Registration Nos. 811-7987
333-18653
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
--
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
--
Pre-Effective Amendment No.
Post-Effective Amendment No. 2
and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
--
Amendment No. 5
(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: (937) 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
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to Rule 485(b)
/ / on (date) pursuant to Rule 485(b)
/X/ 75 days after filing pursuant to Rule 485(a)
/ / on (date) pursuant to Rule 485(a)
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933, as amended, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended.
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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 Principal Security Holders
of Securities
16. Investment Advisory and Other Services The Investment Adviser; The
Sub-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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PROSPECTUS
October 1, 1997
DEAN FAMILY OF FUNDS
2480 KETTERING TOWER
DAYTON, OHIO 45423
The Dean Family of Funds currently offers four separate series of
shares to investors: the Large Cap Value Fund, the Small Cap Value Fund, the
Balanced Fund and the International 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.
The INTERNATIONAL FUND seeks to provide long-term capital growth by
investing primarily in the common stocks of foreign companies.
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).
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., dba Dean Investment Associates, 2480
Kettering Tower, Dayton, Ohio 45423 ("Dean Investment Associates"), serves as
investment adviser to the Funds. 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 October 1, 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)
Total Fund
Operating
Management Fees Other Expenses
After Waivers(A) 12b-1 Fees(B) Expenses After Waivers(C)
--------------- ---------- -------- -------------
Large Cap
Value Fund
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Class A Shares .75% .25% .85% 1.85%
Class C Shares .75% 1.00% .85% 2.60%
Small Cap
Value Fund
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Class A Shares .75% .25% .85% 1.85%
Class C Shares .75% 1.00% .85% 2.60%
Balanced Fund
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Class A Shares .75% .25% .85% 1.85%
Class C Shares .75% 1.00% .85% 2.60%
International Fund
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Class A Shares .__% .25% .__% 1.85%
Class C Shares .__% 1.00% .__% 2.60%
(A) Absent waivers, management fees would be 1.00% for each of the Large
Cap Value Fund, the Small Cap Value Fund and the Balanced Fund and
1.25% for the International Fund.
(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 of the Large
Cap Value Fund, the Small Cap Value Fund and the Balanced Fund and ___%
for Class A shares and ___% for Class C shares of the International
Fund.
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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 $ 70 $26
3 Years 108 81
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INVESTMENT OBJECTIVES, INVESTMENT POLICIES AND RISK CONSIDERATIONS
The Dean Family of Funds (the "Trust") is comprised of four 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 capitalizations in terms of total market value.
Usually, but not
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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 investment companies or repurchase agreements
collateralized by U.S. Government obligations. The Fund is also permitted to
lend
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its securities and to borrow money and pledge its assets in connection
therewith. See "Additional Investment Information" for a discussion of these
transactions. 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.
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 higher risks because they lack the management
experience, financial resources, product diversification and competitive
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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
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its securities and to borrow money and pledge its assets in connection
therewith. See "Additional Investment Information" for a discussion of these
transactions. 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.
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
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securities that the Fund may purchase include U.S. Government obligations and
corporate debt securities (such as bonds and 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 determined by Dean Investment
Associates to be of comparable quality. 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 fixed-income 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. Fixed-income 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 repurchase
agreements collateralized by U.S. Government obligations 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
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companies may result in duplication of advisory, administrative and distribution
fees. When Dean Investment 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, fixed-income 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. 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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INTERNATIONAL FUND
The International Fund seeks to provide long-term capital growth by
investing primarily in the common stocks of foreign companies. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in the
common stocks of foreign issuers. Generally, the common stocks purchased by the
Fund are issued by companies located in the United Kingdom, Continental Europe,
and the Pacific Basin, including Japan, Singapore, Malaysia, Hong Kong and
Australia. Under normal market conditions, investments will be made in a minimum
of three countries other than the United States.
Dean Investment Associates has retained Newton Capital Management Ltd.
("Newton Capital") to manage the investments of the International Fund.
Individual stock selection decisions are based upon Newton's assessment of value
based on fundamental research. The strategic framework guides the managers
towards the sectors and company characteristics that can lead to future
out-performance. Attractively valued stocks are then evaluated within the
framework.
Over the longer term, stocks are selected which will be able to deliver
superior earnings and dividend growth. This will often reflect the company's
market position and pricing power. Newton Capital looks for either a dominant
position in a competitive market or a well protected niche. The goal is to be
able to invest in these companies at valuation levels which do not reflect their
future prospects so a wider view is used when analyzing a company's potential.
Response to different phases of the market and economic cycle will be made, for
instance, through varying the Fund's exposure to more cyclical companies ahead
of an expected economic recovery. Other, more specific criteria will also
generate some stock selection decisions.
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 Newton Capital. As a result, the return and
net asset value of the Fund will fluctuate.
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 fluctuations in foreign exchange rates, future
political and economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. In addition, with
respect to certain countries, there is the possibility of expropriation of
assets, confiscatory
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taxation, political or social instability or diplomatic developments which could
adversely affect investments in those countries.
There may be less publicly available information about a foreign company
than about a U.S. company, and accounting, auditing and financial reporting
standards and requirements may not be comparable. Securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable U.S. companies. Transaction costs of investing in foreign securities
markets are generally higher than in the U.S. and there is generally less
governmental supervision and regulation of exchanges, brokers and issuers than
there is in the U.S. The Fund might have greater difficulty taking appropriate
legal action in foreign courts. Depository receipts that are not sponsored by
the issuer may be less liquid. Dividend and interest income from foreign
securities will generally be subject to withholding taxes by the country in
which the issuer is located and may not be recoverable by the Fund or the
investor.
The Fund's investments that are denominated in a currency other than the
U.S. dollar are subject to the risk that the value of a particular currency will
change in relation to one or more other currencies including the U.S. dollar.
Among the factors that may affect currency values are trade balances, the level
of short-term interest rates, differences in relative values of similar assets
in different currencies, long-term opportunities for investment and capital
appreciation and political developments. The Fund may try to hedge these risks
by investing in foreign currencies, currency futures contracts and options
thereon, forward currency exchange contracts, or any combination thereof, but
there can be no assurance that such strategies will be effective.
The risks of foreign investing are of greater concern in the case of
investments in emerging markets, which may exhibit greater price volatility and
have less liquidity. Furthermore, the economies of emerging market countries
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be adversely affected by trade barriers, managed
adjustments in relative currency values, and other protectionist measures
applied internally or imposed by the countries with which they trade. These
emerging market economies also have been and may continue to be adversely
affected by economic conditions in the countries with which they trade. The Fund
presently intends to limit its investments in emerging market countries to no
more than __% of its net assets.
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
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contracts and the purchase and sale of stock index futures contracts and forward
currency exchange contracts. For a discussion of these transactions, see
"Additional Investment Information."
When Newton Capital 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 Newton Capital 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 connection therewith. See "Additional Investment
Information" for a discussion of these transactions. 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.
ADDITIONAL INVESTMENT INFORMATION
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.
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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.
The purchaser of an option risks a total loss of the premium paid for the
option if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unrecognized but
forgoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options purchased and sold other than on an
exchange in private transactions also impose on the Funds the credit risk that
the counterparty will fail to honor its obligations. If the price of the
security sold short increases between the time of the short sale and the time a
Fund replaces the borrowed security, the Fund will incur a loss; conversely, if
the price declines, a Fund will realize a capital gain. Although a Fund's gain
is limited to the price at which it sold the security short, its potential loss
is theoretically unlimited.
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.
The Funds may purchase and sell futures contracts to hedge against changes
in prices. The Funds will not engage in futures transactions for speculative
purposes. 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
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<PAGE>
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 not
obligated) to sell a futures contract at the fixed price during the life of the
option.
A Fund may not purchase or sell 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, the investment
adviser 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 the investment adviser 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.
FORWARD CURRENCY EXCHANGE CONTRACTS. The International Fund may enter into
forward currency exchange contracts. When Newton Capital believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, it may attempt to hedge some portion or all of this
anticipated risk by entering into a forward contract to sell an amount of
foreign currency approximating the value of some or all of the International
Fund's portfolio obligations denominated in such foreign currency. It may also
enter into such contracts to protect against loss between trade and settlement
dates resulting
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from changes in foreign currency exchange rates. Such contracts will also have
the effect of limiting any gains to the International Fund between trade and
settlement dates resulting from changes in such rates.
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 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 the
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<PAGE>
investment adviser most creditworthy primary U.S. Government securities dealers.
Each Fund will enter into repurchase agreements which are collateralized by U.S.
Government obligations. 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.
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 the investment adviser
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 the investment adviser, 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
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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.
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
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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 the investment adviser. Although the annual portfolio turnover
rate of each of the Funds cannot be accurately 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 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", the "Balanced Fund" or the
"International Fund", whichever is applicable. An account application is
included in this Prospectus. You may purchase additional shares through the Open
Account Program described below.
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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.
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
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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 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 specific 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
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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.
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 6 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 6 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
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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.
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
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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.
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
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.
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Trustees, directors, officers and employees of the Trust, Dean Investment
Associates, the Underwriter or the Transfer Agent, including members of the
immediate families 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 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
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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 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.
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<PAGE>
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.
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.
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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.
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'
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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 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.
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<PAGE>
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 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.
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<PAGE>
EXCHANGE PRIVILEGE
Shares of the Funds may be exchanged for each other or for the following
series of Countrywide Investment Trust:
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.
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 a Fund which are not subject to a contingent deferred
sales load may be exchanged for Class A shares of any other Fund, for shares of
the Short Term Government Income Fund and for Class A shares of the Intermediate
Term Government Income Fund (provided such shares are not subject to a
contingent deferred sales load).
Class C shares of a Fund, as well as Class A shares of a Fund subject to a
contingent deferred sales load, may be exchanged, on the basis of relative net
asset value per share, for shares of any other Fund subject to a contingent
deferred sales load, for shares of the Short Term Government Income Fund and for
any shares of the Intermediate Term Government Income Fund subject to a
contingent deferred sales load. 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 the Short Term Government Income 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.
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<PAGE>
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, the Balanced Fund and the International 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.
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
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<PAGE>
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 and 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 resulting
from the sale of foreign currencies and foreign obligations, to the extent of
foreign exchange gains, are taxed as ordinary income or loss. If these
transactions result in reducing the Fund's net income, a portion of the income
may be classified as a return of capital (which will lower your tax basis). If
the Fund pays nonrefundable taxes to foreign governments during the year, the
taxes will reduce the Fund's net investment income but still may be included in
your taxable income. However, you may be able to claim an offsetting tax credit
or itemized deduction on your return for your portion of foreign taxes paid by
the Fund. 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.
Under applicable tax law, the Fund may be required to limit its gains from
hedging in foreign currency forwards, futures and options. Although it is
anticipated the Fund will comply with such limits, the Fund's use of these
hedging techniques involves greater risk of unfavorable tax consequences than
funds not engaging in such techniques. Hedging may also result in the
application of the mark-to-market and straddle provisions of the Internal
Revenue Code. These provisions could result in an increase (or decrease) in the
amount of taxable dividends paid by the Fund as well as affect whether dividends
paid by the Fund are classified as capital gains or ordinary income.
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
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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 Investment 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
currently provides investment advisory services to three registered investment
companies which serve as underlying vehicles for variable annuity insurance
products. The controlling shareholder of Dean Investment Associates is Chauncey
H. Dean. The Large Cap Value Fund, the Small Cap Value Fund and the Balanced
Fund each 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. The
International Fund pays Dean Investment Associates a fee for its services equal
to the annual rate of 1.25% of the average value of its daily net assets. As the
owner of greater than 25% of its shares, Chauncey H. Dean may be deemed to
control each of the Funds.
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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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.
Newton Capital Management Ltd., 71 Queen Victoria Street, London, England
EC4V 4DR ("Newton Capital"), has been retained by Dean Investment Associates to
manage the investments of the International Fund. Newton Capital is a United
Kingdom investment advisory firm registered with the Securities and Exchange
Commission. Newton Capital is affiliated with Newton Investment Management Ltd.,
an English investment advisory firm which has been managing assets for
institutional investors, mutual funds and individuals since 1977. Dean
Investment Associates (not the Fund) pays Newton Capital a fee for its services
equal to the rate of .50% of the net average value of the Fund's daily net
assets.
Paul Butler is International Equities Director for Newton Capital
Management and is primarily responsible for managing the portfolio of the
International Equity Fund. Paul graduated from Cambridge University in 1986 with
a degree in Natural Sciences and joined Newton in 1987. Paul worked as an
International Equities analyst for five years before becoming a Portfolio
Manager in 1992. In 1993, Paul was appointed as a director of Newton and
promoted to his current position as Director of International Equities.
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.
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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 retains Countrywide Fund Services, Inc. (the "Transfer Agent"),
P.O. Box 5354, Cincinnati, Ohio 45201-5354, to serve as the Funds' transfer
agent, dividend paying agent and shareholder service agent. The Transfer Agent
is a 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 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, and with respect to the
International Fund, Newton Capital, 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, Newton Capital 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. Each class of shares of a Fund shall vote separately on
matters
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relating to its plan of distribution pursuant to Rule 12b-1 (see "Distribution
Plans"). 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 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 1940 Act, 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
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.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 certain
distribution-related 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 such 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 the Funds' Class C shares.
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
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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 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. Securities held by the Fund may be primarily listed on foreign
exchanges or traded in foreign markets which are open on days (such as Saturdays
and U.S. holidays) when the New York Stock Exchange is not open for business. As
a result, the net asset value per share of the Fund may be significantly
affected by trading on days when the Trust is not open for business. 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
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<PAGE>
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 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.
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<PAGE>
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' or Newton Capital's 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 45423
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, Investment 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...................................................
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<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.
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<PAGE>
[Logo] DEAN
family of funds_______
[Logo]
Prospectus
October 1, 1997
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<PAGE>
DEAN FAMILY OF FUNDS
STATEMENT OF ADDITIONAL INFORMATION
October 1, 1997
Large Cap Value Fund
Small Cap Value Fund
Balanced Fund
International 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
October 1, 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.
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<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..................13
INVESTMENT LIMITATIONS...................................................15
TRUSTEES AND OFFICERS....................................................18
THE INVESTMENT ADVISER...................................................20
THE SUB-ADVISER..........................................................21
THE UNDERWRITER..........................................................22
DISTRIBUTION PLANS.......................................................22
SECURITIES TRANSACTIONS..................................................24
PORTFOLIO TURNOVER.......................................................25
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE.....................26
OTHER PURCHASE INFORMATION...............................................26
TAXES....................................................................27
REDEMPTION IN KIND.......................................................30
HISTORICAL PERFORMANCE INFORMATION.......................................30
CUSTODIAN................................................................32
AUDITORS.................................................................32
PRINCIPAL SECURITY HOLDERS...............................................33
COUNTRYWIDE FUND SERVICES, INC...........................................33
STATEMENT OF ASSETS AND LIABILITIES......................................34
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THE TRUST
The Dean Family of Funds (the "Trust") was organized as an Ohio
business trust on December 18, 1996. The Trust currently offers four series of
shares to investors: the Large Cap Value Fund, the Small Cap Value Fund, the
Balanced Fund and the International 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.
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<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 or, when appropriate,
Newton, 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 or Newton, 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
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<PAGE>
allowance made for unusual circumstances; typically, the issuer's 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
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<PAGE>
shorter period of time. The resale price will be in excess of 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.
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<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 Newton or any affiliated person of the Trust or an
affiliated person of Dean Investment Associates or Newton 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
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<PAGE>
based upon changes in the level of interest rates (which will 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.
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<PAGE>
Investing in STRIPS may help to preserve capital during periods 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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<PAGE>
Forward Foreign Currency Exchange Contracts. The value of the
International Fund's portfolio securities which are invested in non-U.S. dollar
denominated instruments as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and the Fund may incur costs in connection with conversions between
various currencies. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through forward contracts to purchase
or sell foreign currencies. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
traded directly between currency traders (usually large commercial banks) and
their customers. The Fund will not, however, hold foreign currency except in
connection with purchase and sale of foreign portfolio securities.
The International Fund will enter into forward foreign currency
exchange contracts as described hereafter. When the Fund enters into a contract
for the purchase or sale of a security denominated in a foreign currency, it may
desire to establish the cost or proceeds relative to another currency. The
forward contract may be denominated in U.S. dollars or may be a "cross-currency"
contract where the forward contract is denominated in a currency other than U.S.
dollars. However, this tends to limit potential gains which might result from a
positive change in such currency relationships.
The forecasting of a short-term currency market movement is extremely
difficult and the successful execution of a short-term hedging strategy is
highly uncertain. The International Fund may enter into such forward contracts
if, as a result, not more than 50% of the value of its total assets would be
committed to such contracts. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies.
However, the Trustees believe that it is important to have the flexibility to
enter into forward contracts when the Sub-Advisor determines it to be in the
best interests of the Fund. The Custodian will segregate cash, U.S. Government
obligations or other liquid high-grade debt obligations in an amount not less
than the value of the Fund's total assets committed to foreign currency exchange
contracts entered into under this type of transaction. If the value of the
segregated securities declines, additional cash or securities will be added on a
daily basis, i.e., "marked to market," so that the segregated amount will not be
less than the amount of the Fund's commitments with respect to such contracts.
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<PAGE>
Generally, the International Fund will not enter into a forward foreign
currency exchange contract with a term of greater than 90 days. At the maturity
of the contract, the Fund may either sell the portfolio security and make
delivery of the foreign currency, or may retain the security and terminate the
obligation to deliver the foreign currency by purchasing an "offsetting" forward
contract with the same currency trader obligating the Fund to purchase, on the
same maturity date, the same amount of the foreign currency.
It is impossible to forecast with absolute precision the market value
of portfolio securities at the expiration of the contract. Accordingly, it may
be necessary for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the Fund is obligated to
deliver.
If the International Fund retains the portfolio security and engages in
an offsetting transaction, the Fund will incur a gain or a loss (as described
below) to the extent that there has been movement in forward contract prices. If
the Fund engages in an offsetting transaction, it may subsequently enter into a
new forward contract to sell the foreign currency. Should forward prices decline
during the period between entering into a forward contract for the sale of a
foreign currency and the date the Fund enters into an offsetting contract for
the purchase of the foreign currency, the Fund will realize a gain to the extent
the price of the currency the Fund has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent the price of the currency the Fund has agreed
to purchase exceeds the price of the currency the Fund has agreed to sell.
The International Fund's dealings in forward foreign currency exchange
contracts will be limited to the transactions described above. The Fund is not
required to enter into such transactions with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Sub-Advisor. It should also be realized that this method of protecting the
value of the Fund's portfolio securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices of the
securities held by the Fund. It simply establishes a rate of exchange which one
can achieve at some future point in time. Additionally, although such contracts
tend to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result should the value of such currency increase.
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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.
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
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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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<PAGE>
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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<PAGE>
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 40 Vice President 0
Mark J. Seger 35 Treasurer 0
Tina D. Hosking 29 Secretary 0
John F. Splain 41 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 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 Interactive Investments, 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 Interactive Investments, 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 PRAGMA Investment
Trust, Capitol Square Funds and The New York State Opportunity Funds and
Assistant Secretary of 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, Capitol Square Funds
and Maplewood Investment Trust and Assistant Secretary of Interactive
Investments, Schwartz Investment Trust, Fremont Mutual Funds, Inc., PRAGMA
Investment Trust, 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 agreements between the Trust and Dean
Investment Associates, Dean Investment Associates manages the Funds'
investments. The Large Cap Value Fund, the Small Cap Value Fund and the Balanced
Fund each pay 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
International Fund pays Dean Investment Associates a fee computed and accrued
daily and paid monthly at an annual rate of 1.25% 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.
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<PAGE>
By its terms, the advisory agreement on behalf of each Fund will remain
in force until April 1, 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 purpose of voting
such approval. Each of the Trust's advisory agreements 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. Each of the advisory agreements
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 SUB-ADVISER
Newton Capital Management Ltd. (the "Sub-Adviser") has been retained to
manage the investments of the International Fund. The Sub-Adviser is a United
Kingdom investment advisory firm registered with the Securities and Exchange
Commission. Newton is affiliated with Newton Investment Management Ltd., an
English investment advisory firm which has been managing assets for
institutional investors, mutual funds and individuals since 1977. The Adviser
(not the Fund) pays the Sub-Adviser a fee computed and accrued daily and paid
monthly at an annual rate of .50% of the average value of the Fund's daily net
assets.
By its terms, the Trust's Sub-Advisory Agreement will remain in force
until April 1, 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 the International
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 purpose of
voting on such approval. The Trust's Sub-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 the International Fund's
outstanding voting securities, or by the Adviser or Sub-Adviser. The
Sub-Advisory Agreement automatically terminates in the event of its assignment,
as defined by the Investment Company Act of 1940 and the rules thereunder.
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<PAGE>
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.
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 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 a Fund allocable to its 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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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.
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.
- 25 -
<PAGE>
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.
The value of non-dollar denominated portfolio instruments held by the
International Fund will be determined by converting all assets and liabilities
initially expressed in foreign currency values into U.S. dollar values at the
mean between the bid and offered quotations of such currencies against U.S.
dollars as last quoted by any recognized dealer. If such quotations are not
available, the rate of exchange will be determined in accordance with policies
established in good faith by the Board of Trustees. Gains or losses between
trade and settlement dates resulting from changes in exchange rates between the
U.S. dollar and a foreign currency are borne by the International Fund. To
protect against such losses, the Fund may enter into forward foreign currency
exchange contracts, which will also have the effect of limiting any such gains.
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.
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<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.
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<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.
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<PAGE>
Investments by the International Fund in certain options, futures
contracts and options on futures contracts are "section 1256 contracts." Any
gains or losses on section 1256 contracts are generally considered 60% long-term
and 40% short-term capital gains or losses ("60/40"). Section 1256 contracts
held by the International Fund at the end of each taxable year are treated for
federal income tax purposes as being sold on such date for their fair market
value. The resultant paper gains or losses are also treated as 60/40 gains or
losses. When the section 1256 contract is subsequently disposed of, the actual
gain or loss will be adjusted by the amount of any preceding year-end gain or
loss. The use of section 1256 contracts may force the International Fund to
distribute to shareholders paper gains that have not yet been realized in order
to avoid federal income tax liability.
Foreign currency gains or losses on non-U.S. dollar denominated bonds
and other similar debt instruments and on any non-U.S. dollar denominated
futures contracts, options and forward contracts that are not section 1256
contracts generally will be treated as ordinary income or loss.
Certain hedging transactions undertaken by the International Fund may
result in "straddles" for federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the International Fund. In
addition, losses realized by the International Fund on positions that are part
of a straddle may be deferred, rather than being taken into account in
calculating taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences of hedging transactions to the
International Fund are not entirely clear. The hedging transactions may increase
the amount of short-term capital gain realized by the International Fund which
is taxed as ordinary income when distributed to shareholders. The International
Fund may make one or more of the elections available under the Internal Revenue
Code of 1986, as amended, which are applicable to straddles. If the
International Fund makes any of the elections, the amount, character and timing
of the recognition of gains or losses from the affected straddle positions will
be determined under rules that vary according to the elections made. The rules
applicable under certain of the elections operate to accelerate the recognition
of gains or losses from the affected straddle positions. Because application of
the straddle rules may affect the character of gains or losses, defer losses
and/or accelerate the recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders, and which will
be taxed to shareholders as ordinary income or long-term capital gain in any
year, may be increased or decreased substantially as compared to a fund that did
not engage in such hedging transactions.
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<PAGE>
The 30% limit on gains from the sale of certain assets held for less
than three months and the diversification requirements applicable to the
International Fund's assets may limit the extent to which the International Fund
will be able to engage in transactions in options, futures contracts or options
on futures contracts.
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
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<PAGE>
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 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
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<PAGE>
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:
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 investments of the Funds. 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, 1998. 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.
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<PAGE>
PRINCIPAL SECURITY HOLDERS.
As of ________, 1997, _____________ owned of record ____% of the
outstanding shares of the ____________ Fund.
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 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 class of shares of a 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 + .001%
of average monthly
net assets.
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.
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<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
The Statement of Assets and Liabilities for the Large Cap Value Fund,
the Small Cap Value Fund and the Balanced Fund as of March 17, 1997, which has
been audited by Ernst & Young LLP, is attached to this Statement of Additional
Information.
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<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
<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)(i) Form of Advisory Agreement with C.H. Dean &
Associates, Inc. for the Large Cap Fund, the
Small Cap Fund and the Balanced Fund*
(ii) Form of Advisory Agreement with C.H. Dean &
Associates, Inc. for the International Fund
(iii) Form of Sub-Advisory Agreement with Newton
Capital Management Ltd.
(6) Form of Underwriting Agreement with 2480
Securities LLC*
(7) Inapplicable
(8)(i) Form of Custody Agreement with Bank One Trust
Company*
(9)(i) 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.*
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<PAGE>
(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 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 June 30, 1997, there are 160 holders 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:
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<PAGE>
"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 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
- 3 -
<PAGE>
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.
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 maintains a standard mutual fund and investment
advisory professional and directors and officers liability
policy. The policy provides 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 Agreements with Dean Investment Associates each
provide 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 applicable 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
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<PAGE>
faith or gross negligence, a violation of the standard of care
established by and applicable to Dean Investment Associates in
its actions under the appropriate Advisory Agreement or breach
of its duty or of its obligations under the appropriate
Advisory Agreement.
The Sub-Advisory Agreement with the Sub-Adviser provides that
the Sub-Adviser shall give the International Fund the benefit
of its best judgment and effort in rendering services under
the Sub-Advisory Agreement, but that neither the Sub-Adviser
nor any of its officers, directors, employees, agents or
controlling persons shall be liable for any act or omission or
for any loss sustained by the International Fund in connection
with the matters to which this Sub- Advisory Agreement
relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and
duties under this Sub-Advisory Agreement; provided, however,
that the foregoing shall not constitute a waiver of any rights
which the Trust may have which may not be waived under
applicable law.
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.
The Sub-Adviser is a United Kingdom investment
advisory firm registered with the Securities and
Exchange Commission. The Sub-Adviser is affiliated
with Newton Investment Management Ltd., an English
investment advisory firm which has been managing
assets for institutional investors, mutual funds and
individuals since 1977.
(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,
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<PAGE>
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.
The directors and officers of Newton Capital
Management Ltd. and any other business,
profession, vocation or employment of a
substantial nature engaged in at any time during
the past two years:
[To be inserted.]
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
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<PAGE>
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 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 certifies that it 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 18th
day of July, 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 July 18, 1997
Frank H. Scott and Trustee
/s/ Mark J. Seger Treasurer July 18, 1997
Mark J. Seger
/s/ Chauncey H. Dean Trustee July 18, 1997
Chauncey H. Dean
/s/ Robert D. Dean Trustee July 18, 1997
Robert D. Dean
/s/ Victor S. Curtis Trustee July 18, 1997
Victor S. Curtis
Trustee
Frank J. Perez* By:/s/Tina D. Hosking
Tina D. Hosking
Attorney-in-Fact*
July 18, 1997
Trustee
David H. Ponitz*
Trustee
Gilbert P. Williamson*
<PAGE>
INDEX TO EXHIBITS
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5)(i) Form of Advisory Agreement for the Large Cap Value
Fund, the Small Cap Value Fund and the Balanced Fund*
(ii) Form of Advisory Agreement for the International Fund
(iii) Form of Sub-Advisory Agreement for the International
Fund
(6) Form of Underwriting Agreement*
(7) Inapplicable
(8)(i) Form of Custody Agreement*
(9)(i) Form of Administration Agreement*
(ii) Form of Accounting Services Agreement*
(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*
<PAGE>
(18) Rule 18f-3 Multi-Class Plan*
- ----------------------------
* Incorporated by reference to the Trust's Registration
Statement on Form N-1A.
- 9 -
C.H. Dean & Associates, Inc.
2480 Kettering Tower
Dayton, Ohio 45423
Re: Advisory Agreement
Ladies and Gentlemen:
The Dean Family of Funds (the "Trust") is an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), and subject to the rules and regulations promulgated
thereunder. The Trust's shares of beneficial interest are divided into separate
series and each such share of a series represents an undivided interest in the
assets, subject to the liabilities, allocated to that series and each series has
separate investment objectives and policies. The International Fund (the
"Fund"), a series of the Trust, has been created for the purpose of investing
and reinvesting its assets in securities pursuant to the investment objectives
and policies as set forth in its registration statement under the Act and the
Securities Act of 1933, as heretofore amended and supplemented.
1. Appointment as Adviser. The Trust being duly authorized hereby
appoints and employs C.H. Dean & Associates, Inc. (the "Adviser") to manage the
investment and reinvestment of the assets of the Fund on the terms and
conditions set forth herein.
2. Acceptance of Appointment; Standard of Performance. The Adviser
accepts the appointment and agrees to render the services and assume the
obligations set forth herein.
<PAGE>
3. Portfolio Management Services of The Adviser. The Adviser shall have
overall supervisory responsibility for the general management and investment of
the assets and portfolio securities of the Fund. The Adviser shall provide
overall investment programs and strategies for the Fund, shall revise such
programs as necessary and shall monitor and report periodically to the Board of
Trustees concerning the implementation of the programs.
The Adviser, with the approval of the Board of Trustees of the Trust as
to particular appointments, intends to (i) appoint one or more persons or
companies (the "Sub-Adviser") and, subject to the terms and conditions of this
Agreement, the Sub-Adviser shall have full investment discretion and shall make
all determinations with respect to the investment of the Fund's assets and the
purchase and sale of portfolio securities with those assets, and (ii) take such
steps as may be necessary to implement such appointments. The Adviser shall be
solely responsible for paying the fees and expenses of the Sub-Adviser for its
services to the Fund. The Adviser shall not be responsible or liable for the
investment merits of any decision by the Sub-Adviser to purchase, hold or sell a
portfolio security for the Fund.
The Adviser shall evaluate sub-advisers and shall recommend to the
Board of Trustees the Sub-Adviser which the Adviser believes is best suited to
invest the assets of the Fund; shall monitor and evaluate the investment
performance of the Fund's
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<PAGE>
Sub-Adviser; shall recommend changes in the Sub-Adviser when appropriate; shall
coordinate the investment activities of the Sub-Adviser to ensure compliance
with applicable restrictions and limitations applicable to the Fund; and shall
compensate the Sub- Adviser.
In providing such services to the Fund, the Adviser shall be subject to
such investment restrictions as are set forth in the Act and the rules
thereunder, the Internal Revenue Code of 1986, as amended (the "Code"),
applicable state securities laws, the supervision and control of the Trustees of
the Trust, such specific instructions as the Trustees may adopt and communicate
to the Adviser and the investment objectives, policies and restrictions of the
Fund furnished pursuant to paragraph 4. The Adviser is not authorized by the
Trust to take any action, including the purchase or sale of securities for the
Fund, in contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence.
4. Investment Objectives, Policies and Restrictions. The Trust will
provide the Adviser with the statement of investment objectives, policies and
restrictions applicable to the Fund as contained in the Trust's registration
statement under the Act and the Securities Act of 1933, and any instructions
adopted by the Trustees supplemental thereto. The Trust will provide the Adviser
with such further information concerning the investment objectives, policies and
restrictions applicable thereto as the Adviser may from time to time reasonably
request. The Trust
- 3 -
<PAGE>
retains the right, on written notice to the Adviser from the Trust, to modify
any such objectives, policies or restrictions in any manner at any time.
5. Transaction Procedures. All transactions will be consummated by
payment to or delivery by ______________________ or any successor custodian (the
"Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Fund, of all cash and/or securities
due to or from the Fund, and the Adviser shall not have possession or custody
thereof. The Adviser shall advise the Custodian and confirm in writing to the
Trust and to Countrywide Fund Services, Inc., or any other designated agent of
the Trust, all investment orders for the Fund placed by it with brokers and
dealers. The Adviser shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated by
the Adviser.
6. Allocation of Brokerage. The Sub-Adviser, subject to the limitations
contained in this paragraph 6, shall place, on behalf of the Fund, orders for
the execution of portfolio transactions. The Sub-Adviser is not authorized by
the Trust to take any action, including the purchase or sale of securities for
the Fund's account, (a) in contravention of (i) any investment restrictions set
forth in the Act and the rules thereunder, (ii) specific instructions adopted by
the Board of Trustees and communicated to the Adviser or the Sub-Adviser, (iii)
the investment objectives, policies and restrictions of the Fund as
- 4 -
<PAGE>
set forth in the Trust's Registration Statement, or (iv) instructions from the
Adviser communicated to the Sub-Adviser, or (b) which would have the effect of
causing the Fund to fail to qualify or to cease to qualify as a regulated
investment company under the Code or any succeeding statute.
Subject to the foregoing, the Sub-Adviser shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Sub-Adviser and to select the markets on or in which the
transactions will be executed. In doing so, the Sub-Adviser will give primary
consideration to securing the most favorable price and efficient execution.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking most favorable price and
efficient execution, the Sub-Adviser may (i) pay commissions to brokers or
dealers other than its affiliates which are higher than might be charged by
another qualified broker to obtain brokerage and/or research services considered
by the Sub-Adviser to be useful or desirable in the performance of its duties
hereunder and for the investment management of other advisory accounts over
which it or its affiliates exercise investment discretion and (ii) consider
sales by brokers or dealers (other than its affiliates) of shares of the Fund as
a factor in its selection of brokers and dealers for the Fund's portfolio
transactions. It is understood that neither the Trust, the Adviser nor the
Sub-Adviser has adopted a formula for allocation of the Fund's investment
transaction business. It
- 5 -
<PAGE>
is also understood that it is desirable for the Fund that the Sub-Adviser have
access to supplemental investment and market research and security and economic
analyses provided by certain brokers who may execute brokerage transactions at a
higher commission to the Fund than may result when allocating brokerage to other
brokers on the basis of seeking the lowest commission. Therefore, the
Sub-Adviser is authorized to place orders for the purchase and sale of
securities for the Fund with such certain brokers, subject to review by the
Trust's Trustees from time to time with respect to the extent and continuation
of this practice, provided that the Sub-Adviser determines in good faith that
the amount of the commission is reasonable in relation to the value of the
brokerage and research services provided by the executing broker or dealer. The
determination may be viewed in terms of either a particular transaction or the
Sub-Adviser's overall responsibilities with respect to the Fund and to other
accounts over which it exercises investment discretion. It is understood that
although the information may be useful to the Trust and the Sub-Adviser, it is
not possible to place a dollar value on such information. It is understood that
the services provided by such brokers may be useful to the Sub-Adviser in
connection with its services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be sold or
purchased in order to obtain the most favorable price or lower brokerage
- 6 -
<PAGE>
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as expenses incurred in the transaction, will be
made by the Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Trust and to such other
clients.
The Adviser will not execute any portfolio transactions for the Fund's
account with a broker or dealer which is an "affiliated person" (as defined in
the Act) of the Trust, the Adviser or the Sub-Adviser without the prior written
approval of the Adviser. The Adviser agrees that it will provide the Sub-
Adviser with a list of brokers and dealers which are "affiliated persons" of the
Trust, the Adviser or the Sub-Adviser.
For each fiscal quarter of the Trust, the Sub-Adviser shall prepare and
render reports to the Trust's Trustees of the total brokerage business placed
and the manner in which the allocation has been accomplished. Such reports shall
set forth at a minimum the information required to be maintained by Rule
31a-1(b)(9) under the Act.
7. Proxies. The Sub-Adviser will vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Fund may be invested
from time to time.
8. Reports to the Adviser. The Trust will provide the Adviser with such
periodic reports concerning the status of the Fund as the Adviser may reasonably
request.
- 7 -
<PAGE>
9. Fees for Services. For all of the services to be rendered and
payments made as provided in this Agreement, the Fund will pay the Adviser a
fee, computed and accrued daily and paid monthly, at the annual rate of 1.25% of
its average daily net assets.
10. Allocation of Charges and Expenses. The Adviser shall employ or
provide and compensate the executive, administrative, secretarial and clerical
personnel necessary to provide the services set forth herein, and shall bear the
expense thereof. The Adviser shall compensate all Trustees, officers and
employees of the Trust who are also employees of the Adviser. The Adviser will
pay all expenses incurred in connection with the sale or distribution of the
Fund's shares to the extent such expenses are not assumed by the Fund under the
Trust's Distribution Expense Plans.
The Fund will be responsible for the payment of all operating expenses
of the Fund, including fees and expenses incurred by the Fund 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, insurance expenses, taxes or governmental
fees, fees and expenses of the custodian, the transfer, shareholder service and
dividend disbursing agent and the accounting and pricing agent of the Fund,
expenses including clerical expenses of the issue, sale, redemption or
repurchase of shares of the Fund, the fees and expenses of
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<PAGE>
Trustees of the Trust who are not interested persons of the Trust, the cost of
preparing, printing 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 Trust may be a party and indemnification of
the Trust's officers and Trustees with respect thereto, or any other expense not
specifically described above incurred in the performance of the Trust's
obligations. All other expenses not expressly assumed by the Adviser herein
incurred in connection with the organization, registration of shares and
operations of the Fund will be borne by the Fund.
11. Other Investment Activities of the Adviser. The Trust acknowledges
that the Adviser or one or more of its affiliates may have investment
responsibilities or render investment advice to or perform other investment
advisory services for other individuals or entities and that the Adviser, its
affiliates or any of its or their directors, officers, agents or employees may
buy, sell or trade in any securities for its or their respective accounts
("Affiliated Accounts"). The Trust agrees that the Adviser or its affiliates may
give advice or exercise investment responsibility and take such other action
with respect to other Affiliated Accounts which may differ from the advice given
or the timing or nature of action taken with respect to the Fund, provided that
the Adviser acts in good faith, and provided
- 9 -
<PAGE>
further, that it is the Adviser's policy to allocate, within its reasonable
discretion, investment opportunities to the Fund over a period of time on a fair
and equitable basis relative to the Affiliated Accounts, taking into account the
investment objectives and policies of the Fund and any specific investment
restrictions applicable thereto. The Trust acknowledges that one or more of the
Affiliated Accounts may at any time hold, acquire, increase, decrease, dispose
of or otherwise deal with positions in investments in which the Fund may have an
interest from time to time, whether in transactions which involve the Funds or
otherwise. The Adviser shall have no obligation to acquire for the Fund a
position in any investment which an Affiliated Account may acquire, and the
Trust shall have no first refusal, co- investment or other rights in respect of
any such investment, either for the Fund or otherwise.
12. Certificate of Authority. The Trust and the Adviser shall furnish
to each other from time to time certified copies of the resolutions of their
Trustees or Board of Directors or executive committees, as the case may be,
evidencing the authority of officers and employees who are authorized to act on
behalf of the Trust, the Fund and/or the Adviser.
13. Limitation of Liability. The Adviser 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 this Agreement, or in accordance with (or
in
- 10 -
<PAGE>
the absence of) specific directions or instructions from the Trust, provided,
however, that such acts or omissions shall not have resulted from the Adviser's
willful misfeasance, bad faith or gross negligence, a violation of the standard
of care established by and applicable to the Adviser in its actions under this
Agreement or breach of its duty or of its obligations hereunder. Nothing in this
paragraph 13 shall be construed in a manner inconsistent with Sections 17(h) and
(i) of the Act.
14. Confidentiality. Subject to the duty of the Adviser and the Trust
to comply with applicable law, including any demand of any regulatory or taxing
authority having jurisdiction, the parties hereto shall treat as confidential
all information pertaining to the Funds and the actions of the Adviser and the
Trust in respect thereof.
15. Assignment. No assignment of this Agreement shall be made by the
Adviser, and this Agreement shall terminate automatically in the event of such
assignment. The Adviser shall notify the Trust in writing sufficiently in
advance of any proposed change of control, as defined in Section 2(a)(9) of the
Act, as will enable the Trust to consider whether an assignment will occur, and
to take the steps necessary to enter into a new contract with the Adviser.
16. Representation, Warranties and Agreements of the Trust. The Trust
represents, warrants and agrees that:
A. The Adviser has been duly appointed by the Trustees of the Trust to
provide investment advisory services to the Fund as contemplated hereby.
- 11 -
<PAGE>
B. The Trust will deliver to the Adviser true and complete copies of
its then current prospectuses and statements of additional information as
effective from time to time and such other documents or instruments governing
the investments of the Funds and such other information as is necessary for the
Adviser to carry out its obligations under this Agreement.
C. The Trust is currently in compliance and shall at all times comply
with the requirements imposed upon the Trust by applicable law and regulations.
17. Representations, Warranties and Agreements of the Adviser. The
Adviser represents, warrants and agrees that:
A. The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940.
B. The Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the Act and will provide the Trust with a copy
of the code of ethics and evidence of its adoption. Within forty-five (45) days
of the end of the last calendar quarter of each year while this Agreement is in
effect, an executive officer of the Adviser shall certify to the Trust that the
Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Adviser's code of ethics or, if
such a violation has occurred, that appropriate action was taken in response to
such violation. Upon the written request of the Trust, the Adviser shall permit
the Trust, its employees or its agents to examine the reports required to be
made to the Adviser by Rule 17j-1(c)(1).
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<PAGE>
C. The Adviser will, promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV, furnish a copy of such
amendment to the Trust.
D. Upon request of the Trust, the Adviser will provide assistance to
the Custodian in the collection of income due or payable to the Fund.
E. The Adviser will immediately notify the Trust of the occurrence of
any event which would disqualify the Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the Act or
otherwise.
18. Amendment. This Agreement may be amended at any time, but only by
written agreement between the Adviser and the Trust, which amendment is subject
to the approval of the Trustees and the shareholders of the Fund in the manner
required by the Act and the rules thereunder, subject to any applicable
exemptive order of the Securities and Exchange Commission modifying the
provisions of the Act with respect to approval of amendments to this Agreement.
19. Effective Date; Term. This Agreement shall become effective on the
date of its execution and shall remain in force for a period of two (2) years
from such date, and from year to year thereafter but only so long as such
continuance is specifically approved at least annually by the vote of a majority
of the Trustees who are not interested persons of the Trust, the Adviser or the
Sub-Adviser, cast in person at a meeting called for the purpose of voting on
such approval, and by a vote of the Board of Trustees or of a majority of the
outstanding voting
- 13 -
<PAGE>
securities of the Fund. The aforesaid requirement that this Agreement may be
continued "annually" shall be construed in a manner consistent with the Act and
the rules and regulations thereunder.
20. Termination. This Agreement may be terminated by either party
hereto, without the payment of any penalty, immediately upon written notice to
the other in the event of a breach of any provision thereof by the party so
notified, or otherwise upon sixty (60) days' written notice to the other, but
any such termination shall not affect the status, obligations or liabilities of
any party hereto to the other.
21. Obligations of the Trust. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any of the
trustees, shareholders, nominees, officers, agents or employees of the Trust,
personally, but bind only the trust property of the Trust. The execution and
delivery of this Agreement have been authorized by the trustees of the Trust and
signed by an officer of the Trust, acting as such, and neither such
authorization by such trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust.
22. Use of Name. The name "Dean" is a property right of the Adviser.
The Adviser may use the name "Dean" in other connections and for other purposes,
including without limitation in the name of other investment companies,
corporations or businesses that it may manage, advise, sponsor or own, or in
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<PAGE>
which it may have a financial interest. The Trust will discontinue any use of
the name "Dean" if the Adviser ceases to be employed as the Trust's portfolio
manager.
23. Definitions. As used in paragraphs 15 and 19 of this Agreement, the
terms "assignment," "interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the Act and
the rules and regulations thereunder.
24. Applicable Law. To the extent that state law is not preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of Ohio.
DEAN FAMILY OF FUNDS
By: __________________________
Title:
Date: _______, 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
C.H. DEAN & ASSOCIATES, INC.
By: __________________________
Title:
Date: _______________, 1997
- 15 -
SUB-ADVISORY AGREEMENT
Newton Capital Management Limited
Ladies and Gentlemen:
Dean Family of Funds (the "Trust"), an Ohio business trust, is a
diversified open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "Act"), and is subject to the
rules and regulations promulgated thereunder. The Trust's shares of beneficial
interest are divided into separate series or funds. Each such share of a fund
represents an undivided interest in the assets, subject to the liabilities,
allocated to that fund. Each fund has separate investment objectives and
policies. The International Fund (the "Fund") has been established as a series
of the Trust.
C.H. Dean & Associates, Inc. (the "Adviser") acts as the investment
adviser for the Fund pursuant to the terms of an Advisory Agreement. The Adviser
is responsible for the coordination of investment of the Fund's assets in
portfolio securities. However, specific portfolio purchases and sales for the
investment portfolio of the Fund are to be made by advisory organizations
recommended by the Adviser and approved by the Board of Trustees of the Trust.
<PAGE>
1. Appointment as Sub-Adviser. The Trust being duly authorized hereby
appoints and employs Newton Capital Management Limited (the "Sub-Adviser") as
the discretionary portfolio manager of the Fund, on the terms and conditions set
forth herein.
2. Acceptance of Appointment; Standard of Performance. The Sub-Adviser
accepts the appointment as the discretionary portfolio manager and agrees that
in the performance of its duties under this Agreement, it shall at all times use
all reasonable efforts to conform to, and act in accordance with, any
requirements imposed by (i) the provisions of the Act, and of any rules or
regulations in force thereunder; (ii) any other applicable provision of law;
(iii) the provisions of the Declaration of Trust and Bylaws of the Trust, as
such documents are amended from time to time; (iv) the investment objectives,
policies and restrictions applicable to the Fund as set forth in the Trust's
Registration Statement on Form N-1A and (v) any policies and determinations of
the Board of Trustees of the Trust with respect to the Fund.
3. Portfolio Management Services of Sub-Adviser. The Sub- Adviser is
hereby employed and authorized to select portfolio securities for investment by
the Fund, to purchase and sell securities of the Fund, and upon making any
purchase or sale decision, to place orders for the execution of such portfolio
transactions in accordance with paragraphs 5 and 6 hereof. In providing
portfolio management services to the Fund, the
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<PAGE>
Sub-Adviser shall be subject to such investment restrictions as are set forth in
the Act and the rules thereunder, the Internal Revenue Code of 1986, applicable
state securities laws, the supervision and control of the Board of Trustees of
the Trust, such specific instructions as the Board of Trustees may adopt and
communicate to the Sub-Adviser, the investment objectives, policies and
restrictions of the Fund furnished pursuant to paragraph 4, the provisions of
Schedule A hereto and general instructions from the Adviser. The Sub-Adviser is
not authorized by the Fund to take any action, including the purchase or sale of
securities for the Fund, in contravention of any restriction, limitation,
objective, policy or instruction described in the previous sentence. The
Sub-Adviser shall maintain on behalf of the Fund the records listed in Schedule
A hereto (as amended from time to time). At the Trust's reasonable request, the
Sub-Adviser will consult with the Adviser with respect to any decision made by
it with respect to the investments of the Fund.
4. Investment Objectives, Policies and Restrictions. The Trust will
provide the Sub-Adviser with the statement of investment objectives, policies
and restrictions applicable to the Fund as contained in the Fund's registration
statements under the Act and the Securities Act of 1933, and any instructions
adopted by the Board of Trustees supplemental thereto. The Trust will provide
the Sub-Adviser with such further information concerning the investment
objectives, policies and restrictions applicable thereto as the Sub-Adviser may
from time to time
- 3 -
<PAGE>
reasonably request. The Trust retains the right, on written notice to the
Sub-Adviser from the Trust or the Adviser, to modify any such objectives,
policies or restrictions in any manner at any time.
5. Allocation of Brokerage. The Sub-Adviser shall have the authority
and discretion to select brokers and dealers to execute portfolio transactions
initiated by the Sub-Adviser, and for the selection of the markets on or in
which the transactions will be executed.
A. In doing so, the Sub-Adviser will give primary consideration to
securing the best execution, 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.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking most favorable price and
efficient execution, the Sub-Adviser may (i) pay commissions to brokers or
dealers other than its affiliates which are higher than might be charged by
another qualified broker to obtain brokerage and/or research services considered
by the Sub-Adviser to be useful or desirable in the performance of its duties
hereunder and for the investment management of other advisory accounts over
which it or its affiliates exercise investment discretion and (ii) consider
sales by brokers or dealers (other than its affiliates) of shares of
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<PAGE>
the Fund as a factor in its selection of brokers and dealers for the Fund's
portfolio transactions. It is understood that neither the Trust, the Adviser nor
the Sub-Adviser have adopted a formula for allocation of the Fund's investment
transaction business. It is also understood that it is desirable for the Fund
that the Sub-Adviser have access to supplemental investment and market research
and security and economic analyses provided by certain brokers who may execute
brokerage transactions at a higher commission to the Fund than may result when
allocating brokerage to other brokers on the basis of seeking the lowest
commission. Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Fund with such certain brokers, subject
to review by the Trust's Board of Trustees from time to time with respect to the
extent and continuation of this practice, provided that the Sub-Adviser
determines in good faith that the amount of the commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker or dealer. The determination may be viewed in terms of either a
particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund and to the other accounts over which it exercises investment
discretion. It is understood that although the information may be useful to the
Trust and the Sub-Adviser, it is not possible to place a dollar value on such
information.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Sub-Adviser, to the extent permitted by
- 5 -
<PAGE>
applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as expenses
incurred in the transaction, will be made by the Sub-Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund with respect to the Fund and to such other clients.
For each fiscal quarter of the Fund, the Sub-Adviser shall prepare and
render reports to the Adviser and the Trust's Board of Trustees of the total
brokerage business placed and the manner in which the allocation has been
accomplished. Such reports shall set forth at a minimum the information required
to be maintained by Rule 31a-1(b)(9) under the Act.
B. The Sub-Adviser agrees that it will not execute any portfolio
transactions for the Fund's account with a broker or dealer which is an
"affiliated person" (as defined in the Act) of the Trust, the Adviser, the
Sub-Adviser or any portfolio manager of the Trust without the prior written
approval of the Adviser. The Adviser agrees that it will provide the Sub-Adviser
with a list of brokers and dealers which are "affiliated persons" of the Trust,
the Adviser or the Sub-Adviser.
6. Transaction Procedures. All transactions will be consummated by
payment to or delivery by ________________________ or any successor custodian
(the "Custodian"), or such depositories or agents as may be designated by the
Custodian in
- 6 -
<PAGE>
writing, as custodian for the Fund, of all cash and/or securities due to or from
the Fund, and the Sub-Adviser shall not have possession or custody thereof. The
Sub-Adviser shall advise the Custodian and confirm in writing to the Trust and
to the Adviser all investment orders for the Fund placed by it with brokers and
dealers. The Sub-Adviser shall issue to the Custodian such instructions as may
be appropriate in connection with the settlement of any transaction initiated by
the Sub-Adviser. It shall be the responsibility of the Sub-Adviser to take
appropriate action if the Custodian fails to confirm in writing proper execution
of the instructions.
7. Proxies. The Sub-Adviser will vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Fund may be invested
from time to time.
8. Reports to the Sub-Adviser. The Trust will provide the Sub-Adviser
with such periodic reports concerning the status of the Fund as the Sub-Adviser
may reasonably request.
9. Fees for Services. For the services provided to the Fund, the
Adviser shall pay the Sub-Adviser a fee equal to the annual rate of .50% of the
average value of the Fund's daily net assets.
The Sub-Adviser's fees shall be payable quarterly in arrears within
thirty days following the end of each quarter. Pursuant to the provisions of the
Advisory Agreement between the Trust and the Adviser, the Adviser is solely
responsible for the payment of fees to the Sub-Adviser, and the Sub-Adviser
agrees to seek payment of the Sub-Adviser's fees solely from the Adviser. The
- 7 -
<PAGE>
Sub-Adviser agrees to pay the compensation of any persons rendering any services
to the Fund who are officers, directors or employees of the Sub-Adviser.
10. Non-Exclusive Advisory Services. Nothing in this Agreement shall
prevent the Sub-Adviser or any director, officer, employee or other affiliate
thereof from acting as investment adviser for any other person, firm or
corporation, or from engaging in any other lawful activity.
11. Other Investment Activities of the Sub-Adviser. The Trust
acknowledges that the Sub-Adviser or one or more of its affiliates may have
investment responsibilities or render investment advice to or perform other
investment advisory services for other individuals or entities and that the Sub-
Adviser, its affiliates or any of its or their directors, officers, agents or
employees may buy, sell or trade in any securities for its or their respective
accounts ("Affiliated Accounts"). Subject to the provisions of paragraph 2
hereof, the Trust agrees that the Sub-Adviser or its affiliates may give advice
or exercise investment responsibility and take such other action with respect to
other Affiliated Accounts which may differ from the advice given or the timing
or nature of action taken with respect to the Fund, provided that the
Sub-Adviser acts in good faith, and provided further, that it is the
Sub-Adviser's policy to allocate, within its reasonable discretion, investment
opportunities to the Fund over a period of time on a fair and equitable basis
relative to the Affiliated Accounts, taking into account the investment
objectives and policies of the Fund and
- 8 -
<PAGE>
any specific investment restrictions applicable thereto. The Trust acknowledges
that one or more of the Affiliated Accounts may at any time hold, acquire,
increase, decrease, dispose of or otherwise deal with positions in investments
in which the Fund may have an interest from time to time, whether in
transactions which involve the Fund or otherwise. The Sub-Adviser shall have no
obligation to acquire for the Fund a position in any investment which any
Affiliated Account may acquire, and the Trust shall have no first refusal,
co-investment or other rights in respect of any such investment, either for the
Fund or otherwise.
12. Certificate of Authority. The Trust, the Adviser and the
Sub-Adviser shall furnish to each other from time to time certified copies of
the resolutions of their Board of Trustees or Board of Directors or executive
committees, as the case may be, evidencing the authority of officers and
employees who are authorized to act on behalf of the Trust, the Fund, the
Adviser and/or the Sub-Adviser.
13. Limitation of Liability. The Sub-Adviser shall give the Fund the
benefit of its best judgment and effort in rendering services hereunder, but
neither the Sub-Adviser nor any of its officers, directors, employees, agents or
controlling persons shall be liable for any act or omission or for any loss
sustained by the Fund in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence in the performance of
- 9 -
<PAGE>
its duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement; provided, however, that the foregoing shall not constitute
a waiver of any rights which the Trust may have which may not be waived under
applicable law.
In addition, the Sub-Adviser did not prepare and is not responsible for
any part of the Trust's registration statement on Form N-1A or any amendment or
supplement thereto other than the description of the Sub-Adviser provided to the
Trust by the Sub- Adviser.
14. Confidentiality. Each of the parties shall maintain in strict
confidentiality any information or documentation it may obtain regarding any of
the other parties to this Agreement, including but not limited to their business
activities or financial condition, with the exception of reports or disclosures
required to be made or other actions required to be taken under applicable laws
and regulations or the order of a regulator or court of competent jurisdiction.
15. Indemnity and Liability.
A. The Trust and the Adviser (for the purposes of this subparagraph
15.A., each of the foregoing being an "indemnitor"), severally and not jointly,
will indemnify and hold the Sub-Adviser and its respective officers, directors,
partners, agents, controlling persons and employees (for the purposes of this
subparagraph 15.A., each of the foregoing being an "indemnitee") harmless from
and against all losses, claims, liabilities and expenses of any kind (including
reasonable
- 10 -
<PAGE>
attorneys' fees and expenses) and amounts paid in satisfaction of judgments, in
compromise or as fines or penalties resulting from any inaccuracy of any
representation made by the indemnitor herein (including any supplement hereto)
or arising out of or with respect to actions taken by the Sub-Adviser; provided,
however, that (1) no indemnitee shall be indemnified hereunder against any
liability to the Trust or its shareholders or any expense of such indemnitee
arising by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross
negligence, (iv) reckless disregard of the duties involved in the conduct of his
position (the conduct referred to in such clauses (i) through (iv) being
sometimes referred to herein as "disabling conduct"), (2) as to any matter
disposed of by settlement or a compromise payment by such indemnitee, pursuant
to a consent decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless there has been a determination
that such settlement or compromise is in the best interests of the Trust and
that such indemnitee appears to have acted in good faith in the reasonable
belief that his action was in the best interests of the Trust and did not
involve disabling conduct by such indemnitee and (3) with respect to any action,
suit or other proceeding voluntarily prosecuted by an indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such indemnitee was authorized by a majority of the full
Board of the Trust.
- 11 -
<PAGE>
B. The Sub-Adviser (for purposes of this subparagraph B, the
"indemnitor") will indemnify and hold the Trust and the Adviser and each of
their respective officers, directors, trustees, partners, agents, controlling
persons and employees (for purposes of this subparagraph 15.B., an "indemnitee")
harmless from and against all losses, claims, liabilities and expenses of any
kind (including reasonable attorneys' fees and expenses) and amounts paid in
satisfaction of judgments, in compromise or as fines or penalties resulting from
any inaccuracy of any representation made by the indemnitor herein (including
any supplement hereto) or arising by reason of willful misfeasance, bad faith,
or gross negligence, of the Sub-Adviser or its officers, directors, partners,
agents, controlling persons and employees, or reckless disregard of the duties
of any such person.
C. The indemnitor shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the indemnitor receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the
indemnitor unless it is subsequently determined that he is entitled to such
indemnification and if the directors or trustees, as the case may be, of the
indemnitor determine that the facts then known to them would not preclude
indemnification. In addition, at least one of the following conditions must be
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<PAGE>
met: (A) the indemnitee shall provide a security for his undertaking; (B) the
indemnitor shall be insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum of directors or trustees, as the case
may be, of the indemnitor who are neither "interested persons" of the indemnitor
(as defined in Section 2(a)(19) of the Act) nor parties to the proceeding
("Disinterested Non-Party Directors") or an independent legal counsel in a
written opinion, shall determine, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe that
the indemnitee ultimately will be found entitled to indemnification.
All determinations with respect to indemnification hereunder shall be
made (1) by a final decision on the merits by a court or other body before whom
the proceeding was brought that such indemnitee is not liable by reason of
disabling conduct, or (2) in the absence of such a decision, by (i) a majority
vote of a quorum of the Disinterested Non-party Directors of the indemnitor, or
(ii) if such a quorum is not obtainable or even, if obtainable, if a majority
vote of such quorum so directs, independent legal counsel in a written opinion.
Notwithstanding the foregoing, the indemnitor shall not be obligated to
provide any such indemnification to the extent such provision would waive any
right which the indemnitor cannot lawfully waive. The rights accruing to any
indemnitee under these provisions shall not exclude any other right to which he
may be lawfully entitled.
- 13 -
<PAGE>
16. Assignment. No assignment of this Agreement shall be made by the
Sub-Adviser, and this Agreement shall terminate automatically in the event of
such assignment. The Sub-Adviser shall notify the Trust in writing sufficiently
in advance of any proposed change of control, as defined in Section 2(a)(9) of
the Act, as will enable the Trust to consider whether an assignment will occur,
and to take the steps necessary to enter into a new contract with the
Sub-Adviser.
17. Representations, Warranties and Agreements of the Trust. The Trust
represents, warrants and agrees that:
A. It is a business trust duly organized and existing in good standing
under the laws of the State of Ohio.
B. It is empowered under applicable laws and by its Declaration of
Trust and Bylaws to enter into and perform this Agreement.
C. All corporate proceedings required by the Declaration of Trust and
Bylaws have been taken to authorize it to enter into and perform this Agreement.
D. It is an open-end, management investment company registered under
the Act.
E. Performance of the Trust's obligations under this Agreement will not
violate any law, regulation, agreement or the Trust's registration statement, as
amended.
F. The Trust will deliver to the Sub-Adviser a true and complete copy
of its then current prospectus and statement of additional information as
effective from time to time and such
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<PAGE>
other documents or instruments governing the investments of the Fund and such
other information as is necessary for the Sub- Adviser to carry out its
obligations under this Agreement.
G. The Trust is currently in compliance and shall at all times comply
with the requirements imposed upon the Fund by applicable laws and regulations.
18. Representations, Warranties and Agreements of the Sub- Adviser. The
Sub-Adviser represents, warrants and agrees that:
A. It is a corporation duly organized and existing in good standing
under the laws of the ____________________.
B. It is empowered under applicable laws to enter into and perform this
Agreement.
C. All corporate proceedings have been taken to authorize it to enter
into and perform this Agreement.
D. The Sub-Adviser is registered as an "investment adviser" under the
Investment Advisers Act of 1940.
E. The Sub-Adviser will maintain, keep current and preserve on behalf
of the Fund, in the manner and for the time periods required or permitted by the
Act, the records identified in Schedule A. The Sub-Adviser agrees that such
records (unless otherwise indicated on Schedule A) are the property of the
Trust, and will be surrendered to the Trust promptly upon request.
F. The Sub-Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Fund as the Adviser or the Trust may from
time to time require to ensure compliance with the Act, the Internal Revenue
Code of 1986 and applicable state securities laws.
- 15 -
<PAGE>
G. The Sub-Adviser will adopt a written code of ethics complying with
the requirements of Rule 17j-1 under the Act and will provide the Trust with a
copy of the code of ethics and evidence of its adoption. Within forty-five (45)
days of the end of the last calendar quarter of each year while this Agreement
is in effect, the President or a Vice President of the Sub-Adviser shall certify
to the Trust that the Sub-Adviser has complied with the requirements of Rule
17j-1 during the previous year and that there has been no violation of the
Sub-Adviser's code of ethics or, if such a violation has occurred, that
appropriate action was taken in response to such violation. Upon the written
request of the Trust, the Sub-Adviser shall submit to the Trust the reports
required to be made to the Sub-Adviser by Rule 17j-1(c)(1).
H. The Sub-Adviser will promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV furnish a copy of such
amendment to the Trust and to the Adviser.
I. Upon request of the Trust, the Sub-Adviser will provide assistance
to the Custodian in the collection of income due or payable to the Fund. With
respect to income from foreign sources, the Sub-Adviser will undertake any
reasonable procedural steps required to reduce, eliminate or reclaim non-U.S.
withholding taxes under the terms of applicable United States income tax
treaties.
- 16 -
<PAGE>
J. The Sub-Adviser will immediately notify the Trust and the Adviser of
the occurrence of any event which would disqualify the Sub-Adviser from serving
as an investment adviser of an investment company pursuant to Section 9(a) of
the Act or otherwise.
K. Performance of the Sub-Adviser's obligations under this Agreement
will not violate any law, regulation, agreement or the Trust's registration
statement, as amended.
19. Amendment. This Agreement may be amended at any time, but only by
written agreement between the Sub-Adviser, the Adviser and the Trust, which
amendment, other than amendments to Schedule A, is subject to the approval of
the Board of Trustees and the shareholders of the Fund in the manner required by
the Act and the rules thereunder, subject to any applicable exemptive order of
the Securities and Exchange Commission modifying the provisions of the Act with
respect to approval of amendments to this Agreement.
20. Effective Date; Term. This Agreement shall become effective on the
date of its execution and shall remain in full force and effect for two (2)
years from the date hereof, and from year to year thereafter but only so long as
such continuance is specifically approved at least annually by the vote of a
majority of the Trustees who are not interested persons of the Trust, the
Adviser or the Sub-Adviser, cast in person at a meeting called for the purpose
of voting on such approval, and by a vote of the Board of Trustees or of a
majority of the outstanding voting
- 17 -
<PAGE>
securities of the Fund. The aforesaid requirement that this Agreement may be
continued "annually" shall be construed in a manner consistent with the Act and
the rules and regulations thereunder.
21. Termination. This Agreement may be terminated by either party
hereto, without the payment of any penalty, immediately upon written notice to
the other in the event of a breach of any provision thereof by the party so
notified, or otherwise upon sixty (60) days' written notice to the other.
22. Shareholder Liability. The Sub-Adviser is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust of the Trust and agrees that obligations assumed by the
Trust pursuant to this Agreement shall be limited in all cases to the Fund and
its assets. The Sub-Adviser agrees that it shall not seek satisfaction of any
such obligations from the shareholders or any individual shareholder of the
Fund, nor from the Trustees or any individual Trustee of the Trust.
23. Definitions. As used in paragraphs 16 and 20 of this Agreement, the
terms "assignment," interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the Act and
the rules and regulations thereunder.
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<PAGE>
24. Applicable Law. To the extent that state law is not preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of Ohio.
C.H. DEAN & ASSOCIATES, INC. DEAN FAMILY OF FUNDS
By:_____________________ By:______________________
Title: President Title: President
Date: __________________ Date: ___________________
ACCEPTANCE
The foregoing Agreement is hereby accepted.
NEWTON CAPITAL MANAGEMENT
LIMITED
By:___________________________
Title:________________________
Date:_________, 1997
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<PAGE>
SCHEDULE A
RECORDS TO BE MAINTAINED BY THE SUB-ADVISER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all
other portfolio purchases or sales, given by the Sub-Adviser on behalf
of the Fund for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any
modification or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on
behalf of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of portfolio securities to named brokers or dealers was effected,
and the division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers
or dealers.
(ii) The supplying of services or benefits by
brokers or dealers to:
(a) The Trust;
(b) the Adviser;
(c) the Sub-Adviser;
(d) any other portfolio adviser of
the Trust; and
(e) any person affiliated with the
foregoing persons.
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<PAGE>
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as
such.
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is
made by a committee or group, a record shall be kept of the names of
its members who participate in the authorization. There shall be
retained as part of this record: any memorandum, recommendation or
instruction supporting or authorizing the purchase or sale of portfolio
securities and such other information as is appropriate to support the
authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rules
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Sub-Adviser's transactions with respect to the Fund.
*Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage firms
(including their recommendation; i.e., buy, sell, hold) or any internal reports
or portfolio adviser reviews.
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<PAGE>
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 Post-Effective Amendment
No. 2 to the Registration Statement on Form N-1A (No. 333-18653).
