U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
--
Pre-Effective Amendment No. 3
Post-Effective Amendment No.
and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
--
Amendment No. 3
(Check appropriate box or boxes)
DEAN FAMILY OF FUNDS
(Exact Name of Registrant as Specified in Charter)
2480 Kettering Tower
Dayton, Ohio 45423
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (513) 222-9531
Frank H. Scott
C.H. Dean & Associates, Inc.
2480 Kettering Tower
Dayton, Ohio 45423
(Name and Address of Agent for Service)
Copies to:
Tina D. Hosking
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Approximate Date of Proposed Public Offering: As soon as practicable
after this Registration Statement becomes effective.
Registrant hereby declares its intention to register an indefinite
number of shares of beneficial interest pursuant to Rule 24f-2 under the
Investment Company Act of 1940.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
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DEAN FAMILY OF FUNDS
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
PART A
Item No. Registration Statement Caption Caption in Prospectus
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Information Performance Information
4. General Description of Registrant Investment Objectives,
Investment Policies and Risk
Considerations; Operation of
the Funds
5. Management of the Fund Operation of the Funds
6. Capital Stock and Other Securities Cover Page; Operation of the
Funds; Dividends and
Distributions; Taxes
7. Purchase of Securities Being Offered How to Purchase Shares;
Shareholder Services;
Exchange Privilege;
Distribution Plans;
Calculation of Share Price;
Application
8. Redemption or Repurchase How to Redeem Shares;
Shareholder Services;
Exchange Privilege
9. Pending Legal Proceedings Inapplicable
PART B
Caption in Statement
of Additional
Item No. Registration Statement Caption Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
(i)
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12. General Information and History The Trust
13. Investment Objectives and Policies Definitions, Policies and
Risk Considerations; Quality
Ratings of Corporate Bonds
and Preferred Stocks;
Investment Limitations;
Securities Transactions;
Portfolio Turnover
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders Inapplicable
of Securities
16. Investment Advisory and Other Services The Investment Adviser;
Distribution Plans;
Custodian; Auditors;
Countrywide Fund Services, Inc.
17. Brokerage Allocation and Other Securities Transactions
Practices
18. Capital Stock and Other Securities The Trust
19. Purchase, Redemption and Pricing of Calculation of Share
Securities Being Offered Price and Public Offering
Price; Other Purchase
Information; Redemption in Kind
20. Tax Status Taxes
21. Underwriters The Underwriter
22. Calculation of Performance Data Historical Performance
Information
23. Financial Statements Statement of Assets and
Liabilities
PART C
The information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this Registration
Statement.
(ii)
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DEAN FAMILY OF FUNDS
SUPPLEMENT TO PROSPECTUS DATED ________, 1997
SPECIAL OFFERING
During a "Special Offering Period", Class A shares of the Funds will be
available for purchase without an initial sales charge through broker dealers
who have a sales agreement with the Underwriter ("Authorized Dealers"). Class C
shares of the Funds will not be available during the Special Offering Period.
The Special Offering Period will commence on April 30, 1997 and end at the
earlier of July 31, 1997 or when the Trust has accumulated $100 million in total
assets. Should the Trust accumulate $100 million in total assets before July 31,
1997, the Special Offering Period may be extended for any period of time through
July 31, 1997 at the discretion of the Adviser.
All funds tendered for the purchase of shares of the Funds on or before
May 27, 1997 (the "Escrow Period"), will be deposited into a segregated interest
bearing account pending distribution of the Funds' shares on May 28, 1997. All
interest on such amounts will accrue to the benefit of the Funds. Shares
purchased during the Escrow Period, which must be purchased pursuant to a
Subscription Agreement, will be issued at a price of $10.00 per share. Shares
purchased after May 27, 1997 will be issued at a price equal to the net asset
value per share next determined after receipt of the order. The continuance of
the Escrow Period is not contingent upon any amount of shares being purchased
during such period.
If any shares purchased during the Special Offering Period are redeemed
within two years of their purchase, a contingent deferred sales charge of 2% of
the lower of the purchase price or the redemption proceeds will be imposed and
paid to the Underwriter. Each Authorized Dealer will receive at the time of sale
a fee equal to 2% of the net asset value of any shares sold through such Dealer
during the Special Offering Period. No such fee will be paid to Authorized
Dealers for shares purchased for the accounts of employees of Authorized Dealers
or their immediate families. Nor will Authorized Dealers be eligible to receive
during the Special Offering Period the additional fees available for sales of
shares valued at $1 million or more, as described in the Prospectus. Purchases
of shares during the Special Offering Period will be subject to the Fund's
minimum initial investment requirement and will carry the same rights and
privileges as shares purchased subsequent to the Special Offering Period. See
the Trust's Prospectus for additional information.
All questions concerning the timeliness, validity, form and eligibility
of any purchase of shares during the Special Offering Period will be determined
by the Funds, whose determination will be final and binding. The Funds in their
sole discretion may waive any defect or irregularity, or permit a defect or
irregularity to be corrected within such time as it may
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determine, or reject the purported purchase of shares during the Special
Offering Period. Purchases during the Special Offering Period will not be deemed
to have been received or accepted until all irregularities have been waived or
cured within such time as the Funds determine in their sole discretion. The
Funds will not be under any duty to notify purchasers of any defect or
irregularity in connection with the submission of an Account Application or
execution of a Subscription Agreement during the Special Offering Period or
incur any liability for failure to give such notification.
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PROSPECTUS
________, 1997
DEAN FAMILY OF FUNDS
2480 KETTERING TOWER
DAYTON, OHIO 45423
The Dean Family of Funds currently offers three separate series of
shares to investors: the Large Cap Value Fund, the Small Cap Value Fund and the
Balanced Fund (individually a "Fund" and collectively the "Funds").
The LARGE CAP VALUE FUND seeks to provide growth of capital over the
long-term by investing primarily in the common stocks of large companies.
The SMALL CAP VALUE FUND seeks to provide capital appreciation by
investing primarily in the common stocks of small companies.
The BALANCED FUND seeks to preserve capital while producing a high
total return by allocating its assets among equity securities, fixed-income
securities and money market obligations.
Each Fund offers two classes of shares: Class A shares (sold subject to
a maximum 5.25% front-end sales load and a 12b-1 fee of up to .25% of average
daily net assets) and Class C shares (sold subject to a 1% contingent deferred
sales load for a one-year period and a 12b-1 fee of up to 1% of average daily
net assets). Class A and Class C shares of a Fund represent identical interests
in the investment portfolio of such Fund and have the same rights, except that
(i) Class C shares bear the expenses of higher distribution fees, which will
cause Class C shares to have a higher expense ratio and to pay lower dividends
than Class A shares; (ii) certain other class specific expenses will be borne
solely by the class to which such expenses are attributable; and (iii) each
class has exclusive voting rights with respect to matters relating to its own
distribution arrangements.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY.
C.H. Dean & Associates, Inc. ("Dean Investment Associates"), 2480
Kettering Tower, Dayton, Ohio 45423, manages the Funds' investments. Dean
Investment Associates is an independent investment counsel firm which has been
advising individual, institutional and corporate clients since 1973.
This Prospectus sets forth concisely the information about the Funds
that you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated _________, 1997 has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference in its entirety. A copy of the Statement of Additional Information can
be obtained at no charge by calling one of the numbers listed below.
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For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free) . . . . . . . . . . . . . . . . . . . . . . 888-899-8343
Cincinnati . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513-629-2285
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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.
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EXPENSE INFORMATION
Class A Class C
Shareholder Transaction Expenses Shares Shares
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . 5.25% None
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price) . None* 1.00%
Sales Load Imposed on Reinvested Dividends . . None None
Exchange Fee . . . . . . . . . . . . . . . . . None None
Redemption Fee . . . . . . . . . . . . . . . . None** None**
* Purchases at net asset value of amounts totaling $1 million or more may
be subject to a contingent deferred sales load of up to 1.00% if a
redemption occurred within 12 months of purchase and a commission was
paid by the Underwriter to a participating unaffiliated dealer. See
"How to Redeem Shares".
** A wire transfer fee is charged in the case of redemptions made by wire.
Such fee is subject to change and is currently $8. See "How to Redeem
Shares".
Annual Fund Operating Expenses (as a percentage of average net assets)
Large Cap Small Cap Balanced
Value Fund Value Fund Fund
Class A Class C Class A Class C Class A Class C
Shares Shares Shares Shares Shares Shares
Management Fees After
Waivers(A) .75% .75% .75% .75% .75% .75%
12b-1 Fees(B) .25% 1.00% .25% 1.00% .25% 1.00%
Other Expenses .85% .85% .85% .85% .85% .85%
----- ----- ----- ----- ----- -----
Total Fund Operating
Expenses After Waivers(C) 1.85% 2.60% 1.85% 2.60% 1.85% 2.60%
===== ===== ===== ===== ===== =====
(A) Absent waivers, management fees would be 1.00% for each class of each of
the Funds.
(B) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales loads permitted by the National Association of
Securities Dealers.
(C) Absent waivers of management fees, total Fund operating expenses would be
2.10% for Class A shares and 2.85% for Class C shares.
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The percentages expressing "Other Expenses" are based on estimated
amounts for the current fiscal year. THE EXAMPLE BELOW SHOULD NOT BE CONSIDERED
A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN.
Example
You would pay the following
expenses on a $1,000
investment, assuming (1) Class A Class C
5% annual return and (2) Shares Shares
redemption at the end of
each time period: 1 Year $19 $22
3 Years 57 67
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INVESTMENT OBJECTIVES, INVESTMENT POLICIES AND RISK
CONSIDERATIONS
The Dean Family of Funds (the "Trust") is comprised of three Funds, each
with its own portfolio and investment objective. None of the Funds is intended
to be a complete investment program, and there is no assurance that the
investment objective of any Fund can be achieved. Each Fund's investment
objective may be changed by the Board of Trustees without shareholder approval,
but only after notification has been given to shareholders and after this
Prospectus has been revised accordingly. If there is a change in a Fund's
investment objective, shareholders should consider whether such Fund remains an
appropriate investment in light of their then current financial position and
needs. Unless otherwise indicated, all investment practices and limitations of
the Funds are nonfundamental policies which may be changed by the Board of
Trustees without shareholder approval.
LARGE CAP VALUE FUND
The Large Cap Value Fund seeks to provide growth of capital over the long
term by investing primarily in the common stocks of large companies. A "large
company" is one which has a market capitalization of greater than $750 million
at the time of investment. Under normal circumstances, at least 65% of the
Fund's total assets will be invested in common stocks of large companies or
securities convertible into common stocks of large companies (such as
convertible bonds, convertible preferred stocks and warrants). The Fund may
invest in preferred stocks and bonds provided they are rated at the time of
purchase in the four highest grades assigned by Moody's Investors Service, Inc.
(Aaa, Aa, A or Baa) or Standard & Poor's Ratings Group (AAA, AA, A or BBB) or,
if unrated, are determined by Dean Investment Associates to be of comparable
quality. Preferred stocks and bonds rated Baa or BBB have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to pay principal and interest or to
pay the preferred stock obligations than is the case with higher grade
securities. Subsequent to its purchase by the Fund, a security may cease to be
rated or its rating may be reduced below Baa or BBB. Dean Investment Associates
will consider such an event to be relevant in its determination of whether the
Fund should continue to hold such security. See the Statement of Additional
Information for a description of ratings.
The stock selection approach of the Fund can best be described in the
vernacular of the investment business as a "value" orientation. That is, great
emphasis is placed on purchasing stocks that have lower than market multiples of
price to earnings, book value, cash flow and revenues and/or high dividend
yield. As indicated above, companies in whose securities the Fund may invest
will predominantly have large
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capitalizations in terms of total market value. Usually, but not always, the
stocks of such companies are traded on major stock exchanges. Such stocks are
usually very liquid, but there may be periods when a particular stock or stocks
in general become substantially less liquid. Such periods are usually, but not
always, brief and care will be taken by Dean Investment Associates to minimize
the overall liquidity risk of the Fund's portfolio.
Investments in equity securities are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions, quality ratings and
other factors beyond the control of Dean Investment Associates. As a result, the
return and net asset value of the Fund will fluctuate.
The Fund may invest in foreign companies through the purchase of sponsored
American Depository Receipts (certificates of ownership issued by an American
bank or trust company as a convenience to investors in lieu of the underlying
shares which it holds in custody) or other securities of foreign issuers that
are publicly traded in the United States. When selecting foreign investments,
Dean Investment Associates will seek to invest in securities that have
investment characteristics and qualities comparable to the kinds of domestic
securities in which the Fund invests. Investment in securities of foreign
issuers involves somewhat different investment risks from those affecting
securities of domestic issuers. In addition to credit and market risk,
investments in foreign securities involve sovereign risk, which includes local
political and economic developments, potential nationalization, withholding
taxes on dividend or interest payments and currency blockage. Foreign companies
may have less public or less reliable information available about them and may
be subject to less governmental regulation than U.S. companies. Securities of
foreign companies may be less liquid or more volatile than securities of U.S.
companies.
The Trust has approved the use of certain options and futures strategies
for the Fund, including the purchase and sale of options on equity securities,
stock indices and futures contracts and the purchase and sale of stock index
futures contracts. For a discussion of these transactions, see "Additional
Investment Information".
When Dean Investment Associates believes substantial price risks exist for
common stocks and securities convertible into common stocks because of
uncertainties in the investment outlook or when in the judgment of Dean
Investment Associates it is otherwise warranted in selling to manage the Fund's
portfolio, the Fund may temporarily hold for defensive purposes all or a portion
of its assets in short-term obligations such as bank debt instruments
(certificates of deposit, bankers' acceptances and time deposits), commercial
paper, U.S. Government obligations having a maturity of less than one year,
shares of money market
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investment companies or repurchase agreements collateralized by U.S. Government
obligations. The Fund is also permitted to lend its securities and to borrow
money and pledge its assets in connection therewith. The Fund will not invest
more than 10% of its total assets in shares of money market investment
companies. Investments by the Fund in shares of money market investment
companies may result in duplication of advisory, administrative and distribution
fees. For a discussion of these transactions, see "Additional Investment
Information".
SMALL CAP VALUE FUND
The Small Cap Value Fund seeks to provide capital appreciation by investing
primarily in the common stocks of small companies. A "small company" is one
which has a market capitalization of $750 million or less at the time of
investment. Under normal circumstances, the Fund will invest at least 65% of its
total assets in the common stocks of small companies or securities convertible
into common stocks of small companies (such as convertible bonds, convertible
preferred stocks and warrants). However, the Fund may invest a portion of its
assets in common stocks of larger companies. The Fund may invest in preferred
stocks & bonds provided they are rated at the time of purchase in the four
highest grades assigned by Moody's Investors Service, Inc. (Aaa, Aa, A or Baa)
or Standard & Poor's Ratings Group (AAA, AA, A or BBB) or, if unrated, are
determined by Dean Investment Associates to be of comparable quality. Preferred
stocks and bonds rated Baa or BBB have speculative characteristics and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to pay principal and interest or to pay the preferred stock
obligations than is the case with higher grade securities. Subsequent to its
purchase by the Fund, a security may cease to be rated or its rating may be
reduced below Baa or BBB. Dean Investment Associates will consider such an event
to be relevant in its determination of whether the Fund should continue to hold
such security. See the Statement of Additional Information for a description of
ratings.
Investments in equity securities are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions and other factors
beyond the control of Dean Investment Associates. As a result, the return and
net asset value of the Fund will fluctuate.
The stock selection approach of the Fund can best be described in the
vernacular of the investment business as a "value" orientation. That is, great
emphasis is placed on purchasing stocks that have lower than market multiples of
price to earnings, book value, cash flow and revenues and/or high dividend
yield. The Fund may invest a significant portion of its assets in small,
unseasoned companies. While smaller companies generally have potential for rapid
growth, they often involve
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higher risks because they lack the management experience, financial resources,
product diversification and competitive strengths of larger corporations. In
addition, in many instances, the securities of smaller companies are traded only
over-the-counter or on a regional securities exchange, and the frequency and
volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies may be subject to
wider price fluctuations. When making large sales, the Fund may have to sell
portfolio holdings at discounts from quoted prices or may have to make a series
of small sales over an extended period of time.
The Fund may invest in foreign companies through the purchase of sponsored
American Depository Receipts (certificates of ownership issued by an American
bank or trust company as a convenience to investors in lieu of the underlying
shares which it holds in custody) or other securities of foreign issuers that
are publicly traded in the United States. When selecting foreign investments,
Dean Investment Associates will seek to invest in securities that have
investment characteristics and qualities comparable to the kinds of domestic
securities in which the Fund invests. Investment in securities of foreign
issuers involves somewhat different investment risks from those affecting
securities of domestic issuers. In addition to credit and market risk,
investments in foreign securities involve sovereign risk, which includes local
political and economic developments, potential nationalization, withholding
taxes on dividend or interest payments and currency blockage. Foreign companies
may have less public or less reliable information available about them and may
be subject to less governmental regulation than U.S. companies. Securities of
foreign companies may be less liquid or more volatile than securities of U.S.
companies.
The Trust has approved the use of certain options and futures strategies
for the Fund, including the purchase and sale of options on equity securities,
stock indices and futures contracts and the purchase and sale of stock index
futures contracts. For a discussion of these transactions, see "Additional
Investment Information".
When Dean Investment Associates believes substantial price risks exist for
common stocks and securities convertible into common stocks because of
uncertainties in the investment outlook or when in the judgment of Dean
Investment Associates it is otherwise warranted in selling to manage the Fund's
portfolio, the Fund may temporarily hold for defensive purposes all or a portion
of its assets in short-term obligations such as bank debt instruments
(certificates of deposit, bankers' acceptances and time deposits), commercial
paper, U.S. Government obligations having a maturity of less than one year,
shares of money market investment companies or repurchase agreements
collateralized by U.S. Government obligations. The Fund is also permitted to
lend its securities and to borrow money and pledge its assets in
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connection therewith. The Fund will not invest more than 10% of its total assets
in shares of money market investment companies. Investments by the Fund in
shares of money market investment companies may result in duplication of
advisory, administrative and distribution fees. For a discussion of these
transactions, see "Additional Investment Information".
BALANCED FUND
The Balanced Fund seeks to preserve capital while producing a high total
return by allocating its assets among equity securities, fixed-income securities
and money market obligations. Under normal circumstances, the asset mix of the
Fund will normally range between 40-75 percent in common stocks and securities
convertible into common stocks, 25-60 percent in preferred stocks and bonds, and
0-25 percent in money market instruments. Moderate shifts between asset classes
are made in an attempt to maximize returns or reduce risk.
Because the Fund intends to allocate its assets among equity securities,
fixed-income securities and money market obligations, it may not be able to
achieve, at times, a total return as high as that of a portfolio with complete
freedom to invest its assets entirely in any one type of security. Likewise,
since a portion of the Fund's portfolio will normally consist of fixed-income
securities and/or money market obligations, the Fund may not achieve the degree
of capital appreciation that a portfolio investing solely in equity securities
might achieve. It should be noted that, although the Fund intends to invest in
fixed-income securities to reduce the price volatility of the Fund's shares,
intermediate and long-term fixed-income securities do fluctuate in value more
than money market obligations.
The Fund attempts to achieve growth of capital through its investments in
equity securities. The equity securities that the Fund may purchase consist of
common stocks or securities having characteristics of common stocks (such as
convertible preferred stocks, convertible debt securities or warrants) of
domestic issuers. The equity selection approach of the Fund can best be
described in the vernacular of the investment business as a "value" orientation.
That is, great emphasis is placed on purchasing stocks that have lower than
market multiples of price to earnings, book value, cash flow and revenues and/or
high dividend yield.
The Fund attempts to earn current income and at the same time achieve
moderate growth of capital and/or reduce fluctuation in the net asset value of
its shares by investing a portion of its assets in fixed-income securities. The
fixed-income securities that the Fund may purchase include U.S. Government
obligations and corporate debt securities (such as bonds and
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<PAGE>
debentures) maturing in more than one year from the date of purchase and
preferred stocks of domestic issuers rated at the time of purchase in the four
highest grades assigned by Moody's Investors Service, Inc. (Aaa, Aa, A or Baa)
or Standard & Poor's Ratings Group (AAA, AA, A or BBB) or, if unrated, which are
of comparable quality in the opinion of Dean Investment Associates. Preferred
stocks and fixed-income securities rated Baa or BBB have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to pay principal and interest or to
pay the preferred stock obligations than is the case with higher grade
securities. Subsequent to its purchase by the Fund, a security may cease to be
rated or its rating may be reduced below Baa or BBB. Dean Investment Associates
will consider such an event to be relevant in its determination of whether the
Fund should continue to hold such security. See the Statement of Additional
Information for a description of ratings.
Investments in debt and equity securities are subject to inherent market
risks and fluctuations in value due to changes in earnings, economic conditions,
quality ratings and other factors beyond the control of Dean Investment
Associates. Debt securities are also subject to price fluctuations based upon
changes in the level of interest rates, which will generally result in all those
securities changing in price in the same way, i.e., all those securities
experiencing appreciation when interest rates decline and depreciation when
interest rates rise. As a result, the return and net asset value of the Fund
will fluctuate.
The Fund also attempts to earn current income and reduce fluctuation in the
net asset value of its shares by investing a portion of its assets in money
market obligations. The money market obligations that the Fund may purchase
consist of short-term (i.e., maturing in one year or less from the date of
purchase) dollar-denominated debt obligations which (i) are U.S. Government
obligations, (ii) are issued by domestic banks, or (iii) are issued by domestic
corporations, if such corporate debt obligations have been rated at least
Prime-2 by Moody's Investors Service, Inc. ("Moody's") or A-2 by Standard &
Poor's Ratings Group ("S&P"), or have an outstanding issue of debt securities
rated at least A by Moody's or S&P, or are of comparable quality in the opinion
of Dean Investment Associates. Money market obligations also include debt
securities of the quality described above that are subject to repurchase
agreements and shares of money market investment companies. The Fund will not
invest more than 10% of its total assets in shares of money market investment
companies. Investments by the Fund in shares of money market investment
companies may result in duplication of advisory, administrative and distribution
fees. When Dean Investment
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Associates believes substantial price risks exist for equity securities and/or
fixed-income securities because of uncertainties in the investment outlook or
when in the judgment of Dean Investment Associates it is otherwise warranted in
selling to manage the Fund's portfolio, the Fund may temporarily hold greater
than 25% of its assets in money market obligations for defensive purposes.
Investors should be aware that the investment results of the Fund depend
upon the ability of Dean Investment Associates to correctly anticipate the
relative performance and risk of equity securities, debt securities and money
market instruments. Historical evidence indicates that correctly timing
portfolio allocations among these asset classes has been an extremely difficult
investment strategy to implement successfully. There can be no assurance that
Dean Investment Associates will correctly anticipate relative asset class
performance in the future on a consistent basis. Investment results would
suffer, for example, if only a small portion of the Fund's assets were invested
in stocks during a significant stock market advance or if a major portion were
invested in stocks during a major decline.
The Fund may invest in foreign companies through the purchase of sponsored
American Depository Receipts (certificates of ownership issued by an American
bank or trust company as a convenience to investors in lieu of the underlying
shares which it holds in custody) or other securities of foreign issuers that
are publicly traded in the United States. When selecting foreign investments,
Dean Investment Associates will seek to invest in securities that have
investment characteristics and qualities comparable to the kinds of domestic
securities in which the Fund invests. Investment in securities of foreign
issuers involves somewhat different investment risks from those affecting
securities of domestic issuers. In addition to credit and market risks,
investments in foreign securities involve sovereign risk, which includes local
political and economic developments, potential nationalization, withholding
taxes on dividend or interest payments and currency blockage. Foreign companies
may have less public or less reliable information available about them and may
be subject to less governmental regulation than U.S. companies. Securities of
foreign companies may be less liquid or more volatile than securities of U.S.
companies.
The Trust has approved the use of certain options and futures strategies
for the Fund, including the purchase and sale of options on equity securities,
stock indices and futures contracts and the purchase and sale of stock index
futures contracts. For a discussion of these transactions, see "Additional
Investment Information."
The Fund is also permitted to lend its securities and to borrow money and
pledge its assets in connection therewith. For a discussion of these
transactions, see "Additional Investment Information."
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<PAGE>
ADDITIONAL INVESTMENT INFORMATION
U.S. GOVERNMENT OBLIGATIONS. "U.S. Government obligations" include securities
which are issued or guaranteed by the United States Treasury, by various
agencies of the United States Government, and by various instrumentalities which
have been established or sponsored by the United States Government. U.S.
Treasury obligations are backed by the "full faith and credit" of the United
States Government. U.S. Treasury obligations include Treasury bills, Treasury
notes, and Treasury bonds. U.S. Treasury obligations also include the separate
principal and
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interest components of U.S. Treasury obligations which are traded under the
Separate Trading of Registered Interest and Principal of Securities ("STRIPS")
program. Agencies or instrumentalities established by the United States
Government include the Federal Home Loan Banks, the Federal Land Bank, the
Government National Mortgage Association, the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, the Student Loan
Marketing Association, the Small Business Administration, the Bank for
Cooperatives, the Federal Intermediate Credit Bank, the Federal Financing Bank,
the Federal Farm Credit Banks, the Federal Agricultural Mortgage Corporation,
the Resolution Funding Corporation, the Financing Corporation of America and the
Tennessee Valley Authority. Some of these securities are supported by the full
faith and credit of the United States Government while others are supported only
by the credit of the agency or instrumentality, which may include the right of
the issuer to borrow from the United States Treasury. In the case of securities
not backed by the full faith and credit of the United States, the investor must
look principally to the agency issuing or guaranteeing the obligation for
ultimate repayment, and may not be able to assert a claim against the United
States in the event the agency or instrumentality does not meet its commitments.
Shares of the Funds are not guaranteed or backed by the United States
Government.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements.
Repurchase agreements are transactions by which a Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed upon
time and price, thereby determining the yield during the term of the agreement.
In the event of a bankruptcy or other default of the seller of a repurchase
agreement, a Fund could experience both delays in liquidating the underlying
security and losses. To minimize these possibilities, each Fund intends to enter
into repurchase agreements only with its Custodian, banks having assets in
excess of $10 billion and the largest and, in the judgment of Dean Investment
Associates, most creditworthy primary U.S. Government securities dealers. Each
Fund will enter into repurchase agreements which are collateralized by U.S.
Government obligations in which that Fund could invest directly. Collateral for
repurchase agreements is held in safekeeping in the customer- only account of
the Funds' Custodian at the Federal Reserve Bank. At the time a Fund enters into
a repurchase agreement, the value of the collateral, including accrued interest,
will equal or exceed the value of the repurchase agreement and, in the case of a
repurchase agreement exceeding one day, the seller agrees to maintain sufficient
collateral so the value of the underlying collateral, including accrued
interest, will at all times equal or exceed the value of the repurchase
agreement. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value of the net
assets of the Fund would be invested in such securities and other illiquid
securities.
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COMMERCIAL PAPER. Commercial paper consists of short-term (usually from one to
two hundred seventy days) unsecured promissory notes issued by corporations in
order to finance their current operations. The Funds will only invest in
commercial paper within the two top ratings of either Moody's (Prime-1 or
Prime-2) or S&P (A-1 or A-2), or which, in the opinion of Dean Investment
Associates, is of equivalent investment quality. Certain notes may have floating
or variable rates. Variable and floating rate notes with a demand notice period
exceeding seven days will be subject to each Fund's restriction on illiquid
investments unless, in the judgment of Dean Investment Associates, such note is
liquid.
DELAYED SETTLEMENT TRANSACTIONS. Obligations issued on a when- issued or
to-be-announced basis are settled by delivery and payment after the date of the
transaction, usually within 15 to 45 days. In a to-be-announced transaction, a
Fund has committed to purchasing or selling securities for which all specific
information is not yet known at the time of the trade, particularly the face
amount in transactions involving mortgage-related securities. The Funds will
only make commitments to purchase obligations on a when-issued or
to-be-announced basis with the intention of actually acquiring the obligations,
but a Fund may sell these securities before the settlement date if it is deemed
advisable as a matter of investment strategy or in order to meet its
obligations, although it would not normally expect to do so. The Funds will not
enter into a delayed settlement transaction which settles in more than 120 days.
Purchases of securities on a when-issued or to-be-announced basis are
subject to market fluctuations and their current value is determined in the same
manner as other portfolio securities. When effecting such purchases for a Fund,
a segregated account of cash or liquid securities of the Fund in an amount
sufficient to make payment for the portfolio securities to be purchased will be
maintained with the Fund's Custodian at the trade date and valued daily at
market for the purpose of determining the adequacy of the securities in the
account. If the market value of segregated securities declines, additional cash
or securities will be segregated on a daily basis so that the market value of
the Fund's segregated assets will equal the amount of the Fund's commitments to
purchase when-issued obligations and securities on a to-be-announced basis. A
Fund's purchase of securities on a when-issued or to-be-announced basis may
increase its overall investment exposure and involves a risk of loss if the
value of the securities declines prior to the settlement date or if the
broker-dealer selling the securities fails to deliver after the value of the
securities has risen.
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OPTIONS AND FUTURES. Each Fund may write covered call and covered put options on
equity securities that the particular Fund is eligible to purchase. Call options
written by a Fund give the holder the right to buy the underlying securities
from the Fund at a stated exercise price; put options give the holder the right
to sell the underlying security to the Fund. These options are covered by the
Fund because, in the case of call options, it will own the underlying securities
as long as the option is outstanding or because, in the case of put options, it
will maintain a segregated account of cash, U.S. Government obligations or other
high-quality debt securities which can be liquidated promptly to satisfy any
obligation of the Fund to purchase the underlying securities. The Funds may also
write straddles (combinations of puts and calls on the same underlying
security). A Fund will receive a premium from writing a put or call option,
which increases the Fund's return in the event the option expires unexercised or
is closed out at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option and the remaining term of the option. By writing a
call option, the Fund limits its opportunity to profit from any increase in the
market value of the underlying security above the exercise price of the option.
By writing a put option, the Fund assumes the risk that it may be required to
purchase the underlying security for an exercise price higher than its then
current market value, resulting in a potential capital loss unless the security
subsequently appreciates in value.
Each Fund may purchase put options to hedge against a decline in the value
of its portfolio. By using put options in this manner, a Fund will reduce any
profit it might otherwise have realized in the underlying security by the amount
of the premium paid for the put option and by transaction costs. A Fund may
purchase call options on securities or on relevant stock indices to hedge
against an increase in the value of securities that the Fund wants to buy
sometime in the future. The premium paid for the call option and any transaction
costs will increase the cost of securities acquired, upon exercise of the
option, and, unless the price of the underlying security rises sufficiently, the
option may expire worthless.
The Funds may purchase either exchange-traded or over-the-counter options
on securities. A Fund's ability to terminate options positions established in
the over-the-counter market may be more limited than in the case of
exchange-traded options and may also involve the risk that securities dealers
participating in such transactions would fail to meet their obligations to the
Fund.
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The Funds may purchase and sell stock index futures contracts to hedge
against changes in prices. The Funds will not engage in futures transactions for
speculative purposes. Stock index futures contracts are based on indexes that
reflect the market value of common stock of the firms included in the indexes.
An index futures contract is an agreement pursuant to which two parties agree to
take or make delivery of an amount of cash equal to the differences between the
value of the index at the close of the last trading day of the contract and the
price at which the index contract was originally written. A Fund may also write
call options and purchase put options on futures contracts as a hedge to attempt
to protect securities in its portfolio against decreases in value. When a Fund
writes a call option on a futures contract, it is undertaking the obligation of
selling a futures contract at a fixed price at any time during a specified
period if the option is exercised. Conversely, as purchaser of a put option on a
futures contract, a Fund is entitled (but no obligated) to sell a futures
contract at the fixed price during the life of the option.
A Fund may not purchase or sell stock index futures contracts or related
options if immediately thereafter the sum of the amount of margin deposits on a
Fund's existing futures positions and premiums paid for related options would
exceed 5% of the market value of a Fund's total assets. When a Fund purchases
futures contracts, an amount of cash and cash equivalents, equal to the
underlying commodity value of the futures contracts (less any related margin
deposits), will be deposited in a segregated account with the Fund's custodian
(or the broker, if legally permitted) to collateralize the position and thereby
insure that the use of such futures contract is unleveraged. When a Fund sells
futures contracts, it will either own or have the right to receive the
underlying future or security, or will make deposits to collateralize the
position as discussed above. When a Fund uses futures and options on futures as
hedging devices, there is a risk that the prices of the securities subject to
the futures contracts may not correlate perfectly with the prices of the
securities in a Fund's portfolio. This may cause the futures contract and any
related options to react differently than the portfolio securities to market
changes. In addition, Dean Investment Associates could be incorrect in its
expectations about the direction or extent of market factors such as stock price
movements. In these events, the Fund may lose money on the futures contract or
option. It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although Dean Investment
Associates will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market on an exchange or otherwise
will exist for any particular futures contract or option at any particular time.
A Fund's ability to establish and close out futures and options positions
depends on this secondary market.
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BORROWING AND PLEDGING. Each Fund may borrow money from banks, provided
that, immediately after any such borrowings, there is asset coverage of 300% for
all borrowings of the Fund. A Fund will not make any borrowing which would cause
its outstanding borrowings to exceed one-third of the value of its total assets.
Each Fund may pledge assets in connection with borrowings but will not pledge
more than one-third of its total assets. Borrowing magnifies the potential for
gain or loss on the portfolio securities of the Funds and, therefore, if
employed, increases the possibility of fluctuation in a Fund's net asset value.
This is the speculative factor known as leverage. Each Fund's policies on
borrowing and pledging are fundamental policies which may not be changed without
the affirmative vote of a majority of its outstanding shares. It is the Funds
present intention which may be changed by the Board of Trustees without
shareholder approval, to borrow only for emergency or extraordinary purposes and
not for leverage.
LENDING PORTFOLIO SECURITIES. Each Fund may, from time to time, lend
securities on a short-term basis (i.e., for up to seven days) to banks, brokers
and dealers and receive as collateral cash, U.S. Government obligations or
irrevocable bank letters of credit (or any combination thereof), which
collateral will be required to be maintained at all times in an amount equal to
at least 100% of the current value of the loaned securities plus accrued
interest. Although each of the Funds does have the ability to make loans of all
of its portfolio securities, it is the present intention of the Trust, which may
be changed without shareholder approval, that such loans will not be made with
respect to a Fund if as a result the aggregate of all outstanding loans exceeds
one-third of the value of the Fund's total assets. Securities lending will
afford a Fund the opportunity to earn additional income because the Fund will
continue to be entitled to the interest payable on the loaned securities and
also will either receive as income all or a portion of the interest on the
investment of any cash loan collateral or, in the case of collateral other than
cash, a fee negotiated with the borrower. Such loans will be terminable at any
time. Loans of securities involve risks of delay in receiving additional
collateral or in recovering the securities lent or even loss of rights in the
collateral in the event of the insolvency of the borrower of the securities. A
Fund will have the right to regain record ownership of loaned securities in
order to exercise beneficial rights. A Fund may pay reasonable fees in
connection with arranging such loans.
PORTFOLIO TURNOVER. The Funds do not intend to use short-term trading as a
primary means of achieving their investment objectives. However, each Fund's
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when portfolio changes are deemed necessary or
appropriate by Dean Investment Associates. Although the annual portfolio
turnover rate of each of the Funds cannot be accurately
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predicted, it is not expected to exceed 100% with respect to any of the Funds,
but may be either higher or lower. A 100% turnover rate would occur, for
example, if all the securities of a Fund were replaced once in a one-year
period. High turnover involves correspondingly greater commission expenses and
transaction costs and increases the possibility that a Fund would not qualify as
a regulated investment company under Subchapter M of the Internal Revenue Code.
A Fund will not qualify as a regulated investment company if it derives 30% or
more of its gross income from gains (without offset for losses) from the sale or
other disposition of securities held for less than three months. High turnover
may result in a Fund recognizing greater amounts of income and capital gains,
which would increase the amount of income and capital gains which the Fund must
distribute to shareholders in order to maintain its status as a regulated
investment company and to avoid the imposition of federal income or excise taxes
(see "Taxes").
HOW TO PURCHASE SHARES
Your initial investment in a Fund ordinarily must be at least $1,000 ($250
for tax-deferred retirement plans). The Funds may, in Dean Investment
Associates' sole discretion, accept certain accounts with less than the stated
minimum initial investment. You may purchase additional shares through the Open
Account Program described below. You may open an account and make an initial
investment through securities dealers having a sales agreement with the Trust's
principal underwriter, 2480 Securities LLC (the "Underwriter"). You may also
make a direct initial investment by sending a check and a completed account
application to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O. Box
5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Large
Cap Value Fund", the "Small Cap Value Fund" or the "Balanced Fund," whichever is
applicable. An account application is included in this Prospectus.
The Trust mails you confirmations of all purchases or redemptions of Fund
shares. Certificates representing shares are not issued. The Trust and the
Underwriter reserve the right to limit the amount of investments and to refuse
to sell to any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone exchanges) made available to
investors.
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Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or numbers listed
below.
After an initial investment, all investors are considered participants in
the Open Account Program. The Open Account Program helps investors make
purchases of shares of the Funds over a period of years and permits the
automatic reinvestment of dividends and distributions of the Funds in additional
shares without a sales load.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a check
to Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354.
The check should be made payable to the applicable Fund.
Under the Open Account Program, you may also purchase shares of the Funds
by bank wire. Please telephone the Transfer Agent (Nationwide call toll-free
888-899-8343; in Cincinnati call 629- 2285) for instructions. Your bank may
impose a charge for sending your wire. There is presently no fee for receipt of
wired funds, but the Transfer Agent reserves the right to charge shareholders
for this service upon thirty days' prior notice to shareholders.
Each additional purchase request must contain the name of your account and
your account number to permit proper crediting to your account. While there is
no minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by the Trust. If a broker-dealer received concessions for selling
shares of the Funds to a current shareholder, such broker-dealer will receive
the concessions described above with respect to additional investments by the
shareholder.
SALES LOAD ALTERNATIVES
Each Fund offers two classes of shares which may be purchased at the
election of the purchaser. The two classes of shares each represent interests in
the same portfolio of investments of a Fund, have the same rights and are
identical in all material respects except that (i) Class C shares bear the
expenses of higher distribution fees; (ii) certain other class specific expenses
will be borne solely by the class to which such expenses are attributable,
including transfer agent fees
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attributable to a specific class of shares, printing and postage expenses
related to preparing and distributing materials to current shareholders of a
specific class, registration fees incurred by a specific class of shares, the
expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and expenses relating
to a specific class of shares; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements. The net
income attributable to Class C shares and the dividends payable on Class C
shares will be reduced by the amount of the incremental expenses associated with
the distribution fee (see "Distribution Plans").
The Funds' alternative sales arrangements permit investors to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold his or her shares and
other relevant circumstances. Investors should determine whether under their
particular circumstances it is more advantageous to incur a front-end sales load
and be subject to lower ongoing charges, as discussed below, or to have all of
the initial purchase price invested in the Funds with the investment thereafter
being subject to higher ongoing charges. A salesperson or any other person
entitled to receive any portion of a distribution fee may receive different
compensation for selling Class A or Class C shares.
As an illustration, investors who qualify for significantly reduced sales
loads, as described below, might elect the Class A sales load alternative
because similar sales load reductions are not available for purchases under the
Class C sales load alternative. Moreover, shares acquired under the Class A
sales load alternative would be subject to lower ongoing distribution fees as
described below. Investors not qualifying for reduced initial sales loads who
expect to maintain their investment for an extended period of time might also
elect the Class A sales load alternative because over time the accumulated
continuing distribution fees on Class C shares may exceed the difference in
initial sales loads between Class A and Class C shares. Again, however, such
investors must weigh this consideration against the fact that less of their
funds will be invested initially under the Class A sales load alternative.
Furthermore, the higher ongoing distribution fees will be offset to the extent
any return is realized on the additional funds initially invested under the
Class C sales load alternative.
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Some investors might determine that it would be more advantageous to
utilize the Class C sales load alternative to have more of their funds invested
initially, despite being subject to higher ongoing distribution fees and, for a
one-year period, being subject to a contingent deferred sales load. For example,
based on estimated fees and expenses, an investor subject to the maximum 5.25%
initial sales load on Class A shares who elects to reinvest dividends in
additional shares would have to hold the investment in Class A shares
approximately 5 years before the accumulated ongoing distribution fees on the
alternative Class C shares would exceed the initial sales load plus the
accumulated ongoing distribution fees on Class A shares. In this example and
assuming the investment was maintained for more than 5 years, the investor might
consider purchasing Class A shares. This example does not take into account the
time value of money which reduces the impact of the higher ongoing Class C
distribution fees, fluctuations in net asset value or the effect of different
performance assumptions.
In addition to the compensation otherwise paid to securities dealers, the
Underwriter may from time to time pay from its own resources additional cash
bonuses or other incentives to selected dealers in connection with the sale of
shares of the Funds. On some occasions, such bonuses or incentives may be
conditioned upon the sale of a specified minimum dollar amount of the shares of
the Funds during a specific period of time. Such bonuses or incentives may
include financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns and other dealer-sponsored programs or events.
Class A Shares
Class A shares are sold on a continuous basis at the public offering price
next determined after receipt of a purchase order by the Trust. Purchase orders
received by dealers prior to 4:00 p.m., Eastern time, on any business day and
transmitted to the Transfer Agent, the Trust's transfer agent, by 5:00 p.m.,
Eastern time, that day are confirmed at the public offering price determined as
of the close of the regular session of trading on the New York Stock Exchange on
that day. It is the responsibility of dealers to transmit properly completed
orders so that they will be received by the Transfer Agent by 5:00 p.m., Eastern
time. Dealers may charge a fee for effecting purchase orders. Direct purchase
orders received by the Transfer Agent by 4:00 p.m., Eastern time, are confirmed
at that day's public offering price. Direct investments received by the Transfer
Agent after 4:00 p.m., Eastern time, and orders received from dealers after 5:00
p.m., Eastern time, are confirmed at the public offering price next determined
on the following business day.
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The public offering price of Class A shares is the next determined net
asset value per share plus a sales load as shown in the following table.
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- -------- -------- -------
Less than $25,000 5.25% 5.54% 4.75%
$25,000 but less than $50,000 4.75 4.99 4.25
$50,000 but less than $100,000 4.00 4.17 3.50
$100,000 but less than $250,000 3.25 3.36 2.75
$250,000 but less than $500,000 2.50 2.56 2.25
$500,000 but less than $1,000,000 2.25 2.30 2.00
$1,000,000 or more None* None*
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of up to 1.00% may apply with respect to
Class A shares if a commission was paid by the Underwriter to a
participating unaffiliated dealer and the shares are redeemed within twelve
months from the date of purchase.
Under certain circumstances, the Underwriter may increase or decrease
the reallowance to dealers. Dealers engaged in the sale of shares of the Funds
may be deemed to be underwriters under the Securities Act of 1933. The
Underwriter retains the entire sales load on all direct initial investments in
the Funds and on all investments in accounts with no designated dealer of
record.
For initial purchases of Class A shares of the Funds of $1,000,000 or
more and subsequent purchases further increasing the size of the account, a
dealer's commission of 1.00% of such purchases from $1 million to $3 million,
.75% of such purchases from $3 million to $5 million and .50% of such purchases
in excess of $5 million of the purchase amount may be paid by the Underwriter to
participating unaffiliated dealers through whom such purchases are effected. In
determining a dealer's eligibility for such commission, purchases of Class A
shares of the Funds may be aggregated. Dealers should contact the Underwriter
concerning the applicability and calculation of the dealer's commission in the
case of combined purchases. An exchange from other funds will not qualify for
payment of the dealer's commission, unless such exchange is from a fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. Redemptions of Class A shares may result in the imposition of a
contingent deferred sales load if the dealer's commission described in this
paragraph was paid in connection with the purchase of such shares. See
"Contingent Deferred Sales Load for Certain Purchases of Class A Shares" below.
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REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of any Fund in the Dean Family of Funds
or of the Countrywide Intermediate Term Government Income Fund with the amount
of his current purchases in order to take advantage of the reduced sales loads
set forth in the table above. Purchases made of shares of any Fund in the Dean
Family of Funds pursuant to a Letter of Intent may also be eligible for the
reduced sales loads. The minimum initial investment under a Letter of Intent is
$10,000. Shareholders should contact the Transfer Agent for information about
the Right of Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. Banks, bank trust departments and savings
and loan associations, and employees of such institutions, in their fiduciary
capacity or for their own accounts, may purchase Class A shares of the Funds at
net asset value. To the extent permitted by regulatory authorities, a bank trust
department may charge fees to clients for whose account it purchases shares at
net asset value. Federal and state credit unions may also purchase Class A
shares at net asset value.
In addition, Class A shares of the Funds may be purchased at net asset
value by broker-dealers who have a sales agreement with the Underwriter and
their registered personnel and employees, including members of the immediate
families of such registered personnel and employees. Clients of investment
advisers and financial planners may also purchase Class A shares of the Funds at
net asset value if their investment adviser or financial planner has made
arrangements to permit them to do so with the Trust and the Underwriter. The
investment adviser or financial planner must notify the Transfer Agent that an
investment qualifies as a purchase at net asset value.
Class A shares may also be purchased at net asset value by
organizations which qualify under section 501(c)(3) of the Internal Revenue Code
as exempt from Federal income taxes, their employees, alumni, and benefactors,
and family members of such individuals.
Trustees, directors, officers and employees of the Trust, Dean
Investment Associates, the Underwriter or the Transfer Agent, including members
of the immediate family of such individuals and employee benefit plans
established by such entities, may also purchase Class A shares of the Funds at
net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES.
A contingent deferred sales load is imposed upon certain redemptions of Class A
shares (or shares into which such Class A shares were exchanged) purchased at
net asset value in amounts totaling $1 million or more, if the dealer's
commission described above was paid by the Underwriter and the shares are
redeemed within twelve months from the date of purchase. The
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contingent deferred sales load will be paid to the Underwriter and will be equal
to the commission percentage paid at the time of purchase (either 1.00%, .75% or
.50% depending on the amount of purchase) as applied to the lesser of (1) the
net asset value at the time of purchase of the Class A shares being redeemed or
(2) the net asset value of such Class A shares at the time of redemption. In
determining whether the contingent deferred sales load is payable, it is assumed
that shares not subject to the contingent deferred sales load are the first
redeemed followed by other shares held for the longest period of time. The
contingent deferred sales load will not be imposed upon shares representing
reinvested dividends or capital gains distributions, or upon amounts
representing share appreciation. If a purchase of Class A shares is subject to
the contingent deferred sales load, the investor will be so notified on the
confirmation for such purchase.
Redemptions of such Class A shares of the Funds held for at least 12
months will not be subject to the contingent deferred sales load and an exchange
of such Class A shares into another fund is not treated as a redemption and will
not trigger the imposition of the contingent deferred sales load at the time of
such exchange. A fund will "tack" the period for which such Class A shares being
exchanged were held onto the holding period of the acquired shares for purposes
of determining if a contingent deferred sales load is applicable in the event
that the acquired shares are redeemed following the exchange; however, the
period of time that the redemption proceeds of such Class A shares are held in a
money market fund will not count toward the holding period for determining
whether a contingent deferred sales load is applicable. See "Exchange
Privilege".
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Underwriter may require
documentation prior to waiver of the charge, including death certificates,
physicians' certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the applicable
sales load and for purposes of the Letter of Intent and Right of Accumulation
privileges, a purchaser includes an individual, his or her spouse and their
children under the age of 21 purchasing shares for his, her or their own
account; a trustee or other fiduciary purchasing shares for a single fiduciary
account although more than one beneficiary is involved; employees of a common
employer, provided that economies of scale are realized through remittances from
a single source and quarterly
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confirmation of such purchases; or an organized group, provided that the
purchases are made through a central administration, or a single dealer, or by
other means which result in economy of sales effort or expense. Contact the
Transfer Agent for additional information concerning purchases at net asset
value or at reduced sales loads.
Class C Shares
Class C shares are sold on a continuous basis at the net asset value
next determined after receipt of a purchase order by the Trust. Purchase orders
received by dealers prior to 4:00 p.m., Eastern time, on any business day and
transmitted to the Transfer Agent by 5:00 p.m., Eastern time, that day are
confirmed at the net asset value determined as of the close of the regular
session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Transfer Agent by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
the Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's net
asset value. Direct investments received by the Transfer Agent after 4:00 p.m.,
Eastern time, and orders received from dealers after 5:00 p.m., Eastern time,
are confirmed at the net asset value next determined on the following business
day.
A contingent deferred sales load is imposed on Class C shares if an
investor redeems an amount which causes the current value of the investor's
account to fall below the total dollar amount of purchase payments subject to
the deferred sales load, except that no such charge is imposed upon shares
representing reinvested dividends or capital gains distributions, or upon
amounts representing share appreciation.
Whether a contingent deferred sales load is imposed will depend on the
amount of time since the investor made a purchase payment from which an amount
is being redeemed. Purchases are subject to the contingent deferred sales load
according to the following schedule:
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is payable, it
is assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
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The following example will illustrate the operation of the contingent
deferred sales load. Assume that an individual opens an account and purchases
1,000 shares at $10 per share and that six months later the net asset value per
share is $12 and, during such time, the investor has acquired 50 additional
shares through reinvestment of distributions. If at such time the investor
should redeem 450 shares (proceeds of $5,400), 50 shares will not be subject to
the load because of dividend reinvestment. With respect to the remaining 400
shares, the load is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $4,000 of the
$5,400 redemption proceeds will be charged the load. At the rate of 1%, the
contingent deferred sales load would be $40. In determining whether an amount is
available for redemption without incurring a deferred sales load, the purchase
payments made for all Class C shares in the shareholder's account are
aggregated, and the current value of all such shares is aggregated.
All sales loads imposed on redemptions are paid to the Underwriter. The
Underwriter intends to pay a commission of 1% of the purchase amount to
participating brokers at the time the investor purchases Class C shares.
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Underwriter may require
documentation prior to waiver of the charge, including death certificates,
physicians' certificates, etc.
SHAREHOLDER SERVICES
Contact the Transfer Agent (Nationwide call toll-free 888- 899-8343; in
Cincinnati call 629-2285) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service. Purchases of additional Class A shares while the plan
is in effect are generally undesirable because a sales load is incurred whenever
purchases are made.
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Tax-Deferred Retirement Plans
Shares of the Funds are available for purchase in connection with the
following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for
individuals and their non-employed spouses
-- Qualified pension and profit-sharing plans for
employees, including those profit-sharing plans with a
401(k) provision
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code
Direct Deposit Plans
Shares of the Funds may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Funds.
Automatic Investment Plan
You may make automatic monthly investments in a Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Transfer Agent pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Funds.
Reinvestment Privilege
If you have redeemed shares of a Fund, you may reinvest all or part of
the proceeds without any additional sales load. This reinvestment must occur
within ninety days of the redemption and the privilege may only be exercised
once per year.
HOW TO REDEEM SHARES
You may redeem shares of a Fund on each day that the Trust is open for
business by sending a written request to the Transfer Agent. The request must
state the number of shares or the dollar amount to be redeemed and your account
number. The request must be signed exactly as your name appears on the Trust's
account
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records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any eligible guarantor institution, including
banks, brokers and dealers, municipal securities brokers and dealers, government
securities brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
You may also redeem shares by placing a wire redemption request through
a securities broker or dealer. Unaffiliated broker-dealers may impose a fee on
the shareholder for this service. You will receive the net asset value per share
next determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.
If your instructions request a redemption by wire, you will be charged
an $8 processing fee. The Trust reserves the right, upon thirty days' written
notice, to change the processing fee. All charges will be deducted from your
account by redemption of shares in your account. Your bank or brokerage firm may
also impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
A contingent deferred sales load may apply to a redemption of Class C
shares or to a redemption of certain Class A shares purchased at net asset
value. See "How to Purchase Shares".
Shares are redeemed at their net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described above, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of the Funds by
certified check or wire.
The Trust and the Transfer Agent will consider all written and verbal
instructions as authentic and will not be responsible for the processing of
exchange instructions received by telephone which are reasonably believed to be
genuine or the delivery or transmittal of the redemption proceeds by wire. The
affected shareholders will bear the risk of any such loss. The privilege
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of exchanging shares by telephone is automatically available to all
shareholders. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the Trust
and/or the Transfer Agent do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than $1,000 (based on actual amounts invested including
any sales load paid, unaffected by market fluctuations), or $250 in the case of
tax-deferred retirement plans, or such other minimum amount as the Trust may
determine from time to time. After notification to you of the Trust's intention
to close your account, you will be given thirty days to increase the value of
your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
Shares of the Funds may be exchanged for each other or for the
following series of Countrywide Investment Trust:
Countrywide Short Term Government Income Fund -- a money market fund
which invests in short-term U.S. Government obligations backed by the
"full faith and credit" of the United States and seeks high current
income consistent with protection of capital.
Countrywide Intermediate Term Government Income Fund -- invests in
intermediate term U.S. Government obligations and seeks high current
income consistent with protection of capital. Capital appreciation is a
secondary objective.
Class A shares of the Funds may be exchanged for shares of the
Countrywide Short Term Government Income Fund and for Class A shares of the
Countrywide Intermediate Term Government Income Fund (provided such shares are
not subject to a contingent deferred sales load).
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<PAGE>
Class C shares of the Funds, as well as Class A shares of the Funds
subject to a contingent deferred sales load, may be exchanged, on the basis of
relative net asset value per share, for shares of the Countrywide Short Term
Government Income Fund and Class C shares of the Countrywide Intermediate Term
Government Income Fund. A fund will "tack" the period for which the shares being
exchanged were held onto the holding period of the acquired shares for purposes
of determining if a contingent deferred sales load is applicable in the event
that the acquired shares are redeemed following the exchange. The period of time
that shares are held in a money market fund will not count toward the holding
period for determining whether a contingent deferred sales load is applicable.
You may request an exchange by sending a written request to the
Transfer Agent. The request must be signed exactly as your name appears on the
Trust's account records. Exchanges may also be requested by telephone. If you
are unable to execute your transaction by telephone (for example during times of
unusual market activity) consider requesting your exchange by mail or by
visiting the Trust's offices at 2480 Kettering Tower, Dayton, Ohio 45423. An
exchange will be effected at the next determined net asset value after receipt
of a request by the Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain
more information about exchanges among the Funds.
DIVIDENDS AND DISTRIBUTIONS
The Large Cap Value Fund and the Balanced Fund each expects to
distribute substantially all of its net investment income, if any, on a
quarterly basis. The Small Cap Value Fund expects to distribute substantially
all of its net investment income, if any, on an annual basis. Each Fund expects
to distribute any net realized long-term capital gains at least once each year.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains.
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<PAGE>
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital
gains distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified, distributions will automatically be reinvested in additional shares.
All distributions will be based on the net asset value in effect on the payable
date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option.
An investor who has received in cash any dividend or capital gains
distribution from any Fund may return the distribution within thirty days of the
distribution date to the Transfer Agent for reinvestment at the net asset value
next determined after its return. The investor or his dealer must notify the
Transfer Agent that a distribution is being reinvested pursuant to this
provision.
TAXES
Each Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. Each Fund intends to distribute substantially all of its net
investment income and any net realized capital gains to its shareholders.
Distributions of net investment income as well as from net realized short-term
capital gains, if any, are taxable as ordinary income. Dividends distributed by
the Funds from net investment income may be eligible, in whole or in part, for
the dividends received deduction available to corporations. Distributions of net
realized long-term capital gains are taxable as long-term capital gains
regardless of how long you have held your Fund shares. Redemptions and exchanges
of shares of the Funds are taxable events on which a shareholder may realize a
gain or loss.
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<PAGE>
The Funds will mail to each of their shareholders a statement
indicating the amount and federal income tax status of all distributions made
during the year. In addition to federal taxes, shareholders of the Funds may be
subject to state and local taxes on distributions. Shareholders should consult
their tax advisors about the tax effect of distributions and withdrawals from
the Funds and the use of the Automatic Withdrawal Plan and the Exchange
Privilege. The tax consequences described in this section apply whether
distributions are taken in cash or reinvested in additional shares.
OPERATION OF THE FUNDS
The Funds are diversified series of the Dean Family of Funds, an
open-end management investment company organized as an Ohio business trust on
December 18, 1996. The Board of Trustees supervises the business activities of
the Trust. Like other mutual funds, the Trust retains various organizations to
perform specialized services for the Funds.
The Trust retains Dean Investments Associates, 2480 Kettering Tower,
Dayton, Ohio, to manage the Funds' investments. Dean Investment Associates is an
independent investment counsel firm which has been advising individual,
institutional and corporate clients since 1973. Dean Investment Associates has
not previously provided investment advisory services to a registered investment
company. The controlling shareholder of Dean Investment Associates is Chauncey
H. Dean. Each Fund pays Dean Investment Associates a fee for its services equal
to the annual rate of 1.00% of the average value of its daily net assets. As of
the date of this Prospectus, Dean Investment Associates is the sole shareholder
of each Fund.
Dirk H. Van Dijk and Arvind K. Sachdeva are primarily responsible for
managing the portfolio of the Large Cap Value Fund. Mr. Van Dijk is currently
Senior Equity Analyst and has been employed by Dean Investment Associates since
1994. He previously was an Equity Analyst with Bartlett & Co., an investment
adviser. Mr. Sachdeva is currently Director of Research and has been employed by
Dean Investment Associates in various capacities since 1993. He previously was a
portfolio manager for Carillon Advisers, an investment management firm.
Dirk H. Van Dijk and Amit Dugar are the persons primarily responsible
for managing the portfolio of the Small Cap Value Fund. Mr. Dugar has been
employed by Dean Investment Associates as an Equity Analyst since 1994. He
formerly was a Quantitative Analyst with Renaissance Investment Management, an
investment adviser.
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<PAGE>
Arvind K. Sachdeva, James C. Hunter, David S. Oda and James G. Tillar
are primarily responsible for managing the portfolio of the Balanced Fund. Mr.
Hunter has been employed as an Equity Analyst by Dean Investment Associates
since 1993. He previously was a Security Analyst for Star Bank, N.A. Mr. Oda,
Senior Fixed Income Analyst, has been employed by Dean Investment Associates
since 1990. Mr. Tillar, Assistant Vice President, has been employed by Dean
Investment Associates since 1987.
The Funds are responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Funds' shares (see
"Distribution Plans"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Funds, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Funds may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
2480 Securities LLC, 2480 Kettering Tower, Dayton, Ohio (the
"Underwriter"), an affiliate of Dean Investment Associates, is the exclusive
agent for the distribution of shares of the Funds.
The Trust has retained Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio 45202, to serve as the Funds' transfer
agent, dividend paying agent and shareholder service agent. The Transfer Agent
is wholly-owned indirect subsidiary of Countrywide Credit Industries, Inc., a
New York Stock Exchange listed company principally engaged in residential
mortgage lending.
The Transfer Agent also provides accounting and pricing services to the
Funds. The Transfer Agent receives a monthly fee from each Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained to provide
administrative services to the Funds. In this capacity, the Transfer Agent
supplies executive, administrative and regulatory services, supervises the
preparation of tax returns, and coordinates the preparation of reports to
shareholders and reports to and filings with the Securities and Exchange
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<PAGE>
Commission and state securities authorities. Each Fund pays the Transfer Agent a
fee for these administrative services at the annual rate of .10% of the average
value of its daily net assets up to $100,000,000, .075% of such assets from
$100,000,000 to $200,000,000 and .05% of such assets in excess of $200,000,000;
provided, however, that the minimum fee is $1,000 per month with respect to each
Fund.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, Dean Investment Associates may give
consideration to sales of shares of the Funds as a factor in the selection of
brokers and dealers to execute portfolio transactions of the Funds. Subject to
the requirements of the Investment Company Act of 1940 (the "1940 Act") and
procedures adopted by the Board of Trustees, the Funds may execute portfolio
transactions through any broker or dealer and pay brokerage commissions to a
broker (i) which is an affiliated person of the Trust, or (ii) which is an
affiliated person of such person, or (iii) an affiliated person of which is an
affiliated person of the Trust, Dean Investment Associates or the Underwriter.
Shares of each Fund have equal voting rights and liquidation rights,
and are voted in the aggregate and not by Fund except in matters where a
separate vote is required by the 1940 Act or when the matter affects only the
interests of a particular Fund. When matters are submitted to shareholders for a
vote, each shareholder is entitled to one vote for each full share owned and
fractional votes for fractional shares owned. The Trust does not normally hold
annual meetings of shareholders. The Trustees shall promptly call and give
notice of a meeting of shareholders for the purpose of voting upon the removal
of any Trustee when requested to do so in writing by shareholders holding 10% or
more of the Trust's outstanding shares. The Trust will comply with the
provisions of Section 16(c) of the 1940 Act in order to facilitate
communications among shareholders.
DISTRIBUTION PLANS
CLASS A SHARES. Pursuant to Rule 12b-1 under the 1940 Act, the Funds
have adopted a plan of distribution (the "Class A Plan") under which the Funds'
Class A shares may directly incur or reimburse the Underwriter for certain
distribution-related expenses, including payments to securities dealers and
others who are engaged in the sale of shares of the Funds and who may be
advising investors regarding the purchase, sale or retention of Fund shares;
expenses of maintaining personnel who engage in or support distribution of
shares or who render shareholder support services not otherwise provided by the
Transfer Agent; expenses of formulating and implementing marketing and
promotional
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activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Funds; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of the Funds' Class A shares.
Pursuant to the Class A Plan, the Funds may make payments to dealers
and other persons, including the Underwriter and its affiliates, who may be
advising investors regarding the purchase, sale or retention of Class A shares.
The annual limitation for payment of expenses pursuant to the Class A Plan is
.25% of each Fund's average daily net assets allocable to Class A shares.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class A Plan is terminated by a Fund in accordance with its terms, the
Fund will not be required to make any payments for expenses incurred by the
Underwriter after the date the Class A Plan terminates.
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company Act
of 1940, the Funds have adopted a plan of distribution (the "Class C Plan")
which provides for two categories of payments. First, the Class C Plan provides
for the payment to the Underwriter of an account maintenance fee, in an amount
equal to an annual rate of .25% of a Fund's average daily net assets allocable
to Class C shares, which may be paid to other dealers based on the average value
of Fund shares owned by clients of such dealers. In addition, the Class C shares
may directly incur or reimburse the Underwriter in an amount not to exceed .75%
per annum of a Fund's average daily net assets allocable to Class C shares for
expenses incurred in the distribution and promotion of the Fund's Class C
shares, including payments to securities dealers and others who are engaged in
the sale of shares of the Funds and who may be advising investors regarding the
purchase, sale or retention of Fund shares; expenses of maintaining personnel
who engage in or support distribution of shares or who render shareholder
support services not otherwise provided by the Transfer Agent; expenses of
formulating and implementing marketing and promotional activities, including
direct mail promotions and mass media advertising; expenses of preparing,
printing and distributing sales literature and prospectuses and statements of
additional information and reports for recipients other than existing
shareholders of the Funds; expenses of obtaining such information, analyses and
reports with respect to marketing and promotional activities as the Trust may,
from time to time, deem advisable; and any other expenses related to the
distribution of a Fund's Class C shares.
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<PAGE>
Pursuant to the Class C Plan, the Funds may make payments to dealers
and other persons, including the Underwriter and its affiliates, who may be
advising investors regarding the purchase, sale or retention of Class C shares.
Unreimbursed expenditures will not be carried over from year to year.
In the event the Class C Plan is terminated by a Fund in accordance with its
terms, the Fund will not be required to make any payments for expenses incurred
by the Underwriter after the date the Class C Plan terminates. The Underwriter
may make payments to dealers and other persons in an amount up to .75% per annum
of the average value of Class C shares owned by their clients, in addition to
the .25% account maintenance fee described above.
GENERAL. Pursuant to the Plans, the Funds may also make payments to
banks or other financial institutions that provide shareholder services and
administer shareholder accounts. The Glass-Steagall Act prohibits banks from
engaging in the business of underwriting, selling or distributing securities.
Although the scope of this prohibition under the Glass-Steagall Act has not been
clearly defined by the courts or appropriate regulatory agencies, management of
the Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Funds or their shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Funds may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Funds, no preference will be shown for
such securities.
The National Association of Securities Dealers, in its Rules of Fair
Practice, places certain limitations on asset-based sales charges of mutual
funds. These Rules require fund-level accounting in which all sales charges -
front-end load, 12b-1 fees or contingent deferred load - terminate when a
percentage of gross sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
On each day that the Trust is open for business, the share price (net
asset value) of Class C shares and the public offering price (net asset value
plus applicable sales load) of Class A shares is determined as of the close of
the regular session of
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trading on the New York Stock Exchange, currently 4:00 p.m., Eastern time. The
Trust is open for business on each day the New York Stock Exchange is open for
business and on any other day when there is sufficient trading in a Fund's
investments that its net asset value might be materially affected. The net asset
value per share of each Fund is calculated by dividing the sum of the value of
the securities held by the Fund plus cash or other assets minus all liabilities
(including estimated accrued expenses) by the total number of shares outstanding
of the Fund, rounded to the nearest cent.
U.S. Government obligations are valued at their most recent bid prices
as obtained from one or more of the major market makers for such securities.
Other portfolio securities are valued as follows: (i) securities which are
traded on stock exchanges or are quoted by NASDAQ are valued at the last
reported sale price as of the close of the regular session of trading on the New
York Stock Exchange on the day the securities are being valued, or, if not
traded on a particular day, at the closing bid price, (ii) securities traded in
the over-the-counter market, and which are not quoted by NASDAQ, are valued at
the last sale price (or, if the last sale price is not readily available, at the
last bid price as quoted by brokers that make markets in the securities) as of
the close of the regular session of trading on the New York Stock Exchange on
the day the securities are being valued, (iii) securities which are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, and (iv) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of each Fund will fluctuate with the
value of the securities it holds.
PERFORMANCE INFORMATION
From time to time, each Fund may advertise its "average annual total
return." Each Fund may also advertise "yield." Both yield and average annual
total return figures are based on historical earnings and are not intended to
indicate future performance.
The "average annual total return" of a Fund refers to the average
annual compounded rates of return over the most recent 1, 5 and 10 year periods
or, where the Fund has not been in operation for such period, over the life of
the Fund (which periods will be stated in the advertisement) that would equate
an initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and the
deduction of the current maximum sales load from the initial investment. A Fund
may also
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advertise total return (a "nonstandardized quotation") which is calculated
differently from "average annual total return." A nonstandardized quotation of
total return may be a cumulative return which measures the percentage change in
the value of an account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and capital gains
distributions. A nonstandardized quotation of total return may also indicate
average annual compounded rates of return over periods other than those
specified for "average annual total return." These nonstandardized returns do
not include the effect of the applicable sales load which, if included, would
reduce total return. A nonstandardized quotation of total return will always be
accompanied by a Fund's "average annual total return" as described above.
The "yield" of a Fund is computed by dividing the net investment income
per share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period.
From time to time, the Funds may advertise their performance rankings
as published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Funds may also compare
their performance to that of other selected mutual funds, averages of the other
mutual funds within their categories as determined by Lipper, or recognized
indicators such as the Dow Jones Industrial Average and the Standard & Poor's
500 Stock Index. In connection with a ranking, the Funds may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Funds may also present their performance and other investment
characteristics, such as volatility or a temporary defensive posture, in light
of Dean Investment Associates' view of current or past market conditions or
historical trends.
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<PAGE>
DEAN FAMILY OF FUNDS
2480 Kettering Tower
Dayton, Ohio 45423
Board of Trustees
Victor S. Curtis
Chauncey H. Dean
Robert D. Dean
Frank J. Perez
Dr. David H. Ponitz
Frank H. Scott
Gilbert P. Williamson
Investment Adviser
C.H. DEAN & ASSOCIATES, INC.
2480 Kettering Tower
Dayton, Ohio 45423
Underwriter
2480 SECURITIES LLC
2480 Kettering Tower
Dayton, Ohio 45243
Transfer Agent
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 888-899-8343
Cincinnati: 513-629-2285
TABLE OF CONTENTS
PAGE
Expense Information..........................................................
Investment Objectives, Investments Policies and Risk
Considerations..............................................................
How To Purchase Shares.......................................................
Shareholder Services.........................................................
How To Redeem Shares.........................................................
Exchange Privilege...........................................................
Dividends and Distributions..................................................
Taxes........................................................................
Operation of the Funds.......................................................
Distribution Plans...........................................................
Calculation of Share Price and Public Offering Price.........................
Performance Information......................................................
- 37 -
<PAGE>
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 38 -
<PAGE>
DEAN FAMILY OF FUNDS
Account Application (Check appropriate Fund)
o Large Cap Value Fund Class A Shares (D0) $____ ACCOUNT NO. D -
o Large Cap Value Fund Class C Shares (D1) (For Fund Use Only)
o Small Cap Value Fund Class A Shares (D2) $____
o Small Cap Value Fund Class C Shares (D3) FOR BROKER/DEALER USE ONLY
o Balanced Fund Class A Shares (D4) $____ Firm Name:__________________
o Balanced Fund Class C Shares (D5) Home Office Address:________
Branch Address:_____________
Please mail account application to: Rep Name & No.:_____________
Countrywide Fund Services, Inc. Rep Signature:______________
P.O. Box 5354
Cincinnati, Ohio 45201-5354
o Check or draft enclosed payable to the Fund(s) designated above
($1,000 minimum).
o Bank Wire From:_____________________________________________________________
o Exchange From:______________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
_______________________________________________ _____________________________
Name of Individual, Corporation, Organization, (In case of custodial account
or Minor, etc. please list minor's S.S.#)
_______________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other________
Address Phone
_______________________________________________ ( )________________________
Street or P.O. Box Business Phone
_______________________________________________ ( )
City State Zip Home Phone
Check Appropriate Box: o Individual o Partnership o Corporation o Trust
o Joint Tenant (Right of Survivorship Presumed) o Custodial o Non-Profit o Other
Occupation and Employer Name/Address____________________________________________
Are you an associated person of an NASD member? o Yes o No
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the
Taxpayer Identification Number listed above is my correct number. Check box if
appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject to backup
withholding because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends; or the
Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number has
not been issued to me and I have mailed or delivered an application to receive a
Taxpayer Identification Number to the Internal Revenue Service Center or Social
Security Administration Office. I understand that if I do not provide a Taxpayer
Identification Number within 60 days that 31% of all reportable payments will be
withheld until I provide a number.
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital gains
distributions paid in cash, long term capital gains
distributions reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions
paid in cash.
REDUCED SALES CHARGES (CLASS A SHARES ONLY)
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's
confirmation of the following holdings of the Dean Family of Funds.
Account Number/Name Account Number/Name
_____________________________________ __________________________________
_____________________________________ __________________________________
_____________________________________ __________________________________
Letter of Intent: (Complete the Right of Accumulation section if related
accounts are being applied to your Letter of Intent.)
o I agree to the Letter of Intent in the current Prospectus of the Dean Family
of Funds. Although I am not obligated to purchase, and the Trust is not
obligated to sell, I intend to invest over a 13 month period beginning
______________________ 19 _______ (purchase date of not more than 90 days prior
to this Letter) an aggregate amount in the Dean Family of Funds at least equal
to (check appropriate box):
o $25,000 o $50,000 o $100,000 o $250,000 o $500,000 o $1,000,000
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Funds' current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions
for automatic reinvestment in additional shares of the Funds for credit to the
investor's account and to surrender for redemption shares held in the investor's
account in accordance with any of the procedures elected above or for payment of
service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this Application.
The investor hereby ratifies any instructions given pursuant to this Application
and for himself and his successors and assigns does hereby release Countrywide
Fund Services, Inc., Dean Family of Funds, C.H. Dean & Associates, Inc., 2480
Securities LLC, and their respective officers, employees, agents and affiliates
from any and all liability in the performance of the acts instructed herein
provided that such entities have exercised due care to determine that the
instructions are genuine. Neither the Trust, Countrywide Fund Services, Inc.,
nor their respective affiliates will be liable for complying with telephone
instructions they reasonably believe to be genuine or for any loss, damage, cost
or expense in acting on such telephone instructions. The investor(s) will bear
the risk of any such loss. The Trust or Countrywide Fund Services, Inc., or
both, will employ reasonable procedures to determine that telephone instructions
are genuine. If the Trust and/or Countrywide Fund Services, Inc. do not employ
such procedures, they may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions, providing
written confirmation of the transactions and/or tape recording telephone
instructions. The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to avoid
backup withholding.
_____________________________________ ___________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
_____________________________________ ___________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: Corporations, trusts and other organizations must complete the resolution
form on the reverse side. Unless otherwise specified, each joint owner shall
have full authority to act on behalf of the account.
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund(s))
The Automatic Investment Plan is available for all established accounts of the
Dean Family of Funds. There is no charge for this service, and it offers the
convenience of automatic investing on a regular basis. The minimum investment is
$50.00 per month. For an account that is opened by using this Plan, the minimum
initial and subsequent investments must be $50.00. Though a continuous program
of 12 monthly investments is recommended, the Plan may be discontinued by the
shareholder at any time.
Please invest $ _________________ per month ABA Routing Number_____________
in the (check the appropriate Fund.)
o Large Cap Value Fund o Small Cap Value Fund FI Account Number______________
o Balanced Fund o Checking Account
o Savings Account
__________________________________________
Name of Financial Institution (FI) Please make my automatic
investment on:
__________________________________________
City State o the last business day of
each month
o the 15th day of each month
o both the 15th and last
business day
X_________________________________________ X_____________________________
(Signature of Depositor EXACTLY as it (Signature of Joint Tenant -
appears on FI Records) if any)
(Joint Signatures are required when bank account is in joint names. Please sign
exactly as signature appears on your FI's records.)
Please attach a voided check for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund
Services, Inc. ("Countrywide") has put into effect, by which amounts, determined
by your depositor, payable to the applicable Fund designated above, for purchase
of shares of said Fund, are collected by Countrywide, Countrywide hereby agrees:
Countrywide will indemnify and hold you harmless from any liability to
any person or persons whatsoever arising out of the payment by you of any amount
drawn by the Funds to their own order on the account of your depositor or from
any liability to any person whatsoever arising out of the dishonor by you
whether with or without cause or intentionally or inadvertently, of any such
amount. Countrywide will defend, at its own cost and expense, any action which
might be brought against you by any person or persons whatsoever because of your
actions taken pursuant to the foregoing request or in any manner arising by
reason of your participation in this arrangement. Countrywide will refund to you
any amount erroneously paid by you to the Funds if the claim for the amount of
such erroneous payment is made by you within six (6) months from the date of
such erroneous payment; your participation in this arrangement and that of the
Funds may be terminated by thirty (30) days' written notice from either party to
the other.
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund(s))
This is an authorization for you to withdraw $ from my mutual fund
account beginning the last business day of the month __________.
Please Indicate Withdrawal Schedule (Check One):
o Monthly -- Withdrawals will be made on the last business day of each month.
o Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
o Annually -- Please make withdrawals on the last business day of the month
of:___________.
Please Select Payment Method (Check One):
o Exchange: Please exchange the withdrawal proceeds into another account
number: ___ ___ -- ___ ___ ___ ___ ___ ___ -- ___
o Check: Please mail a check for my withdrawal proceeds to the mailing address
on this account.
o ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank
checking or savings account as indicated below. I understand that the transfer
will be completed in two to three business days and that there is no charge.
o Bank Wire: Please send my withdrawal proceeds via bank wire, to the account
indicated below. I understand that the wire will be completed in one business
day and that there is an $8.00 fee.
Please attach a voided _____________________________________________
check for ACH or bank wire Bank Name Bank Address
_____________________________________________
Bank ABA# Account # Account Name
o Send to special payee (other than applicant): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee___________________________________________________________________
Please send to:_________________________________________________________________
Street address City State Zip
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of the Dean
Family of Funds (the Trust) and that
________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of
the corporation or organization and to take any action for it as may be
necessary or appropriate with respect to its shareholder account with the Trust,
and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign
any documents necessary or appropriate to appoint Countrywide Fund Services,
Inc. as redemption agent of the corporation or organization for shares of the
applicable series of the Trust, to establish or acknowledge terms and conditions
governing the redemption of said shares and to otherwise implement the
privileges elected on the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the
Charter and Bylaws or other empowering documents of the
________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on at which a quorum was
present and acting throughout, and that the same are now in full force and
effect. I further certify that the following is (are) duly elected officer(s) of
the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
__________________________________ ________________________________
__________________________________ ________________________________
__________________________________ ________________________________
Witness my hand and seal of the corporation or organization this__________day
of___________________, 19_______
__________________________________ ________________________________
*Secretary-Clerk Other Authorized Officer
(if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
<PAGE>
DEAN FAMILY OF FUNDS
STATEMENT OF ADDITIONAL INFORMATION
________, 1997
Large Cap Value Fund
Small Cap Value Fund
Balanced Fund
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of the Dean Family of Funds dated
________, 1997. A copy of the Funds' Prospectus can be obtained by writing the
Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202, or by calling
the Trust nationwide toll-free 800-899-8343.
- 1 -
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dean Family of Funds
2480 Kettering Tower
Dayton, Ohio 45423
TABLE OF CONTENTS
PAGE
THE TRUST....................................................................3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS................................4
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS.....................11
INVESTMENT LIMITATIONS......................................................13
TRUSTEES AND OFFICERS.......................................................16
THE INVESTMENT ADVISER......................................................18
THE UNDERWRITER. . . . .....................................................19
DISTRIBUTION PLANS. . . . ..................................................19
SECURITIES TRANSACTIONS.....................................................21
PORTFOLIO TURNOVER..........................................................23
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE........................23
OTHER PURCHASE INFORMATION..................................................23
TAXES.......................................................................24
REDEMPTION IN KIND..........................................................26
HISTORICAL PERFORMANCE INFORMATION..........................................26
CUSTODIAN...................................................................28
AUDITORS....................................................................28
COUNTRYWIDE FUND SERVICES, INC..............................................28
STATEMENT OF ASSETS AND LIABILITIES.........................................29
- 2 -
<PAGE>
THE TRUST
The Dean Family of Funds (the "Trust") was organized as an Ohio
business trust on December 18, 1996. The Trust currently offers three series of
shares to investors: the Large Cap Value Fund, the Small Cap Value Fund and the
Balanced Fund (referred to individually as a "Fund" and collectively as the
"Funds"). Each Fund has its own investment objective(s) and policies.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.
Both Class A shares and Class C shares of the Funds represent an
interest in the same assets of such Fund, have the same rights and are identical
in all material respects except that (i) Class C shares bear the expenses of
higher distribution fees; (ii) certain other class specific expenses will be
borne solely by the class to which such expenses are attributable, including
transfer agent fees attributable to a specific class of shares, printing and
postage expenses related to preparing and distributing materials to current
shareholders of a specific class, registration fees incurred by a specific class
of shares, the expenses of administrative personnel and services required to
support the shareholders of a specific class, litigation or other legal expenses
relating to a class of shares, Trustees' fees or expenses incurred as a result
of issues relating to a specific class of shares and accounting fees and
expenses relating to a specific class of shares; and (iii) each class has
exclusive voting rights with respect to matters relating to its own distribution
arrangements. The Board of Trustees may classify and reclassify the shares of a
Fund into additional classes of shares at a future date.
- 3 -
<PAGE>
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
A more detailed discussion of some of the terms used and investment
policies described in the Prospectus (see "Investment Objectives and Policies")
appears below:
Majority. As used in the Prospectus and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
any Fund) means the lesser of (1) 67% or more of the outstanding shares of the
Trust (or the applicable Fund) present at a meeting, if the holders of more than
50% of the outstanding shares of the Trust (or the applicable Fund) are present
or represented at such meeting or (2) more than 50% of the outstanding shares of
the Trust (or the applicable Fund).
Commercial Paper. Commercial paper consists of short-term (usually from
one to two hundred seventy days) unsecured promissory notes issued by
corporations in order to finance their current operations. Each Fund will only
invest in commercial paper rated A-1 or A-2 by Standard & Poor's Ratings Group
("S&P") or Prime-1 or Prime-2 by Moody's Investors Service, Inc. ("Moody's") or
which, in the opinion of Dean Investment Associates, is of equivalent investment
quality. Certain notes may have floating or variable rates. Variable and
floating rate notes with a demand notice period exceeding seven days will be
subject to each Fund's restrictions on illiquid investments (see "Investment
Limitations") unless, in the judgment of Dean Investment Associates, subject to
the direction of the Board of Trustees, such note is liquid.
The rating of Prime-1 is the highest commercial paper rating assigned
by Moody's. Among the factors considered by Moody's in assigning ratings are the
following: valuation of the management of the issuer; economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
strength of the parent company and the relationships which exist with the
issuer; and recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to meet such
obligations. These factors are all considered in determining whether the
commercial paper is rated Prime-1 or Prime-2. Commercial paper rated A-1
(highest quality) by S&P has the following characteristics: liquidity ratios are
adequate to meet cash requirements; long-term senior debt is rated "A" or
better, although in some cases "BBB" credits may be allowed; the issuer has
access to at least two additional channels of borrowing; basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances;
typically, the issuer's
- 4 -
<PAGE>
industry is well established and the issuer has a strong position within the
industry; and the reliability and quality of management are unquestioned. The
relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1 or A-2.
Bank Debt Instruments. Bank debt instruments in which the Funds may
invest consist of certificates of deposit, bankers' acceptances and time
deposits issued by national banks and state banks, trust companies and mutual
savings banks, or of banks or institutions the accounts of which are insured by
the Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation. Certificates of deposit are negotiable certificates
evidencing the indebtedness of a commercial bank to repay funds deposited with
it for a definite period of time (usually from fourteen days to one year) at a
stated or variable interest rate. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft which has been drawn on it by
a customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Investments in time deposits maturing
in more than seven days will be subject to each Fund's restrictions on illiquid
investments (see "Investment Limitations").
Repurchase Agreements. Repurchase agreements are transactions by which
a Fund purchases a security and simultaneously commits to resell that security
to the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
of the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value of its net
assets would be invested in such securities and other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of
- 5 -
<PAGE>
the purchase price, reflecting an agreed upon market rate effective for the
period of time the Fund's money will be invested in the securities, and will not
be related to the coupon rate of the purchased security. At the time a Fund
enters into a repurchase agreement, the value of the underlying security,
including accrued interest, will equal or exceed the value of the repurchase
agreement, and in the case of a repurchase agreement exceeding one day, the
seller will agree that the value of the underlying security, including accrued
interest, will at all times equal or exceed the value of the repurchase
agreement. The collateral securing the seller's obligation must be of a credit
quality at least equal to a Fund's investment criteria for portfolio securities
and will be held by the Custodian or in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from a Fund to the seller subject to the
repurchase agreement and is therefore subject to that Fund's investment
restriction applicable to loans. It is not clear whether a court would consider
the securities purchased by a Fund subject to a repurchase agreement as being
owned by that Fund or as being collateral for a loan by the Fund to the seller.
In the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the securities before repurchase of the security under
a repurchase agreement, a Fund may encounter delay and incur costs before being
able to sell the security. Delays may involve loss of interest or decline in
price of the security. If a court characterized the transaction as a loan and a
Fund has not perfected a security interest in the security, that Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for a Fund, Dean
Investment Associates seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligor, in this case, the
seller. Apart from the risk of bankruptcy or insolvency proceedings, there is
also the risk that the seller may fail to repurchase the security, in which case
a Fund may incur a loss if the proceeds to that Fund of the sale of the security
to a third party are less than the repurchase price. However, if the market
value of the securities subject to the repurchase agreement becomes less than
the repurchase price (including interest), the Fund involved will direct the
seller of the security to deliver additional securities so that the market value
of all securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be unsuccessful in seeking to
enforce the seller's contractual obligation to deliver additional securities.
- 6 -
<PAGE>
Loans of Portfolio Securities. Each Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the value of the loaned
securities. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by a Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund. The
Funds receive amounts equal to the dividends or interest on loaned securities
and also receive one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt securities
purchased with such collateral; either type of interest may be shared with the
borrower. The Funds may also pay fees to placing brokers as well as custodian
and administrative fees in connection with loans. Fees may only be paid to a
placing broker provided that the Trustees determine that the fee paid to the
placing broker is reasonable and based solely upon services rendered, that the
Trustees separately consider the propriety of any fee shared by the placing
broker with the borrower, and that the fees are not used to compensate Dean
Investment Associates or any affiliated person of the Trust or an affiliated
person of Dean Investment Associates or other affiliated person. The terms of
the Funds' loans must meet applicable tests under the Internal Revenue Code and
permit the Funds to reacquire loaned securities on five days' notice or in time
to vote on any important matter.
When-Issued Securities and Securities Purchased On a To-Be- Announced
Basis. The Funds will only make commitments to purchase securities on a
when-issued or to-be-announced ("TBA") basis with the intention of actually
acquiring the securities. In addition, the Funds may purchase securities on a
when-issued or TBA basis only if delivery and payment for the securities takes
place within 120 days after the date of the transaction. In connection with
these investments, each Fund will direct the Custodian to place cash or U.S.
Government obligations in a segregated account in an amount sufficient to make
payment for the securities to be purchased. When a segregated account is
maintained because a Fund purchases securities on a when-issued or TBA basis,
the assets deposited in the segregated account will be valued daily at market
for the purpose of determining the adequacy of the securities in the account. If
the market value of such securities declines, additional cash or securities will
be placed in the account on a daily basis so that the market value of the
account will equal the amount of a Fund's commitments to purchase securities on
a when-issued or TBA basis. To the extent funds are in a segregated account,
they will not be available for new investment or to meet redemptions. Securities
purchased on a when-issued or TBA basis and the securities held in a Fund's
portfolio are subject to changes in market value based upon changes in the level
of interest rates (which will
- 7 -
<PAGE>
generally result in all of those securities changing in value in the same way,
i.e., all those securities experiencing appreciation when interest rates decline
and depreciation when interest rates rise). Therefore, if in order to achieve
higher returns, a Fund remains substantially fully invested at the same time
that it has purchased securities on a when-issued or TBA basis, there will be a
possibility that the market value of the Fund's assets will have greater
fluctuation. The purchase of securities on a when-issued or TBA basis may
involve a risk of loss if the broker-dealer selling the securities fails to
deliver after the value of the securities has risen.
When the time comes for a Fund to make payment for securities purchased
on a when-issued or TBA basis, the Fund will do so by using then available cash
flow, by sale of the securities held in the segregated account, by sale of other
securities or, although it would not normally expect to do so, by directing the
sale of the securities purchased on a when-issued or TBA basis themselves (which
may have a market value greater or less than the Fund's payment obligation).
Although a Fund will only make commitments to purchase securities on a
when-issued or TBA basis with the intention of actually acquiring the
securities, the Funds may sell these securities before the settlement date if it
is deemed advisable by Dean Investment Associates as a matter of investment
strategy.
Warrants and Rights. Warrants are options to purchase equity securities
at a specified price and are valid for a specific time period. Rights are
similar to warrants, but normally have a short duration and are distributed by
the issuer to its shareholders. Each Fund and the Equity Fund may purchase
warrants and rights, provided that the Fund does not invest more than 5% of its
net assets at the time of purchase in warrants and rights other than those that
have been acquired in units or attached to other securities. Of such 5%, no more
than 2% of a Fund's assets at the time of purchase may be invested in warrants
which are not listed on either the New York Stock Exchange or the American Stock
Exchange.
STRIPS. STRIPS are U.S. Treasury bills, notes, and bonds that have been
issued without interest coupons or stripped of their unmatured interest coupons,
interest coupons that have been stripped from such U.S. Treasury securities, and
receipts or certificates representing interests in such stripped U.S. Treasury
securities and coupons. A STRIPS security pays no interest in cash to its holder
during its life although interest is accrued for federal income tax purposes.
Its value to an investor consists of the difference between its face value at
the time of maturity and the price for which it was acquired, which is generally
an amount significantly less than its face value. Investing in STRIPS may help
to preserve capital during periods
- 8 -
<PAGE>
of declining interest rates. For example, if interest rates decline, GNMA
Certificates owned by a Fund which were purchased at greater than par are more
likely to be prepaid, which would cause a loss of principal. In anticipation of
this, a Fund might purchase STRIPS, the value of which would be expected to
increase when interest rates decline.
STRIPS do not entitle the holder to any periodic payments of interest
prior to maturity. Accordingly, such securities usually trade at a deep discount
from their face or par value and will be subject to greater fluctuations of
market value in response to changing interest rates than debt obligations of
comparable maturities which make periodic distributions of interest. On the
other hand, because there are no periodic interest payments to be reinvested
prior to maturity, STRIPS eliminate the reinvestment risk and lock in a rate of
return to maturity. Current federal tax law requires that a holder of a STRIPS
security accrue a portion of the discount at which the security was purchased as
income each year even though the Fund received no interest payment in cash on
the security during the year.
Foreign Securities. Subject to each Fund's investment policies and
quality and maturity standards, the Funds may invest in the securities (payable
in U.S. dollars) of foreign issuers. Because the Funds may invest in foreign
securities, an investment in the Funds involves risks that are different in some
respects from an investment in a fund which invests only in securities of U.S.
domestic issuers. Foreign investments may be affected favorably or unfavorably
by changes in currency rates and exchange control regulations. There may be less
publicly available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those applicable to
U.S. companies. There may be less governmental supervision of securities
markets, brokers and issuers of securities. Securities of some foreign companies
are less liquid or more volatile than securities of U.S. companies, and foreign
brokerage commissions and custodian fees are generally higher than in the United
States. Settlement practices may include delays and may differ from those
customary in United States markets. Investments in foreign securities may also
be subject to other risks different from those affecting U.S. investments,
including local political or economic developments, expropriation or
nationalization of assets, restrictions on foreign investment and repatriation
of capital, imposition of withholding taxes on dividend or interest payments,
currency blockage (which would prevent cash from being brought back to the
United States), and difficulty in enforcing legal rights outside the United
States.
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Writing Covered Call Options. Each Fund may write covered call options
on equity securities or futures contracts to earn premium income, to assure a
definite price for a security it has considered selling, or to close out options
previously purchased. A call option gives the holder (buyer) the right to
purchase a security or futures contract at a specified price (the exercise
price) at any time until a certain date (the expiration date). A call option is
"covered" if a Fund owns the underlying security subject to the call option at
all times during the option period. A covered call writer is required to deposit
in escrow the underlying security in accordance with the rules of the exchanges
on which the option is traded and the appropriate clearing agency.
The writing of covered call options is a conservative investment
technique which Dean Investment Associates believes involves relatively little
risk. However, there is no assurance that a closing transaction can be effected
at a favorable price. During the option period, the covered call writer has, in
return for the premium received, given up the opportunity for capital
appreciation above the exercise price should the market price of the underlying
security increase, but has retained the risk of loss should the price of the
underlying security decline.
A Fund may write covered call options if, immediately thereafter, not
more than 30% of its net assets would be committed to such transactions. As long
as the Securities and Exchange Commission continues to take the position that
unlisted options are illiquid securities, a Fund will not commit more than 15%
of its net assets to unlisted covered call transactions and other illiquid
securities. The ability of a Fund to write covered call options may be limited
by state regulations which require the Fund to commit no more than a specified
percentage of its assets to such transactions and the tax requirement that less
than 30% of the Fund's gross income be derived from the sale or other
disposition of securities held for less than 3 months.
Writing Covered Put Options. Each Fund may write covered put options on
equity securities and futures contracts to assure a definite price for a
security if it is considering acquiring the security at a lower price than the
current market price or to close out options previously purchased. A put option
gives the holder of the option the right to sell, and the writer has the
obligation to buy, the underlying security at the exercise price at any time
during the option period. The operation of put options in other respects is
substantially identical to that of call options. When a Fund writes a covered
put option, it maintains in a segregated account with its Custodian cash or
obligations in an amount not less than the exercise price at all times while the
put option is outstanding.
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The risks involved in writing put options include the risk that a
closing transaction cannot be effected at a favorable price and the possibility
that the price of the underlying security may fall below the exercise price, in
which case a Fund may be required to purchase the underlying security at a
higher price than the market price of the security at the time the option is
exercised. A Fund may not write a put option if, immediately thereafter, more
than 25% of its net assets would be committed to such transactions.
Options Transactions Generally. Option transactions in which the Funds
may engage involve the specific risks described above as well as the following
risks: the writer of an option may be assigned an exercise at any time during
the option period; disruptions in the markets for underlying instruments could
result in losses for options investors; imperfect or no correlation between the
option and the securities being hedged; the insolvency of a broker could present
risks for the broker's customers; and market imposed restrictions may prohibit
the exercise of certain options. In addition, the option activities of a Fund
may affect its portfolio turnover rate and the amount of brokerage commissions
paid by a Fund. The success of a Fund in using the option strategies described
above depends, among other things, on Dean Investment Associates' ability to
predict the direction and volatility of price movements in the options, futures
contracts and securities markets and Dean Investment Associates' ability to
select the proper time, type and duration of the options.
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group for corporate bonds in which the Funds may invest are as follows:
Moody's Investors Service, Inc.
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.
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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.
Standard & Poor's Ratings Group
AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit 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 bonds in this category than for bonds in higher rated categories.
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group for preferred stocks in which the Funds may invest are as follows:
Moody's Investors Service, Inc.
aaa - An issue which is rated aaa is considered to be a top- quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.
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a - An issue which is rated a is considered to be an upper- medium
grade preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.
Standard & Poor's Ratings Group
AAA - This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the diverse
effects of changes in circumstances and economic conditions.
BBB - An issue rated BBB is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
INVESTMENT LIMITATIONS
The Trust has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Funds. These limitations may
not be changed with respect to any Fund without the affirmative vote of a
majority of the outstanding shares of that Fund.
1. Borrowing Money. The Funds will not borrow money, except from a
bank, provided that immediately after such borrowing there is asset coverage of
300% for all borrowings of the Funds. The Funds will not make any borrowing
which would cause its outstanding borrowings to exceed one-third of the value of
its total assets. This limitation is not applicable to when- issued purchases.
2. Pledging. The Funds will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by a
Fund except as may
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be necessary in connection with borrowings described in limitation (1) above. A
Fund will not mortgage, pledge or hypothecate more than one-third of its assets
in connection with borrowings.
3. Margin Purchases. The Funds will not purchase any securities or
evidences of interest thereon on "margin" (except such short-term credits as are
necessary for the clearance of transactions or to the extent necessary to engage
in transactions described in the Prospectus and Statement of Additional
Information which involve margin purchases).
4. Options. The Funds will not purchase or sell puts, calls, options,
futures, straddles, commodities or commodities futures contracts except as
described in the Prospectus and Statement of Additional Information.
5. Real Estate. The Funds will not purchase, hold or deal in real
estate or real estate mortgage loans, except that a Fund may purchase (a)
securities of companies (other than limited partnerships) which deal in real
estate or (b) securities which are secured by interests in real estate.
6. Amount Invested in One Issuer. Each Fund will not invest more than
5% of its total assets in the securities of any issuer; provided, however, that
there is no limitation with respect to investments and obligations issued or
guaranteed by the United States Government or its agencies or instrumentalities
or repurchase agreements with respect thereto.
7. Short Sales. The Funds will not make short sales of securities, or
maintain a short position, other than short sales "against the box." (A short
sale is made by selling a security the Fund does not own. A short sale is
"against the box" to the extent that the Fund contemporaneously owns or has the
right to obtain at no added cost securities identical to those sold short.)
8. Mineral Leases. The Funds will not purchase oil, gas or other
mineral leases or exploration or development programs.
9. Underwriting. The Funds will not act as underwriter of securities
issued by other persons, either directly or through a majority owned subsidiary.
This limitation is not applicable to the extent that, in connection with the
disposition of its portfolio securities (including restricted securities), a
Fund may be deemed an underwriter under certain federal securities laws.
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10. Illiquid Investments. Each Fund will not purchase securities which
cannot be readily resold to the public because of legal or contractual
restrictions on resale or for which no readily available market exists or engage
in a repurchase agreement maturing in more than seven days if, as a result
thereof, more than 15% of the value of that Fund's net assets would be invested
in such securities.
11. Concentration. Each Fund will not invest 25% or more of its total
assets in the securities of issuers in any particular industry; provided,
however, that there is no limitation with respect to investments in obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities or repurchase agreements with respect thereto.
12. Investing for Control. The Funds will not invest in
companies for the purpose of exercising control.
13. Other Investment Companies. Each Fund will not invest
more than 10% of its total assets in securities of other
investment companies. Each Fund will not invest more than 5% of
its total assets in the securities of any single investment
company.
14. Senior Securities. The Funds will not issue or sell any senior
security. This limitation is not applicable to short-term credit obtained by the
Funds for the clearance of purchases and sales or redemptions of securities, or
to arrangements with respect to transactions involving options, futures
contracts, short sales and other similar permitted investments and techniques.
15. Loans. The Funds will not make loans to other persons, except (a)
by loaning portfolio securities, or (b) by engaging in repurchase agreements.
For purposes of this limitation, the term "loans" shall not include the purchase
of bonds, debentures, commercial paper or corporate notes, and similar
marketable evidences of indebtedness.
With respect to the percentages adopted by the Trust as maximum
limitations on the Funds' investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money and the holding of illiquid securities) will not be a
violation of the policy or restriction unless the excess results immediately and
directly from the acquisition of any security or the action taken.
The Trust does not intend to pledge, mortgage or hypothecate the assets
of any Fund. The statements of intention in this paragraph reflect
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval.
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TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive officers of the
Trust. Each Trustee who is an "interested person" of the Trust, as defined by
the Investment Company Act of 1940, is indicated by an asterisk.
Estimated Annual
Compensation
Name Age Position Held from the Trust
- ---- --- ------------ --------------
*Frank H. Scott 52 President/Trustee $ 0
*Chauncey H. Dean 72 Trustee 0
*Robert D. Dean 63 Trustee 0
*Victor S. Curtis 35 Trustee 0
+Frank J. Perez 53 Trustee 6,000
+David H. Ponitz 66 Trustee 6,000
+Gilbert P. Williamson 59 Trustee 6,000
Robert G. Dorsey 39 Vice President 0
Mark J. Seger 35 Treasurer 0
Tina D. Hosking 28 Secretary 0
John F. Splain 40 Asst. Secretary 0
* Mr. Scott, Mr. Chauncey Dean, Mr. Robert Dean and Mr.
Curtis, as affiliated persons of C.H. Dean & Associates,
Inc., the Trust's investment adviser, and 2480 Securities
LLC, the Trust's principal underwriter, are "interested
persons" of the Trust within the meaning of Section 2(a)(19)
of the Investment Company Act of 1940.
+ Member of Audit Committee.
The principal occupations of the Trustees and executive officers of the
Trust during the past five years are set forth below:
FRANK H. SCOTT, 2480 Kettering Tower, Dayton, Ohio is Senior Vice
President of C.H. Dean & Associates, Inc. (the investment adviser to the Trust)
and President of 2480 Securities LLC (the Trust's principal underwriter).
VICTOR S. CURTIS, 2480 Kettering Tower, Dayton, Ohio is Portfolio
Manager of C. H. Dean & Associates. He previously was Assistant Vice President
of Corporate Banking for PNC Bank.
CHAUNCEY H. DEAN, 2480 Kettering Tower, Dayton, Ohio, is Chairman &
Chief Executive Officer and the controlling shareholder of C.H. Dean &
Associates. He is also the controlling shareholder of 2480 Securities LLC, the
Trust's principal underwriter.
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<PAGE>
ROBERT D. DEAN, 2480 Kettering Tower, Dayton, Ohio, is President and
Chief Investment Officer of C.H. Dean & Associates. He formerly was Professor of
Economics at the University of Memphis.
FRANK J. PEREZ, 3535 Southern Blvd., Kettering, Ohio is President and
Chief Executive Officer of Kettering Medical Center.
DAVID H. PONITZ, 444 W. Third Street, Dayton, Ohio is President of
Sinclair Community College.
GILBERT P. WILLIAMSON, 2520 Kettering Tower, Dayton, Ohio, is a
Director of S.C.O., Inc. (a software company), Retix, Inc. (a communications
company), Roberds, Inc. (a retail company) and Citizens Federal Bank. He
formerly was Chairman and Chief Executive Officer of NCR Corp.
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio, is President and
Treasurer of Countrywide Fund Services, Inc. (a registered transfer agent) and
Treasurer of Countrywide Investments, Inc. (a registered broker-dealer and
investment adviser) and Countrywide Financial Services, Inc. (a financial
services company and parent of Countrywide Fund Services, Inc. and Countrywide
Investments, Inc. and a wholly-owned indirect subsidiary of Countrywide Credit
Industries, Inc.). He is also Vice President of Brundage, Story and Rose
Investment Trust, PRAGMA Investment Trust, Markman MultiFund Trust, Capitol
Square Funds, The New York State Opportunity Funds and Maplewood Investment
Trust and Assistant Vice President of Fremont Mutual Funds, Inc., Schwartz
Investment Trust, The Tuscarora Investment Trust, Williamsburg Investment Trust
and The Gannett Welsh & Kotler Funds (all of which are registered investment
companies).
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio, is Vice
President of Countrywide Financial Services, Inc. and Countrywide Fund Services,
Inc. He is also Treasurer of Countrywide Investment Trust, Countrywide Tax Free
Trust, Countrywide Strategic Trust, Brundage, Story and Rose Investment Trust,
Markman MultiFund Trust, PRAGMA Investment Trust, Williamsburg Investment Trust,
Capitol Square Funds, The New York State Opportunity Funds and Maplewood
Investment Trust, Assistant Treasurer of Schwartz Investment Trust, The
Tuscarora Investment Trust and The Gannett Welsh & Kotler Funds and Assistant
Secretary of Fremont Mutual Funds, Inc.
TINA D. HOSKING, 312 Walnut Street, Cincinnati, Ohio, is Counsel of
Countrywide Fund Services, Inc. She is also Secretary of Capitol Square Funds
and The New York State Opportunity Funds and Assistant Secretary of PRAGMA
Investment Trust and The Gannett Welsh & Kotler Funds.
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<PAGE>
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio, is Secretary and
General Counsel of Countrywide Fund Services, Inc., Countrywide Investments,
Inc. and Countrywide Financial Services, Inc. He is also Secretary of
Countrywide Investment Trust, Countrywide Tax Free Trust, Countrywide Strategic
Trust, Brundage, Story and Rose Investment Trust, Markman MultiFund Trust, The
Tuscarora Investment Trust, Williamsburg Investment Trust, PRAGMA Investment
Trust, Capitol Square Funds and Maplewood Investment Trust and Assistant
Secretary of Schwartz Investment Trust, Fremont Mutual Funds, Inc., The New York
State Opportunity Funds and The Gannett Welsh & Kotler Funds.
Each non-interested Trustee will receive an annual retainer of $2,000
and a $1,000 fee for each Board meeting attended and will be reimbursed for
travel and other expenses incurred in the performance of their duties.
THE INVESTMENT ADVISER
C.H. Dean & Associates, Inc. ("Dean Investment Associates") is the
Funds' investment manager. Chauncey H. Dean is the controlling shareholder of
Dean Investment Associates. Mr. Dean, by reason of such affiliation, may
directly or indirectly receive benefits from the advisory fees paid to Dean
Investment Associates. Mr. Dean is also the controlling shareholder of the
Trust's principal underwriter, 2480 Securities LLC.
Under the terms of the advisory agreement between the Trust and Dean
Investment Associates, Dean Investment Associates manages the Funds'
investments. Each Fund pays Dean Investment Associates a fee computed and
accrued daily and paid monthly at an annual rate of 1.00% of its average daily
net assets.
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Trust may be a party. The Funds may have an
obligation to indemnify the Trust's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties. The compensation and expenses of any officer,
Trustee or employee of the Trust who is an officer, director, employee or
stockholder of Dean Investment Associates are paid by Dean Investment
Associates.
By its terms, the Trust's advisory agreement will remain in force until
_______, 1999 and from year to year thereafter, subject to annual approval by
(a) the Board of Trustees or (b) a vote of the majority of a Fund's outstanding
voting securities; provided that in either event continuance is also approved by
a majority of the Trustees who are not interested persons of the Trust, by a
vote cast in person at a meeting called for the
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purpose of voting such approval. The Trust's investment advisory agreement may
be terminated at any time, on sixty days' written notice, without the payment of
any penalty, by the Board of Trustees, by a vote of the majority of a Fund's
outstanding voting securities, or by Dean Investment Associates. The investment
advisory agreement automatically terminates in the event of its assignment, as
defined by the Investment Company Act of 1940 and the rules thereunder.
Dean Investment Associates may use the name "Dean" or any derivation
thereof in connection with any registered investment company or other business
enterprise with which it is or may become associated.
THE UNDERWRITER
2480 Securities LLC (the "Underwriter") is the principal underwriter of
the Funds and, as such, is the exclusive agent for distribution of shares of the
Funds. The Underwriter is obligated to sell the shares on a best efforts basis
only against purchase orders for the shares. Shares of each Fund are offered to
the public on a continuous basis.
The Underwriter currently allows concessions to dealers who sell shares
of the Funds. The Underwriter receives that portion of the sales load which is
not reallowed to the dealers who sell shares of the Funds. The Underwriter
retains the entire sales load on all direct initial investments in the Funds and
on all investments in accounts with no designated dealer of record. The
Underwriter bears promotional expenses in connection with the distribution of
the Funds' shares to the extent that such expenses are not assumed by the Funds
under their plans of distribution (see below).
The Funds may compensate dealers, including the Underwriter and its
affiliates, based on the average balance of all accounts in the Funds for which
the dealer is designated as the party responsible for the account. See
"Distribution Plans" below.
DISTRIBUTION PLANS
Class A Shares -- As stated in the Prospectus, the Funds have adopted a
plan of distribution with respect to the Class A shares of the Funds (the "Class
A Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 which
permits each Fund to pay for expenses incurred in the distribution and promotion
of the Funds' Class A shares, including but not limited to, the printing of
prospectuses, statements of additional information and reports used for sales
purposes, advertisements, expenses of preparation and printing of sales
literature, promotion, marketing and sales expenses, and other
distribution-related
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<PAGE>
expenses, including any distribution fees paid to securities dealers or other
firms who have executed a distribution or service agreement with the
Underwriter. The Class A Plan expressly limits payment of the distribution
expenses listed above in any fiscal year to a maximum of .25% of the average
daily net assets of the Funds allocable to Class A shares. Unreimbursed expenses
will not be carried over from year to year.
Class C Shares -- The Funds have also adopted a plan of distribution
(the "Class C Plan") with respect to the Class C shares of the Funds. The Class
C Plan provides for two categories of payments. First, the Class C Plan provides
for the payment to the Underwriter of an account maintenance fee, in an amount
equal to an annual rate of .25% of the average daily net assets of the Class C
shares, which may be paid to other dealers based on the average value of Class C
shares owned by clients of such dealers. In addition, a Fund may pay up to an
additional .75% per annum of the daily net assets of the Class C shares for
expenses incurred in the distribution and promotion of the shares, including
prospectus costs for prospective shareholders, costs of responding to
prospective shareholder inquiries, payments to brokers and dealers for selling
and assisting in the distribution of Class C shares, costs of advertising and
promotion and any other expenses related to the distribution of the Class C
shares. Unreimbursed expenditures will not be carried over from year to year.
The Funds may make payments to dealers and other persons in an amount up to .75%
per annum of the average value of Class C shares owned by their clients, in
addition to the .25% account maintenance fee described above.
The continuance of the Plans must be specifically approved at least
annually by a vote of the Trust's Board of Trustees and by a vote of the
Trustees who are not interested persons of the Trust and have no direct or
indirect financial interest in the Plans (the "Independent Trustees") at a
meeting called for the purpose of voting on such continuance. A Plan may be
terminated at any time by a vote of a majority of the Independent Trustees or by
a vote of the holders of a majority of the outstanding shares of a Fund or the
applicable class of a Fund. In the event a Plan is terminated in accordance with
its terms, the affected Fund (or class) will not be required to make any
payments for expenses incurred by the Underwriter after the termination date.
The Plans may not be amended to increase materially the amount to be spent for
distribution without shareholder approval. All material amendments to the Plans
must be approved by a vote of the Trust's Board of Trustees and by a vote of the
Independent Trustees.
In approving the Plans, the Trustees determined, in the exercise of
their business judgment and in light of their fiduciary duties as Trustees, that
there is a reasonable likelihood that the Plans will benefit the Funds and their
shareholders. The Board of Trustees believes that expenditure of the Funds'
assets for distribution expenses under the Plans
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<PAGE>
should assist in the growth of the Funds which will benefit the Funds and their
shareholders through increased economies of scale, greater investment
flexibility, greater portfolio diversification and less chance of disruption of
planned investment strategies. The Plans will be renewed only if the Trustees
make a similar determination for each subsequent year of the Plans. There can be
no assurance that the benefits anticipated from the expenditure of the Funds'
assets for distribution will be realized. While the Plans are in effect, all
amounts spent by the Funds pursuant to the Plans and the purposes for which such
expenditures were made must be reported quarterly to the Board of Trustees for
its review. Distribution expenses attributable to the sale of more than one
class of shares of a Fund will be allocated at least annually to each class of
shares based upon the ratio in which the sales of each class of shares bears to
the sales of all the shares of such Fund. In addition, the selection and
nomination of those Trustees who are not interested persons of the Trust are
committed to the discretion of the Independent Trustees during such period.
By reason of his ownership of shares of Dean Investment Associates,
Chauncey H. Dean may be deemed to have a financial interest in the operation of
the Plans.
SECURITIES TRANSACTIONS
Decisions to buy and sell securities for the Funds and the placing of
the Funds' securities transactions and negotiation of commission rates where
applicable are made by Dean Investment Associates and are subject to review by
the Board of Trustees of the Trust. In the purchase and sale of portfolio
securities, Dean Investment Associates seeks best execution for the Funds,
taking into account such factors as price (including the applicable brokerage
commission or dealer spread), the execution capability, financial responsibility
and responsiveness of the broker or dealer and the brokerage and research
services provided by the broker or dealer. Dean Investment Associates generally
seeks favorable prices and commission rates that are reasonable in relation to
the benefits received.
Generally, the Funds attempt to deal directly with the dealers who make
a market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Funds may be purchased
directly from the issuer.
Dean Investment Associates is specifically authorized to select brokers
who also provide brokerage and research services to the Funds and/or other
accounts over which Dean Investment Associates exercises investment discretion
and to pay such brokers a commission in excess of the commission another broker
would charge if Dean Investment Associates determines in good
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<PAGE>
faith that the commission is reasonable in relation to the value of the
brokerage and research services provided. The determination may be viewed in
terms of a particular transaction or Dean Investment Associates' overall
responsibilities with respect to the Funds and to accounts over which it
exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and Dean
Investment Associates, it is not possible to place a dollar value on it.
Research services furnished by brokers through whom the Funds effect securities
transactions may be used by Dean Investment Associates in servicing all of its
accounts and not all such services may be used by Dean Investment Associates in
connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, Dean Investment Associates and
other affiliates of the Trust or Dean Investment Associates may effect
securities transactions which are executed on a national securities exchange or
transactions in the over-the-counter market conducted on an agency basis. No
Fund will effect any brokerage transactions in its portfolio securities with
Dean Investment Associates if such transactions would be unfair or unreasonable
to its shareholders. Over-the-counter transactions will be placed either
directly with principal market makers or with broker-dealers. Although the Funds
do not anticipate any ongoing arrangements with other brokerage firms, brokerage
business may be transacted from time to time with other firms. Neither Dean
Investment Associates nor affiliates of the Trust or Dean Investment Associates
will receive reciprocal brokerage business as a result of the brokerage business
transacted by the Funds with other brokers.
Code of Ethics. The Trust and Dean Investment Associates have each
adopted a Code of Ethics under Rule 17j-1 of the Investment Company Act of 1940.
The Code significantly restricts the personal investing activities of all
employees of Dean Investment Associates. No employee may purchase or sell any
security which at the time is being purchased or sold (as the case may be), or
to the knowledge of the employee, is being considered for purchase or sale by
any Fund.
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PORTFOLIO TURNOVER
A Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Funds. Dean Investment Associates anticipates that each Fund's portfolio
turnover rate normally will not exceed 100%. A 100% turnover rate would occur if
all of a Fund's portfolio securities were replaced once within a one year
period.
Generally, each Fund intends to invest for long-term purposes. However,
the rate of portfolio turnover will depend upon market and other conditions, and
it will not be a limiting factor when Dean Investment Associates believes that
portfolio changes are appropriate.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
The share price (net asset value) and the public offering price (net
asset value plus applicable sales load) of the shares of each Fund are
determined as of the close of the regular session of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time), on each day the Trust is
open for business. The Trust is open for business on every day except Saturdays,
Sundays and the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The Trust may also be open for business on other days in which
there is sufficient trading in a Fund's portfolio securities that its net asset
value might be materially affected. For a description of the methods used to
determine the share price and the public offering price, see "Calculation of
Share Price and Public Offering Price" in the Prospectus.
OTHER PURCHASE INFORMATION
The Prospectus describes generally how to purchase shares of the Funds.
Additional information with respect to certain types of purchases of shares of
the Class A shares of the Funds is set forth below.
Right of Accumulation. A "purchaser" (as defined in the Prospectus) of
shares of a Fund has the right to combine the cost or current net asset value
(whichever is higher) of his existing Class A shares of any Fund in the Dean
Family of Funds with the amount of his current purchases in order to take
advantage of the reduced sales loads set forth in the tables in the Prospectus.
The purchaser or his dealer must notify Countrywide Fund Services, Inc.
("Countrywide") that an investment qualifies for a reduced sales load. The
reduced load will be granted upon confirmation of the purchaser's holdings by
Countrywide.
- 23 -
<PAGE>
Letter of Intent. The reduced sales loads set forth in the tables in
the Prospectus may also be available to any "purchaser" (as defined in the
Prospectus) of shares of a Fund who submits a Letter of Intent to Countrywide.
The Letter must state an intention to invest within a thirteen month period in
any Fund in the Dean Family of Funds a specified amount which, if made at one
time, would qualify for a reduced sales load. A Letter of Intent may be
submitted with a purchase at the beginning of the thirteen month period or
within ninety days of the first purchase under the Letter of Intent. Upon
acceptance of this Letter, the purchaser becomes eligible for the reduced sales
load applicable to the level of investment covered by such Letter of Intent as
if the entire amount were invested in a single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Trust to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales load will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases
at the purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify Countrywide that an investment is being made pursuant to
an executed Letter of Intent.
Other Information. The Trust either does not impose a front-end sales
load or imposes a reduced sales load in connection with purchases of shares of a
Fund made under the reinvestment privilege or the purchases described in the
"Reduced Sales Load," "Purchases at Net Asset Value" or "Exchange Privilege"
sections in the Prospectus because such purchases require minimal sales effort
by Dean Investment Associates. Purchases described in the "Purchases at Net
Asset Value" section may be made for investment only, and the shares may not be
resold except through redemption by or on behalf of the Trust.
TAXES
The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
- 24 -
<PAGE>
Each Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. To so qualify a Fund must, among other things, (i) derive at least
90% of its gross income in each taxable year from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock, securities or foreign currency, or certain other income (including but
not limited to gains from options, futures and forward contracts) derived with
respect to its business of investing in stock, securities or currencies; (ii)
derive less than 30% of its gross income in each taxable year from the sale or
other disposition of the following assets held for less than three months: (a)
stock or securities, or (b) options, futures or forward contracts not directly
related to its principal business of investing in stock or securities; and (iii)
diversify its holdings so that at the end of each quarter of its taxable year
the following two conditions are met: (a) at least 50% of the value of the
Fund's total assets is represented by cash, U.S. Government securities,
securities of other regulated investment companies and other securities (for
this purpose such other securities will qualify only if the Fund's investment is
limited in respect to any issuer to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such issuer) and (b) not
more than 25% of the value of the Fund's assets is invested in securities of any
one issuer (other than U.S. Government securities or securities of other
regulated investment companies).
A Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Funds intend to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
- 25 -
<PAGE>
REDEMPTION IN KIND
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Funds to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
HISTORICAL PERFORMANCE INFORMATION
From time to time, each Fund may advertise average annual total return.
Average annual total return quotations will be computed by finding the average
annual compounded rates of return over 1, 5 and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 and 10 year periods
at the end of the 1, 5 or 10 year periods (or fractional
portion thereof)
The calculation of average annual total return assumes the reinvestment
of all dividends and distributions and the deduction of the current maximum
sales load from the initial $1,000 payment. If a Fund has been in existence less
than one, five or ten years, the time period since the date of the initial
public offering of shares will be substituted for the periods stated. Each Fund
may also advertise total return (a "non-standardized quotation") which is
calculated differently from average annual total return. A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions. This computation does not include the effect of
the applicable sales load which, if included, would reduce total return. A
nonstandardized quotation may also indicate average annual compounded rates of
return
- 26 -
<PAGE>
without including the effect of the applicable sales load or over periods other
than those specified for average annual total return. A nonstandardized
quotation of total return will always be accompanied by the Fund's average
annual total return as described above.
From time to time, each of the Funds may advertise its yield. A yield
quotation is based on a 30-day (or one month) period and is computed by dividing
the net investment income per share earned during the period by the maximum
offering price per share on the last day of the period, according to the
following formula:
Yield = 2[(a-b/cd +1)6 -1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that a Fund
owns the security. Generally, interest earned (for the purpose of "a" above) on
debt obligations is computed by reference to the yield to maturity of each
obligation held based on the market value of the obligation (including actual
accrued interest) at the close of business on the last business day prior to the
start of the 30-day (or one month) period for which yield is being calculated,
or, with respect to obligations purchased during the month, the purchase price
(plus actual accrued interest). With respect to the treatment of discount and
premium on mortgage or other receivables-backed obligations which are expected
to be subject to monthly paydowns of principal and interest, gain or loss
attributable to actual monthly paydowns is accounted for as an increase or
decrease to interest income during the period and discount or premium on the
remaining security is not amortized.
To help investors better evaluate how an investment in a Fund might
satisfy their investment objective, advertisements regarding each Fund may
discuss various measures of Fund performance, including current performance
ratings and/or rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements may also
compare performance (using the calculation methods set forth in the Prospectus)
to performance as reported by other investments, indices and averages. When
advertising current ratings or rankings, the Funds may use the following
publications or indices to discuss or compare Fund performance:
- 27 -
<PAGE>
Lipper Mutual Fund Performance Analysis measures total return for the
mutual fund industry and ranks individual mutual fund performance over specified
time periods assuming reinvestment of all distributions, exclusive of sales
loads. In addition, the Funds may use comparative performance information
appearing in relevant indices, including the S&P 500 Index, the Dow Jones
Industrial Average and the Russell 2000 Index. The S&P 500 Index is an unmanaged
index of 500 stocks, the purpose of which is to portray the pattern of common
stock price movement. The Dow Jones Industrial Average is a measurement of
general market price movement for 30 widely held stocks listed on the New York
Stock Exchange. The Russell 2000 Index is an unmanaged index comprised of the
2,000 smallest U.S. domiciled publicly-traded common stocks in the Russell 3000
Index (an unmanaged index of the 3,000 largest U.S. domiciled publicly-traded
common stocks by market capitalization).
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Funds' portfolios, 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 Funds to calculate
their performance. In addition, there can be no assurance that the Funds will
continue this performance as compared to such other averages.
CUSTODIAN
Bank One Trust Company, N.A., 100 East Broad Street, Columbus, Ohio,
has been retained to act as Custodian for the Funds' investments. Bank One acts
as each Fund's depository, safekeeps its portfolio securities, collects all
income and other payments with respect thereto, disburses funds as instructed
and maintains records in connection with its duties.
AUDITORS
The firm of Ernst & Young LLP has been selected as independent auditors
for the Trust for the fiscal year ending March 31, 1997. Ernst & Young LLP, 1300
Chiquita Center, Cincinnati, Ohio, performs an annual audit of the Trust's
financial statements and advises the Trust as to certain accounting matters.
COUNTRYWIDE FUND SERVICES, INC.
The Trust's transfer agent, Countrywide Fund Services, Inc.
("Countrywide"), maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Funds' shares, acts as dividend and distribution disbursing
agent and performs other shareholder service functions. Countrywide receives for
its services as transfer agent a fee from the Fund
- 28 -
<PAGE>
payable monthly at an annual rate of $20 per account from each of the Funds,
provided, however, that the minimum fee is $1,200 per month for each Fund. In
addition, the Funds pay out-of-pocket expenses, including but not limited to,
postage, envelopes, checks, drafts, forms, reports, record storage and
communication lines.
Countrywide also provides accounting and pricing services to the Funds.
For calculating daily net asset value per share and maintaining such books and
records as are necessary to enable Countrywide to perform its duties, each Fund
will pay Countrywide a fee in accordance with the following schedule:
Average Monthly Net Assets Monthly Fee
$ 0 - $ 50,000,000 $3,000
50,000,000 - 100,000,000 3,500
100,000,000 - 200,000,000 4,000
200,000,000 - 300,000,000 5,000
Over 300,000,000 6,000
In addition, each Fund pays all costs of external pricing services.
Countrywide also provides administrative services to the Funds. In this
capacity, Countrywide supplies non-investment related statistical and research
data, internal regulatory compliance services and executive and administrative
services. Countrywide supervises the preparation of tax returns, reports to
shareholders of the Funds, reports to and filings with the Securities and
Exchange Commission and state securities commissions, and materials for meetings
of the Board of Trustees. For the performance of these administrative services,
each Fund pays Countrywide a fee at the annual rate of .10% of the average value
of its daily net assets up to $100,000,000, .075% of such assets from
$100,000,000 to $200,000,000 and .05% of such assets in excess of $200,000,000,
provided, however, that the minimum fee is $1,000 per month for each Fund.
STATEMENT OF ASSETS AND LIABILITIES
The Funds' Statement of Assets and Liabilities as of March 31, 1997,
which has been audited by Ernst & Young LLP, is attached to this Statement of
Additional Information.
- 29 -
<PAGE>
LARGE CAP VALUE FUND
SMALL CAP VALUE FUND
BALANCED FUND
OF
DEAN FAMILY OF FUNDS
STATEMENT OF ASSETS AND LIABILITIES
AS OF
MARCH 17, 1997
TOGETHER WITH
AUDITORS' REPORT
- 30 -
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholder
Dean Family of Funds:
We have audited the accompanying statement of assets and liabilities of Dean
Family of Funds (comprised of the Large Cap Value Fund, the Small Cap Value
Fund, and the Balanced Fund)(the Fund) as of March 17, 1997. This statement of
assets and liabilities is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this statement of assets and
liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of each of the
portfolios comprising Dean Family of Funds at March 17, 1997, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young, LLP
Ernst & Young, LLP
Cincinnati, Ohio
March 18, 1997
<PAGE>
DEAN FAMILY OF FUNDS
STATEMENT OF ASSETS AND LIABILITIES
AS OF MARCH 17, 1997
LARGE CAP SMALL CAP
VALUE VALUE BALANCED
FUND FUND FUND
ASSETS:
Cash $34,000 $33,000 $33,000
Organization costs (Note 2) 17,000 17,000 17,000
-------- -------- --------
Total assets 51,000 50,000 50,000
-------- -------- --------
LIABILITIES:
Accrued expenses (Note 2) 17,000 17,000 17,000
-------- -------- --------
Total liabilities 17,000 17,000 17,000
-------- -------- --------
Net assets for shares of
beneficial interest
outstanding (Note 1) $34,000 $33,000 $33,000
======== ======== ========
Shares outstanding (Note 1) 3,400 3,300 3,300
======== ======== ========
Net asset value per share $10.00 $10.00 $10.00
======== ======== ========
The accompanying notes are an
integral part of this
statement.
<PAGE>
DEAN FAMILY OF FUNDS
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
AS OF MARCH 17, 1997
(1) The Dean Family of Funds (the Trust) is an open-end management
investment company established as an Ohio business trust under a
Declaration of Trust dated December 18, 1996. The Trust has established
three fund series to date, the Large Cap Value Fund, the Small Cap
Value Fund and the Balanced Fund (the Funds). The Funds each offer two
classes of shares: Class A shares (sold subject to maximum front-end
sales load of 5.25% and a distribution fee of up to 0.25% of average
daily net assets of each Fund) and Class C shares (sold subject to
maximum contingent deferred sales load of 1% if redeemed within a
one-year period from purchase and a distribution fee of up to 1% of
average daily net assets). Each Class A and Class C share of the Fund
represents identical interests in the Fund's investment portfolio and
has the same rights, except that (i) Class C shares bear the expenses
of higher distribution fees, which is expected to cause Class C shares
to have a higher expense ratio and to pay lower dividends than Class A
shares; (ii) certain other class specific expenses will be borne solely
by the class to which such expenses are attributable; and (iii) each
class has exclusive voting rights with respect to matters relating to
its own distribution arrangements.
The Trust has had no operations except for the initial issuance of
Class A shares. On March 17, 1997, 3,400 shares, 3,300 shares and 3,300
shares of each fund, respectively, were issued for cash at $10.00 per
share.
(2) Expenses incurred in connection with the organization of the Funds and
the initial offering of shares are estimated to be $51,000, which
includes $45,000 paid to Countrywide Fund Services, Inc., the Trust's
administrator. These expenses have been paid by Dean Investment
Associates (the Adviser). Upon commencement of the public offering of
shares of the Funds, the Funds will reimburse the Adviser for such
expenses, with that amount being capitalized and amortized on a
straight-line basis over five years. As of March 17, 1997, all
outstanding shares of the Funds were held by the Adviser, who purchased
these initial shares in order to provide the Trust with its required
capital. In the event the initial shares of the Funds are redeemed by
any holder thereof at any time prior to the complete amortization of
organizational expenses, the redemption proceeds payable with respect
to such shares will be reduced by the pro rata share (based upon the
portion of the shares redeemed in relation to the required
capitalization) of the unamortized deferred organizational expenses as
of the date of such redemption.
<PAGE>
(3) Reference is made to the Prospectus and this Statement of Additional
Information for a description of the Management Agreement, the
Underwriting Agreement, the Distribution Expense Plan, the
Administration Agreement, tax aspects of the Funds and the calculation
of the net asset value of shares of
each Fund.
<PAGE>
DEAN FAMILY OF FUNDS
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) (i) Financial Statements included in Part A:
None
(ii) Financial Statements included in Part B:
Statement of Assets and Liabilities,
March 17, 1997
Notes to Statement of Assets and Liabilities
Report of Independent Auditors
(b) Exhibits
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) Form of Advisory Agreement with C.H. Dean &
Associates, Inc.*
(6) Form of Underwriting Agreement with 2480
Securities LLC*
(7) Inapplicable
(8) Form of Custody Agreement with Bank One Trust
Company
(9)(i) Form of Administration Agreement with
Countrywide Fund Services, Inc.*
(ii) Form of Accounting Services Agreement with
Countrywide Fund Services, Inc.*
(iii) Form of Transfer, Dividend Disbursing,
Shareholder Service and Plan Agency Agreement
with Countrywide Fund Services, Inc.*
(10) Opinion and Consent of Counsel
(11) Consent of Independent Auditors
<PAGE>
(12) Inapplicable
(13) Form of Agreement Relating to Initial
Capital*
(14) Inapplicable
(15)(i) Form of Plan of Distribution Pursuant to Rule
12b-1 for Class A Shares*
(ii) Form of Plan of Distribution Pursuant to Rule
12b-1 for Class C Shares*
(16) Inapplicable
(17)(i) Financial Data Schedule for Large Cap Value Fund
(ii) Financial Data Schedule for Small Cap Value Fund
(iii) Financial Data Schedule for Balanced Fund
(18) Rule 18f-3 Multi-Class Plan
- --------------------------------------
* Incorporated by reference to the Trust's initial
Registration Statement on Form N-1A.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
After commencement of the public offering of the Registrant's
shares, the Registrant expects that no person will be directly
or indirectly controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities.
As of March 20, 1997, there is one holder of the shares of
beneficial interest of the Registrant.
Item 27. Indemnification
Article VI of the Registrant's Agreement and Declaration of
Trust provides for indemnification of officers and Trustees as
follows:
"Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS,
ETC. Subject to and except as otherwise provided in
the Securities Act of 1933, as amended, and the 1940
Act, the Trust shall indemnify each of its Trustees
and officers, including persons who serve at the
Trust's request as directors, officers or trustees of
another organization in which the Trust has any
interest
- 2 -
<PAGE>
as a shareholder, creditor or otherwise (hereinafter
referred to as a "Covered Person") against all
liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or
as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by
any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or
administrative or legislative body, in which such
Covered Person may be or may have been involved as a
party or otherwise or with which such person may be
or may have been threatened, while in office or
thereafter, by reason of being or having been such a
Trustee or officer, director or trustee, and except
that no Covered Person shall be indemnified against
any liability to the Trust or its Shareholders to
which such Covered Person would otherwise be subject
by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's
office.
Section 6.5 ADVANCES OF EXPENSES. The
Trust shall advance attorneys' fees or other expenses
incurred by a Covered Person in defending a
proceeding to the full extent permitted by the
Securities Act of 1933, as amended, the 1940 Act, and
Ohio Revised Code Chapter 1707, as amended. In the
event any of these laws conflict with Ohio Revised
Code Section 1701.13(E), as amended, these laws, and
not Ohio Revised Code Section 1701.13(E), shall
govern.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE,
ETC. The right of indemnification provided by this
Article VI shall not be exclusive of or affect any
other rights to which any such Covered Person may be
entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors
and administrators. Nothing contained in this article
shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on
behalf of any such person.
- 3 -
<PAGE>
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Trustees, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee,
officer or controlling person in connection with the
securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The Registrant expects to maintain a standard mutual fund and
investment advisory professional and directors and officers
liability policy. The policy will provide coverage to the
Registrant, its Trustees and officers, C.H. Dean & Associates,
Inc. ("Dean Investment Associates") and 2480 Securities LLC.
Coverage under the policy will include losses by reason of any
act, error, omission, misstatement, misleading statement,
neglect or breach of duty.
The Advisory Agreement with Dean Investment Associates
provides that Dean Investment Associates shall not be liable
for any action taken, omitted or suffered to be taken by it in
its reasonable judgment, in good faith and believed by it to
be authorized or within the discretion or rights or powers
conferred upon it by the Advisory Agreement, or in accordance
with (or in the absence of) specific directions or
instructions from the Trust, provided, however, that such acts
or omissions shall not have resulted from Dean Investment
Associates' willful misfeasance, bad faith or gross
negligence, a violation of the standard of care established by
and applicable to Dean Investment Associates in its actions
under the Advisory Agreement or breach of its duty or of its
obligations under the Advisory Agreement.
- 4 -
<PAGE>
Item 28. Business and Other Connections of the Investment Adviser
(a) Dean Investment Associates is a registered investment
adviser, providing investment advisory services to
the Registrant. Dean Investment Associates has been
engaged since 1975 in the business of providing
investment advisory services to individual,
institutional and corporate clients.
(b) The directors and officers of Dean Investment
Associates and any other business, profession,
vocation or employment of a substantial nature
engaged in at any time during the past two years:
(i) Chauncey H. Dean - Chairman of the Board,
Chief Executive Officer and controlling
shareholder of Dean Investment Associates.
(ii) Dennis D. Dean - Treasurer of Dean
Investment Associates. He formerly was
President, Chief Operating Officer and
Secretary of Dean Investment Associates.
(iii) Zada L. Dean - Secretary of Dean Investment
Associates.
(iv) Robert D. Dean - Director of Research of
Dean Investment Associates. He formerly
was Professor of Economics of the
University of Memphis.
(v) Frank H. Scott - Senior Vice President of
Dean Investment Associates.
President and a Trustee of the Trust.
(vi) Richard M. Luthman - Senior Vice President
of Dean Investment Associates.
- 5 -
<PAGE>
Item 29. Principal Underwriters
(a) Inapplicable
(b) Position with Position with
Name Underwriter Registrant
Frank H. Scott President President and a
Trustee
Edward J. Blake Vice President Assistant Vice
President
Stephen M. Miller Treasurer Assistant Vice
President and
Chief Financial
Officer
The address of the above-named persons is 2480 Kettering Tower, Dayton,
Ohio 45423.
(c) Inapplicable
Item 30. Location of Accounts and Records
Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder will be maintained by the
Registrant at its offices located at 2480 Kettering Tower,
Dayton, Ohio 45423 as well as at the offices of the
Registrant's transfer agent located at 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202.
Item 31. Management Services Not Discussed in Parts A or B
Inapplicable
Item 32. Undertakings
(a) Inapplicable
(b) The Registrant undertakes to file a post-effective
amendment, using financial statements which need not
be certified, within four to six months from the
effective date of this Registration Statement.
(c) The Registrant undertakes to furnish each person
to whom a Prospectus is delivered with a copy of
the Registrant's latest annual report to
- 6 -
<PAGE>
shareholders, upon request and without charge.
(d) The Registrant undertakes to call a meeting of
shareholders, if requested to do so by holders of
at least 10% of the Fund's outstanding shares, for
the purpose of voting upon the question of removal
of a trustee or trustees and to assist in
communications with other shareholders as required
by Section 16(c) of the Investment Company Act of
1940.
- 7 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, thereunto duly
authorized, in the City of Dayton and State of Ohio, on the 31st day of March,
1997.
DEAN FAMILY OF FUNDS
By:/s/ Frank H. Scott
Frank H. Scott
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Frank H. Scott President March 31, 1997
Frank H. Scott and Trustee
/s/ Mark J. Seger Treasurer March 31, 1997
Mark J. Seger
/s/ Chauncey H. Dean Trustee By:/s/ Tina D. Hosking
Chauncey H. Dean Tina D. Hosking
Attorney-in-Fact*
March 31, 1997
/s/ Robert D. Dean Trustee
Robert D. Dean
/s/ Victor S. Curtis Trustee
Victor S. Curtis
Trustee
Frank J. Perez*
Trustee
David H. Ponitz*
Trustee
Gilbert P. Williamson*
INDEX TO EXHIBITS
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) Form of Advisory Agreement*
(6) Form of Underwriting Agreement*
(7) Inapplicable
(8) Form of Custody Agreement
(9)(i) Form of Administration Agreement*
(9)(ii) Form of Accounting Services Agreement*
(9)(iii) Form of Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement*
(10) Opinion and Consent of Counsel
(11) Consent of Independent Auditors
(12) Inapplicable
(13) Form of Agreement Relating to Initial Capital*
(14) Inapplicable
(15)(i) Form of Plan of Distribution Pursuant to Rule 12b-1 for
Class A Shares*
(ii) Form of Plan of Distribution Pursuant to Rule 12b-1 for
Class C Shares*
(16) Inapplicable
(17) (i) Financial Data Schedule for Large Cap Value Fund
(ii) Financial Data Schedule for Small Cap Value Fund
(iii) Financial Data Schedule for Balanced Fund
(18) Rule 18f-3 Multi-Class Plan
- ----------------------------
* Incorporated by reference to the Trust's initial
Registration Statement on Form N-1A.
BANK ONE TRUST COMPANY, N.A.
CUSTODIAN AGREEMENT
FOR
MUTUAL FUNDS
<PAGE>
BANK ONE TRUST COMPANY, N.A.
CUSTODIAN AGREEMENT
FOR
MUTUAL FUNDS
Execution Form
Name of Fund: DEAN FAMILY OF FUNDS, with respect to each portfolio (each a
"Portfolio) listed on Schedule B as it may be amended from time to time.
Address of Fund: c/o Countrywide Fund Services, Inc., 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202.
Execution Date:_________________________________________________________________
Effective Date:_________________________________________________________________
This Custodian Agreement is entered into on the Execution Date set forth above
effective on the Effective Date set forth above, by and between the above named
Fund ("Fund") and Bank One Trust Company, N.A. ("Custodian"), with its principal
offices located at 100 East Broad Street, Columbus, Ohio 43271. In consideration
of the mutual covenants and conditions of this agreement, the Custodian and Fund
hereby agree to the Provisions of this agreement attached hereto and the
Schedules (if any) of this agreement attached hereto.
IN WITNESS WHEREOF, this agreement is executed by the Custodian and the Fund on
the Execution Date.
CUSTODIAN FUND
BANK ONE TRUST COMPANY, N.A. DEAN FAMILY OF FUNDS
BY: BY:
TITLE: TITLE:
ATTEST: ATTEST:
- 2 -
<PAGE>
BANK ONE TRUST COMPANY, N.A.
CUSTODIAN AGREEMENT
FOR
MUTUAL FUNDS
Table of Contents for Provisions
Section 1 Appointment of Custodian
Section 2 Delivery of Securities, Cash and Other Property
Section 3 Accounts
Section 4 Proper Instructions
Section 5 Payments for Shares
Section 6 Collection of Income and Short Term Investments
Section 7 Payment of Monies
Section 8 Duties of Custodian with Respect to Securities
of the Fund Held by Custodian
Section 9 Registration of Securities
Section 10 Segregated Account
Section 11 Voting and Other Action
Section 12 Transfer Taxes and Other Disbursements
Section 13 Responsibility of Custodian
Section 14 Options
Section 15 Futures Contracts
Section 16 Records and Reports
Section 17 Effective Period, Termination and Interpretive
and Additional Provisions
Section 18 Successor Custodian
Section 19 Compensation of Custodian
Section 20 Notices
Section 21 Overdrafts
Section 22 Governing Law
Section 23 Severability
Section 24 Non-Waiver
Section 25 No Third Party Benefit
Section 26 Captions
Section 27 Governed Accounts
Section 28 Entire Agreement
Section 29 Dispute Resolution
- 3 -
<PAGE>
BANK ONE TRUST COMPANY, N.A.
CUSTODIAN AGREEMENT
FOR
MUTUAL FUNDS
Provisions
These Provisions are applicable to the Custodian Agreement between the Custodian
and the Fund described in the foregoing Execution Form.
1. APPOINTMENT OF CUSTODIAN Subject to the terms and conditions of
this agreement, the Fund hereby appoints and Custodian hereby accepts such
appointment by the Fund as custodian for certain cash, securities and other
property owned by the Fund.
2. DELIVERY OF SECURITIES, CASH AND OTHER PROPERTY The Fund shall
deliver to Custodian the cash, securities and other property of the Portfolios.
Custodian shall accept for deposit hereunder additional cash, securities and
other property upon receiving written notice from Fund. The Custodian shall only
be responsible for custody hereunder of cash, securities, and other property
delivered to it and then only while they are held in and as a part of the
custodial account. All securities received by Custodian from time to time shall
be hereinafter referred to collectively as the "Securities" and shall be held by
Custodian subject to the terms and conditions of this agreement.
3. ACCOUNTS Custodian shall open and maintain a separate account or
accounts in the name of each Portfolio of the Fund, subject only to draft or
order by Custodian pursuant to the terms of this agreement, and shall maintain
in such account or accounts all cash received by it from or for the account of
the Portfolio, other than cash maintained by the Portfolio pursuant to Rule
17f-3 promulgated under the Investment Company Act of 1940 (the "40 Act").
Custodian may deposit the securities held in the account of a Portfolio:
(a) in the banking department of Custodian;
(b) in such other banks or trust companies, including
affiliates of Custodian, as Custodian may deem appropriate;
- 4 -
<PAGE>
(c) in its accounts with a clearing agency registered with the
Securities and Exchange Commission (the "Commission") under
Section 17A of the Securities Exchange Act of 1934 (the
"Exchange Act"), which acts as a securities depository (the
"Securities Depository"); or
(d) in a book-entry account which is maintained for the
Custodian by a Federal Reserve bank (the "Book Entry
Account").
So long as Custodian maintains any account pursuant to
subsections (c) and (d) above for a Portfolio, Custodian shall
comply with the requirements of Rule 17f-4, including, but not
limited to:
(i) deposit the Securities in such an account that
includes only assets held for the Portfolio;
(ii) send the Fund confirmation of any transfers to or
from the account maintained for the Portfolio;
(iii) with respect to Securities transferred to the
account of the Portfolio, identify as belonging to
the Portfolio, by book-entry or otherwise, a
quantity of such Securities in the fungible bulk of
Securities (A) registered in the name of Custodian
or its nominee, or (B) shown on Custodian's account
on the books of the Securities Depository, the
Book-Entry Account, or Custodian's agent;
(iv) promptly send to the Fund reports it receives from
the appropriate Federal Reserve Bank of Securities
Depository on its system of internal accounting
control; and
(v) send to the Fund such reports of the systems of
internal accounting control of Custodian and its
agents through which such Securities are deposited
as are available and as the Fund may reasonably
request from time to time.
4. PROPER INSTRUCTIONS For the purpose of this agreement, "proper
instructions" shall mean (a) any oral authorizations, instructions or approvals
of any kind transmitted to Custodian in person or by telephone by a person
believed in good faith by Custodian to be a person authorized by a resolution of
the Board of Trustees of the Fund to give such authorizations, instructions or
approvals on behalf of the Fund; or (b) written authorizations, instructions, or
approvals of any kind transmitted to Custodian by mail, personal delivery,
telecopy, telegram or other written means by at least two (2) persons believed
in good faith by Custodian to be persons authorized by a resolution of the Board
of Trustees of the Fund to give such authorization,
- 5 -
<PAGE>
instructions or approvals on behalf of the Fund. The Fund shall confirm any
oral authorization, instructions or approval described in (a), above, the same
business day by transmittal to Custodian of a written authorization, instruction
or approval described in (b), above.
5. PAYMENTS FOR SHARES The Fund shall be responsible for allocation of
payment for Shares of a Portfolio, issued from time to time by the Fund. Such
payments will be made instructions or approvals on behalf of the Fund. The Fund
shall confirm any oral authorization, available to the Portfolio in federal
funds as of specified times agreed upon from time to time by the Fund and
Custodian.
6. COLLECTION OF INCOME AND SHORT TERM INVESTMENTS Custodian shall
collect all income and other payments with respect to registered Securities held
hereunder to which each Portfolio shall be entitled by law or pursuant to custom
in the securities business, and shall collect all income and principal and other
payments with respect to bearer Securities if, on the date of payment by the
issuer, such Securities are held by Custodian or agent thereof, and shall
deposit such income and principal, as collected, into such Portfolio's account.
Without limiting the generality of the foregoing, Custodial shall detach and
present for payment all coupons and other income and principal items requiring
presentation as and when they become due, shall collect dividends and interest
when due on Securities held hereunder, and shall endorse and deposit for
collection, in the name of the Portfolio, checks, drafts, and other negotiable
instruments within a reasonable period of time. The Custodian is further
authorized, empowered and directed to invest, said proceeds and any other monies
not directed by the Fund or Fund's agent to be invested in short term interest
bearing or short term discount obligations to the best of Custodian's ability.
It is contemplated that the Fund will, from time to time, provide Custodian with
certain written guidelines setting forth specific short term interest bearing
and short term discount obligations which are acceptable to Fund, and Custodian
agreed to act within said guidelines.
Unless provided otherwise in written instructions from the Fund to the
Custodian, the Custodian is specifically authorized, empowered and directed to
invest any short term monies in securities of The One Group U.S. Treasury
Securities Money Market Fund and The One Group Prime Money Market Fund. The One
Group is an open-end investment company registered under the '40 Act. The fact
that the Custodian, any affiliate of the Custodian, or any affiliate of BANC ONE
CORPORATION is providing services to and receiving remuneration from the
foregoing investment company or investment trust as investment advisor,
custodian, transfer agent, registrar, or otherwise shall not preclude the
Custodian from investing in the securities of such investment company or
investment trust.
- 6 -
<PAGE>
With respect to Securities of foreign issuers, while Custodian will use its best
efforts to collect any monies which may to its knowledge become collectible
arising from such Securities including dividends, interest and other income and
principal, and to notify the Fund of any call for redemption, offer of exchange,
right of subscription, reorganization or other proceedings affecting such
Securities, it is understood that Custodian shall be under no responsibility for
any failure or delay in effecting such collections or giving such notices.
Custodian shall not be under any obligation or duty to take action to effect
collection of any amount, if the Securities (domestic or foreign) on which such
amount is payable are in default and payment is refused after due demand or
presentation. Custodian will, however, promptly notify the Fund in writing of
such default and refusal to pay.
7. PAYMENT OF MONIES Upon receipt of proper instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing instructions when
Fund and Custodian specifically agree in writing, Custodian shall pay out monies
of a Portfolio from the custodial account in the following cases only:
(a) Upon the purchase of Securities for the account of the Portfolio
by only (i) against the delivery of such Securities to Custodian (or any bank,
banking firm or trust company doing business in the United States or abroad
which is qualified under the '40 Act to act as a custodian and has been
designated by Custodian as its agent for this purpose) registered in the name of
the Portfolio or in the name of a nominee of the Fund or in the name of a
nominee of Custodian referred to in Section 9 below or in proper form for
transfer; (ii) in the case of a purchase effected through a Securities
Depository, in accordance with the conditions set forth in Section 3 above or
(iii) in the case of repurchase agreements entered into between the Fund and
another bank or broker-dealer, against delivery of Securities either in
certificate form or through an entry crediting Custodian's account at the
Federal Reserve Bank with such securities.
(b) In connection with conversion, exchange, surrender, or redemption
of securities owned by the Fund as set forth in Section 8(b) of
this agreement;
- 7 -
<PAGE>
(c) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management
accounting, transfer agent and legal fees, distribution plan
payments and other operating expenses of the Fund;
(d) For the payment of any dividends or other distributions on
shares of the Portfolio declared pursuant to the governing
documents of the Fund;
(e) In connection with options and futures contracts, as set
forth in sections 14 and 15 of this agreement, respectively; and
(f) For any other purpose of the Fund, but only upon receipt of
proper instructions from the Fund, specifying the amount of such
payment, setting forth the purpose for which such payment is to
be made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be made.
Notwithstanding anything to the contrary, in connection with sales and purchases
of Securities, the Custodian is hereby authorized to debit or credit the
Portfolio's Account on contractual settlement date.
8. DUTIES OF CUSTODIAN WITH RESPECT TO SECURITIES OF THE FUND HELD BY
CUSTODIAN
(a) Holding Securities Custodian shall hold and physically
segregate for the account of each Portfolio all Securities owned
by the Fund other than securities held in a Securities Depository
or Book Entry Account, as provided in Section 3 of this
agreement.
(b) Delivery of Securities Custodian shall release and deliver
Securities owned by a Portfolio held by Custodian or in a
Securities Depository or Book Entry Account for Custodian only
upon receipt of proper instructions from the Fund on behalf of
the applicable Portfolio, which may be continuing instructions
when the Fund and Custodian specifically agree in writing, and
only in the following cases:
(i) Upon the sale of such Securities for the account of the
Portfolio and the receipt of payment therefor;
- 8 -
<PAGE>
(ii) Upon the receipt of payment in connection with any
repurchase agreement related to such Securities entered
into by the Portfolio;
(iii) In the case of a sale effected through a Securities
Depository or Book Entry Account, in accordance with the
provisions of Section 3 of this agreement;
(iv) In connection with tender or other similar offers for
Securities owned by the Portfolio, provided that, in any
such case, the cash or other consideration is to be
delivered to Custodian;
(v) To the issuer thereof or its agent when such Securities
are called, redeemed, retired, or otherwise become
payable, provided that, in any such case, the cash or
other consideration is to be delivered to Custodian;
(vi) To the issuer thereof, or its agent, for transfer into
the name of the Custodian or into the name of any nominee
or nominees of Custodian, or for exchange for a different
number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units, or for exchange of interim receipts or temporary
Securities or definitive Securities, provided that, in any
such case, the new Securities are to be delivered to
Custodian;
(vii) To the broker selling the same, against a receipt,
for examination in accordance with "street delivery"
custom provided that Custodian may adopt such procedures
to ensure their prompt return to Custodian by the broker
in the event the broker elects not to accept them;
(viii) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization,
or readjustment of the Securities of the issuer of such
Securities, or pursuant to provisions for conversion
contained in such Securities provided that, in any such
case, the new Securities and cash, if any, are to be
delivered to Custodian;
(ix) In the case of warrants, rights or similar
Securities, the surrender thereof upon the exercise of
such warrants, rights or similar Securities or the
surrender of interim receipts or temporary Securities for
definitive Securities, provided that, in any such case,
the new Securities and cash, if any, are to be delivered
to Custodian;
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<PAGE>
(x) If the Custodian and the Fund have executed a
Securities Lending Agreement, for delivery in connection
with any loans of securities made by the Portfolio
pursuant to the terms of such Securities Lending
Agreement;
(xi) For delivery as security in connection with any
borrowings by the Fund on behalf of the Portfolio
requiring a pledge of assets by the Fund on behalf of the
Portfolio but only against receipt of amounts borrowed;
(xii) For delivery in accordance with the provisions of
any agreement among the Fund on behalf of the Portfolio,
Custodian and a broker- dealer registered under the
Exchange Act and a member of theNational
(xiii) For delivery in accordance with the provisions of
any agreement among the Fund on behalf of the Portfolio,
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to the
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits
in connection with transactions by the Portfolio;
(xiv) Upon receipt of instructions from the Transfer Agent
for the Fund, for delivery to such Transfer Agent or to
holders of Shares in connection with distributions in
kind, as may be described from time to time in one or more
currently effective prospectuses of the Fund, in
satisfaction of requests by holders of Shares
forrepurchase or redemption; and
(xv) For any other purpose of the Fund, but only upon
receipt of, in addition to proper instructions from the
Fund on behalf of the applicable Portfolio, a certified
resolution of the Board of Trustees of the Fund specifying
the Securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such
purpose to be a proper purpose and naming the person or
persons to whom delivery of such Securities shall be made.
Notwithsanding anything to the contrary, in connection with sales and purchases
of Securities, the Custodian is hereby authorized to debit or credit the
Portfolio's Account on contractual settlement date.
- 10 -
<PAGE>
(c) Security Holdings Disclosure The Custodian is not authorized
and shall not disclose the name, address, or security positions
of the Fund in response to requests concerning shareholder
communications under Section 14 of the Securities Exchange Act of
1934, the rules and regulations thereunder, and any similar
statute, regulation or rule in effect from time to time.
9. REGISTRATION OF SECURITIES Securities held by Custodian (other than
bearer Securities) shall be registered in the name of the Fund or in the name of
any nominee of the Fund or of any nominee of Custodian, unless the Fund has
authorized in writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment adviser as the
Fund. All Securities accepted by Custodian on behalf of the Fund under the terms
of this agreement shall be in "street name" or other good delivery form.
10. SEGREGATED ACCOUNT Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or accounts for and on
behalf of each applicable Portfolio, into which account or accounts may be
transferred cash and/or Securities including Securities maintained in an account
by the Custodian pursuant to Section 3 of this agreement (a) in accordance with
the provisions of any agreement among the Fund on behalf of the Portfolio,
Custodian and a dealer or broker which is registered under the Exchange Act and
is a member in good standing of the NASD relating to compliance with the rules
of the O.C.C. and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio; (b) for purposes of segregating
cash or government Securities in connection with options purchased or written by
the Fund or commodity futures contracts or options thereon purchase, sold, or
written by the Fund; and (c) for any other purpose, upon receipt of proper
instructions.
11. VOTING AND OTHER ACTION Custodian shall promptly deliver or mail to
the Fund all forms of proxies and all notices of meetings relating to Securities
held for the account of each Portfolio, and, upon receipt of proper
instructions, shall execute and deliver such proxies or other authorizations as
may be required. Neither Custodian nor its nominee shall vote any Securities or
execute any proxy to vote the same or give any consent to take any other action
with respect thereto (except as otherwise herein provided) unless directed to do
so by the Fund on behalf of the Portfolio upon receipt of proper instructions.
12. TRANSFER TAXES AND OTHER DISBURSEMENTS The Fund shall pay or
reimburse Custodian from time to time for any transfer taxes payable upon
transfers of Securities made hereunder, and for all other necessary and proper
disbursements and expenses made or incurred by Custodian in the performance of
its duties and obligations under this agreement. Custodian shall execute and
deliver and shall cause any Securities Depository to execute and deliver such
certificates in connection with Securities delivered to it or by it under this
agreement as may be required under the laws of any jurisdiction to exempt from
taxation any exemptible transfers and/or deliveries of any such Securities.
- 11 -
<PAGE>
13. RESPONSIBILITY OF CUSTODIAN Custodian shall be held to the exercise
of reasonable care in carrying out its obligations under this Agreement and
shall be without liability to the Fund for any loss, damage, cost, expense
(including attorney's fees and disbursement), liability or claim, unless such
loss, damage, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any sub-custodian
appointed by Custodian. IN NO EVENT SHALL THE AGENT BE LIABLE FOR ANY SPECIAL,
INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES EVEN IF THE AGENT HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION OF LIABILITY
WILL APPLY REGARDLESS OF THE FORM OF ACTION, INCLUDING WITHOUT LIMITATION,
BREACH OF CONTRACT OF TORT (INCLUDING NEGLIGENCE).
Custodian shall be held harmless in acting upon proper instructions, certified
resolutions of the Board of Trustees of the Fund, or any notice, request,
consent, certificate or other instrument reasonably believed by it to be genuine
and to be signed by the proper party or parties; and shall be entitled to
receive as conclusive proof of any fact or matter required to be ascertained by
it hereunder, a certificate by the President, Treasurer, or Secretary or
Assistant Secretary of the Fund. Custodian may receive and accept a certified
resolution of the Board of Trustees of the Fund as conclusive evidence (a) of
the authority of any person to act in accordance with such resolution or (b) of
any determination or of any action by the Board of Trustees of the Fund pursuant
to the Declaration of Trust or the Code of Regulation or the By-Laws as
described in such resolution, and such vote may be considered as in full force
and effect until receipt by Custodian of written notice from the Secretary or
Assistant Secretary to the contrary. Notwithstanding anything to the contrary,
Custodian shall have no obligation to perform market-to-market services in
connection with securities transactions, including, without limitation, options
and futures.
Custodian shall be entitled to reasonably rely upon and may act upon advice of
counsel (who may or may not be counsel for the Fund) on all matters, and shall
be without liability for any action reasonably taken or omitted pursuant to such
advice.
If the Fund on behalf of a Portfolio requires Custodian to take any action with
respect to Securities, which action involves the payment of monies or which
action may, in the opinion of Custodian, result in Custodian or its nominee
being liable for the payment of money or incurring liability of some other form,
the Fund on behalf of a Portfolio, as a prerequisite to requiring Custodian to
take such action, shall provide indemnity to Custodian in an amount and form
satisfactory to it.
With respect to Securities held by Custodian on behalf of a Portfolio, Custodian
shall collect all income or other payments, release and deliver such Securities,
and take any other action as directed by the Fund with respect to dividends,
splits, distributions, spin-offs, puts, calls,
- 12 -
<PAGE>
conversions, redemptions, tenders, exchanges, mergers, reorganizations, rights,
warrants or any other similar activity relating to the Securities. The Custodian
shall request direction of Fund upon receipt of actual notice of any such
activity. For purposes of this paragraph, Custodian shall be deemed to have
actual notice if any such activity is published in one or more of the following
publications: J.J. Kenney's Munibase System, Xcitek, Inc., Financial Card
Service, Standard & Poors' Called Bond Listing, Depository Trust Reorganization
Notices, and The Wall Street Journal. If Custodian does not have actual notice
of such activity, any such activity will be handled by Custodian on a "best
efforts" basis.
14. OPTIONS
(a) Purchase of Options by a Portfolio Upon the purchase
by a Portfolio of any Option (as defined below), the Fund
on behalf of the Portfolio shall promptly deliver to the
Custodian a certificate signed by an appropriate officer
of the Fund (a "Certificate") specifying with respect to
each such Option: (i) whether the Option is a put or call
Option; (ii) the name of the issuer of the securities
subject to the Option and the title and number of such
securities; (iii) the expiration date: (iv) the exercise
price; (v) the date of purchase and settlement; (vi) the
premium to be paid by the Portfolio; and (vii) the name of
the registered broker-dealer who is acting as the clearing
agent (the "Clearing Agent"). Upon receipt of a Clearing
Agent's confirmation of the purchase of the Option held by
such Clearing Agent for the account of Custodian as
custodian for the Portfolio, Custodian shall pay the
premium payable to the Clearing Agent through whom the
purchase was made; provided, that such premium conforms to
the total premium payable as set forth in such
Certificate.
(b) Sale of Options by a Portfolio Upon the sale of any
Option purchased by a Portfolio in accordance with
subsection (a) above, the Fund on behalf of the Portfolio
shall promptly deliver to Custodian a Certificate
specifying with respect to such sale: (i) the type of
Option (put or call); (ii) the name of the issuer of the
securities subject to the Option and the title and number
of such securities; (iii) the date of sale; (iv) the sales
price; (v) the date of settlement; (vi) the total amount
payable to the Portfolio upon such sale; and (vii) the
name of the Clearing Agent through whom the sale was made.
Custodian shall consent to the delivery of the Option sold
by the Clearing Agent which previously supplies the
confirmation described in subsection (a) above with
respect to such Option against payment to Custodian of the
total amount payable to the Portfolio; provided that the
same conforms to the total amount payable as set forth in
such Certificate.
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<PAGE>
(c) Upon the exercise by the Portfolio of any Call Option
(as defined below) purchased by the Portfolio pursuant to
subsection (a) above, the Fund on behalf of the Portfolio
shall promptly deliver to Custodian a Certificate
specifying with respect to such Call Option: (i) the name
of the issuer of the securities subject to such Call
Option and the title and number of such securities; (ii)
the expiration date; (iii) the date of exercise and
settlement; (iv) the exercise price per share; (v) the
total amount to be paid by the Portfolio upon such
exercise; and (vi) the name of the Clearing Agent through
whom such Call Option was exercised. Custodian shall, upon
receipt of the securities underlying the Call Option which
was exercised,(A) pay out of the moneys held for the
account of the Portfolio the total amount payable to the
Clearing Agent through whom the Call Option was exercised;
provided that the same conforms to the total amount
payable as set forth in such Certificate, and (B) delete
the exercised Call Option from the statements delivered to
the Fund pursuant to Section 16 of this agreement.
(d) Upon the exercise by a Portfolio of any Put Option (as
defined below) purchased by the Portfolio pursuant to
subsection (a) hereof, the Fund on behalf of the Portfolio
shall deliver to Custodian a Certificate specifying with
respect to such Put Option: (i) the name of the issuer of
the securities subject to such Put Option and the title
and number of such securities; (ii) the expiration date;
(iii) the date of exercise and settlement; (iv) the
exercise price per share; (v) the total amount to be paid
to the Portfolio upon such exercise; and (vi) the name of
the Clearing Agent through whom such Put Option was
exercised. Custodian shall upon receipt of the amount
payable upon the exercise of the Put Option (A) deliver or
cause the Securities Depository or Book Entry Account to
deliver, out of the account of the Portfolio to which such
Put Option was allocated, the securities which were
subject to such Put Option; provided that the same
conforms to the amount payable to the Portfolio as set
forth in such Certificate, and (B) delete the exercised
Put Option from the statements to be delivered to the Fund
pursuant to Section 16 of this agreement.
(e) Whenever a Portfolio writes a Covered Call Option (as
defined below) with respect to securities held by
Custodian hereunder, the Fund on behalf of the Portfolio
shall promptly deliver to Custodian a Certificate
specifying with respect to such Covered Call Option: (i)
the name of the issuer of the securities subject to such
Covered Call Option and the title and number of such
securities; (ii) the expiration date; (iii) the exercise
price; (iv) the premium to be received by the Portfolio;
(v) the date such Covered Call Option was written; and
(vi) the name of the Clearing Agent through whom the
- 14 -
<PAGE>
premium is to be received. Custodian shall deliver or
cause to be delivered, in exchange for receipt of the
premium specified in the Certificate with respect to such
Covered Call Option, such receipts as are required in
accordance with the customs prevailing among brokers in
Covered Call Options, and shall impose, or direct the
Securities Depository or Book Entry Account to impose,
upon the underlying securities specified in the
Certificate such restrictions as may be required by such
receipts.
(f) Whenever Covered Call Option written by a Portfolio
and described in the preceding subsection (e) is
exercised, the Fund on behalf of the Portfolio shall
promptly deliver to Custodian a Certificate instructing
Custodian to deliver, or to direct the Securities
Depository or Book Entry Account to deliver, the
securities subject to such Covered Call Option and
specifying: (i) the name of the issuer of the securities
subject to such Covered Call Option and the title and
number of such securities; (ii) the Clearing Agent to whom
the underlying securities are to be delivered; and (iii)
the total amount payable to the Portfolio upon such
delivery. Upon the return and/or cancellation of any
receipts delivered pursuant to subsection (e) hereof,
Custodian shall deliver, or cause the Securities
Depository or Book Entry Account to deliver, the
underlying securities as specified in the Certificate for
the amount to be received as set forth in such
Certificate.
(g) Whenever a Portfolio purchases any Option identical to
a previously written Covered Call Option described in
subsection (e) hereof in a transaction expressly
designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund
on behalf of the Portfolio shall promptly deliver to
Custodian a Certificate specifying with respect to the
Option being purchased: (i) that the transaction is a
Closing Purchase Transaction; (ii) the name of the issuer
of the securities subject to such Option and the title and
number of such securities; (iii) the exercise price; (iv)
the premium to be paid by the Portfolio; (v) the
expiration date; (vi) the date of such purchase; and (vii)
the name of the Clearing Agent to whom the premium is to
be paid. Upon Custodian's payment of the premium and the
return and/or cancellation of any receipt issued pursuant
to subsection (e) of this Section 14 with respect to the
Covered Call option being liquidated through the Closing
Purchase Transaction, Custodian shall (A) remove, or
direct the Securities Depository or Book Entry Account to
remove, the previously imposed restriction on the
securities underlying the Covered Call Option, and (B)
delete such Option from statements delivered to the Fund
by Custodian pursuant to Section 16 of this agreement.
- 15 -
<PAGE>
(h) Upon the expiration of any Option purchased by a
Portfolio pursuant to subsection (a) of this Section 14 or
any Covered Call Option written by a Portfolio and
described in subsection (e) of this Section 14, Custodian
shall (i) delete such Option from the statements delivered
to the Fund pursuant to Section 16 of this agreement and,
if such expired Option was a Covered Call Option written
by the Portfolio, (ii) free, or instruct the Securities
Depository or Book Entry Account to free, the Securities
underlying such Covered Call Option from the restrictions
imposed by receipts issued in connection therewith.
(i) For purposes of this Section 14, the following terms
shall have the meanings as set forth below:
(i) "Option" shall mean a Call Option, Covered Call
Option and/or Put Option.
(ii) "Call Option" shall mean an option entitling the
holder thereof, upon timely exercise and payment of
the exercise price, as specified therein, to purchase
from the writer of such Call Option the specified
underlying Securities.
(iii) "Covered Call Option" shall mean an option
entitling its holder, upon timely exercise and
payment of the specified exercise price, to purchase
from the writer of such Covered Call Option the
specified underlying Securities which are owned by
such writer and are subject to appropriate
restrictions.
(iv) "Put Option" shall mean an option entitling the
holder thereof, upon timely exercise and tender of
the specified underlying Securities, to sell such
Securities to the writer of such Put Option for the
specified exercise price.
15. FUTURES CONTRACTS
(a) Whenever a Portfolio shall enter into a Futures
Contract (as defined below) to be held by Custodian under
this agreement, the Fund on behalf of the Portfolio shall
deliver to Custodian a Certificate specifying with respect
to such Futures Contract: (i) the category of Futures
Contract (the name of the underlying stock index or
financial instrument); (ii) the number of identical
Futures Contracts entered into; (iii) the delivery of
settlement date of the Futures Contract; (iv) the date the
Futures Contract was entered into; (v) whether the Fund is
buying (going long) or selling (going short) on such
Futures Contract; (vi) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited by
Custodian in a - 16 - margin account with respect to such
Futures Contract and the name in which the margin account
has been, or is to be, established; (vii) the name of the
- 16 -
<PAGE>
broker, dealer, or futures commission merchant through
whom the Futures Contract was entered into; and (viii) the
amount of fee or commission, if any, to be paid to the
broker, dealer, or futures commission merchant. Custodian
shall upon receipt of such broker's, dealer's, or futures
commission merchant's statement confirming the purchase
(creation of a long position) or sale (creation of a short
position) of a Futures Contract which is held by such
broker, dealer, or futures commission merchant in the name
of Custodian (or of a duly appointed and registered
nominee of Custodian or a designated depository or its
nominee) as custodian for the Portfolio, make payment of
the fee or commission, if any, specified in the
Certificate and deposit in such margin account the amount
of cash and/or the amount and kind of securities specified
in such Certificate.
(b) The Portfolio shall, from time to time, make such
additional deposits to, or withdrawals from, a margin
account as specified in a Certificate received by
Custodian. Such Certificate shall specify the amount of
cash and/or the amount and kind of Securities specifically
to be deposited in, or withdrawn from, a specified margin
account. In the event that the Fund fails to specify in a
Certificate the name of the issuer, the title and the
number of shares or the principal amount of any particular
Securities to be deposited by Custodian in a margin
account, Custodian shall not be under any obligation to
make any such deposit and shall so notify the Fund.
(c) Custodian shall make deliveries or payments from a
margin account to the broker, dealer, or futures
commission merchant in whose name, or for whose benefit,
the account was established only upon the receipt of a
certificate specifying the broker, dealer, or futures
commission merchant to whom such payment or delivery is to
be made, the amount of money and/or the amount and kind of
securities to be paid or delivered, and the date on which
such payment or delivery is to be made. After receipt of
such a Certificate, Custodian shall make the payments
and/or deliveries to the broker, dealer, or futures
commission merchant therein specified.
(d) Whenever a Futures Contract held by Custodian
hereunder is retained by a Portfolio until delivery or
settlement is made on such Futures Contract, the Fund on
behalf of the Portfolio shall deliver to Custodian a
Certificate specifying: (i) the Futures Contract; (ii)
with respect to a Stock Index Futures Contract (as defined
below), the total cash settlement amount to be paid or
received, and with respect to a Financial Futures Contract
(as defined below), the Securities and/or amount of cash
to be delivered or received; (iii) the broker, dealer, or
futures commission merchant to or - 17 - from whom payment
or delivery is to be made or received; and (iv) the amount
of cash and/or Securities to be withdrawn from the related
margin account. Upon the receipt of a broker's, dealer's,
or futures commission merchant's statement or confirmation
reasonably believed by Custodian to be in the form
customarily used by brokers, dealers or futures commission
merchants confirming that the Futures Contract is being
settled and that the Portfolio's position in such Futures
Contract is thereby terminated, Custodian shall make the
payment or delivery specified in the Certificate, and
delete such Futures Contract from the statements delivered
to the Fund pursuant to Section 16 of this agreement.
- 17 -
<PAGE>
(e) Whenever a Portfolio shall enter into a Futures
Contract to offset a Futures Contract held by Custodian
hereunder, the Fund on behalf of the Portfolio shall
deliver to Custodian a Certificate specifying: (i) the
items of information required in a Certificate described
in subsection (a) above, and (ii) the Futures Contract
being offset. Custodian shall, upon receipt of a broker's,
dealer's. or futures commission merchant's statement or
confirmation reasonably believed by Custodian to be in the
form customarily used by brokers, dealers, or futures
commission merchants confirming the offsetting
transaction, make payment of the fee or commission, if
any, specified in the Certificate and delete the Futures
Contract being offset from the statements delivered to the
Fund pursuant to Section 16 of this agreement.
(f) Custodian shall accept cash and/or Securities tendered
or delivered by a broker, dealer, or futures commission
merchant in connection with any Futures Contract held by
Custodian hereunder when instructed to accept such cash
and/or Securities in a Certificate. Such Certificate shall
instruct Custodian where to deposit such cash and/or
Securities.
(g) For purposes of this Section 15, the following terms
shall have the meanings set forth below:
(i) "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contract.
(ii) "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities,
including U.S. Treasury Bills, U.S. Treasury Notes,
U.S. Treasury Bonds, Government National Mortgage
Association mortgage-backed securities and commercial
paper, at a specified time at an agreed upon price.
- 18 -
<PAGE>
(iii) "Stock Index Futures Contract" shall mean a
bilateral agreement pursuant to which the parties
agree to take or make delivery of an amount of cash
equal to a specified dollar amount times the
difference between the value of a particular stock
index at the close of the last business day of the
contract and the price at which the Futures Contract
is originally struck.
16. RECORDS AND REPORTS Fund hereby acknowledges that it may have the
right to receive broker confirmations within the time period prescribed by 12
C.F.R. Section 12.5 at no additional cost. In lieu of receiving such
confirmations within such time period, Custodian and Fund agree to the
alternative procedures set forth below.
Custodian shall create and maintain records relating to its activities and
obligations under this agreement in such manner as will meet the obligations of
the Fund under the '40 Act, with particular attention to Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder, applicable Federal and State tax laws and any
other law or administrative rules or procedures which may be applicable to the
Fund and employees and agents of the Securities and Exchange Commission. All
such records shall remain the property of the Fund, shall be subject to the
provisions of Section 13 of this agreement, and shall be open to the inspection
and audit as reasonable times by duly authorized officers, employees or agents
of the Fund. Custodian shall, at the Fund's request, supply the Fund with a
tabulation of Securities owned by each Portfolio and held by Custodian and shall
supply to the Fund a report from time to time as parties shall agree of all
monies received or paid on behalf of each Portfolio and of the resultant cash
balance, a list of all security transactions that remain unsettled at such time,
and such other reports as the Fund may reasonably request.
17. EFFECTIVE PERIOD, TERMINATION AND INTERPRETIVE AND ADDITIONAL
PROVISIONS This agreement shall become effective as of the date first set forth
in this agreement, and may be terminated by either party by 60 days advance
written notice delivered pursuant to Section 20 of this agreement to the other
party.
Upon termination hereof, the Fund shall pay to Custodian such compensation as
may be due as of the date of such termination, and shall likewise reimburse
Custodian for its costs, expenses and disbursements as of the date of such
termination as contemplated by this agreement.
In connection with the operation of this agreement, Custodian and the Fund may
agree from time to time on such provisions interpretive or in addition to the
provisions of this agreement as may in their joint opinion be consistent with
the general tenor of this agreement. Any such interpretive or additional
provisions shall be signed by both parties and annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
Federal or State regulations, or any provision of the Declaration of Trust and
By-Laws of the Fund as the same may from time to time be amended.
- 19 -
<PAGE>
18. SUCCESSOR CUSTODIAN If a successor custodian for the Fund, or one
or more of the Portfolios is appointed by the Board of Trustees of the Fund,
Custodian shall, upon termination, deliver to such successor custodian, duly
endorsed and in form for transfer, all Securities of each applicable Portfolio
then held hereunder and all other property of the applicable Portfolio(s)
deposited with or held by it hereunder and Custodian shall be released of all
duties and obligations under this agreement.
If no such successor custodian is appointed and this agreement is terminated
pursuant to Section 17 of this agreement, Custodian shall, in like manner, at
its office, upon receipt of a certified resolution of the Board of Trustees of
the Fund, deliver such property in accordance with such resolution.
In the event that no written order designating a successor custodian or
certified copy of a resolution of the Board of Trustees of the Fund shall have
been delivered to Custodian on or before the date when such termination shall
become effective, then Custodian shall have the right to deliver to a bank or
trust company of its own selection qualified to act as a custodian under the '40
Act, all property of applicable Portfolios held by Custodian, under this
agreement. Thereafter, such bank or trust company shall be the successor of
Custodian under this agreement and Custodian shall be released of all duties and
obligations under this agreement. Alternatively, Custodian shall have the right
to commence as action in the nature of an interpleader, and seek to deposit the
property in a court of competent jurisdiction.
19. COMPENSATION OF CUSTODIAN Custodian shall be entitled to
compensation for its services as set forth in Schedule A attached hereto and
made a part hereof as amended by Custodian from time to time (the "Fee
Schedule") and for reimbursement of its out of pocket expenses.
20. NOTICES Any notices required or desired to be given to any party
hereto shall be in writing, shall be addressed to such other party at that
party's address set forth at the beginning of this agreement and shall be deemed
given when deposited in the United States mail, certified, return receipt
requested, or actually received by the party to whom it was addressed if
delivered by an alternate method. Any party may change the address to which
notices or other communications are to be given by giving the other parties
notice of such change.
21. OVERDRAFTS Any Securities purchased in anticipation of the delivery
of cash on behalf of the Portfolio shall not be credited to the Account of the
Portfolio if such cash is not actually received by the Custodian by the
anticipated delivery date. In such event, Custodian may, in its sole discretion,
advance the necessary funds to complete the transaction and immediately shall
notify the Portfolio of the foregoing. Upon receipt of such notification, the
Portfolio shall wire such funds to the Custodian, in such amount as agreed upon
by the Fund and Custodian to make the Custodian whole in connection with the
shortfall, by 1:00 p.m. eastern standard time on the day the notification is
received or, alternatively, instruct the Custodian to sell Securities in the
Portfolio's account in the amount agreed. Upon Custodian's receipt of the
- 20 -
<PAGE>
funds representing the shortfall, the subject Securities will be credited to the
Portfolio's account. If the Custodian has not received funds in the amount
necessary to cover the shortfall in the Portfolio's account within two days
following notification, Custodian is authorized to sell the subject Securities
and retain that portion of the proceeds necessary to make the Custodian whole,
and shall credit any remaining proceeds to the Account of the Portfolio.
22. GOVERNING LAw This agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of Ohio.
23. SEVERABILITY The intention of the parties to this agreement is to
comply fully with all laws, rules, regulations and public policies, and this
agreement shall be construed consistently with all laws, rules, regulations and
public policies to the extent possible. If and to the extent that any court of
competent jurisdiction determines it is impossible to construe any provision of
this agreement consistently with any law, rule, regulation or public policy and
consequently holds that provision to be invalid, such holding shall in no way
affect the validity of the other provisions of this agreement, which shall
remain in full force and effect.
24. NON-WAIVER No failure by any party to insist upon compliance with
any term of this agreement, to exercise any option, enforce any right, or seek
any remedy upon any default of any other party shall affect, or constitute a
waiver of, the first party's right to insist on such strict compliance, exercise
that option, enforce that right, or seek that remedy with respect to that
default or any prior, contemporaneous, or subsequent default. No custom or
practice of the parties at variance with any provision of this agreement shall
affect or constitute a waiver of, any party's right to demand strict compliance
with all provisions of this agreement.
25. NO THIRD PARTY BENEFIT This agreement is intended for the exclusive
benefit of the parties to this agreement and their respective successors and
assigns, and nothing contained in this agreement shall be construed as creating
any rights or benefits in or to any third party.
26. CAPTIONS The captions of the various sections of this agreement are
not part of the context of this agreement, but are only labels to assist in
locating those sections and shall be ignored in construing this agreement.
27. ENTIRE AGREEMENT. This agreement represents the entire agreement
between the parties and may not be modified or amended except by a writing
signed by the party to be charged, except as otherwise provided herein.
28. DISPUTE RESOLUTION AND ARBITRATION. Any controversy or claim
arising out of or relating to this agreement, or the breach of the same, shall
be settled through consultation and negotiation in good faith and a spirit of
mutual cooperation. However, if those attempts fail, the
- 21 -
<PAGE>
parties agree that any misunderstandings or disputes arising from this agreement
shall be decided by arbitration which shall be conducted, upon request by either
party, before three (3) arbitrators (unless both parties agree on one (1)
arbitrator) designated by the American Arbitration Association (the "AAA"), in
accordance with the terms of the Commercial Arbitration Rules of the AAA, and,
to the maximum extent applicable, the United States Arbitration Act (Title 9 of
the United States Code), or if such Act is not applicable, any substantially
equivalent state law. The parties further agree that the arbitrator(s) will
decide which party must bear the expenses of the arbitration proceedings.
CUSTODIAN FUND
BANK ONE TRUST COMPANY, N.A. DEAN FAMILY OF FUNDS
By:________________________ By:________________________________
Title:_____________________ Title:_____________________________
Attest:____________________ Attest:____________________________
<PAGE>
BANK ONE TRUST COMPANY, N.A.
STANDARD CUSTODY AGREEMENT
SCHEDULE A
FEE SCHEDULE
This Schedule A sets forth the compensation agreed upon by DEAN FAMILY
OF FUNDS to be paid to Bank One Trust Company, N.A. (the "Custodian") pursuant
to the terms and conditions of Section 14 of the Standard Custody Agreement
Effective ____________, 1997 and executed by such parties. Any changes to the
fee schedule shall be by execution of a new Schedule A.
Custody Fees
Base Fee (per portfolio) $400
Transactions (per transaction) $5 DTC/FRB Eligible
$20 DTC/FRB Ineligible
$5 Principal Paydowns
Market Value Fee (annual) .0l% Of Market Value
This fee schedule shall not be amended by Custodian for a period of three years
from the Effective Date hereof.
Effective Date of this Fee Schedule: April 1, 1997
CUSTODIAN PRINCIPAL
Bank One Trust Company, N.A. DEAN FAMILY OF FUNDS
By:_________________________ By:_____________________________
Printed Name:_______________ Printed Name:___________________
Title:______________________ Title:__________________________
Dated:______________________ Dated:__________________________
<PAGE>
SCHEDULE B
LIST OF PORTFOLIOS
LARGE CAP VALUE FUND
SMALL CAP VALUE FUND
BALANCED FUND
MGF
SERVICE CORP
March 21, 1997
Dean Family of Funds
2480 Kettering Tower
Dayton, Ohio 45423
Ladies and Gentlemen:
You have requested my opinion in connection with the registration by Dean Family
of Funds, an Ohio business trust (the "Trust"), of an indefinite number of
shares of beneficial interest of each of the Large Cap Value Fund, the Small Cap
Value Fund and the Balanced Fund of the Trust (the "Shares") authorized by the
Trust's Agreement and Declaration of Trust, which has been filed with the
Securities and Exchange Commission as an exhibit to the Trust's registration
statement on Form N-1A (File No. 333-18653), as amended (the "Registration
Statement"), under the Securities Act of 1933 and the Investment Company Act of
1940.
I have examined and relied upon originals or copies, certified or otherwise
identified to my satisfaction, of such records, agreements, documents and other
instruments and certificates or comparable documents of public officials and of
officers and representatives of the Trust, and I have made such inquiries of the
officers and representatives of the Trust, as I have deemed relevant and
necessary as the basis for the opinion hereinafter set forth.
In such examination, I have assumed, without independent verification, the
genuineness of all signatures (whether original or photostatic) and the
authenticity of all documents submitted to me as originals and the conformity to
authentic original documents of all documents submitted to me as certified or
photostatic copies. As to all questions of fact material to such opinion, I have
relied upon the certificates referred to hereinabove. I have assumed, without
independent verification, the accuracy of the relevant facts stated therein.
This letter expresses my opinion as to the provisions of the Trust's Agreement
and Declaration of Trust and the laws of the State of Ohio applying to business
trusts generally, but does not extend to the Ohio Securities Act or to federal
securities or other laws.
MGF Service Corp.
a subsidiary of Leshner Financial, Inc.
312 Walnut Street / Cincinnati, Ohio 45202 / 513.629.2000 / 800.543.8721
<PAGE>
Dean Family of Funds
March 21, 1997
Page Two
Based on the foregoing, and subject to the qualifications set forth herein, I am
of the opinion that the Shares have been duly and validly authorized, and, when
issued and delivered as described in the Registration Statement, will be fully
paid and nonassessable by the Trust.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement. In giving such consent, I do not thereby admit that I come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or under the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/s/ Tina D. Hosking
Tina D. Hosking
Counsel
Consent Of Independent Auditors
We consent to the references to our firm under the captions "Auditors"
and "Statement of Assets and Liabilities" in the Statement of Additional
Information and to the use of our report dated March 18, 1997 in Pre-Effective
Amendment No. 3 to the Registration Statement on Form N-1A (No. 333-18653).
/s/Ernst & Young LLP
Ernst & Young, LLP
Cincinnati, Ohio
March 18, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001027624
<NAME> DEAN FAMILY OF FUNDS
<SERIES>
<NUMBER> 1
<NAME> LARGE CAP VALUE FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-17-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 34,000
<OTHER-ITEMS-ASSETS> 17,000
<TOTAL-ASSETS> 51,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,000
<TOTAL-LIABILITIES> 17,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,000
<SHARES-COMMON-STOCK> 3,400
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 34,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,400
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 34,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 34,000
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001027624
<NAME> DEAN FAMILY OF FUNDS
<SERIES>
<NUMBER> 2
<NAME> SMALL CAP VALUE FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-17-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 33,000
<OTHER-ITEMS-ASSETS> 17,000
<TOTAL-ASSETS> 50,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,000
<TOTAL-LIABILITIES> 17,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,000
<SHARES-COMMON-STOCK> 3,300
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,300
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 33,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 33,000
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001027624
<NAME> DEAN FAMILY OF FUNDS - BALANCED FUND
<SERIES>
<NUMBER> 3
<NAME> BALANCED FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-17-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 33,000
<OTHER-ITEMS-ASSETS> 17,000
<TOTAL-ASSETS> 50,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,000
<TOTAL-LIABILITIES> 17,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,000
<SHARES-COMMON-STOCK> 3,300
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,300
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 33,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 33,000
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
RULE 18f-3 PLAN ADOPTED WITH RESPECT TO THE MULTIPLE
CLASS DISTRIBUTION SYSTEM OF THE DEAN FAMILY OF FUNDS
The Dean Family of Funds (the "Trust") has adopted this Plan pursuant
to Rule 18f-3 promulgated under the Investment Company Act of 1940 (the "1940
Act"). The individual series of the Trust are referred to collectively, in whole
or in part, as the context requires, as the "Funds." The Trust is an open-end
management investment company registered under the 1940 Act. C. H. Dean &
Associates, Inc. (the "Adviser") provides investment advisory and management
services to the Trust. 2480 Securities LLC (the "Underwriter") acts as principal
underwriter for the Trust.
This Plan permits the Funds to issue and sell two classes of shares
for the purpose of establishing a multiple class distribution system (the
"Multiple Class Distribution System"). The Plan further permits the Funds to
assess a contingent deferred sales charge ("CDSC") on certain redemptions of a
class of the Funds' shares and to waive the CDSC in certain instances. These
guidelines set forth the conditions pursuant to which the Multiple Class
Distribution System will operate and the duties and responsibilities of the
Trustees of each Trust with respect to the Multiple Class Distribution System.
DESCRIPTION OF THE MULTIPLE CLASS DISTRIBUTION SYSTEM
MULTIPLE CLASS DISTRIBUTION SYSTEM FOR THE FUNDS. The Multiple Class
Distribution System enables each Fund to offer investors the option of
purchasing shares in one of two manners: (1) subject to a conventional
- 1 -
<PAGE>
front-end sales load and a distribution fee not to exceed .25% of average net
assets (Class A shares); (2) subject to a CDSC and a distribution fee and
service fee of up to 1% of average net assets (Class C shares).
The two classes will each represent interests in the same portfolio of
investments of such Fund. The two classes will be identical except that (i) the
distribution fees attributable to each class payable by a Fund pursuant to the
distribution plans adopted by the Funds in accordance with Rule 12b-1 under the
1940 Act will be higher for Class C shares than for Class A shares; (ii) each
class may bear different Class Expenses (as defined below); (iii) each class
will vote separately as a class with respect to a Fund's Rule 12b-1 distribution
plan; (iv) each class has different exchange privileges; and (v) each class may
bear a different name or designation.
Investors purchasing Class A shares will do so at net asset value plus
a front-end sales load in the traditional manner. The sales load may be subject
to reductions for larger purchases, under a combined purchase privilege, under a
right of accumulation or under a letter of intent. The sales load may be subject
to certain other reductions permitted by Section 22(d) of the 1940 Act and set
forth in the registration statement of the Trust. The public offering price for
the Class A shares will be computed in accordance with Rule 22c-1, Section 22(d)
and other relevant provisions of the 1940 Act and the rules and regulations
thereunder. Each Fund will also pay a distribution fee pursuant
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<PAGE>
to the appropriate Rule 12b-1 distribution plan at an annual rate of up to .25%
of the average daily net asset value of its Class A shares.
Investors purchasing Class C shares will do so at net asset value per
share without the imposition of a sales load at the time of purchase. Each Fund
will pay a distribution fee pursuant to the appropriate Rule 12b-1 distribution
plan at an annual rate of up to 1% of the average daily net asset value of its
Class C shares. In addition, an investor's proceeds from a redemption of Class C
shares made within one year of time of their purchase generally will be subject
to a CDSC of 1% imposed by the Underwriter. Redemptions of shares held for
greater than one year will not be subject to a CDSC. The CDSC will be made
subject to the conditions set forth below. The Class C alternative is designed
to permit the investor to purchase Class C shares without the assessment of a
front-end sales load and at the same time permit the Underwriter to pay
financial intermediaries selling shares of a Fund a commission on the sale of
the Class C shares.
Under the Trust's distribution plans, the Underwriter will not be
entitled to any specific percentage of the net asset value of each class of
shares of the Funds or other specific amount. As described above, each Fund will
pay a distribution fee pursuant to its distribution plan at an annual rate of up
to .25% of the average daily net assets of such Fund's Class A shares and up to
1% of the average daily net asset value of such Fund's
- 3 -
<PAGE>
Class C shares. Under the Trust's distribution plans, payments will be made for
expenses incurred in providing distribution- related services (including, in the
case of the Class C shares, commission expenses as described in more detail
below). Each Fund will accrue at a rate (but not in excess of the applicable
maximum percentage rate) which is reviewed by each Trust's Board of Trustees
quarterly. Such rate is intended to provide for accrual of expenses at a rate
that will not exceed the unreimbursed amounts actually expended for distribution
by a Fund. If at any time the amount accrued by a Fund would exceed the amount
of distribution expenses incurred with respect to such Fund during the fiscal
year (plus, in the case of Class C shares, prior unreimbursed commission-related
expenses), then the rate of accrual will be adjusted accordingly. In no event
will the amount paid by the Funds exceed the unreimbursed expenses previously
incurred in providing distribution-related services.
Proceeds from the distribution fee and, in the case of Class C shares,
the CDSC, will be used to compensate financial intermediaries with a service fee
based upon a percentage of the average daily net asset value of the shares
maintained in the Funds by their customers and to defray the expenses of the
Underwriter with respect to providing distribution related services, including
commissions paid on the sale of Class C shares.
GENERAL. Both classes of shares of each Fund will have identical
voting, dividend, liquidation and other rights,
- 4 -
<PAGE>
preferences, powers, restrictions, limitations, qualifications, designations and
terms and conditions, except for the differences mentioned above.
Under the Multiple Class Distribution System, the Board of Trustees
could determine that any of certain expenses attributable to the shares of a
particular class of shares will be borne by the class to which they were
attributable ("Class Expenses"). Class Expenses are limited to (a) transfer
agency fees identified by the Trust as being attributable to a class of shares;
(b) printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and proxy statements to
current shareholders of a specific class; (c) SEC and Blue Sky registration fees
incurred by a class of shares; (d) the expenses of administrative personnel and
services as required to support the shareholders of a specific class; (e)
litigation or other legal expenses relating to a specific class of shares; (f)
Trustees' fees or expenses incurred as a result of issues relating to a specific
class of shares; (g) accounting fees and expenses relating to a specific class
of shares; and (h) additional incremental expenses not specifically identified
above that are subsequently identified and determined to be properly allocated
to one class of shares and approved by the Board of Trustees.
Under the Multiple Class Distribution System, certain expenses could be
attributable to more than one Fund ("Trust Expenses"). All such Trust Expenses
would be first allocated
- 5 -
<PAGE>
among the Funds, based on the aggregate net assets of such Funds, and then borne
on such basis by each Fund and without regard to class. Expenses that were
attributable to a particular Fund but not to a particular class thereof ("Series
Expenses"), would be borne by each class on the basis of the net assets of such
class in relation to the aggregate net assets of the Fund. In addition to
distribution fees, Class Expenses may be applied to the shares of a particular
class. Any additional Class Expenses not specifically identified above in the
preceding paragraph which are subsequently identified and determined to be
properly applied to one class of shares shall not be so applied until approved
by the Board of Trustees.
Subject to the approval of the Board of Trustees, certain expenses may
be applied differently if their current application becomes no longer
appropriate. For example, if a Class Expense is no longer attributable to a
specific class, it may be charged to the applicable Fund or Funds, as
appropriate. In addition, if application of all or a portion of a particular
expense to a class is determined by the Internal Revenue Service or counsel to
the Trust to result in a preferential dividend for which, pursuant to Section
562(c) of the Internal Revenue Code of 1986, as amended (the "Code"), a Fund
would not be entitled to a dividends paid deduction, all or a portion of the
expense may be treated as a Series Expense or a Trust Expense. Similarly, if a
Trust Expense becomes attributable to a specific Fund it may be treated as a
Series Expense.
- 6 -
<PAGE>
Because of the varying distribution fees and Class Expenses that may be
borne by each class of shares, the net income of (and dividends payable with
respect to) one class may be different from the net income of (and dividends
payable with respect to) the other class of shares of a Fund. Dividends paid to
holders of each class of shares in a Fund would, however, be declared and paid
on the same days and at the same times and, except as noted with respect to the
varying distribution fees and Class Expenses would be determined and paid in the
same manner. To the extent that a Fund has undistributed net income, the net
asset value per share of each class of such Fund's shares will vary.
The salient features of the Multiple Class Distribution System will be
described in the Funds' prospectus. Each Fund will disclose the respective
expenses, performance data, distribution arrangements, services, fees, sales
loads, deferred sales loads and exchange privileges applicable to each class of
shares offered through that prospectus. The shareholder reports of each Fund
will disclose the respective expenses and performance data applicable to each
class of shares. The shareholder reports will contain, in the statement of
assets and liabilities and statement of operations, information related to the
Fund as a whole generally and not on a per class basis. Each Fund's per share
data, however, will be prepared on a per class basis with respect to all classes
of shares of such Fund. The information provided by the Underwriter or Adviser
for publication in any newspaper or similar listing of the Funds' net
- 7 -
<PAGE>
asset values and public offering prices will separately present Class A and
Class C shares.
The Class C alternative is designed to permit the investor to purchase
Class C shares without the assessment of a front-end sales load and at the same
time permit the Underwriter to pay financial intermediaries selling shares of
the Funds a commission on the sale of the Class C shares. Proceeds from the
distribution fee and the CDSC will be used to compensate financial
intermediaries with a service fee and to defray the expenses of the Underwriter
with respect to providing distribution related services, including commissions
paid on the sale of Class C shares.
The CDSC will not be imposed on redemptions of shares which were
purchased more than a specified period, up to six years (the "CDSC Period")
prior to their redemption. The CDSC will be imposed on the lesser of the
aggregate net asset value of the shares being redeemed either at the time of
purchase or redemption. No CDSC will be imposed on shares acquired through
reinvestment of income dividends or capital gains distributions. In determining
whether a CDSC is applicable, unless the shareholder otherwise specifically
directs, it will be assumed that a redemption is made first of any Class C
shares derived from reinvestment of distributions, second of Class C shares held
for a period longer than the CDSC Period, third of any Class A shares in the
shareholder's account, and forth of Class C shares held for a period not longer
than the CDSC Period.
- 8 -
<PAGE>
In addition, the Funds will waive the CDSC on redemptions following the
death or disability of a shareholder as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986. The Underwriter will require satisfactory proof
of death or disability before it determines to waive the CDSC. In cases of death
or disability, the CDSC may be waived where the decedent or disabled person is
either an individual shareholder or owns the shares with his or her spouse as a
joint tenant with rights of survivorship if the redemption is made within one
year of death or initial determination of disability.
Under the Multiple Class Distribution System, Class A shares of a Fund
will be exchangeable for Class A shares of the other Funds, for Class A shares
of the Countrywide Intermediate Term Government Income Fund and for any shares
of the Countrywide Short Term Government Income Fund on the basis of relative
net asset value per share, plus an amount equal to the difference, if any,
between the sales charge previously paid on the exchanged shares and sales
charge payable at the time of the exchange on the acquired shares.
Class C shares of a Fund will be exchangeable for Class C shares of the
other Funds, for Class C shares of the Countrywide Intermediate Term Government
Income Fund and for shares of the Short Term Government Income Fund. A Fund will
"tack" the period for which original Class C shares were held onto the holding
period of the acquired Class C shares for purposes of determining what, if any,
CDSC is applicable in the event that the acquired
- 9 -
<PAGE>
Class C shares are redeemed following the exchange. In the event of redemptions
of shares after an exchange, an investor will be subject to the CDSC of the Fund
with the longest CDSC period and/or highest CDSC schedule which may have been
owned by him or her, resulting in the greatest CDSC payment. The period of time
that Class C shares are held in the Short Term Government Income Fund will not
count toward the CDSC holding period. The Funds will comply with Rule 11a-3
under the 1940 Act as to any exchanges.
LEGAL ANALYSIS
The Adviser and the Underwriter believe that the Multiple Class
Distribution System as described herein will better enable the Funds to meet the
competitive demands of today's financial services industry. Under the Multiple
Class Distribution System, an investor will be able to choose the method of
purchasing shares that is most beneficial given the amount of his or her
purchase, the length of time the investor expects to hold his or her shares, and
other relevant circumstances. The System permits the Funds to facilitate both
the distribution of their securities and provide investors with a broader choice
as to the method of purchasing shares without assuming excessive accounting and
bookkeeping costs or unnecessary investment risks.
The allocation of expenses and voting rights relating to the Rule 12b-1
plans in the manner described is equitable and does not discriminate against any
group of shareholders. In addition, such arrangements should not give rise to
any conflicts of
- 10 -
<PAGE>
interest because the rights and privileges of each class of shares are
substantially identical.
The Adviser and the Underwriter believe that the Multiple Class
Distribution System will not increase the speculative character of the shares of
the Funds. The Multiple Class Distribution System does not involve borrowing,
nor will it affect the Funds' existing assets or reserves, and does not involve
a complex capital structure. Nothing in the Multiple Class Distribution System
suggests that it will facilitate control by holders of any class of shares.
The Adviser and the Underwriter believe that the ability of the Funds
to implement the CDSC is appropriate in the public interest, consistent with the
protection of investors, and consistent with the purposes fairly intended by the
policy and provisions of the 1940 Act. The CDSC arrangement will provide
shareholders the option of having their full payment invested for them at the
time of their purchase of shares of the Funds with no deduction of a sales
charge.
CONDITIONS OF OPERATING UNDER THE MULTIPLE CLASS DISTRIBUTION SYSTEM
The operation of the Multiple Class Distribution System shall at all
times be in accordance with Rule 18f-3 under the 1940 Act and all other
applicable laws and regulations, and in addition, shall be subject to the
following conditions:
1. Each class of shares will represent interests in the same portfolio
of investments of a Fund, and be identical in all material respects, except as
set forth below. The only differences among the various classes of a Fund will
relate
- 11 -
<PAGE>
solely to: (a) the impact of the disproportionate Rule 12b-1 distribution plan
payments allocated to each of the Class A shares or Class C shares of a Fund;
(b) Class Expenses, which are limited to (i) transfer agency fees (including the
incremental cost of monitoring a CDSC applicable to a specific class of shares),
(ii) printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and proxies to current
shareholders of a specific class, (iii) SEC and Blue Sky registration fees
incurred by a class of shares, (iv) the expenses of administrative personnel and
services as required to support the shareholders of a specific class, (v)
litigation or other legal expenses relating to a specific class of shares, (vi)
Trustees' fees or expenses incurred as a result of issues relating to a specific
class of shares, and (vii) accounting fees and expenses relating to a specific
class of shares; (c) the fact that each class will vote separately as a class
with respect to the Rule 12b-1 distribution plans or any other matter affecting
only that class; (d) the different exchange privileges of the various classes of
shares; and (e) the designation of each class of shares of the Funds. Any
additional incremental expenses not specifically identified above that are
subsequently identified and determined to be properly allocated to one class of
shares shall not be so allocated until approved by the Board of Trustees.
2. The Trustees of the Trust, including a majority of the Trustees who
are not interested persons of the Trust, have approved this Plan as being in the
best interests of each class
- 12 -
<PAGE>
individually and each Fund as a whole. In making this finding, the Trustees
evaluated the relationship among the classes, the allocation of expenses among
the classes, potential conflicts of interest among classes, and the level of
services provided to each class and the cost of those services.
3. Any material changes to this Plan, including but not limited to a
change in the method of determining Class Expenses that will be applied to a
class of shares, will be reviewed and approved by votes of the Board of Trustees
of each Trust, including a majority of the Trustees who are not interested
persons of the Trust.
4. On an ongoing basis, the Trustees of the Trust, pursuant to their
fiduciary responsibilities under the 1940 Act and otherwise, will monitor each
Fund for the existence of any material conflicts between the interests of the
classes of shares. The Trustees, including a majority of the Trustees who are
not interested persons of the Trust, shall take such action as is reasonably
necessary to eliminate any such conflicts that may develop. The Adviser will be
responsible for reporting any potential or existing conflicts to the Trustees.
If a conflict arises, the Adviser at its own cost will remedy such conflict up
to and including establishing a new registered management investment company.
5. The Trustees of the Trust will receive quarterly and annual
Statements complying with paragraph (b)(3)(ii) of Rule 12b-1, as it may be
amended from time to time. In the Statements, only distribution expenditures
properly attributable
- 13 -
<PAGE>
to the sale of a class of shares will be used to support the Rule 12b-1 fee
charged to shareholders of such class of shares. Expenditures not related to the
sale of a particular class will not be presented to the Trustees to justify any
fee attributable to that class. The Statements, including the allocations upon
which they are based, will be subject to the review and approval of the
independent Trustees in the exercise of their fiduciary duties.
6. Dividends paid by a Fund with respect to each class of shares, to
the extent any dividends are paid, will be calculated in the same manner, at the
same time, on the same day, and will be in the same amount, except that
distribution fee payments and Class Expenses relating to each respective class
of shares will be borne exclusively by that class.
7. Applicants have established the manner in which the net asset value
of the multiple classes of shares will be determined and the manner in which
dividends and distributions will be paid. Attached hereto as Exhibit A is a
procedures memorandum and worksheets with respect to the methodology and
procedures for calculating the net asset value and dividends and distributions
of the various classes and the proper allocation of income and expenses among
the classes.
8. The Underwriter represents that it has in place, and will continue
to maintain, adequate facilities in place to ensure implementation of the
methodology and procedures for calculating the net asset value and dividends and
distributions among the various classes of shares.
- 14 -
<PAGE>
9. If a Fund offers separate classes of shares through separate
prospectuses, each such prospectus will disclose (i) that the Fund issues other
classes, (ii) that those other classes may have different sales charges and
other expenses, which may affect performance, (iii) a telephone number investors
may call to obtain more information concerning the other classes available to
them through their sales representative, and (iv) that investors may obtain
information concerning those classes from their sales representative or the
Underwriter.
10. The Underwriter has adopted compliance standards as to when Class A
and Class C shares may appropriately be sold to particular investors. The
Underwriter will require all persons selling shares of the Funds to agree to
conform to such standards.
11. The Funds will briefly describe the salient features of the
Multiple Class Distribution System in their prospectus. Each Fund will disclose
the respective expenses, performance data, distribution arrangements, services,
fees, sales loads, deferred sales loads and exchange privileges applicable to
each class of shares offered through that prospectus. Each Fund will disclose
the respective expenses and performance data applicable to each class of shares
in every shareholder report. The shareholder reports will contain, in the
statement of assets and liabilities and statement of operations, information
related to the Fund as a whole generally and not on a per class basis. Each
Fund's per share data, however, will be prepared on a per class basis with
respect to all classes of shares of such Fund. The information
- 15 -
<PAGE>
provided by the Trust for publication in any newspaper or similar listing of the
Funds' net asset values and public offering prices will separately present Class
A and Class C shares.
12. The Trust will comply with the provisions of Rule 6c-10 under the
1940 Act, IC-20916 (February 23, 1995), as such rule is currently adopted and as
it may be amended.
<PAGE>
EXHIBIT A
DEAN FAMILY OF FUNDS
MULTIPLE-CLASS FUNDS
METHODOLOGY, PROCEDURES
AND
INTERNAL ACCOUNTING CONTROLS
<PAGE>
INTRODUCTION
Dean Family of Funds (the "Trust") is an Ohio business trust registered
under the Investment Company Act of 1940 as open-end management investment
company. C.H. Dean & Associates, Inc. (the "Adviser") acts as the investment
manager to each Fund and 2480 Securities LLC (the "Underwriter") serves as the
Funds' principal underwriter. The Underwriter is an affiliate of the Adviser.
The Trust presently offers the following series of shares (collectively, the
"Funds") representing interests in separate investment portfolios:
Large Cap Value Fund
Small Cap Value Fund
Balanced Fund
Each Fund may offer multiple classes of shares as more fully described
in the Trusts' Rule 18f-3 Plan. The Multiple Class Distribution System would
enable each Fund to offer investors the option of purchasing shares in one of
two manners: (1) subject to a conventional front-end sales load and a
distribution fee not to exceed .25% of average net assets (Class A shares); or
(2) subject to a contingent deferred sales charge and a distribution fee and
service fee of up to 1% of average net assets (Class C shares). The Large Cap
Value Fund and the Balanced Fund each expect to distribute substantially all of
its net investment income, if any, on a quarterly basis. The Small Cap Value
Fund expects to distribute substantially all of its net investment income, if
any, on an annual basis. Future series of the Trust may declare dividends daily
or periodically. The Funds and any future series of the Trust will declare and
pay substantially all net realized gains, if any, at least annually.
Pursuant to an Accounting Services Agreement, Countrywide Fund
Services, Inc. ("Countrywide") maintains the Funds' accounting records and
performs the daily calculations of each Fund's net asset value. Thus the
procedures and internal accounting controls for the Funds include the
participation of Countrywide.
The internal accounting control environment at Countrywide provides for
minimal risk of error. This has been accomplished through the use of competent
and well-trained employees, adequate facilities and established internal
accounting control procedures.
Additional procedures and internal accounting controls have been
designed for the multiple class funds. These procedures and internal accounting
controls have been reviewed by management of the Trust and Countrywide to ensure
that the risks associated with multiple-class funds are adequately addressed.
The specific internal accounting control objectives and the related
methodology, procedures and internal accounting controls to achieve these stated
objectives are outlined below.
- 1 -
<PAGE>
METHODOLOGY, PROCEDURES AND INTERNAL
ACCOUNTING CONTROLS FOR MULTIPLE-CLASS FUNDS
The three internal accounting control objectives to be achieved are:
(1) The daily net asset value for all classes of shares of
each Fund is accurately calculated.
(2) Recorded expenses of a Fund are properly allocated
between each class of shares.
(3) Dividend distributions are accurately calculated for
each class of shares.
1. Control Objective
The daily net asset value for all classes of shares of each Fund is
accurately calculated.
Methodology, Procedures and Internal Accounting Controls
a. Securities of the Funds will be valued daily at their current
market value by a reputable pricing source. Security positions
will be reconciled from the Trust's records and to custody
records and reviewed for completeness and accuracy.
b. Prepaid and intangible assets will be amortized over their
estimated useful lives. These assets will be reviewed monthly
to ensure a proper presentation and amortization during the
period.
c. Investment income, realized and unrealized gains or losses
will be calculated daily from Countrywide's portfolio system
and reconciled to the general ledger. Yields and fluctuations
in security prices will be monitored on a daily basis by
Countrywide personnel. Interest and dividend receivable
amounts will be reconciled to holdings reports.
d. An estimate of all expenses for each Fund will be
accrued daily. Daily expense accruals will be reviewed
and revised, as required, to reflect actual payments
made to vendors.
e. Capital accounts for each class of shares will be updated
based on daily share activity and reconciled to transfer agent
reported outstanding shares.
f. All balance sheet asset, liability and capital accounts
will be reconciled to subsidiary records for
completeness and accuracy.
- 2 -
<PAGE>
g. For each Fund, a pricing worksheet (see attached
example) will be prepared daily which calculates the
net asset value of outstanding shares and the
percentage of net asset value of such class to the
total of all classes of shares. Investment income and
joint expenses will be allocated by class of shares
according to such percentages. Realized and unrealized
gains will be allocated by class of shares according to
such percentages.
h. Prior day net assets by class will be rolled forward to
current day net assets by class of shares by adjusting
for current day income, expense and distribution
activity. (There may or may not be distribution
activity in the periodic dividend funds.) Net assets
by class of shares will then be divided by the number
of outstanding shares for each class to obtain the net
asset value per share. Net asset values will be
reviewed and approved by supervisors.
i. Net asset values per share of the different classes of shares
for daily dividend funds should be identical except with
respect to possible differences attributable to rounding.
Differences, if any, will be investigated by the accounting
supervisor.
j. Net asset values per share of the different classes of shares
for the periodic dividend funds may be different as a result
of accumulated income between distribution dates and the
effect of class specific expenses. Other differences, if any,
will be investigated by the accounting supervisor.
2. Control Objective
Recorded expenses of a Fund are properly allocated between each class
of shares.
Methodology, Procedures and Internal Accounting Controls
a. Expenses will be classified as being either joint or
class specific on the pricing worksheet.
b. Certain expenses will be attributable to more than one
Fund. Such expenses will be first allocated among the
Funds, based on the aggregate net assets of such Funds,
and then borne on such basis by each Fund and without
regard to class. These expenses could include, for
example, Trustees' fees and expenses, unallocated audit
and legal fees, insurance premiums, expenses relating
to shareholder reports and printing expenses. Expenses
that are attributable to a particular Fund but not to a
particular class thereof will be borne by each class on
the basis of the net assets of such class in relation
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<PAGE>
to the aggregate net assets of the Fund. These expenses could
include, for example, advisory fees and custodian fees, and
fees related to the preparation of separate documents for
current shareholders of a particular Fund.
c. Class specific expenses are those identifiable with
each individual class of shares. These expenses
include 12b-1 distribution fees; transfer agent fees as
identified by Countrywide as being attributable to a
specific class; printing and postage expenses related
to preparing and distributing materials such as
shareholder reports, prospectuses and proxies to
current shareholders of a particular class; SEC and
Blue Sky registration fees; the expenses of
administrative personnel and services required to
support the shareholders of a specific class;
litigation or other legal expenses relating solely to
one class of shares; Trustees' fees incurred as a
result of issues relating to one class of shares; and
accounting fees and expenses relating to a specific
class of shares.
d. Joint expenses will be allocated daily to each class of shares
based on the percentage of the net asset value of shares of
such class to the total of the net asset value of shares of
all classes of shares. Class specific expenses will be charged
to the specific class of shares. Both joint expenses and class
specific expenses are compared against expense projections.
e. The total of joint and class specific expense limits
will be reviewed to ensure that voluntary or
contractual expense limits are not exceeded. Amounts
will be adjusted to ensure that any limits are not
exceeded. Expense waivers and reimbursements will be
calculated and allocated to each class of shares based
upon the pro rata percentage of the net assets of a
Fund as of the end of the prior day, adjusted for the
previous day's share activity.
f. Each Fund and class will accrue distribution expenses
at a rate (but not in excess of the applicable maximum
percentage rate) which will be reviewed by the Board of
Trustees on a quarterly basis. Such distribution
expenses will be calculated at an annual rate not to
exceed .25% of the average daily net assets of a Fund's
Class A shares and not to exceed 1% of the average
daily net assets of a Fund's Class C shares. Under the
distribution plans, payments will be made only for
expenses incurred in providing distribution related
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<PAGE>
services. Unreimbursed distribution expenses of the
Underwriter will be determined daily and the Underwriter shall
not be entitled to reimbursement for any amount with respect
to any day on which there exist no unreimbursed distribution
expenses.
g. Expense accruals for both joint and class specific expenses
are reviewed each month. Based upon these reviews, adjustments
to expense accruals or expense projections are made as needed.
h. Expense ratios and yields for each class of shares will be
reviewed daily to ensure that differences in yield relate
solely to acceptable expense differentials.
i. Any change to the classification of expenses as joint
or class specific is reviewed and approved by the Board
of Trustees.
j. Countrywide will perform detailed expense analyses to ensure
that expenses are properly charged to each Fund and to each
class of shares. Any expense adjustments required as a result
of this process will be made.
3. Control Objective
Dividend distributions are accurately calculated for each class of
shares.
Methodology, Procedures and Internal Accounting Controls
a. The Funds declare substantially all net investment
income periodically.
b. Investment income, including amortization of discount and
premium, where applicable, is recorded by each Fund and is
allocated to each class of shares based upon its pro rata
percentage of the net assets of the Fund as of the end of the
prior day, adjusted for the previous day's share activity.
c. Each Fund will determine the amount of accumulated
income available for all classes after deduction of
allocated expenses but before consideration of any
class specific expenses. This amount will be divided
by total outstanding shares for all classes combined to
arrive at a gross dividend rate for all shares. From
this gross rate, a class specific amount per share for
each class (representing the unique and incrementally
higher, if any, expenses accrued during the period to
that class divided by the shares outstanding for that
class) is subtracted. The result is the actual per
share rate available for each class in determining
amounts to distribute.
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<PAGE>
d. Realized capital gains, if any, are allocated daily to each
class based upon its relative percentage of the total net
assets of the Fund as of the end of the prior day, adjusted
for the previous day's share activity.
e. Capital gains are distributed at least once every
twelve months with respect to each class of shares.
f. The capital gains distribution rate will be determined on the
ex-date by dividing the total realized gains of the Fund to be
declared as a distribution by the total outstanding shares of
the Fund as of the record date.
g. Capital gains dividends per share should be identical
for each class of shares within a Fund. Differences,
if any, will be investigated and resolved.
h. Distributions are reviewed annually by Countrywide at fiscal
year end and as required for excise tax purposes during the
fiscal year to ensure compliance with IRS regulations and
accuracy of calculations.
There are several pervasive procedures and internal accounting controls which
impact all three of the previously mentioned objectives.
a. Countrywide's supervisory personnel will be involved on a
daily basis to ensure that the methodology and procedures for
calculating the net asset value and dividend distribution for
each class of shares is followed and a proper allocation of
expenses among each class of shares is performed.
b. Countrywide fund accountants will receive overall
supervision. Their work with regard to multiple class
calculations will be reviewed and approved by
supervisors.
c. Countrywide's pricing worksheets will be clerically
checked and verified against corresponding computer
system generated reports.
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<PAGE>
Sample Multiple Class Worksheet
Allocation Methodology - Value of Shares Outstanding (periodic dividend Funds)
Value of Settled Shares Outstanding (daily dividend Funds)
Fund ______________________________
Date ______________________________
Total
(T) (A) (B) (C)
1 Prior day NAV per share (unrounded)
Allocation Percentages
Complete for all Funds:
2 Shares O/S - prior day
3 Prior day shares activity
4 Adjusted shares O/S [2 + 3]
5 Adjusted net assets [4 x 1]
6 % Assets by class
For daily dividend funds complete Rows 7 - 11 For periodic (non daily) dividend
funds insert
same # from Rows 2 - 6
7 Settled shares prior day
8 Prior day settled shares activity
9 Adjusted settled shares O/S [7 & 8]
10 Adjusted settled assets [9 x 1]
11 % Assets by class
Income and Expenses
12 Daily income *
Expenses:
13 Management Fee*
14 12-1 Fee
15 Other Joint Expenses*
16 Direct Class Expenses
17 Daily expenses [13+14+15+16]
18 Daily Net Income [12 - 17]
19 Dividend Rate (Daily Dividend Funds Only)
[18/9]
Capital
20 Income distribution
21 Undistributed Net Income [18 - 20]
22 Capital share activity
23 Realized Gains/Losses:
24 Short-Term**
25 Long-Term**
26 Capital gain distribution
27 Unrealized appreciation/depreciation**
28 Daily net asset change
[21 + 22 + 24 + 25 + 26 + 27]
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<PAGE>
Sample Multiple Class Worksheet
Allocation Methodology - Value of Shares Outstanding (periodic dividend Funds)
Value of Settled Shares Outstanding (daily dividend Funds)
Fund ______________________________
Date ______________________________
Total
(T) (A) (B) (C)
NAV Proof
29 Prior day net assets
30 Current day net assets [28 + 29]
31 NAV per share [30 / 4]
32 Sales Load as a percent of offering price
33 Offering Price [31 / (100% - 32)]
* - Allocated based on Line 11 percentages.
** - Allocated based on Line 6 percentages.
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<PAGE>
MULTIPLE CLASS PRICING
FINANCIAL STATEMENT DISCLOSURE
Statement of Assets and Liabilities
- Assets and liabilities will be disclosed in accordance
with standard reporting format.
- The following will be disclosed for each class:
Net Assets:
Class A Shares
Paid-in capital
Undistributed net investment income
Undistributed realized gain (loss) on
investments - net
Unrealized appreciation (depreciation) on
investments - net
Net Assets - equivalent to $____ per share based
on ____ shares outstanding.
Class C Shares
Paid-in capital
Undistributed net investment income
Undistributed realized gain (loss) on
investments - net
Unrealized appreciation (depreciation) on
investments - net
Net Assets - equivalent to $ per share based
on shares outstanding.
Statement of Operations
- Standard reporting format, except that class specific expenses
will be disclosed for each class.
Statement of Changes in Net Assets
- Show components by each class of shares and in total as
follows:
Current Year
Total Class A Class C
Prior Year
Total Class A Class C
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<PAGE>
Selected Share Data and Ratios
- Show components by each class as follows:
Current Year
Class A Class C
Prior Years
Class A Class C
Notes to Financial Statements
- Note on share transactions will include information on
each class of shares for two years
- Notes will include additional disclosure regarding
allocation of expenses between classes.
- Notes will describe the distribution arrangements,
incorporating disclosure on any classes' 12b-1 fee
arrangements.
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