voting
rights.
The Trustees are not required, and do not intend, to hold annual meetings of
shareholders. The Trustees have undertaken to the Securities and Exchange
Commission (the "SEC"), however, that they will promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Trustee when requested to do so by holders of not less than 10% of the
outstanding shares of the Fund. In addition, subject to certain conditions,
shareholders of the Fund may apply to the Fund to communicate with other
shareholders to request a shareholders' meeting to vote upon the removal of a
Trustee or Trustees.
INVESTMENT POLICIES AND TECHNIQUES
The following supplements the information contained in the Fund's Prospectus
regarding the permitted investments and risk factors and the investment
objective and policies of the Fund.
BANKERS' ACCEPTANCES:
Negotiable bills of exchange or time drafts drawn on and accepted by a
commercial bank, meaning, in effect, that the bank unconditionally agrees to pay
the face value of the instrument on maturity. Bankers' Acceptances are used by
corporations to finance the shipment and storage of goods and to furnish dollar
exchanges. Banker's Acceptances generally mature within six months.
CERTIFICATES OF DEPOSIT:
A negotiable interest-bearing instrument with a specific maturity date.
Certificates of deposit are issued by U.S. commercial banks and savings and loan
institutions in exchange for the deposit of funds and normally can be traded in
the secondary market prior to maturity. Certificates of deposit generally carry
penalties for early withdrawal.
EQUITY SECURITIES:
Equity securities in which the Fund may invest include common stocks, preferred
stocks, warrants for the purchase of common stock, debt securities convertible
into or exchangeable for common or preferred stock and sponsored or unsponsored
American Depository Receipts ("ADRs").
A WARRANT is a security that gives the holder the right, but not the
obligation, to subscribe for newly created securities of the issuer or a
related company at a fixed price either at a certain date or during a set
period.
COMMON STOCK is defined as shares of a corporation that entitle the holder
to a pro rata share of the profits of the corporation, if any, without a
preference over any other shareholder or class of shareholders, including
holders of the corporation's preferred stock and other senior equity.
Common stock usually carries with it the right to vote, and frequently, an
exclusive right to do so. Holders of common stock also have the right to
participate in the remaining assets of the corporation after all other
claims, including those of debt securities and preferred stock, are paid.
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Generally, PREFERRED STOCK receives dividends prior to distributions on
common stock and usually has a priority of claim over common stockholders
if the issuer of the stock is liquidated. Unlike common stock, preferred
stock does not usually have voting rights; preferred stock, in some
instances, is convertible into common stock. In order to be payable,
dividends on preferred stock must be declared by the issuer's Board of
Directors. Dividends on preferred stock typically are cumulative, causing
dividends to accrue even if not declared by the Board of Directors. There
is, however, no assurance that dividends will be declared by the Board of
Directors of issuers of the preferred stocks in which the Fund invests.
FOREIGN SECURITIES:
The Fund may invest in securities of foreign issuers through sponsored and
unsponsored ADRs. ADRs are dollar-denominated securities which are listed and
traded in the United States, but which represent the right to receive securities
of foreign issuers deposited in a domestic or correspondent bank. ADRs are
receipts which evidence ownership of underlying securities issued by a foreign
corporation. Unsponsored ADRs differ from sponsored ADRs in that the
establishment of unsponsored ADRs is not approved by the issuer of the
underlying securities. As a result, available information concerning the issuer
may not be as current or reliable as the information for sponsored ADRs, and the
price of unsponsored ADRs may be more volatile.
Investments in foreign securities involve special risks, costs and opportunities
which are in addition to those inherent in domestic investments. Political,
economic or social instability of the issuer or the country of issue, the
possibility of expropriation or confiscatory taxation, limitations on the
removal of assets or diplomatic developments, and the possibility of adverse
changes in investment or exchange control regulations are among the inherent
risks. Securities of some foreign companies are less liquid, more volatile and
more difficult to value than securities of comparable U.S. companies. Foreign
companies are not subject to the regulatory requirements of U.S. companies and,
as such, there may be less publicly available information about such companies.
Moreover, foreign companies are not subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those applicable to
U.S. companies. Currency fluctuations may affect the net asset value of the Fund
by affecting the performance of the ADRs' underlying investments in foreign
issuers. Dividends and interest payable on a Fund's foreign portfolio securities
may be subject to foreign withholding taxes. To the extent such taxes are not
offset by credits or deductions allowed to investors under U.S. federal income
tax law, such taxes may reduce the net return to shareholders. Because of these
and other factors, the value of ADRs acquired by the Fund may be subject to
greater fluctuation than the value of securities of domestic companies.
TIME DEPOSITS:
A non-negotiable receipt issued by a bank in exchange for the deposit of funds.
Like a certificate of deposit, it earns a specified rate of interest over a
definite period of time; however, it cannot be traded in the secondary market.
Time deposits in excess of seven days with a withdrawal penalty are considered
to be illiquid securities. The Fund will not invest more than 15% of its net
assets in illiquid securities, including time deposits.
BORROWING:
The Fund may borrow as a temporary measure for extraordinary purposes or to
facilitate redemptions. The Fund intends to limit such borrowings to no more
than 5% of its net assets.
LOANS OF PORTFOLIO SECURITIES:
The Fund may lend portfolio securities to broker-dealers and financial
institutions provided that (1) the loan is secured continuously by collateral
marked-to-market daily and maintained in an amount at least equal to the current
market value of the securities loaned; (2) the Fund may call the loan at any
time and receive the securities loaned; (3) the Fund will receive any interest
or dividends paid on the loaned securities and (4) the aggregate market value of
securities loaned by the Fund will not at any time exceed 33% of the total
assets of the Fund. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans will be made only to borrowers deemed by the Adviser to be of good
standing and when, in its judgment, the income to be earned from the loan
justifies the attendant risks.
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Collateral will consist of U.S. Government securities, cash equivalents or
irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral. Therefore, the Fund will only enter into portfolio loans
after a review by the Adviser, under the supervision of the Board of Trustees,
including a review of the creditworthiness of the borrower. Such reviews will be
monitored on an ongoing basis.
ILLIQUID SECURITIES:
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to the Adviser pursuant to guidelines reviewed by
the Board of Trustees. The Fund's policy is to limit its investment in illiquid
securities to a maximum of 15% of net assets at the time of purchase. The SEC
has adopted Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act") which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Fund may invest in
securities that are exempt from the registration requirements of the Securities
Act pursuant to SEC Rule 144A. Those securities purchased pursuant to Rule 144A
are traded among qualified institutional buyers, and are subject to the Fund's
limitation on illiquid investment. The Adviser, pursuant to procedures adopted
by the Trustees of the Trust, will make a determination as to the liquidity of
each restricted security purchased by the Fund. If a restricted security is
determined to be "liquid", such security will not be included within the
category "illiquid securities". The Adviser will monitor the liquidity of
securities held by the Fund, and report periodically on such determinations to
the Board of Trustees.
Investing in securities under Rule 144A could have the effect of increasing the
levels of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. The Fund
will limit its investments in illiquid securities including securities of
issuers which the Fund is restricted from selling to the public without
registration under the Securities Act to no more than 15% of the Fund's net
assets (excluding restricted securities eligible for resale pursuant to Rule
144A that have been determined to be liquid by the Trust's Board of Trustees).
REPURCHASE AGREEMENTS:
The Fund may enter into repurchase agreements with banks or broker-dealers.
Repurchase agreements are considered under the Investment Company Act of 1940,
as amended (the "1940 Act") to be collateralized loans by the Fund to the
seller, secured by the securities transferred to the Fund. In accordance with
requirements under the 1940 Act, repurchase agreements will be fully
collateralized by securities in which the Fund may directly invest. Such
collateral will be marked-to-market daily. If the seller of the underlying
security under the repurchase agreement should default on its obligation to
repurchase the underlying security, the Fund may experience delay or difficulty
in recovering its cash. To the extent that, in the meantime, the value of the
security purchased has decreased, the Fund could experience a loss. No more than
15% of the Fund's net assets will be invested in illiquid securities, including
repurchase agreements which have a maturity of longer than seven days. The
financial institutions with whom the Fund may enter into repurchase agreements
are banks and non-bank dealers of U.S. Government securities that are listed on
the Federal Reserve Bank of New York's list of reporting dealers and banks, if
such banks and non-bank dealers are deemed creditworthy by the Adviser. The
Adviser will continue to monitor the creditworthiness of the seller under a
repurchase agreement, and will require the seller to maintain during the term of
the agreement the value of the securities subject to the agreement at not less
than the repurchase price. The Fund will only enter into a repurchase agreement
where the market value of the underlying security, including accrued interest,
will at all times be equal to or exceed the value of the repurchase agreement.
FUTURES:
The Fund may buy and sell futures contracts to manage its exposure to changes in
securities prices, as an efficient means of adjusting its overall exposure to
certain markets, in an effort to enhance income, and to protect the value of
portfolio securities. The Fund will not use futures contracts to leverage its
assets. Futures contracts deposits may not exceed 5% of the Fund's assets
(determined at the time of the transaction) and the Fund's total investment in
futures contracts may not exceed 20% of the Fund's total assets.
OTHER INVESTMENTS:
Subject to prior disclosure to shareholders, the Board of Trustees may, in the
future, authorize the Fund to invest in securities other than those listed here
and in the prospectus, provided that such investment would be consistent with
the Fund's investment objective, and that it would not violate any fundamental
investment policies or restrictions applicable to the Fund.
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INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental restrictions and may
not be changed without the approval of a majority of the outstanding voting
shares (as defined in the 1940 Act) of the Fund. Unless otherwise indicated, all
percentage limitations listed below apply at the time of the transaction only.
Accordingly, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in the percentage which results from a
relative change in values or from a change in the Fund's total assets will not
be considered a violation.
The Adviser will use "FactSet" computer software to categorize the industries in
which the Fund invests ("FactSet Codes"). The FactSet Codes that are assigned
may or may not correspond to the Standard Industry Codes ("SIC Codes"); however,
the Adviser feels that the differences are not substantial enough to effect the
percentage of asset restrictions above. In most cases the SIC Codes will match
the FactSet Codes. Except as set forth in the Prospectus, the Fund may not:
1. Purchase securities of any one issuer if, as a result of the purchase,
more than 5% of the Fund's total assets would be invested in securities of that
issuer or the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 15% of the Fund's total assets may
be invested without regard to this limitation, and except that this limit does
not apply to securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities or to securities issued by other investment
companies;
2. Purchase any security if, as a result of the purchase, 15% or more of
the Fund's total assets would be invested in securities of issuers having their
principal business activities in the same industry, except that this limitation
does not apply to securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities;
3. Issue senior securities or borrow money, except as permitted under the
1940 Act and then not in excess of one-third of the Fund's total assets
(including the amount of the senior securities issued but reduced by any
liabilities not constituting senior securities) at the time of the issuance or
borrowing, except that the Fund may borrow up to an additional 5% of its total
assets (not including the amount borrowed) for temporary or emergency purposes.
The Fund will not purchase securities when borrowings exceed 5% of its total
assets;
4. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
in an amount up to one-third of the value of its net assets but only to secure
borrowing for temporary or emergency purposes, such as to effect redemptions;
5. Make loans, except through loans of securities or through repurchase
agreements, provided that, for purposes of this restriction, the acquisition of
bonds, debentures, other debt securities or instruments, or participations or
other interest therein and investments in government obligations, commercial
paper, certificates of deposit, bankers' acceptances or similar instruments will
not be considered the making of a loan;
6. Engage in the business of underwriting the securities of others,
except to the extent that the Fund might be considered an underwriter under the
Federal securities laws in connection with its disposition of securities; or
7. Purchase or sell real estate, except that investments in securities of
issuers that invest in real estate or other instruments supported by interests
in real estate are not subject to this limitation, and except that the Fund may
exercise rights under agreements relating to such securities, including the
right to enforce security interests to hold real estate acquired by reason of
such enforcement until that real estate can be liquidated in an orderly manner.
The following investment limitations are not fundamental and may be changed
without shareholder approval. The Fund does not currently intend to:
(i) Engage in uncovered short sales of securities or maintain a short
position;
(ii) Purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions;
(iii)Purchase securities of other investment companies except as
permitted by the 1940 Act and the rules and regulations
thereunder;
(iv) Invest in companies for the purpose of exercising control or
management;
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(v) Invest in oil, gas or mineral exploration or development programs
or leases, except that direct investment in securities of issuers
that invest in such programs or leases and investments in
asset-backed securities supported by receivables generated by
such programs or leases are not subject to this prohibition; and
(vi) Invest more than 5% of its net assets in warrants, including
within that amount no more than 2% in warrants which are not
listed on the New York or American Stock exchanges, except
warrants acquired as a result of its holdings of common stocks.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
George D. Bjurman & Associates serves as the Fund's investment adviser and is an
investment adviser registered as such under the Investment Advisers Act of 1940,
as amended. The Adviser was founded in 1970 and is wholly-owned by senior
associates and the Bjurman family. G. Andrew Bjurman and O. Thomas Barry, III
own 40% and 20%, respectively, of the Adviser and as a result may be deemed to
be "control persons" of the Adviser.
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser have entered into an investment advisory agreement for
a two-year period (the "Investment Advisory Agreement"). The Investment Advisory
Agreement provides that the Adviser shall furnish advice to the Fund with
respect to its investments and shall determine what securities shall be
purchased or sold by the Fund.
The Investment Advisory Agreement provides that the Adviser shall not be
protected against any liability to the Fund or its shareholders by reason of the
Adviser's willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.
The continuance of the Investment Advisory Agreement, after the first two years,
must be specifically approved at least annually (i) by the vote of the Trustees
or by a vote of the shareholders of Fund, and (ii) by the vote of a majority of
the Trustees who are not parties to the Investment Advisory Agreement or
"interested persons" (as that term is defined in the 1940 Act) of any party
thereto, cast in person at a meeting called for the purpose of voting on such
approval. The Investment Advisory Agreement will terminate automatically in the
event of its assignment, and is terminable at any time without penalty by the
Trustees of the Fund, or by a majority of the outstanding shares of the Fund on
60-days' written notice to the Adviser.
For providing investment advisory services, the Fund pays the Adviser a monthly
fee of one twelfth of 1.00% of the Fund's average daily net assets. The Adviser
has voluntarily agreed to waive its fee and reimburse expenses to the extent
that the Fund's total operating expenses, inclusive of distribution expenses,
exceed 1.80% of the Fund's average daily net assets. Any fees withheld or
voluntarily reduced and any Fund expense absorbed by the Adviser voluntarily or
pursuant to an agreed upon expense cap which are the Fund's obligation are
subject to reimbursement by the Fund to the Adviser, if so requested by the
Adviser, in subsequent fiscal years, if the aggregate amount paid by the Fund
toward the operating expenses for such fiscal year (taking into account the
reimbursement) does not exceed the applicable limitation on Fund expenses. The
Adviser is permitted to be reimbursed only for fee reductions and expenses
payments made in the previous three fiscal years, except that it is permitted to
look back up to five years and four years, respectively, during the initial six
years and seventh year of the Fund's operations. Any potential management fee
reimbursement will be disclosed in the footnotes to the Fund's financial
statements. At such time as it appears probable that the Fund is able to effect
such reimbursement, and such reimbursement is requested by the Adviser and
approved by the Board of Trustees, the amount of reimbursement that the Fund is
able to effect will be accrued as an expense of the Fund for that current
period.
For the fiscal years ended March 31, 1998 and 1999, the Fund accrued advisory
fees of $21,878 and $82,678; however, in order to reduce the Fund's operating
expenses, the Adviser waived its entire advisory fee in each year and reimbursed
the Fund $209,641 and $134,062 of expenses, respectively. For the fiscal year
ended March 31, 2000, the Fund accrued advisory fees of $140,550, of which
$131,854 were waived in order to reduce the Fund's operating expenses.
ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTANT
The Fund has retained Integrated Fund Services, Inc. ("IFS") as the Fund's
Transfer Agent, Administrator and Fund Accountant. Pursuant to a Transfer,
Dividend Disbursing, Shareholder Service and Plan Agency Agreement, IFS
maintains the records of each
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shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of the Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. IFS receives for its services as transfer agent a fee payable
monthly at an annual rate of $20 per account; provided, however, that the
minimum fee is $2,000 per month. In addition, the Fund pays out-of-pocket
expenses, including but not limited to, postage, envelopes, checks, drafts,
forms, reports, record storage and communication lines.
Pursuant to an Accounting Services Agreement, IFS also provides accounting and
pricing services to the Fund. For calculating daily net asset value per share
and maintaining such books and records as are necessary to enable IFS to perform
its duties, the Fund pays IFS a fee in accordance with the following schedule:
Average Monthly Net Assets Monthly Fee
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$ 0 to $100 million $2,500
$100 million to $200 million $3,500
$200 million to $300 million $4,500
Over $300 million $5,500 + .001%
The .001% on assets over $300 million represents the asset based fee charged by
IFS for external pricing services.
In addition, IFS is retained to provide administrative services to the Fund
pursuant to an Administration Agreement. In this capacity, IFS supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. IFS supervises
the preparation of tax returns, reports to shareholders of the Fund, reports to
and filings with the SEC and state securities commissions, and materials for
meetings of the Board of Trustees. For the performance of these administrative
services, the Fund pays IFS a fee at the annual rate of .15% of the average
value of its daily net assets up to $25,000,000, .125% of such assets from
$25,000,000 to $50,000,000 and .10% of such assets in excess of $50,000,000;
provided, however, that the minimum fee is $2,000 per month.
For the fiscal years ended March 31, 1999 and 2000, IFS received $21,807 and
$80,278, respectively, as compensation for services performed as administrator,
fund accountant and transfer agent.
Prior to December 18, 1998, the Fund retained First Data Investor Services
Group, Inc., 3200 Horizon Drive, King of Prussia, Pennsylvania 19406-0903, for
administration, fund accounting and transfer agency services. For the fiscal
year ended March 31, 1999, the Fund paid First Data Investor Services Group,
Inc. $95,174 as compensation for services performed as administrator, fund
accountant and transfer agent.
UNDERWRITER
IFS Fund Distributors, Inc. (the "Distributor"), 221 East Fourth Street, Suite
300, Cincinnati, Ohio 45202, serves as principal underwriter for the Fund
pursuant to an Underwriting Agreement. Shares are sold on a continuous basis by
the Distributor. The Distributor has agreed to use its best efforts to solicit
orders for the sale of Trust shares, but it is not obliged to sell any
particular amount of shares. For these services, the Distributor receives a
monthly fee of $500 from the Fund. The Distributor is an affiliate of IFS by
reason of common ownership.
The Underwriting Agreement provides that, unless sooner terminated, it will
continue in effect until December 18, 2000. Thereafter, the Underwriting
Agreement will continue from year to year only if such continuance is approved
at least annually (i) by the Board of Trustees or a vote of a majority of the
outstanding shares, and (ii) by a majority of the Trustees who are not
interested persons of the Trust or of the Distributor by vote cast in person at
a meeting called for the purpose of voting on such approval.
The Underwriting Agreement may be terminated by the Fund at any time, without
the payment of any penalty, by vote of a majority of the entire Board of
Trustees of the Trust or by vote of a majority of the outstanding shares of the
Fund on 60 days' written notice to the Distributor, or by the Distributor at any
time, without the payment of any penalty, on 60 days' written notice to the
Trust. The Underwriting Agreement will automatically terminate in the event of
its assignment. For the fiscal years ended March 31, 1999 and 2000, the
Distributor was paid $1,500 and $6,000, respectively, for services provided to
the Fund.
Shares of the Fund are subject to a distribution plan (the "Distribution Plan")
pursuant to Rule 12b-1 under the 1940 Act. As provided
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in the Distribution Plan, the Fund will pay an annual fee of 0.25% of the Fund's
average daily net assets to reimburse expenses incurred in distributing and
promoting sales of the Fund. From these amounts, the Distributor or the Fund may
make payments to financial institutions and intermediaries such as banks,
savings and loan associations, insurance companies, investment counselors and
broker-dealers who assist in the distribution of shares of the Fund or provide
services to the Fund's shareholders pursuant to service agreements with the
Fund. The Fund intends to operate the Distribution Plan in accordance with its
terms and the Conduct Rules of the National Association of Securities Dealers,
Inc. concerning sales charges.
The Distribution Plan will continue in effect from year to year, provided that
its continuance is approved at least annually by a vote of the Board of
Trustees, including the Trustees who are not "interested persons" of the Trust
and have no direct or indirect financial interest in the operation of the
Distribution Plan, cast in person at a meeting called for the purpose of voting
on such continuance. The Distribution Plan may be terminated at any time,
without penalty, by vote of those Trustees that are not interested persons of
the Trust or by vote of the holders of a majority of the outstanding shares of
the Fund on not more than 60-days' written notice and shall terminate
automatically in the event of its assignment. The Plan may not be amended to
increase materially the amounts to be spent for the services described herein
without approval by the shareholders of the Fund, and all material amendments
are required to be approved by the Board of Trustees. Pursuant to the Plan, the
Board of Trustees will review at least quarterly a written report of the
distribution expenses incurred on behalf of the Fund. The report will include an
itemization of the distribution expenses and the purpose of such expenditures.
For the fiscal year ended March 31, 2000, the Fund incurred $34,137 of
distribution-related expenses pursuant to the Distribution Plan, which amount
was spent primarily as compensation to dealers. No interested person of the Fund
or interested Trustee had a direct or indirect financial interest in the
operation of the Distribution Plan.
TRUSTEES AND OFFICERS
The Trust has a Board of Trustees that establishes the Fund's policies and
supervises and reviews the management of the Fund. The day-to-day operations of
the Fund are administered by the officers of the Trust and by the Adviser. The
Trustees review, among other things, the various services provided by the
Adviser to ensure that the Fund's general investment policies and programs are
followed and that administrative services are provided to the Fund in a
satisfactory manner.
The Trustees and executive officers of the Fund and their principal occupations
for the last five years are set forth below. Each Trustee who is an "interested
person," as that term is defined in the 1940 Act, of the Fund is indicated by an
asterisk.
G. Andrew Bjurman and O. Thomas Barry, III share the office of the presidency of
the Trust. They are jointly vested in full executive authority under the Trust's
By-Laws.
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<TABLE>
<CAPTION>
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NAME AGE POSITION PRINCIPAL OCCUPATION
WITH THE
FUND
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<S> <C> <C> <C>
G. Andrew Bjurman* 52 Co-President; Mr. Bjurman joined George D. Bjurman & Associates when it
George D. Bjurman & Associates, Trustee was founded in 1970 as Vice President and Portfolio Manager.
10100 Santa Monica Boulevard, Suite 1200, At that time he assumed responsibility for the portfolio
Los Angeles, CA 90067-4103 management of institutional accounts. From 1974 to 1978 he
acted as Executive Vice President and Senior Portfolio
Manager. In 1978 he assumed his present responsibilities as
President and Chief Executive Officer of the firm. He is
currently a member of the Adviser's Investment Policy
Committee. In 1977 he became both a Chartered Financial
Analyst and a Chartered Investment Counselor.
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O. Thomas Barry, III, * 55 Co-President; Mr. Barry, III, joined the firm in 1978 as Vice President
George D. Bjurman & Associates, Trustee and Senior Portfolio Manager. In 1979 he became Executive
10100 Santa Monica Boulevard, Suite 1200, Vice President and assumed the responsibilities of Director
Los Angeles, CA 90067-4103 of Research. He is a member of the Adviser's Investment
Policy Committee. In 1982 he became the Senior Executive
Vice President and in 1985 he also became Chief Investment
Officer. Prior to joining the firm, Mr. Barry acted as
Senior Investment Officer and Portfolio Manager for Security
Pacific National Bank in Los Angeles and was a member of the
Stock Selection Committee. In 1977 he became a Chartered
Financial Analyst and in 1978 a Chartered Investment
Counselor.
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Donald W. Hudson, Jr. 55 Trustee; Mr. Hudson has been a Senior Vice President of CB Commercial
CB Commercial Real Estate Chairman of Real Estate since 1993.
21700 Oxnard Street Audit
Suite 200 Committee
Woodland Hills, CA 91367
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Joseph E. Maiolo 62 Trustee Mr. Maiolo is an industrial real estate broker/developer. He
INCO Commercial Brokerage is a principal of INCO Commercial Brokerage, Joseph E.
14700 Firestone Boulevard, #111 Maiolo & Associates, Inc. and Penta Pacific Properties, Los
La Mirada, CA 90638 Angeles.
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William Wallace 53 Trustee Mr. Wallace is involved in residential real estate. He is
Wallace Properties Vice President of Wallace Properties.
5288 South Franklin Circle
Greenwood Village, CO 80121
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</TABLE>
10
<PAGE>
COMPENSATION TABLE
Trustees and Officers
Aggregate Compensation from Trust for Fiscal Year Ended 3/31/00 1
-----------------------------------------------------------------
Joseph E. Maiolo $4,500
Donald W. Hudson, Jr. $4,500
William Wallace $4,500
G. Andrew Bjurman2 $ 0
O. Thomas Barry, III2 $ 0
1 This amount represents the aggregate amount of compensation paid to the
Trustees for service on the Board of Trustees. There are no other funds in
the Fund Complex.
2 This Trustee is considered an "Interested Person" of the Trust as defined
under the 1940 Act.
No officer or Trustee of the Trust who is also an officer or employee of the
Adviser receives any compensation from the Trust for services to the Trust. The
Trust pays each Trustee who is not affiliated with the Adviser a fee of $4,500
per year, and reimburses each Trustee and officer for out-of-pocket expenses in
connection with travel and attendance at such meetings.
PRINCIPAL SHAREHOLDERS
As of July 21, 2000, the Trustees and officers, as a group, beneficially owned
less than 1.00% of the Fund.
As of July 21, 2000, the following persons owned of record or beneficially more
than 5% of the outstanding voting shares of the Fund:
NAME & ADDRESS PERCENTAGE
-------------- ----------
Charles Schwab & Co., Inc. *1 38.26%
FBO Customers
San Francisco, CA
National Investor Services Corp.2 19.67%
FEBO Exclusive Customers
New York, NY
National Financial Services Corp.3 14.29%
FBO Mary Weeks
New York, NY
11
<PAGE>
* Person deemed to control the Fund within the meaning of the 1940 Act.
1 Charles Schwab & Co., Inc. is a discount broker-dealer acting as a nominee
for registered investment advisers whose clients have purchased shares of
the Fund and also holds shares for the benefit of its clients.
2 National Investor Services Corp. is a broker-dealer holding shares for the
benefit of its clients.
3 National Financial Service Corp. is a broker-dealer holding shares for the
benefit of its clients.
NET ASSET VALUE
The net asset value per share is computed by dividing the value of the assets of
the Fund, less its liabilities, by the number of shares outstanding.
Portfolio securities are valued and net asset value per share is determined as
of the close of regular trading on the New York Stock Exchange ("NYSE"), which
currently is 4:00 p.m. (Eastern Time), on each day the NYSE is open for trading.
The NYSE is open for trading every day except Saturdays, Sundays and the
following holidays: New Year's Day, Martin Luther King Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas Day. Additionally, if any of the aforementioned holidays falls on a
Saturday, the NYSE will not be open for trading on the preceding Friday and when
such holiday falls on a Sunday, the NYSE will not be open for trading on the
succeeding Monday, unless unusual business conditions exist, such as the ending
of a monthly or the yearly accounting period.
TAXES
The following is only a summary of certain federal tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus, and is not intended as a substitute for careful tax planning.
Shareholders are urged to consult their tax advisers with specific reference to
their own tax situations, including their state and local tax liabilities.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% U.S. withholding tax.
FEDERAL INCOME TAX
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended ("the Code"), court decisions and
published administrative materials from the Internal Revenue Service and as in
effect on the date of this Statement of Additional Information. New legislation,
as well as administrative changes or court decisions, may significantly change
the conclusions expressed herein, and may have a retroactive effect with respect
to the transactions contemplated herein.
The Fund has qualified and intends to continue qualify as a "regulated
investment company" ("RIC") as defined under Subchapter M of the Code. By doing
so, the Fund expects to eliminate or reduce to a nominal amount the federal
income taxes to which it may be subject. In order to qualify for treatment as a
RIC under the Code, the Fund generally must distribute annually to its
shareholders at least 90% of its investment company taxable income (generally,
net investment income plus net short-term capital gain) (the "Distribution
Requirement") and must meet several additional requirements. Among these
requirements are the following: (i) at least 90% of the Fund's gross income each
taxable year must be derived from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of stock or
securities, or certain other income; (ii) at the close of each quarter of the
Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities, with such other securities limited, in respect
to any one issuer, to an amount that does not exceed 5% of the value of the
Fund's assets and that does not represent more than 10% of the outstanding
voting securities of such issuer and (iii) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its assets may be
invested in securities (other than U.S. government securities or the securities
of other RICs) of any one issuer or of two or more issuers which the Fund
controls and which are engaged in the same, similar or related trades or
businesses. Notwithstanding the Distribution Requirement described above, which
requires only that the Fund distribute at least 90% of its annual investment
company taxable income and does not require any minimum distribution of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), the Fund will be subject to a nondeductible 4% federal excise tax
to the extent that it fails to distribute by the end of any calendar year 98% of
its ordinary income for that year and 98% of its capital gain net income (the
excess of short- and long-term
12
<PAGE>
capital gains over short- and long-term capital losses) for the one-year period
ending on October 31 of that year, plus certain other amounts. The Fund intends
to make sufficient distributions of its ordinary income and capital gain net
income prior to the end of each calendar year to avoid liability for federal
excise tax.
In the case of corporate shareholders, distributions from the Fund may qualify
for the corporate dividends-received deduction to the extent the Fund designates
the amount distributed as a qualifying dividend. Availability of the
dividends-received deduction is subject to certain holding period and
debt-financing limitations.
Distributions of net capital gains (i.e, the excess of net long-term capital
gains over net short-term capital losses) by the Fund are taxable to the
recipient shareholders as a long-term capital gain, without regard to the length
of time a shareholder has held Fund shares. Capital gain distributions are not
eligible for the dividends-received deduction referred to in the preceding
paragraph.
Any gain or loss recognized on a sale, redemption or exchange of shares of the
Fund by a non-exempt shareholder who is not a dealer in securities generally
will be treated as a long-term capital gain or loss if the shares have been held
for more than one year and otherwise generally will be treated as a short-term
capital gain or loss. If shares of the Fund on which a net capital gain
distribution has been received are subsequently sold, redeemed or exchanged and
such shares have been held for six months or less, any loss recognized will be
treated as a long-term capital loss to the extent of the long-term capital gain
distribution received with respect to such shares.
In certain cases, the Fund will be required to withhold, and remit to the U.S.
Treasury, 31% of any distributions paid to a shareholder who (1) has failed to
provide a correct taxpayer identification number, (2) is subject to backup
withholding by the Internal Revenue Service or (3) has not certified to the Fund
that such shareholder is not subject to backup withholding.
If the Fund fails to qualify as a RIC for any taxable year, it will be subject
to tax on its taxable income at regular corporate rates. In such an event,
distributions from the Fund (to the extent of its current and accumulated
"earnings and profits") generally would be eligible for the corporate
dividends-received deduction for corporate shareholders.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Fund does not have an obligation to place orders with any broker-dealer or
group of broker-dealers in the execution of transactions in portfolio
securities. Most transactions will be effected on a net cost basis through
brokers who make markets in the stock being purchased or sold. Subject to
policies established by the Trustees, the Adviser is responsible for placing the
orders to execute transactions for the Fund. In placing orders, it is the policy
of the Fund to seek to obtain the best execution taking into account such
factors as price (including the applicable dealer spread), the size, type and
difficulty of the transaction involved, the firm's general execution and
operational facilities, the firm's risk in positioning the securities involved,
the Adviser's past experience in placing orders through the firm, and the firm's
research capabilities. While the Adviser generally seeks reasonably competitive
spreads, the Fund will not necessarily be paying the lowest spread available for
a particular transaction. Subject to policies established by the Board of
Trustees, however, the Adviser may cause the Fund to pay a broker-dealer a
commission in excess of the amount of commission another broker-dealer would
have charged if the Adviser determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such broker-dealer.
For the fiscal years ended March 31, 1998, 1999 and 2000, the Fund incurred
total brokerage commissions of $15,069, $62,487 and $112,638. All commissions
paid are reviewed quarterly by the Board of Trustees of the Trust.
The Fund and the Adviser may direct portfolio transactions to persons or firms
because of research and investment services provided by such persons or firms if
the commissions or spreads on the transactions are reasonable in relation to the
value of the investment information provided. Among such research and investment
services are those that brokerage houses customarily provide to institutional
investors and include statistical and economic data and research reports on
companies and industries. Such research provides lawful and appropriate
assistance to the Adviser in the performance of its investment decision-making
responsibilities. The Adviser may use these services in connection with all of
its investment activities, and some services obtained in connection with the
Fund's transactions may be used in connection with other investment advisory
clients of the Adviser, including other mutual funds and other series of the
Trust, if any. During the fiscal year ended March 31, 2000, the amount of
brokerage transactions and related commissions for the Fund directed to brokers
due to research services provided were $36,342,210 and $15,048, respectively.
13
<PAGE>
The Fund may invest in securities that are traded exclusively in the
over-the-counter market. The Fund may also purchase securities listed on a
national securities exchange through the "third market" (i.e., through markets
other than the exchanges on which the securities are listed). When executing
transactions in the over-the-counter market or the third market, the Adviser
will seek to execute transactions through brokers or dealers that, in the
Adviser's opinion, will provide the best overall price and execution so that the
resultant price to the Fund is as favorable as possible under prevailing market
conditions.
It is not the Fund's practice to allocate brokerage or principal business on the
basis of sales of its shares which may be made through brokers or dealers.
However, the Adviser may place portfolio orders with qualified broker-dealers
who recommend the Fund to clients, and may, when a number of brokers and dealers
can provide best net results on a particular transaction, consider such
recommendations by a broker or dealer in selecting among broker-dealers.
It is possible that purchases or sales of securities for the Fund also may be
considered for other clients of the Adviser or its affiliates, including the
other series of the Trust, if any. Any transactions in such securities at or
about the same time will be allocated among the Fund and such other clients in a
manner deemed equitable to all by the Adviser, taking into account the
respective sizes of the Fund and the other clients' accounts, and the amount of
securities to be purchased or sold. It is recognized that it is possible that in
some cases this procedure could have a detrimental effect on the price or volume
of the security so far as the Fund is concerned. However, in other cases, it is
possible that the ability to participate in volume transactions and to negotiate
lower commissions will be beneficial to the Fund.
CODE OF ETHICS. The Trust, the Adviser and the Distributor have each adopted a
Code of Ethics under Rule 17j-1 of the 1940 Act which permits Fund personnel to
invest in securities for their own accounts. The Codes of Ethics adopted by the
Trust, the Adviser and the Distributor are on public file with, and are
available from, the SEC.
PERFORMANCE INFORMATION
IN GENERAL
From time to time, the Fund may include general comparative information, such as
statistical data regarding inflation, securities indices or the features or
performance of alternative investments, in advertisements, sales literature and
reports to shareholders. The Fund may also include calculations, such as
hypothetical compounding examples or tax-free compounding examples, which
describe hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions and are not
indicative of the performance of the Fund.
From time to time, the total return of the Fund may be quoted in advertisements,
shareholder reports or other communications to shareholders.
TOTAL RETURN CALCULATION
The Fund computes average annual total return by determining the average annual
compounded rate of return during specified periods that equate the initial
amount invested to the ending redeemable value of such investment. This is done
by dividing the ending redeemable value of a hypothetical $1,000 initial payment
by $1,000 and raising the quotient to a power equal to one divided by the number
of years (or fractional portion thereof) covered by the computation and
subtracting one from the result. This calculation can be expressed as follows:
n
Average Annual Total Return = P (1 + T) = ERV
Where: ERV= ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of years.
T = average annual total return.
The Fund computes the aggregate total return by determining the aggregate
compounded rate of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate
14
<PAGE>
total return is as follows:
Aggregate Total Return = [ (ERV/P) - 1 ]
Where: ERV= ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. Since performance will fluctuate,
performance data for the Fund should not be used to compare an investment in the
Fund's shares with bank deposits, savings accounts and similar investment
alternatives which often provide an agreed-upon or guaranteed fixed yield for a
stated period of time. Shareholders should remember that performance is
generally a function of the kind and quality of the instruments held in a
portfolio, portfolio maturity, operating expenses and market conditions.
Based upon the foregoing calculations, the average annual total returns for the
Fund as of March 31, 2000 were as follows:
Since Inception
One Year (March 31, 1997)
-------- ----------------
124.64% 50.80%
PERFORMANCE AND ADVERTISEMENTS
Performance information such as total return for the Fund may be quoted in
advertisements or in communications to shareholders. Such performance
information may be useful in reviewing the performance of the Fund and for
providing a basis for comparison with other investment alternatives. However,
because the net investment return of the Fund changes in response to
fluctuations in market conditions, interest rates and Fund expenses, any given
performance quotation should not be considered representative of the Fund's
performance for any future period. The value of an investment in the Fund will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost.
From time to time, in marketing and other fund literature, the Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income and capital gains dividends
reinvested. Such calculations do not include the effect of any sales charges
imposed by other funds. The Fund will be compared to Lipper's appropriate fund
category, that is, by fund objective and portfolio holdings. The Fund's
performance may also be compared to the average performance of its Lipper
category.
The Fund's performance may also be compared to the performance of other mutual
funds by Morningstar, Inc. ("Morningstar"), which ranks funds on the basis of
historical risk and total return. Morningstar's rankings range from five stars
(highest) to one star (lowest) and represent Morningstar's assessment of the
historical risk level and total return of a fund as a weighted average for
three, five and ten year periods. Ranks are not absolute or necessarily
predictive of future performance.
15
<PAGE>
In assessing such comparisons of yield, return or volatility, an investor should
keep in mind that the composition of the investments in the reported indices and
averages is not identical to those of the Fund, that the averages are generally
unmanaged, and that the items included in the calculations of such averages may
not be identical to the formula used by the Fund to calculate its figures.
OTHER INFORMATION
LIMITATION ON TRUSTEES' LIABILITY
The Trust Instrument provides that a Trustee shall be personally liable only to
the Trust for any act, omission or obligation of the Trust or Trustee. A Trustee
will not be liable for any act or omission of any officer, employee, agent or
investment adviser of the Trust. The Trust Instrument also provides that the
Trust will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with actual or threatened litigation in which they may be
involved because of their offices with the Trust unless it is determined in the
manner provided in the Trust Instrument that they have not acted in good faith
in the reasonable belief that their actions were in the best interests of the
Trust. However, nothing in the Trust Instrument shall protect or indemnify a
Trustee against any liability for his or her willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties. All Trustee's
liability is further subject to the limitations imposed by the 1940 Act.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP, 350 South Grand Ave., Suite 200, Los Angeles, California,
90071-3462, has been selected as the independent accountants for the Fund.
Deloitte & Touche LLP provides audit and tax services. The books of the Fund
will be audited at least once a year by Deloitte & Touche LLP.
REPORTS TO SHAREHOLDERS
Shareholders will receive unaudited semi-annual reports describing the Fund's
investment operations and annual financial statements audited by the Fund's
independent accountants. Inquiries regarding the Fund may be directed to
Integrated Fund Services, Inc. at (800) 227-7264.
FINANCIAL STATEMENTS
The Fund's audited annual financial statements, including the notes thereto,
dated March 31, 2000, are incorporated by reference from the Fund's March 31,
2000 Annual Report to Shareholders.
16
