Registration Nos. 811-7987
333-18653
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 5
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and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
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Amendment No. 8
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(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:
/X/ immediately upon filing pursuant to Rule 485(b)
/ / on (date) pursuant to Rule 485(b)
/ / 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.
<PAGE>
DEAN FAMILY OF FUNDS
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
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PART A
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Item No. Registration Statement Caption Caption in Prospectus
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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
and Public Offering Price;
Application
8. Redemption or Repurchase How to Redeem Shares;
Shareholder Services;
Exchange Privilege
9. Pending Legal Proceedings Inapplicable
PART B
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Caption in Statement
of Additional
Item No. Registration Statement Caption Information
- -------- ------------------------------ --------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
(i)
<PAGE>
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 Annual Report
PART C
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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)
<PAGE>
PROSPECTUS
July 15, 1998
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 Value 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 instruments.
The INTERNATIONAL VALUE 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).
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 1972. The firm manages approximately $4.2 billion for
clients worldwide. Currently, Dean Investment Associates has 110 employees which
include 9 Chartered Financial Analysts (CFA), 8 Certified Public Accountants
(CPA), 3 Certified Financial Planners (CFP) and 3 PhDs. Dean Investment
Associates is Dayton, Ohio's largest independent investment manager.
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. SHARES ARE
SUBJECT TO INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED.
This Prospectus sets forth concisely the information about the Funds that
potential investors should know before investing. Please retain this Prospectus
for future reference. A Statement of Additional Information dated July 15, 1998
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 the number listed below.
<PAGE>
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For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free) . . . . . . . . . . . . . . . 888-899-8343
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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.
<PAGE>
EXPENSE INFORMATION
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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 $500,000 or more and
purchases by qualified retirement plans with greater than 100 participants
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. See
"How to Redeem Shares".
Annual Fund Operating Expenses (as a percentage of average net assets)
- ------------------------------
<TABLE>
<CAPTION>
Total Fund
Operating
Management Fees Other Expenses
(After Waivers)(A) 12b-1 Fees(B) Expenses (After Waivers)(C)
------------------ ------------- -------- ------------------
<S> <C> <C> <C> <C>
Large Cap Value Fund
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Class A Shares .12% .00% 1.72% 1.84%
Class C Shares .12% .00% 2.47% 2.59%
Small Cap Value Fund
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Class A Shares .86% .04% .94% 1.84%
Class C Shares .86% .00% 1.73% 2.59%
Balanced Fund
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Class A Shares .24% .00% 1.60% 1.84%
Class C Shares .24% .00% 2.35% 2.59%
International Value Fund
- ------------------------
Class A Shares .75% .25% 1.10% 2.10%
Class C Shares .75% 1.00% 1.10% 2.85%
</TABLE>
(A) Absent waivers, management fees would be 1.00% for the Large Cap Value Fund,
the Small Cap Value Fund and the Balanced Fund and 1.25% for the
International Value Fund.
(B) Class A shares may incur 12b-1 fees in an amount up to .25% of average net
assets and Class C shares may incur 12b-1 fees in an amount up to 1.00% of
average net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the National
Association of Securities Dealers.
(C) Absent waivers of management fees and/or expense reimbursements by Dean
Investment Associates, total Fund operating expenses would be 2.72% for
Class A shares and 52.73% for Class C shares of the Large Cap Value Fund,
1.98% for Class A shares and 6.41% for Class C shares of the Small Cap Value
Fund, 2.60% for Class A shares and 7.39% for Class C shares of the Balanced
Fund, and 2.60% for Class A shares and 3.35% for Class C shares of the
International Value Fund.
- 3 -
<PAGE>
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 amounts
incurred during the most recent fiscal year, except for the percentages
pertaining to the International Value Fund which 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
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You would pay the following
expenses on a $1,000
investment, assuming (1) Large Cap Value Fund
5% annual return and (2) Small Cap Value Fund International
redemption at the end of Balanced Fund Value Fund
each time period: -------------------- ------------------
Class A Class C Class A Class C
Shares Shares Shares Shares
------ ------ ------ ------
1 Year $ 71 $ 36 $ 74 $ 39
3 Years 110 81 119 88
5 Years 152 137
10 Years 268 292
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<PAGE>
FINANCIAL HIGHLIGHTS
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The following information, which has been audited by Ernst & Young, LLP, is an
integral part of the Funds' financial statements and should be read in
conjunction with the financial statements. The financial statements as of March
31, 1998 appear in the Statement of Additional Information of the Funds, which
can be obtained at no charge by calling Countrywide Fund Services, Inc.
(Nationwide call toll-free 888-899-8343) or by writing to the Funds at the
address on the front of this Prospectus.
Per Share Data for a Share Outstanding Throughout the Period
From Initial Public Offering of Shares(A) through March 31, 1998
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<TABLE>
<CAPTION>
Large Cap Value Fund Small Cap Value Fund
---------------------------- ----------------------------
Class A Class C Class A Class C
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.00 $ 10.76 $ 10.00 $ 10.95
----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) 0.03 (0.01) 0.03 (0.02)
Net realized and unrealized gains
on investments 2.36 1.56 3.30 2.33
----------- ----------- ----------- -----------
Total from investment operations 2.39 1.55 3.33 2.31
----------- ----------- ----------- -----------
Less distributions:
From net investment income (0.03) (0.00) (0.02) (0.00)
From net realized gains (0.15) (0.15) (0.47) (0.47)
----------- ----------- ----------- -----------
Total distributions (0.18) (0.15) (0.49) (0.47)
----------- ----------- ----------- -----------
Net asset value at end of period $ 12.21 $ 12.16 $ 12.84 $ 12.79
=========== =========== =========== ===========
Total return(B) 24.11% 14.63% 33.86% 21.63%
=========== =========== =========== ===========
Net assets at end of period $ 7,669,807 $ 136,237 $19,437,554 $ 1,392,036
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before waiver of fees by Adviser 2.72% 52.73% 1.98% 6.41%
After waiver of fees by Adviser 1.84% 2.59% 1.84% 2.59%
Ratio of net investment income (loss)
to average net assets(C) 0.30% (0.55%) 0.35% (0.42%)
Portfolio turnover rate(C) 54% 54% 62% 62%
Average commission rate per share $ 0.0600 $ 0.0600 $ 0.0589 $ 0.0589
(A) Initial public offering date 5-28-97 8-19-97 5-28-97 8-1-97
</TABLE>
(B) Total returns shown exclude the effect of applicable sales loads and are not
annualized.
(C) Annualized.
<PAGE>
Per Share Data for a Share Outstanding Throughout the Period
From Initial Public Offering of Shares(A) through March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund International Value Fund
---------------------------- ----------------------------
Class A Class C Class A Class C
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.00 $ 10.71 $ 10.00 $ 9.89
----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) 0.17 0.07 (0.05) (0.04)
Net realized and unrealized gains
on investments and foreign currency 1.62 0.92 1.81 1.87
----------- ----------- ----------- -----------
Total from investment operations 1.79 0.99 1.76 1.83
----------- ----------- ----------- -----------
Less distributions:
From net investment income (0.16) (0.10) -- --
From net realized gains (0.08) (0.08) -- --
----------- ----------- ----------- -----------
Total distributions (0.24) (0.18) -- --
----------- ----------- ----------- -----------
Net asset value at end of period $ 11.55 $ 11.52 $ 11.76 $ 11.72
=========== =========== =========== ===========
Total return(B) 18.07% 9.37% 17.60% 18.50%
=========== =========== =========== ===========
Net assets at end of period $ 7,262,670 $ 1,083,890 $ 1,295,896 $ 87,249
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before waiver of fees by Adviser 2.60% 7.39% 16.66% 58.89%
After waiver of fees by Adviser 1.84% 2.59% 2.04% 2.82%
Ratio of net investment income (loss)
to average net assets(C) 1.85% 0.99% (1.30%) (1.94%)
Portfolio turnover rate(C) 64% 64% 109% 109%
Average commission rate per share $ 0.0600 $ 0.0600 $ 0.0368 $ 0.0368
(A) Initial public offering date 5-28-97 8-1-97 10-13-97 11-6-97
</TABLE>
(B) Total returns shown exclude the effect of applicable sales loads and are not
annualized.
(C) Annualized.
- 5 -
<PAGE>
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.
Known primarily for its balanced approach to managing money, Dean
Investment Associates strives to generate superior risk-adjusted returns over
full market cycles. Dean Investment Associates also has 25 years experience in
managing equities via the "value" approach. The "value" approach is a
disciplined, prudent approach to equity management that attempts to provide
superior capital appreciation on a risk-adjusted basis by investing in equities
which are out-of-favor, neglected or misunderstood. The goal is to choose those
equities that appear to have the greatest margin of safety.
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
- 6 -
<PAGE>
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 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.
- 7 -
<PAGE>
The Trust has approved the use of certain options and futures strategies
for the Fund, including the purchase and sale of options on equity securities,
stock indices and futures contracts and the purchase and sale of stock index
futures contracts. For a discussion of these transactions, see "Additional
Investment Information."
When Dean Investment Associates believes substantial price risks exist for
common stocks and securities convertible into common stocks because of
uncertainties in the investment outlook or when in the judgment of Dean
Investment Associates it is otherwise warranted in selling to manage the Fund's
portfolio, the Fund may temporarily hold for defensive purposes all or a portion
of its assets in short-term obligations such as bank debt instruments
(certificates of deposit, bankers' acceptances and time deposits), commercial
paper, U.S. Government obligations having a maturity of less than one year,
shares of money market investment companies or repurchase agreements
collateralized by U.S. Government obligations. The Fund is also permitted to
lend its securities and to borrow money and pledge its assets in 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 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
- 8 -
<PAGE>
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
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.
- 9 -
<PAGE>
The Trust has approved the use of certain options and futures strategies
for the Fund, including the purchase and sale of options on equity securities,
stock indices and futures contracts and the purchase and sale of stock index
futures contracts. For a discussion of these transactions, see "Additional
Investment Information".
When Dean Investment Associates believes substantial price risks exist for
common stocks and securities convertible into common stocks because of
uncertainties in the investment outlook or when in the judgment of Dean
Investment Associates it is otherwise warranted in selling to manage the Fund's
portfolio, the Fund may temporarily hold for defensive purposes all or a portion
of its assets in short-term obligations such as bank debt instruments
(certificates of deposit, bankers' acceptances and time deposits), commercial
paper, U.S. Government obligations having a maturity of less than one year,
shares of money market investment companies or repurchase agreements
collateralized by U.S. Government obligations. The Fund is also permitted to
lend its securities and to borrow money and pledge its assets in 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 instruments. 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 instruments, 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 instruments, 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 instruments.
- 10 -
<PAGE>
The Fund attempts to achieve growth of capital through its investments in
equity securities. The equity securities that the Fund may purchase consist of
common stocks or securities having characteristics of common stocks (such as
convertible preferred stocks, convertible debt securities or warrants) of
domestic issuers. The equity selection approach of the Fund can best be
described in the vernacular of the investment business as a "value" orientation.
That is, great emphasis is placed on purchasing stocks that have lower than
market multiples of price to earnings, book value, cash flow and revenues and/or
high dividend yield.
The Fund attempts to earn current income and at the same time achieve
moderate growth of capital and/or reduce fluctuation in the net asset value of
its shares by investing a portion of its assets in fixed-income securities. The
fixed-income securities that the Fund may purchase include U.S. Government
obligations and corporate debt securities (such as bonds and 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 instruments. The money market instruments that the Fund may purchase
consist of short-
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<PAGE>
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 instruments 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 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 instruments 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,
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<PAGE>
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."
INTERNATIONAL VALUE FUND
------------------------
The International Value Fund seeks to provide long-term capital growth by
investing primarily in the common stocks of foreign companies. Generally, the
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 Value Fund.
Individual stock selection decisions are based upon Newton Capital's assessment
of value based on fundamental research. Fundamental research includes a review
of capitalization and valuation measures. Stocks are chosen that Newton Capital
believes sell at a discount to the company's true economic value. The stock
selection process includes a review of enterprise value to sales, price/earnings
relative to the local market, dividend coverage, dividend yield relative to the
local market, and price to free cash flow. Preference is given to companies with
strong balance sheets and histories of consistent profitability. This strategic
framework guides the managers towards the sectors and company characteristics
that they believe will lead to future out-performance of the Europe, Australia
and Far East Index compiled by Morgan Stanley Capital International.
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
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<PAGE>
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.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in the common stocks of foreign companies and securities convertible
into the common stocks of foreign 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 (Aaa, Aa, A or Baa) or S&P (AAA, AA, A or
BBB) or, if unrated, are determined by Newton Capital 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. Newton Capital 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, 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 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.
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<PAGE>
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 10% 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 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
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<PAGE>
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 or portfolio securities
which can be liquidated promptly to satisfy any obligation of the Fund to
purchase the underlying securities. The Funds may also write straddles
(combinations of puts and calls on the same underlying security). A Fund will
receive a premium from writing a put or call option, which increases the Fund's
return in the event the option expires unexercised or is closed out at a profit.
The amount of the premium will reflect, among other things, the relationship of
the market price of the underlying security to the exercise price of the option
and the remaining term of the option. By writing a call option, the Fund limits
its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, the Fund assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
value, resulting in a potential capital loss unless the security subsequently
appreciates in value.
Each Fund may purchase put options to hedge against a decline in the value
of its portfolio. By using put options in this manner, a Fund will reduce any
profit it might otherwise have realized in the underlying security by the amount
of the premium paid for the put option and by transaction costs. A Fund
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<PAGE>
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 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.
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
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
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<PAGE>
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.
REAL ESTATE SECURITIES. The Funds may not invest in real estate (including
limited partnership interests), but may invest in readily marketable securities
secured by real estate or interests therein or issued by companies that invest
in real estate or interests therein. The Funds may also invest in readily
marketable interests in real estate investment trusts ("REITs"). REITs are
generally publicly traded on the national stock exchanges and in the
over-the-counter market and have varying degrees of liquidity.
FORWARD CURRENCY EXCHANGE CONTRACTS. The International Value 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
Value 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 from changes in foreign currency exchange rates. Such
contracts will also have the effect of limiting any gains to the International
Value 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
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<PAGE>
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. 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 investment adviser, most creditworthy primary U.S. Government
securities dealers. Each Fund will only 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 Fund's
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
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<PAGE>
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.
WHEN-ISSUED SECURITIES. 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
purchase securities on a when-issued basis or to-be-announced basis only if
delivery and payment for the securities takes place within 120 days after the
date of the transaction.
Purchases of securities on a when-issued or to-be-announced basis are
subject to market fluctuations and their current value is determined in the same
manner as other portfolio securities. When effecting such purchases for a Fund,
a segregated account of cash or liquid securities of the Fund in an amount
sufficient to make payment for the portfolio securities to be purchased will be
maintained with the Fund's Custodian at the trade date and valued daily at
market for the purpose of determining the adequacy of the securities in the
account. If the market value of segregated securities declines, additional cash
or securities will be segregated on a daily basis so that the market value of
the Fund's segregated assets will equal the amount of the Fund's commitments to
purchase when-issued obligations and securities on a to-be-announced basis. A
Fund's purchase of securities on a when-issued or to-be-announced basis may
increase its overall investment exposure and involves a risk of loss if the
value of
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<PAGE>
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. It is the present intention of the Trust, which may be changed without
shareholder approval, that loans of portfolio securities will not be made with
respect to a Fund if as a result the aggregate of all outstanding loans exceeds
one-third of the value of the Fund's total assets. Securities lending will
afford a Fund the opportunity to earn additional income because the Fund will
continue to be entitled to the interest payable on the loaned securities and
also will either receive as income all or a portion of the interest on the
investment of any cash loan collateral or, in the case of collateral other than
cash, a fee negotiated with the borrower. Such loans will be terminable at any
time. Loans of securities involve risks of delay in receiving additional
collateral or in recovering the securities lent or even loss of rights in the
collateral in the event of the insolvency of the borrower of the securities. A
Fund will have the right to regain record ownership of loaned securities in
order to exercise beneficial rights. A Fund may pay reasonable fees in
connection with arranging such loans.
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<PAGE>
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 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
- ----------------------
The 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. Investors 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"). Investors may
also make an initial investment directly by sending a check and a completed
account application to Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio 45201-5354 (the "Transfer Agent"). Checks should be made
payable to the applicable Fund. An account application is included in this
Prospectus. Additional shares may be purchased through the Open Account Program
described below.
The Trust mails investors a confirmation 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 Underwriter, the Transfer Agent and
certain of their affiliates, excluding such entities from certain liabilities
(including, among others, losses resulting from unauthorized shareholder
transactions) relating to the various services (for example, telephone
exchanges) made available to investors.
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<PAGE>
Should an order to purchase shares be canceled because the check does not
clear, the investor 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, the investor may purchase and add shares to
his or her account at any time either through a 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, investors may also purchase shares of the
Funds by bank wire. Please telephone the Transfer Agent (Nationwide call
toll-free 888-899-8343) for instructions. The bank may impose a charge for
sending a 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 the account and
the account number to permit proper crediting to the account. While there is no
minimum amount required for subsequent investments, the Trust reserves the right
to impose such a requirement. All purchases under the Open Account Program are
made at the public offering price next determined after receipt of a purchase
order by the Trust. If a broker-dealer received concessions for selling shares
of the Funds to a current shareholder, such broker-dealer will receive the
concessions described above with respect to additional investments by the
shareholder.
SALES LOAD ALTERNATIVES
-----------------------
Each Fund offers two classes of shares which may be purchased at the
election of the purchaser. The two classes of shares each represent interests in
the same portfolio of investments of a Fund, have the same rights and are
identical in all material respects except that (i) Class C shares bear the
expenses of higher distribution fees; (ii) certain other class specific expenses
will be borne solely by the class to which such
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<PAGE>
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 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.
- 24 -
<PAGE>
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 by 5:00 p.m., Eastern time, that day are
confirmed at the public offering price determined as of the close of the regular
session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Transfer Agent by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
the Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's
public offering price. Direct investments received by the Transfer Agent after
4:00 p.m., Eastern time, and orders received from dealers after 5:00 p.m.,
Eastern time, are confirmed at the public offering price next determined on the
following business day.
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<PAGE>
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.
Sales Load as % of:
------------------- Dealer
Public Net Reallowance
Offering Amount as % of Public
Amount of Investment Price Invested Offering Price
- -------------------- ------- -------- ---------------
Less than $25,000 5.25% 5.54% 4.75%
$25,000 but less than $50,000 4.50 4.71 4.00
$50,000 but less than $100,000 3.75 3.90 3.25
$100,000 but less than $250,000 3.00 3.09 2.50
$250,000 but less than $500,000 2.25 2.30 2.00
$500,000 or more None* None*
* There is no front-end sales load on purchases of $500,000 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 purchases of Class A shares of the Funds by qualified retirement plans
with greater than 100 participants, a dealer's commission of 1.00% of such
purchases may be paid by the Underwriter to participating unaffiliated dealers
through whom such purchases are effected. For initial purchases of Class A
shares of the Funds of $500,000 or more and subsequent purchases further
increasing the size of the account, a dealer's commission of 1.00% of such
purchases from $500,000 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 and shares of any
other fund which has made appropriate arrangements with the Underwriter may be
aggregated. Dealers should contact the Underwriter concerning the applicability
and calculation of the dealer's commission in the case of combined purchases. An
exchange from other funds will not qualify for payment of the dealer's
commission, unless such exchange is from a fund with assets as to which a
dealer's
- 26 -
<PAGE>
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, and by qualified retirement plans with greater than
100 participants whose broker of record is not affiliated with the Adviser or
the Underwriter and has made appropriate arrangements with the Funds.
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<PAGE>
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 $500,000 or more or by qualified retirement
plans with greater than 100 participants, 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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<PAGE>
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. The
contingent deferred sales load is also waived for any partial or complete
redemption of shares purchased by qualified retirement plans whose broker of
record has made appropriate arrangements with the Funds.
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; or a trustee or other fiduciary purchasing shares for a single
fiduciary account although more than one beneficiary is involved; or 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. The
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<PAGE>
contingent deferred sales load is also waived for any partial or complete
redemption of shares purchased by qualified retirement plans where the broker of
record and the Underwriter have agreed to such waiver.
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 888-899-8343) for
additional information about the shareholder services described below.
Automatic Withdrawal Plan
-------------------------
If the shares in an account have a value of at least $5,000, the
shareholder 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, including Roth IRAs and Education IRAs
-- 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.
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<PAGE>
Automatic Investment Plan
-------------------------
Shareholders may make automatic monthly investments in a Fund from their
bank, savings and loan or other depository institution account on the 15th
and/or last business day of the month. The minimum initial and subsequent
investments must be $50 under the plan. The Transfer Agent pays the costs
associated with these transfers, but reserves the right, upon thirty days'
written notice, to make reasonable charges for this service. A shareholder's
depository institution may impose its own charge for debiting an account which
would reduce the return from an investment in the Funds.
Reinvestment Privilege
----------------------
If a shareholder has redeemed shares of a Fund, he or she 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
- --------------------
Shareholders 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 the
account number. The request must be signed exactly as the shareholder's name
appears on the Trust's account records. If the shares to be redeemed have a
value of $25,000 or more, the shareholder's 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.
Shareholders 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. Shareholders will receive the net asset
value per share next determined after receipt by the Transfer Agent of the wire
redemption request. It is the responsibility of broker-dealers to properly
transmit wire redemption orders.
If the instructions request a redemption by wire, the shareholder will be
charged a processing fee. The Trust reserves the right, upon thirty days'
written notice, to change the processing fee. All charges will be deducted from
the shareholder's account by redemption of shares in the account. The
shareholder's 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.
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<PAGE>
Redemption requests may direct that the proceeds be deposited directly in
the shareholder's account with a commercial bank or other depository institution
via an Automated Clearing House (ACH) transaction. There is currently no charge
for ACH transactions. Contact the Transfer Agent for more information about ACH
transactions.
A contingent deferred sales load may apply to a redemption of Class C
shares or to a redemption of certain Class A shares purchased at net asset
value. See "How to Purchase Shares".
Shares are redeemed at their net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described above, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, shareholders 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 shareholders to close an account if at any time the value of
the shares in the account 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 of the Trust's
intention to close an account, the shareholder will be given thirty days to
increase the value of the account to the minimum amount.
- 33 -
<PAGE>
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Funds may be exchanged for each other or for shares of other
funds which have made appropriate arrangements with the Underwriter.
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 or for shares
of a money market fund which has made the appropriate arrangements with the
Underwriter. Class A shares of a Fund which are not subject to a contingent
deferred sales load may also be exchanged for Class A shares of any other fund
which has made the appropriate arrangements with the Underwriter (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. Class C shares of a Fund, as well as Class A shares of a
Fund subject to a contingent deferred sales load, may also be exchanged, on the
basis of relative net asset value per share, for shares subject to a contingent
deferred sales load of any other fund which has made appropriate arrangements
with the Underwriter. A fund will "tack" the period for which the shares being
exchanged were held onto the holding period of the acquired shares for purposes
of determining if a contingent deferred sales load is applicable in the event
that the acquired shares are redeemed following the exchange. The period of time
that shares are held in a money market fund will not count toward the holding
period for determining whether a contingent deferred sales load is applicable.
Class C shares of a Fund, purchased by a qualified retirement plan whose broker
of record is not affiliated with the Adviser or the Underwriter and which has
made appropriate arrangements with the Fund, may be exchanged for Class A shares
of a Fund on the earlier of the date that the value of such plan's assets first
equals or exceeds $5 million or that is ten years after the date of the initial
purchase of the shares to be exchanged.
Shareholders may request an exchange by sending a written request to the
Transfer Agent. The request must be signed exactly as the shareholder's name
appears on the Trust's account records. Exchanges may also be requested by
telephone. If a
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<PAGE>
shareholder is unable to execute a transaction by telephone (for example during
times of unusual market activity) the shareholder should consider requesting the
exchange by mail or by visiting the Trust's offices at 2480 Kettering Tower,
Dayton, Ohio 45423. An exchange will be effected at the next determined net
asset value after receipt of a request by the Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in the
shareholder's 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 the shareholder to
recognize a capital gain or loss. Before making an exchange, contact the
Transfer Agent to obtain more information about exchanges.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
The Large Cap Value Fund, the Balanced Fund and the International Value
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.
The choice of option should be indicated on the 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.
- 35 -
<PAGE>
If the Income Option or the Cash Option is selected and the U.S. Postal
Service cannot deliver the checks or if the checks remain uncashed for six
months, dividends may be reinvested in the account at the then-current net asset
value and the account will be converted to the Share Option. No interest will
accrue on amounts represented by uncashed distribution checks.
An investor who has received in cash any dividend or capital gains
distribution from any Fund may return the distribution within thirty days of the
distribution date to the Transfer Agent for reinvestment at the net asset value
next determined after its return. The investor or his dealer must notify the
Transfer Agent that a distribution is being reinvested pursuant to this
provision.
TAXES
- -----
Each Fund has qualified and intends to continue 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 a Fund's net
income, a portion of the income may be classified as a return of capital (which
will lower a shareholder's tax basis). If a 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 a shareholder's taxable income.
However, a shareholder may be able to claim an offsetting tax credit or itemized
deduction on his return for his portion of foreign taxes paid by the Fund.
Distributions of net capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) by a Fund to its shareholders
are taxable to the recipient shareholders as capital gains, without regard to
the length of time a shareholder has held Fund shares. The maximum capital gains
rate for individuals is 28% with respect to assets held for more than 12 months,
but not more than 18 months, and 20% with respect to assets held more than 18
months. The maximum capital gains rate for corporate shareholders is the same as
the maximum tax rate for ordinary income. Redemptions of shares of the Funds are
taxable events on which a shareholder may realize a gain or loss.
- 36 -
<PAGE>
The Fund's use of hedging techniques such as foreign currency forwards,
futures and options, 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 Funds as well as affect whether
dividends paid by the Funds 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 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 45423, to manage the Funds' investments. Dean Investment Associates is an
independent investment counsel firm which has been advising individual,
institutional and corporate clients since 1972. Dean Investment Associates
currently provides investment advisory services to three registered investment
companies which serve as underlying vehicles for variable annuity insurance
products. The firm manages approximately $4.2 billion for clients worldwide.
Currently, Dean Investment Associates has 110 employees which include 9
Chartered Financial Analysts (CFA), 8 Certified Public Accountants (CPA), 3
Certified Financial Planners (CFP) and 3 PhDs. Dean Investment Associates is
Dayton, Ohio's largest independent investment manager. 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
Value Fund pays Dean
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<PAGE>
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 of the date of this Prospectus,
Chauncey H. Dean may be deemed to control the Trust by virtue of his ownership
of more than 25% of each Fund's shares.
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.
Arvind K. Sachdeva, James C. Hunter and David S. Oda 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.
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 Value 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 average value of the International
Value 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 Value Fund. Mr. Butler graduated from Cambridge University in 1986
with a degree in Natural Sciences and joined Newton Capital in 1987. Mr. Butler
worked as an International Equities analyst for five years before becoming
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<PAGE>
a Portfolio Manager in 1992. In 1993, Mr. Butler was appointed as a director of
Newton Capital 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.
2480 Securities LLC, 2480 Kettering Tower, Dayton, Ohio 45423 (the
"Underwriter"), an affiliate of Dean Investment Associates, serves as principal
underwriter for the Funds and, as such, is the exclusive agent for the
distribution of shares of the Funds.
The Trust retains Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio 45201-5354 (the "Transfer Agent"), to serve as the Funds'
transfer agent, dividend paying agent and shareholder servicing 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
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<PAGE>
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.
DRPS, Inc., an affiliate of Dean Investment Associates and the Underwriter,
provides certain sub-accounting and recordkeeping services to the Funds. In
return for these services, DRPS, Inc. receives a fee at the annual rate of .10%
of the average balance of accounts in each Fund for which DRPS, Inc. provides
these services.
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 Value 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 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.
Management has reviewed the impact of the year 2000 issue on the Funds. The
Funds rely on several external service providers for administrative, accounting,
pricing and custodial services. Our external service providers have completed an
analysis of their own year 2000 issues, and have reported to us, or are in the
process of completing the necessary analysis and presenting a report.
Management expects the Funds to be able to operate satisfactorily on and
after January 1, 2000. As of the date of this Prospectus, each service provider
has reported to Management that it anticipates that its systems will be year
2000 compliant by January 1, 2000. We will be closely monitoring our external
service providers. While there can be no assurance all our current external
agents will be ready for year 2000, we fully expect to have the Funds prepared
to operate in the year 2000 environment.
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
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<PAGE>
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 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 .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
- 41 -
<PAGE>
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 after the
date the Class C Plan terminates. The Underwriter may make payments to dealers
and other persons in an amount up to .75% per annum of the average value of
Class C shares owned by their clients, in addition to the .25% account
maintenance fee described above.
GENERAL. Pursuant to the Plans, the Funds may also make payments to banks
or other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Funds or their shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Funds may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Funds, no preference will be shown for
such securities.
The National Association of Securities Dealers, in its Rules of Fair
Practice, places certain limitations on asset-based sales charges of mutual
funds. These Rules require fund-level accounting in which all sales charges -
front-end load, 12b-1 fees or contingent deferred load - terminate when a
percentage of gross sales is reached.
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<PAGE>
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 a 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 such 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 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.
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<PAGE>
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.
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
- 44 -
<PAGE>
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 the investment adviser's view of current or past market
conditions or historical trends. Further information about the Funds'
performance is contained in the Trust's annual report which can be obtained by
shareholders at no charge by calling the Transfer Agent (Nationwide call
toll-free 888-899-8343) or by writing to the Funds at the address on the front
of this prospectus.
PRIOR PERFORMANCE OF THE ADVISER. Since 1972, the Adviser has managed separate
accounts. Since 1985, the Adviser has managed separate accounts with investment
objectives, policies and strategies substantially similar to those employed by
the Adviser in managing the Balanced Fund. The Adviser believes that it has
produced outstanding, risk-adjusted investment results over time for these
separate accounts. The investment performance illustrated below, represents, for
one, three, five and ten year periods ended March 31, 1998, the composite
performance of all of the Adviser's separate accounts which were managed by the
Adviser with investment objectives, policies and strategies substantially
similar to those employed by the Adviser in managing the Balanced Fund (the
"Separate Accounts"). As a point of comparison, the charts below also reflect
the average historical performance of balanced mutual funds as reported by
Morningstar Mutual Fund Values.
While the Adviser employs for the Balanced Fund investment objectives,
policies and strategies that are substantially similar to those that were
employed by the Adviser in managing the Separate Accounts, the Adviser, in
managing the Balanced Fund, may be subject to certain restrictions imposed by
the 1940 Act and the Internal Revenue Code on its investment activities to
which, as investment adviser to the Separate Accounts, it was not previously
subject. Examples include limits on the percentage of assets invested in
securities of issuers in a single industry and requirements on distributing
income to shareholders. Operating expenses are incurred by the Balanced Fund
which were not incurred by the Separate Accounts. Excluding the impact of
applicable sales loads, the total return of the Balanced Fund since inception
through March 31, 1998 is as follows:
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<PAGE>
Class A Shares Class C Shares
(Inception May 28, 1997) (Inception August 1, 1997)
------------------------ --------------------------
18.07% 9.37%
The performance data below represents the prior composite performance of
the Separate Accounts and not the prior performance of the Balanced Fund and
should not be relied upon by investors as an indication of future performance of
the Balanced Fund. The performance of the Separate Accounts has been computed in
accordance with the standards formulated by the Association for Investment
Management and Research ("AIMR") since January 1, 1993. In accordance with those
standards, the gross performance of each Separate Account is computed monthly
using the Modified Dietz Method. The value at the start of the month plus
time-weighted deposits minus time-weighted withdrawals provides the average
assets available during the month. Funds invested are computed by adding the
deposits to the value at the start of the month and subtracting withdrawals.
Appreciation is the difference between the end of period value and the funds
invested. Each Separate Account's performance is the appreciation divided by the
average assets available during the month. To develop the composite, the total
beginning value of all discretionary Separate Accounts is first determined. Each
Separate Account's performance is then weighted by its percentage of the total
beginning value. The composite is the total of all these weighted values. The
net composite is computed similarly except that the Separate Account's
management fee is subtracted from the appreciation of the Separate Account as if
it had been removed on the first of the month.
Prior to January 1, 1993, the methodology used to compute the performance
of the Separate Accounts was in substantial conformity with AIMR standards;
however, the Separate Accounts included in the composite were weighted based on
end-of-period asset values rather than start-of-period asset values, as required
by AIMR. In order to comply with AIMR, start-of-period values were used in
performance calculations beginning January 1, 1993, as discussed above. All
performance data presented is net of expenses.
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<PAGE>
AVERAGE ANNUAL RETURNS FOR 1, 3, 5 AND 10 YEAR PERIODS ENDED MARCH 31, 1998
Average Performance of
Balanced Mutual Funds as
Separate reported by Morningstar
Accounts Mutual Fund Values
-------- ------------------------
1 Year 27.45% 26.96%
3 Years 20.31% 19.00%
5 Years 13.81% 13.28%
10 Years 13.92% 12.57%
The average performance of balanced mutual funds as presented represents an
average of the annual returns of 405 balanced mutual funds tracked by
Morningstar Mutual Fund Values. Mutual funds are subject to certain restrictions
on their investment activities to which the Separate Accounts were not subject.
Examples include limits on the percentage of assets invested in securities of
issuers in a single industry and requirements on distributing income to
shareholders. Operating expenses are incurred by the mutual funds which were not
incurred by the Separate Accounts.
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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
TABLE OF CONTENTS PAGE
- ----------------- ----
Expense Information. . . . . . . . . . . . . . . . . . . . . 3
Financial Highlights . . . . . . . . . . . . . . . . . . . . 5
Investment Objectives, Investment Policies and Risk
Considerations . . . . . . . . . . . . . . . . . . . . . . . 6
How To Purchase Shares . . . . . . . . . . . . . . . . . . . 22
Shareholder Services . . . . . . . . . . . . . . . . . . . . 31
How To Redeem Shares . . . . . . . . . . . . . . . . . . . . 32
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . 34
Dividends and Distributions. . . . . . . . . . . . . . . . . 35
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Operation of the Funds . . . . . . . . . . . . . . . . . . . 37
Distribution Plans. . . . . . . . . . . . . . . . . . . . . 40
Calculation of Share Price and Public Offering Price . . . . 43
Performance Information. . . . . . . . . . . . . . . . . . . 44
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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
July 15, 1998
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<PAGE>
DEAN FAMILY OF FUNDS
--------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
July 15, 1998
Large Cap Value Fund
Small Cap Value Fund
Balanced Fund
International Value 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 July
15, 1998. 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 888-899-8343.
- 1 -
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
Dean Family of Funds
2480 Kettering Tower
Dayton, Ohio 45423
TABLE OF CONTENTS
THE TRUST.................................................................... 3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS................................ 4
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS...................... 15
INVESTMENT LIMITATIONS....................................................... 17
TRUSTEES AND OFFICERS........................................................ 19
THE INVESTMENT ADVISER....................................................... 22
THE SUB-ADVISER.............................................................. 24
THE UNDERWRITER.............................................................. 24
DISTRIBUTION PLANS........................................................... 25
SECURITIES TRANSACTIONS...................................................... 27
PORTFOLIO TURNOVER........................................................... 28
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE......................... 29
OTHER PURCHASE INFORMATION................................................... 29
TAXES .................................................................... 31
REDEMPTION IN KIND........................................................... 33
HISTORICAL PERFORMANCE INFORMATION........................................... 33
CUSTODIAN.................................................................... 36
AUDITORS .................................................................... 36
PRINCIPAL SECURITY HOLDERS................................................... 36
COUNTRYWIDE FUND SERVICES, INC............................................... 37
ANNUAL REPORT................................................................ 38
- 2 -
<PAGE>
THE TRUST
- ---------
The Dean Family of Funds (the "Trust") was organized as an Ohio business
trust on December 18, 1996. The Trust currently offers four series of shares to
investors: the Large Cap Value Fund, the Small Cap Value Fund, the Balanced Fund
and the International Value 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 a Fund represent an interest in
the same assets of such Fund, have the same rights and are identical in all
material respects except that (i) Class C shares bear the expenses of higher
distribution fees; (ii) certain other class specific expenses will be borne
solely by the class to which such expenses are attributable, including transfer
agent fees attributable to a specific class of shares, printing and postage
expenses related to preparing and distributing materials to current shareholders
of a specific class, registration fees incurred by a specific class of shares,
the expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and expenses relating
to a specific class of shares; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements. The Board
of Trustees may classify and reclassify the shares of a Fund into additional
classes of shares at a future date.
- 3 -
<PAGE>
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
- ---------------------------------------------
A more detailed discussion of some of the terms used and investment
policies described in the Prospectus (see "Investment Objectives and Policies")
appears below:
MAJORITY. As used in the Prospectus and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
any Fund) means the lesser of (1) 67% or more of the outstanding shares of the
Trust (or the applicable Fund) present at a meeting, if the holders of more than
50% of the outstanding shares of the Trust (or the applicable Fund) are present
or represented at such meeting or (2) more than 50% of the outstanding shares of
the Trust (or the applicable Fund).
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from one
to two hundred seventy days) unsecured promissory notes issued by corporations
in order to finance their current operations. The Funds 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 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 restrictions on illiquid investments (see "Investment Limitations")
unless, in the judgment of the investment adviser, 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: evaluation of the management of the issuer; economic evaluation of
the issuer's industry or industries and an appraisal of speculative-type risks
which may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
strength of the parent company and the relationships which exist with the
issuer; and recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to meet such
obligations. These factors are all considered in determining whether the
commercial paper is rated Prime-1 or Prime-2. Commercial paper rated A-1
(highest quality) by S&P has the following characteristics: liquidity ratios are
adequate to meet cash requirements; long-term senior debt is rated "A" or
better, although in some cases "BBB" credits may be allowed; the issuer has
access to at least two additional channels of borrowing; basic earnings and cash
flow have an upward trend with allowance made for unusual
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<PAGE>
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 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 a 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 the 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, the
investment adviser 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 the investment adviser or any affiliated
person of the Trust or an affiliated person of the investment adviser 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.
Each Fund 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, each Fund 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 liquid portfolio securities
in a segregated account in an amount sufficient to make payment for the
securities to be purchased. When a segregated account is maintained because a
Fund purchases securities on a when-issued or TBA basis, the assets deposited in
the segregated account will be valued daily at market for the purpose of
determining the adequacy of the securities in the account. If the market value
of such securities declines, additional cash or securities will be placed in the
account on a daily basis so that the market value of the account will equal the
amount of a Fund's commitments to purchase securities on a when-issued or TBA
basis. To the extent funds are in a segregated account, they will not be
available for new investment or to meet redemptions. Securities purchased on a
when-issued or TBA basis and the securities held in a Fund's portfolio are
subject to changes in market value based upon changes in the level of interest
rates (which will
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<PAGE>
generally result in all of those securities changing in value in the same way,
i.e., all those securities experiencing appreciation when interest rates decline
and depreciation when interest rates rise). Therefore, if in order to achieve
higher returns, a Fund remains substantially fully invested at the same time
that it has purchased securities on a when-issued or TBA basis, there will be a
possibility that the market value of the Fund's assets will have greater
fluctuation. The purchase of securities on a when-issued or TBA basis may
involve a risk of loss if the broker-dealer selling the securities fails to
deliver after the value of the securities has risen.
When the time comes for a Fund to make payment for securities purchased on
a when-issued or TBA basis, the Fund will do so by using then available cash
flow, by sale of the securities held in the segregated account, by sale of other
securities or, although it would not normally expect to do so, by directing the
sale of the securities purchased on a when-issued or TBA basis themselves (which
may have a market value greater or less than the Fund's payment obligation).
Although a Fund will only make commitments to purchase securities on a
when-issued or TBA basis with the intention of actually acquiring the
securities, the Fund may sell these securities before the settlement date if it
is deemed advisable by the investment adviser 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 may purchase warrants and rights, provided
that the Fund does not invest more than 5% of its net assets at the time of
purchase in warrants and rights other than those that have been acquired in
units or attached to other securities. Of such 5%, no more than 2% of a Fund's
assets at the time of purchase may be invested in warrants which are not listed
on either the New York Stock Exchange or the American Stock Exchange.
STRIPS. STRIPS are U.S. Treasury bills, notes and bonds that have been
issued without interest coupons or stripped of their unmatured interest coupons,
interest coupons that have been stripped from such U.S. Treasury securities, and
receipts or certificates representing interests in such stripped U.S. Treasury
securities and coupons. A STRIPS security pays no interest in cash to its holder
during its life although interest is accrued for federal income tax purposes.
Its value to an investor consists of the difference between its face value at
the time of maturity and the price for which it was acquired, which is generally
an amount significantly less than its face value. Investing in STRIPS may help
to preserve capital during periods of declining interest rates.
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<PAGE>
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 the Fund's investment policies and quality
and maturity standards, a Fund 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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The value of the International
Value 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
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<PAGE>
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 Value 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 Value 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-Adviser determines it to be in the
best interests of the Fund. The Custodian will segregate cash or liquid
portfolio securities 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.
Generally, the International Value 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.
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<PAGE>
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 Value 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 Value 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-Adviser. 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.
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.
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<PAGE>
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 the investment adviser 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.
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
liquid portfolio securities 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 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.
PURCHASING PUT OPTIONS. Each Fund may purchase put options. As the holder
of a put option, a Fund has the right to sell the underlying security at the
exercise price at any time during the option period. Each Fund may enter into
closing sale transactions with respect to such options, exercise them or
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<PAGE>
permit them to expire. Each Fund may purchase put options for defensive purposes
in order to protect against an anticipated decline in the value of its
securities. An example of such use of put options is provided below.
Each Fund may purchase a put option on an underlying security (a
"protective put") owned as a defensive technique in order to protect against an
anticipated decline in the value of the security. Such hedge protection is
provided only during the life of the put option when the Fund, as the holder of
the put option, is able to sell the underlying security at the put exercise
price regardless of any decline in the underlying security's market price. For
example, a put option may be purchased in order to protect unrealized
appreciation of a security where the Adviser deems it desirable to continue to
hold the security because of tax considerations. The premium paid for the put
option and any transaction costs would reduce any capital gain otherwise
available for distribution when the security is eventually sold.
Each Fund may also purchase put options at a time when it does not own the
underlying security. By purchasing put options on a security it does not own, a
Fund seeks to benefit from a decline in the market price of the underlying
security. If the put option is not sold when it has remaining value, and if the
market price of the underlying security remains equal to or greater than the
exercise price during the life of the put option, a Fund will lose its entire
investment in the put option. In order for the purchase of a put option to be
profitable, the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium and transaction
costs, unless the put option is sold in a closing sale transaction.
Each Fund will commit no more than 5% of its assets to premiums when
purchasing put options. The premium paid by a Fund when purchasing a put option
will be recorded as an asset in the Fund's statement of assets and liabilities.
This asset will be adjusted daily to the option's current market value, which
will be the latest sale price at the time at which the Fund's net asset value
per share is computed (close of trading on the New York Stock Exchange), or, in
the absence of such sale, the latest bid price. The asset will be extinguished
upon expiration of the option, the selling (writing) of an identical option in a
closing transaction, or the delivery of the underlying security upon the
exercise of the option.
PURCHASING CALL OPTIONS. Each Fund may purchase call options. As the holder
of a call option, a Fund has the right to purchase the underlying security at
the exercise price at any time during the option period. Each Fund may enter
into closing sale transactions with respect to such options, exercise them or
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<PAGE>
permit them to expire. Each Fund may purchase call options for the purpose of
increasing its current return or avoiding tax consequences which could reduce
its current return. Each Fund may also purchase call options in order to acquire
the underlying securities. Examples of such uses of call options are provided
below.
Call options may be purchased by a Fund for the purpose of acquiring the
underlying securities for its portfolio. Utilized in this fashion, the purchase
of call options enables a Fund to acquire the securities at the exercise price
of the call option plus the premium paid. At times the net cost of acquiring
securities in this manner may be less than the cost of acquiring the securities
directly. This technique may also be useful to a Fund in purchasing a large
block of securities that would be more difficult to acquire by direct market
purchases. So long as it holds such a call option rather than the underlying
security itself, a Fund is partially protected from any unexpected decline in
the market price of the underlying security and in such event could allow the
call option to expire, incurring a loss only to the extent of the premium paid
for the option.
Each Fund will commit no more than 5% of its assets to premiums when
purchasing call options. Each Fund may also purchase call options on underlying
securities it owns in order to protect unrealized gains on call options
previously written by it. A call option would be purchased for this purpose
where tax considerations make it inadvisable to realize such gains through a
closing purchase transaction. Call options may also be purchased at times to
avoid realizing losses that would result in a reduction of a Fund's current
return. For example, where a Fund has written a call option on an underlying
security having a current market value below the price at which such security
was purchased by the Fund, an increase in the market price could result in the
exercise of the call option written by the Fund and the realization of a loss on
the underlying security with the same exercise price and expiration date as the
option previously written.
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
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other things, on the investment adviser's ability to predict the direction and
volatility of price movements in the options, futures contracts and securities
markets and the investment adviser's 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.
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.
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<PAGE>
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.
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.
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<PAGE>
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 each Fund. 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 Fund 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 Fund. The Fund 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 Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. The Fund will not mortgage, pledge or hypothecate more
than one-third of its assets in connection with borrowings.
3. MARGIN PURCHASES. The Fund 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).
- 17 -
<PAGE>
4. OPTIONS. The Fund 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 Fund will not purchase, hold or deal in real estate
or real estate mortgage loans, except that the 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. The 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 Fund will not make short sales of securities, or
maintain a short position, other than short sales "against the box."
8. MINERAL LEASES. The Fund will not purchase oil, gas or other mineral
leases or exploration or development programs.
9. UNDERWRITING. The Fund 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), the
Fund may be deemed an underwriter under certain federal securities laws.
10. ILLIQUID INVESTMENTS. The 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 the Fund's net assets would be invested
in such securities.
11. CONCENTRATION. The 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 Fund will not invest in companies for the
purpose of exercising control.
- 18 -
<PAGE>
13. OTHER INVESTMENT COMPANIES. The Fund will not invest more than 10% of
its total assets in securities of other investment companies. The Fund will not
invest more than 5% of its total assets in the securities of any single
investment company.
14. SENIOR SECURITIES. The Fund will not issue or sell any senior
security. This limitation is not applicable to short-term credit obtained by the
Fund 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 Fund 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 each Fund's 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.
TRUSTEES AND OFFICERS
- ---------------------
The following is a list of the Trustees and executive officers of the Trust
and their compensation from the Trust for the fiscal year ended March 31, 1998.
Each Trustee who is an "interested person" of the Trust, as defined by the
Investment Company Act of 1940, is indicated by an asterisk.
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<PAGE>
Compensation
Name Age Position Held from the Trust
- ---- --- ------------- --------------
*Frank H. Scott 53 President/Trustee $ 0
*Chauncey H. Dean 73 Trustee 0
*Robert D. Dean 64 Trustee 0
*Victor S. Curtis 36 Trustee 0
+Frank J. Perez 54 Trustee 7,000(1)
+David H. Ponitz 67 Trustee 6,000(1)
+Gilbert P. Williamson 61 Trustee 7,000(1)
Robert G. Dorsey 41 Vice President 0
Mark J. Seger 36 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.
(1) Messrs. Perez, Ponitz and Williamson have elected to defer their
compensation by participating in the Dean Family of Funds Directors
Deferred Compensation Plan (the "Plan"). The Plan is a non-qualified
deferred compensation plan in which the Trustees will accrue their benefits
on a tax-free basis until such time as they begin receiving distributions.
The tax obligations of the Plan will be paid by C.H. Dean & Associates,
Inc. Messrs. Perez, Ponitz and Williamson will not be entitled to receive a
distribution from the Plan until they have attained the age of 72.
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 45423, 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).
CHAUNCEY H. DEAN, 2480 Kettering Tower, Dayton, Ohio 45423, is Chairman &
Chief Executive Officer and the controlling shareholder of C.H. Dean &
Associates, Inc. He is also the controlling shareholder of 2480 Securities LLC.
ROBERT D. DEAN, 2480 Kettering Tower, Dayton, Ohio 45423, is President and
Chief Investment Officer of C.H. Dean & Associates, Inc. He previously was
Professor of Economics at the University of Memphis.
- 20 -
<PAGE>
VICTOR S. CURTIS, 2480 Kettering Tower, Dayton, Ohio 45423, is a Portfolio
Manager of C.H. Dean & Associates, Inc. He previously was Assistant Vice
President of Corporate Banking for PNC Bank.
FRANK J. PEREZ, 3535 Southern Blvd., Kettering, Ohio 45429 is President and
Chief Executive Officer of Kettering Medical Center.
DAVID H. PONITZ, 444 W. Third Street, Dayton, Ohio 45402, is President of
Sinclair Community College.
GILBERT P. WILLIAMSON, 2320 Kettering Tower, Dayton, Ohio 45423, 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.
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio 45202, is President
and Treasurer of Countrywide Fund Services, Inc. (a registered transfer agent)
and CW Fund Distributors Inc. (a registered broker-dealer) 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., CW Fund Distributors, Inc. and
Countrywide Investments, Inc.) He is also Vice President of Brundage, Story and
Rose Investment Trust, Markman MultiFund Trust, The New York State Opportunity
Funds, Maplewood Investment Trust, Lake Shore Family of Funds, Wells Family of
Real Estate Funds, UC Investment Trust, Boyar Value Fund, Inc., Atalanta/Sosnoff
Investment Trust, Bowes Investment Trust and Profit Funds Investment Trust and
Assistant Vice President of Firsthand Funds, Schwartz Investment Trust, The
Tuscarora Investment Trust, Williamsburg Investment Trust, The James Advantage
Funds, The Gannett Welsh & Kotler Funds, Albemarle Investment Trust and The
Westport Funds (all of which are registered investment companies).
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio 45202, is Vice
President of Countrywide Financial Services, Inc., Countrywide Fund Services,
Inc. and CW Fund Distributors, 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, Williamsburg
Investment Trust, Albemarle Investment Trust, The New York State Opportunity
Funds, Lake Shore Family of Funds, Maplewood Investment Trust, Bowes Investment
Trust, Wells Family of Real Estate Funds, UC Investment Trust, Profit Funds
Investment Trust, and Atalanta/Sosnoff Investment Trust and Assistant Treasurer
of Firsthand Funds, The James Advantage Funds, Schwartz Investment Trust, The
Tuscarora Investment Trust, The Gannett Welsh & Kotler Funds, The Westport Funds
and Boyar Value Fund, Inc.
- 21 -
<PAGE>
TINA D. HOSKING, 312 Walnut Street, Cincinnati, Ohio 45202, is Assistant
Vice President and Associate General Counsel of Countrywide Fund Services, Inc.
and CW Fund Distributors, Inc. She is also Secretary of The New York State
Opportunity Funds and the Atalanta/Sosnoff Investment Trust and Assistant
Secretary of Boyar Value Fund, Inc., Albemarle Investment Trust, The Gannett
Welsh & Kotler Funds, The Westport Funds, Wells Family of Real Estate Funds, UC
Investment Trust, The James Advantage Funds and Lake Shore Family of Funds.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio 45202, is Secretary and
General Counsel of Countrywide Fund Services, Inc., CW Fund Distributors, 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,
Boyar Value Fund, Inc., Lake Shore Family of Funds, Maplewood Investment Trust,
Profit Funds Investment Trust and Wells Family of Real Estate Funds and
Assistant Secretary of Firsthand Funds, Schwartz Investment Trust, The New York
State Opportunity Funds, The Gannett Welsh & Kotler Funds, Bowes Investment
Trust, Albemarle Investment Trust, Atalanta/Sosnoff Investment Trust, UC
Investment Trust, The James Advantage Funds and The Westport 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.
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 Value 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.
- 22 -
<PAGE>
For the fiscal period ended March 31, 1998, the Large Cap Value Fund
accrued advisory fees of $52,709, the Small Cap Value Fund accrued advisory fees
of $127,902, the Balanced Fund accrued advisory fees of $57,457, and the
International Value Fund accrued advisory fees of $4,452; however, in order to
reduce the operating expenses of the Fund, the Adviser voluntarily waived
$46,607 of its fees and reimbursed $20,468 of Class C expenses with respect to
the Large Cap Value Fund, voluntarily waived $17,445 of its fees and reimbursed
$16,684 of Class C expenses with respect to the Small Cap Value Fund,
voluntarily waived $44,231 of its fees and reimbursed $16,291 of Class C
expenses with respect to the Balanced Fund, and voluntarily waived its entire
advisory fee and reimbursed $49,049 of common expenses and $5,663 of Class C
expenses with respect to the International Value Fund.
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Trust may be a party. The Funds may have an
obligation to indemnify the Trust's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties. The compensation and expenses of any officer,
Trustee or employee of the Trust who is an officer, director, employee or
stockholder of Dean Investment Associates are paid by Dean Investment
Associates.
By its terms, the 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 the
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 Fund's 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 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.
- 23 -
<PAGE>
THE SUB-ADVISER
- ---------------
Newton Capital Management Ltd. (the "Sub-Adviser") has been retained by
Dean Investment Associates to manage the investments of the International Value
Fund. 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. Dean Investment Associates (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 International Value Fund's daily net assets. For the fiscal
period ended March 31, 1998, Dean Investment Associates paid the Sub-Adviser
fees of $1,780.
By its terms, the 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 Value
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 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 Value Fund's
outstanding voting securities, or by Dean Investment Associates 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.
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 is a subsidiary of Dean
Investment Associates.
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.
- 24 -
<PAGE>
For the fiscal period ended March 31, 1998, the aggregate commissions
collected on sales of Class A shares of the Trust were $326,654, of which the
Underwriter paid $311,410 to unaffiliated broker-dealers in the selling network
and earned $15,244 from underwriting and broker commissions.
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 that Fund's 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. For the fiscal
period ended March 31, 1998, the Class A shares of the Small Cap Value Fund
incurred $5,533 in distribution expenses for payments to broker-dealers and
others for the sale or retention of Fund shares.
CLASS C SHARES -- The Funds have also adopted a plan of distribution (the
"Class C Plan") with respect to the Class C shares of the Funds. The Class C
Plan provides for two categories of payments. First, the Class C Plan provides
for the payment to the Underwriter of an account maintenance fee, in an amount
equal to an annual rate of .25% of the average daily net assets of a Fund
allocable to its Class C shares, which may be paid to other dealers based on the
average value of the Fund's Class C shares owned by clients of such dealers. In
addition, a Fund may pay up to an additional .75% per annum of that Fund's daily
net assets allocable to its Class C shares for expenses incurred in the
distribution and promotion of the shares, including but not limited to,
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
- 25 -
<PAGE>
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.
GENERAL INFORMATION - - Agreements implementing the Plans (the
"Implementation Agreements"), including agreements with dealers wherein such
dealers agree for a fee to act as agents for the sale of the Funds' shares, are
in writing and have been approved by the Board of Trustees. All payments made
pursuant to the Plans are made in accordance with written agreements.
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 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 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
- 26 -
<PAGE>
shares of a Fund will be allocated at least annually to each class of shares
based upon the ratio in which the sales of each class of shares bears to the
sales of all the shares of such Fund. In addition, the selection and nomination
of those Trustees who are not interested persons of the Trust are committed to
the discretion of the Independent Trustees during such period.
By reason of his controlling interest in 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. For the period ended March 31, 1998, the Large Cap Value
Fund paid brokerage commissions of $16,707, the Small Cap Value Fund paid
brokerage commissions of $92,954, the Balanced Fund paid brokerage commissions
of $12,687, and the International Value Fund paid brokerage commissions of
$3,616.
The Funds may 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.
- 27 -
<PAGE>
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and Dean
Investment Associates, it is not possible to place a dollar value on it.
Research services furnished by brokers through whom the Funds effect securities
transactions may be used by Dean Investment Associates in servicing all of its
accounts and not all such services may be used by Dean Investment Associates in
connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Underwriter 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 the
Underwriter nor other 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, Dean Investment Associates and the Sub-Adviser
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 the Trust, Dean Investment Associates and the Sub-Adviser.
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
- 28 -
<PAGE>
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 the investment adviser believes that
portfolio changes are appropriate. For the fiscal period ended March 31, 1998,
the annualized portfolio turnover rate was 54% for the Large Cap Value Fund, 62%
for the Small Cap Value Fund, 64% for the Balanced Fund, and 109% for the
International Value Fund.
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, Martin Luther King, Jr. 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 Value 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
Value 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.
- 29 -
<PAGE>
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.
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
- 30 -
<PAGE>
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.
Each Fund has qualified and intends to continue 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 and (ii) 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.
- 31 -
<PAGE>
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.
Investments by the Funds 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 Funds 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 Funds 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 Funds may result in
"straddles" for federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by the Funds. In addition, losses
realized by the Funds 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 Funds are not entirely clear. The hedging
transactions may increase the amount of short-term capital gain realized by the
Funds which is taxed as ordinary income when distributed to shareholders. The
Funds 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 Funds make
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
- 32 -
<PAGE>
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.
The diversification requirements applicable to the Funds may limit the
extent to which the Funds 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:
n
P (1 + T) = 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
- 33 -
<PAGE>
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 "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. 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. The total return
(excluding the effect of applicable sales loads) of each of the Funds since
inception through March 31, 1998 is as follows:
Class A Shares* Class C Shares*
--------------- ---------------
Large Cap Value Fund 24.11% 14.63%
Small Cap Value Fund 33.86% 21.63%
Balanced Fund 18.07% 9.37%
International Value Fund 17.60% 18.50%
* The initial public offering of the Class A shares of the Large Cap Value Fund,
the Small Cap Value Fund and the Balanced Fund was May 28, 1997. The initial
public offering of the Class A shares of the International Value Fund was
October 13, 1997. The initial public offering of the Class C shares was August
19, 1997 for the Large Cap Value Fund, August 1, 1997 for the Small Cap Value
Fund and the Balanced Fund and November 6, 1997 for the International Value
Fund.
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:
6
Yield = 2[(a-b/cd +1) -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
- 34 -
<PAGE>
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that a Fund
owns the security. Generally, interest earned (for the purpose of "a" above) on
debt obligations is computed by reference to the yield to maturity of each
obligation held based on the market value of the obligation (including actual
accrued interest) at the close of business on the last business day prior to the
start of the 30-day (or one month) period for which yield is being calculated,
or, with respect to obligations purchased during the month, the purchase price
(plus actual accrued interest). With respect to the treatment of discount and
premium on mortgage or other receivables-backed obligations which are expected
to be subject to monthly paydowns of principal and interest, gain or loss
attributable to actual monthly paydowns is accounted for as an increase or
decrease to interest income during the period and discount or premium on the
remaining security is not amortized.
To help investors better evaluate how an investment in a Fund might satisfy
their investment objective, advertisements regarding each Fund may discuss
various measures of Fund performance, including current performance ratings
and/or rankings appearing in financial magazines, newspapers and publications
which track mutual fund performance. Advertisements may also compare performance
(using the calculation methods set forth in the Prospectus) to performance as
reported by other investments, indices and averages. When advertising current
ratings or rankings, the Funds may use the following publications or indices to
discuss or compare Fund performance:
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). The International Value
Fund may compare its performance to the Europe, Australia and Far East Index,
which is generally considered to be representative of the performance of
unmanaged common stocks that are publicly traded in the securities markets
located outside the United States.
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'
- 35 -
<PAGE>
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
- ---------
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio, has been retained to
act as Custodian for the investments of the Large Cap Value Fund, the Small Cap
Value Fund and the Balanced Fund. Star Bank, N.A. 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.
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, has been
retained to act as Custodian for the investments of the International Value
Fund. The Fifth Third Bank acts as the 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 current fiscal year. 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.
PRINCIPAL SECURITY HOLDERS
- --------------------------
As of July 2, 1998, Merrill Lynch, Pierce, Fenner & Smith For the Sole
Benefit of its Customers, Attn: Mutual Fund Administration, 4800 Deer Lake Drive
East, 3rd Floor, Jacksonville, Florida, owned of record 16.5% of the outstanding
Class A shares and 68.6% of the outstanding Class C shares of the Large Cap
Value Fund, 23.4% of the outstanding Class A shares and 79.6% of the outstanding
Class C shares of the Small Cap Value Fund, 13.1% of the outstanding Class A
shares and 82.1% of the outstanding Class C shares of the Balanced Fund, and
11.5% of the outstanding Class A shares and 7.85% of the outstanding Class C
shares of the International Value Fund. Merrill Lynch, Pierce, Fenner & Smith
may be deemed to control the Large Cap Value Fund, the Small Cap Value Fund and
the Balanced Fund by virtue of the fact that it owns of record more than 25% of
each Fund's shares. As of
- 36 -
<PAGE>
July 2, 1998, Chauncey H. Dean and Zada G. Dean, 7777 Taylorsville Road, Huber
Heights, Ohio, owned of record 47.4% of the outstanding Class A shares of the
Large Cap Value Fund, 44.5% of the outstanding Class A shares of the Small Cap
Value Fund, 51.9% of the outstanding Class A shares of the Balanced Fund and
75.1% of the outstanding Class A shares of the International Value Fund.
Chauncey H. Dean and Zada G. Dean may be deemed to control each Fund by virtue
of the fact that they own of record more than 25% of their shares. For purposes
of voting on matters submitted to shareholders, any person who owns more than
50% of the outstanding shares of a Fund generally would be able to cast the
deciding vote.
As of July 2, 1998, McDonald & Co. Securities, Inc., C/FBO Pamela H. Leimer
IRA, 910 Michigan Avenue, Evanston, Illinois, owned of record 8.9% of the
outstanding Class C shares of the Large Cap Value Fund; C.H. Dean & Associates,
Inc. 2480 Kettering Tower, Dayton, Ohio, owned of record 24.9% of the
outstanding Class A shares of the Large Cap Value Fund; and Donaldson Lufkin &
Janrette Securities Corporation, Inv. P.O. Box 2052 Jersey City, New Jersey
owned of record 13.6% of the outstanding Class C shares of the Large Cap Value
Fund and McDonald & Co., C/FBO Stanley E. Leimer IRA, 910 Michigan Avenue,
Evanston, Illinois, owned of record 6.9% of the outstanding Class C shares of
the Large Cap Value Fund; C.H. Dean & Associates, Inc., 2480 Kettering Tower,
Dayton, Ohio, owned of record 18.5% of the outstanding Class A shares of the
Balanced Fund; Donaldson Lufkin & Jenrette Securities Corporation, Inc., P.O.
Box 2052, Jersey City, New Jersey, owned of record 18.2% of the outstanding
Class C shares of the International Value Fund; NFSC FEBO, Blake Schwartz, Fmt
Co. Ttee NFRP PS, 1487 Pathfinder, Westlake Village, California owned of record
7.5% of the outstanding Class C shares of the International Value Fund; NFSC
FEBO, Richard Bryce Goodman, Fmt Co. Ttee NFRP PS, 10241 Chrysanthemum Lane, Los
Angeles, California owned of record 14.4% of the outstanding Class C shares of
the International Value Fund; National Financial Services, 312 Walnut Street,
21st Floor, Cincinnati, Ohio, owned of record 5.3% of the outstanding Class C
shares of the International Value Fund; and, NFSC FEBO, Family Trust Andrew
James Summers, Ttee c/o Dittany Lang, 15200 Sunset Boulevard, Suite 209, Pacific
Palisades, California, owned of record 16.2% of the outstanding Class C shares
of the International Value Fund.
As of July 2, 1998, the Trustees and officers of the Trust as a group
owned of record and beneficially 47.4% of the outstanding Class A shares of the
Large Cap Value Fund, 44.5% of the outstanding Class A shares of the Small Cap
Value Fund, 51.9% of the outstanding Class A shares of the Balanced Fund, 75.1%
of the outstanding Class A shares of the International Value Fund and less than
1% of the outstanding Class C shares of each of the Funds.
- 37 -
<PAGE>
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 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 each Fund. In addition, the Funds
pay out-of-pocket expenses, including but not limited to, postage, envelopes,
checks, drafts, forms, reports, record storage and communication lines.
Countrywide also provides accounting and pricing services to the Funds. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable Countrywide to perform its duties, each Fund
will pay Countrywide a fee in accordance with the following schedule:
Average Monthly Net Assets Monthly Fee
-------------------------- -----------
$ 0 - $ 50,000,000 $3,000
50,000,000 - 100,000,000 3,500
100,000,000 - 200,000,000 4,000
200,000,000 - 300,000,000 5,000
Over 300,000,000 6,000 + .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.
ANNUAL REPORT
- -------------
The Funds' financial statements as of March 31, 1998, which have been
audited by Ernst & Young LLP, are attached to this Statement of Additional
information.
- 38 -
<PAGE>
Dean
family of funds
[LOGO]
Large Cap Value Fund
Small Cap Value Fund
Balanced Fund
International Value Fund
[LOGO]
Annual Report
March 31, 1998
<PAGE>
CHAIRMAN AND PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
To Investors in the Dean Family of Funds:
By almost any standard, the performance of the Dean Family of Funds during its
first 10 months represents a strong beginning. Three Dean Funds -- the Small Cap
Value, Large Cap Value and Balanced -- were launched on May 28, 1997. Our
International Value Fund began operation on October 13, 1997. By March 31, 1998,
each had achieved solid, double-digit returns.
Despite the special demands the startup of a mutual fund imposes, the Small Cap
and International Value Funds outperformed their benchmarks. Returns of the
Large Cap Value Fund and the Balanced Fund, though short of their benchmarks
during the 10-month period, still represented a very respectable startup.
It was certainly an exciting 10 months. While the market soared to new heights,
it was a sometimes bumpy ride. The Asian financial crisis in the fall of 1997
brought our first market correction (an 11% decline in the Dow) in seven years.
Then, reassured by generally good earnings reports and continued prospects for
low inflation and low interest rates, investors promptly resumed their bullish
ways. Meanwhile, overseas equity markets were highly volatile. Though
challenging, these conditions created rewarding opportunities for our new
International Value Fund, especially in Europe.
While we continue to find value opportunities for each of the Funds, we are
still concerned about the high valuations so common in the stock market today.
In the U.S., stock prices are selling at roughly 24 times anticipated earnings
on average. That ratio suggests to us that continued corporate earnings growth
is essential; any series of earnings disappointments could alter investor
confidence in a hurry.
Factors which could erode earnings growth include the wage pressures which are
building in the U.S. and the possible reverberations here from troubled Asian
economies. For U.S. producers, Japan and other Asian nations represent both
important export markets and potentially damaging price competition here. The
relative strength of the U.S. dollar works against American exports by making
them more expensive, while favoring imports by making them less expensive.
Still, there are formidable forces driving the stock market ahead. The
fundamentals for continued economic growth and low inflation are still very much
in place. Interest rates should remain low for the foreseeable future, a
prospect enhanced by balanced federal budgets. Productivity increases have made
the U.S. companies much stronger global competitors. And money is pouring into
the market as participation in mutual funds and 401(k) plans grows rapidly.
If this recitation of plusses and minuses is a bit perplexing, it represents the
real world of investing. It is, also, the very kind of mix which creates
opportunities for investors who emphasize the value approach. The Dean Family of
Funds combines the value approach with intensive research and rigorous
investment decision-making disciplines. Ten months is not a long time. Yet, our
results suggest, at least, that your Funds should perform well relative to the
market, whatever its long-term course.
Your participation and confidence are deeply appreciated. Please know that an
exceptional group of professionals here is dedicated to rewarding the trust you
have placed in us.
Sincerely,
/s/ Chauncey H. Dean
Chauncey H. Dean
Chairman of the Board and Chief Executive Officer
C.H. Dean & Associates, Inc.
/s/ Robert D. Dean
Robert D. Dean
President and Chief Investment Officer
C.H. Dean & Associates, Inc.
1
<PAGE>
The Dean Approach to Value Investing
What does value investing mean to the Dean Family of Funds? Simply said, we try
to buy companies which are selling below their intrinsic value. To be more
specific, we believe that to make good money in the market it is imperative to
buy that which is not loved.
Stocks become loved when everything is going right for them -- when earnings
growth has been great and the company is sitting on top of the world. The market
then projects that success far into the future. Such projections can create a
lot of risk, and risk is one of the most important considerations in investing.
Some people argue that safety (reduced risk) is related to size, that a large
cap stock is less risky than a small cap stock. While large companies tend to
have more diversified client bases and larger product portfolios, this view of
risk implies that a stock becomes less risky as it is bid up in price. In other
words, it says the same company is safer valued at $10 billion by the market
than at $2 billion. This seems a dubious proposition. While a large business's
wider array of clients and products can lead to a more stable stream of
earnings, an investor can duplicate this by buying a portfolio of different
stocks.
As long as two stocks do not move in absolute lock step with each other, a
portfolio of two stocks will be less volatile than either of the individual
stocks. How much less volatile depends on how likely the two stocks are to move
together. A portfolio of two computer chip companies is more risky than a
portfolio of one computer chip and one potato chip company. The skills needed to
run the two companies are very different. We would rather hold two smaller
companies, each focusing on what they do best, than one large company which is a
collection of different businesses.
As a general proposition, the more diversified you are, the less risky you are.
But, more often than not, diversification is better achieved at the portfolio
level than at the corporate level.
While we can't express risk as a specific formula which fits all industries, we
believe it is a function of the following, in roughly this order: VALUATION,
BALANCE SHEET STRENGTH, STABILITY OF EARNINGS AND CASH FLOWS, MARKET POSITION
AND DIVERSITY, AND EARNINGS GROWTH POTENTIAL. Note that all of these, with the
exception of valuation, are attributes of the underlying company, not the stock.
If a company can grow at a high rate for a long time, it should be worth a
pretty penny. For example, if you could know with absolute certainty that a
company would grow its earnings at 15% per year, every year, for the next 30
years, what would it be worth? At 15%, $15,000 becomes $1,000,000 million in 30
years. Obviously, the market would be willing to pay a very high multiple of
current earnings for such a mythical company.
But, relatively small changes in growth rates or duration can make a huge
difference. For example, if the growth were 10% for 30 years, $15,000 would grow
to less than $260,000. Furthermore, if a company disappoints with earnings which
are below the analysts' forecasts, or if there is a major uncertainty over its
near-term operations, the market often sells it off violently. If the company
above revealed that it was not going to grow at 15% for 30 years but, rather,
thought it might grow at 12% for five years, the market would despise it. The
multiple of current earnings paid for the stock would plummet, even though it
was still growing earnings at a respectable pace.
It is also very important to note that this process works in reverse. If a
company which is expected to show consistent earnings growth of 5% puts together
a few years of 8% earnings growth, its stock price will start to soar, as long
as the new pace is seen as sustainable.
Thus, it is the market's collective perception of future earnings that causes
stock prices to go up and down. "Collective perception" is another way of
describing crowd behavior. Psychologists tell us that in a crowd, intelligent
people will often do stupid things. The crowd tends to extrapolate the past into
the future, both positive and negative. However, trends don't last forever. At
Dean, we prefer to focus on companies where the expectations are low. If
everyone expects bad things to happen, and they do, then the downside in stock
price is limited. If something good (or even not so bad) happens, good things
happen to the stock price.
At Dean we are interested first and foremost in the preservation and enhancement
of capital. While this does not mean that our stocks never go down, it does mean
that we tend to do best on a relative basis in difficult market environments.
What are our strategies for preserving capital while also enhancing it? Each of
the Funds takes a somewhat different path but the common denominator is our
value philosophy. You will see its application on the pages describing the
activities of each fund.
2
<PAGE>
SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
Diversity: a Virtue and a Necessity
The Small Cap Value Fund attempts to stay as fully invested as possible in
stocks at all times. Small cap stocks can be volatile on a day-to-day basis,
because of their low liquidity. However, we do not view them as risky per se.
Diversification is a virtue and a necessity in small cap funds. It reduces the
day-to-day, or even month-to-month volatility. Even though the portfolio is
invested in small and little-known companies, its diversity reduces risk, and
our investments will still adhere to the Dean discipline of capital
preservation.
Continuing to Climb with Small Cap Stocks
The Dean Small Cap Value Fund continues to chalk up impressive returns with
Class A shares up 11.65%1 in the first three months of 1998, up 33.86%1 since
its inception May 28, 1997 (assuming reinvestment of dividends). These returns
exceed those of its benchmark, the Russell 2000, which was up 10.06% and 27.44%,
respectively. While we do not believe such returns can be sustained
indefinitely, by either the Fund or the index, we are confident that our
disciplined value style can continue to outperform on a relative basis.
"Small" does not equate to "risky" in the Dean Small Cap Value Fund. A
significant portion of the Fund is invested in such areas as electric utilities
and REITs (real estate investment trusts). These help provide the Fund with a
dividend yield which exceeds that of the much larger cap S&P 500.
Other stocks in the Fund have been purchased at prices so low that there is very
little risk. For example, Jan Bell Marketing sells jewelry through leased space
in Sam's Clubs. It was purchased at less than 10x earnings, at an average cost
of $2.69 per share. Total market value was $70 million, though its net current
assets (cash plus inventories plus receivables minus all liabilities) were $95
million at the time. The company has since posted better-than-expected earnings
and is now selling for $4.75, up 77% from our average cost.
1 The total returns shown do not include the effect of applicable sales loads.
Comparison of the Change in Value since May 28, 1997 of a $10,000
Investment in the Dean Small Cap Value Fund and the Russell 2000 Index
March 31, 1998
--------------
Dean Small Cap Value Fund $12,683
Russell 2000 Index $12,900
Dean Small Cap Value Fund
Total Returns Since Inception*
Class A 26.83%
Class C 20.63%
Past performance is not predictive of future performance.
* The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and fees
paid by shareholders in the different classes. The intial public offering of
Class A shares commenced on May 28, 1997, and the initial public offering of
Class C shares commenced on August 1, 1997.
3
<PAGE>
LARGE CAP VALUE FUND
- --------------------------------------------------------------------------------
Low Prices: a Built-in Safety Factor
While the Large Cap Value Fund reflects the strength and stability of the
largest corporations, it does not have the benefit of a bond position. Thus, it
will tend to be more volatile than the Balanced Fund. Because of that
volatility, deeply discounted valuations are relied on to provide a sizable
margin of safety. Such stocks do not have grand expectations priced into them.
Since it is hard to disappoint when no one expects something exciting or good,
downside risk is reduced.
Solid Returns and a Careful Search for Value
The Fund continues to post strong absolute returns, with Class A shares up
24.11%1 between its inception on May 28, 1997, and March 31, 1998. Though solid,
these returns fall short of the 32.24% gain posted by the benchmark Russell 1000
Index during this period. While absolute returns of this magnitude are not
likely to continue indefinitely, either for the Fund or the Russell 1000, we
believe our relative performance should improve over time. On traditional value
measures, such as Price-to-Earnings and Price-to-Book Value, the Fund remains
far less expensive than the overall market.
Our search for value in large cap stocks has been rewarded in the utilities and
financial sectors. Valuations, especially in the financial services area, are
often well below average, despite steady earnings growth and strong balance
sheets. For example, Ambac Financial Group, a firm which specializes in insuring
municipal bonds, has gained more than 50% since being purchased for the Dean
Large Cap Value Fund. Even at that, it has been selling recently for 17x
earnings and only 2.3x an understated book value.
1 The total returns shown do not include the effect of applicable sales loads.
Comparison of the Change in Value since May 28, 1997 of a $10,000
Investment in the Dean Large Cap Value Fund and the Russell 1000 Index
March 31, 1998
--------------
Dean Large Cap Value Fund $11,760
Russell 1000 Index $13,214
Dean Large Cap Value Fund
Total Returns Since Inception*
Class A 17.60%
Class C 13.63%
Past performance is not predictive of future performance.
* The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and fees
paid by shareholders in the different classes. The intial public offering of
Class A shares commenced on May 28, 1997, and the initial public offering of
Class C shares commenced on August 19, 1997.
4
<PAGE>
BALANCED FUND
- --------------------------------------------------------------------------------
Building Value by Limiting Risk
The Balanced Fund diversifies between stocks and bonds. Bonds are of high
quality and of medium length. Thus there is almost no risk of default and very
limited risk due to fluctuations in interest rates. Depending on overall market
risk, we vary the proportion in stocks and bonds slightly. The stocks are solid
companies which are currently out of favor. They have generally good, if not
spectacular, growth prospects but sell at a discount to the overall market. This
discount provides appreciation potential and lower risk.
Strength Followed Fourth Quarter Volatility
After a wild and volatile fourth quarter of 1997, market participants put the
Asian financial crisis in perspective. The first quarter of 1998 saw U.S.
markets respond positively to still-healthy corporate earnings and robust
economic performance. Individual investors continued to pour money into mutual
funds, providing further support to the bullish trend in stocks.
The Balanced Fund's Class A shares gained 18.07%1 since its inception on May 28,
1997, compared to 22.00% for our 60/40 2 benchmark over that same period. Given
the Balanced Fund's relatively cautious investment posture during the period,
its performance represents a solid absolute return. The portfolio holds
important positions in relatively low-risk areas such as electric utilities and
REITs. Its diverse holdings also include attractive and reasonably valued stocks
in dynamic industries, such as technology. It holds stocks in the automotive and
retail sectors, which benefit from steady economic growth. Financial services
companies comprise a significant portion of the holdings, because they are
reasonably valued and benefit from the low-interest environment.
During the quarter we added important positions in several stocks that clearly
fit our value criteria. As the price of oil declined steadily in recent months,
stocks of virtually all the oil service companies declined sharply. In view of
the long-term growth in demand for oil, this presented a very attractive
long-term investment opportunity.
Adhering to the Dean Balanced Fund's primary objective of preservation of
capital and competitive returns, we view the current market as being relatively
overvalued and prone to sharp volatility. We will maintain a modestly
conservative position in our investments but be alert to new value
opportunities.
1 The total returns shown do not include the effect of applicable sales loads.
2 The 60/40 benchmark consists of 60% Russell 1000 Index and 40% Lehman Brothers
Intermediate Government/Corporate Bond Index.
Comparison of the Change in Value since May 28, 1997 of a $10,000
Investment in the Dean Balanced Fund, the Russell 1000 Index and the Lehman
Brothers Intermediate Government/Corporate Bond Index
March 31, 1998
--------------
Dean Balanced Fund $11,187
Russell 1000 Index $13,214
Lehman Brothers Intermediate
Government/Corporate Bond Index $10,799
Dean Balanced Fund
Total Returns Since Inception*
Class A 11.87%
Class C 8.37%
Past performance is not predictive of future performance.
* The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and fees
paid by shareholders in the different classes. The intial public offering of
Class A shares commenced on May 28, 1997, and the initial public offering of
Class C shares commenced on August 19, 1997.
5
<PAGE>
INTERNATIONAL VALUE FUND
- --------------------------------------------------------------------------------
Selecting Value from a World of Stocks
The Dean International Value Fund seeks capital appreciation by investing
primarily in the common stocks of companies located in the United Kingdom,
Continental Europe and the Pacific Basin. Stocks favored are those of companies
with strong management and solid earnings potential, but which are trading at
relatively low valuations. Particular emphasis is given to growth rates and such
valuation measures as price-to-book value and price-to-cash flow. The Fund is
managed under a disciplined, bottom-up, value approach. Strict parameters as to
capitalization and valuation are followed with respect to both buying and
selling these investments.
Off to a Great Beginning
Launched on October 13, 1997, as the Asian financial crisis sent waves of
volatility through international equity markets, the Dean International Value
Fund, nevertheless, got off to an excellent start. It's 17.60%1 total return for
Class A shares through March 31, 1998, nearly tripled the 5.87% return of the
benchmark EAFE Index.
The Fund's heavy cash position in October was used aggressively to buy depressed
European and Canadian equities during the correction. The realization that
growth in Asia was declining depressed bond yields in the West, which served to
boost the markets for European and North American equities. Initially, the Fund
minimized its exposure to companies in troubled Japan and other Asian and Latin
American economies. Early in 1998, however, value opportunities began to emerge,
leading to increased investments in these economies.
During the first quarter of 1998, strong rallies occurred in international
equity markets, with Europe leading the way. The Fund's early focus on European
markets was well rewarded.
1 The total returns shown do not include the effect of applicable sales loads.
Comparison of the Change in Value since October 13, 1997 of a $10,000
Investment in the Dean International Value Fund and the Europe, Australia
and Far East Index (EAFE Index)
March 31, 1998
--------------
Dean International Value Fund $11,143
Europe, Australia and Far East Index $10,620
Dean International Value Fund
Total Returns Since Inception*
Class A 11.43%
Class C 17.50%
Past performance is not predictive of future performance.
* The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and fees
paid by shareholders in the different classes. The intial public offering of
Class A shares commenced on October 13, 1997, and the initial public offering of
Class C shares commenced on November 6, 1997.
6
<PAGE>
FUND FACTS
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
Top Holdings
Jan Bell Marketing, Inc. Audiovox Corp. - Class A
M.D.C. Holdings, Inc. Castle Energy Corp.
Imperial Credit Commercial Mortgage Lennar Corp.
Advanced Marketing Services, Inc. LandAmerica Financial Group
Haverty Furniture Co., Inc. M/I Schottenstein Homes, Inc.
Number of Positions .......................................... 156
Median Price/Earnings Ratio .................................. 12.6
Portfolio Turnover (5/28/97 - 3/31/98) ....................... 62%
LARGE CAP VALUE FUND
- --------------------------------------------------------------------------------
Top Holdings
Bear Stearns Cos., Inc. Edwards (AG), Inc.
Clayton Homes, Inc. Food Lion, Inc. - Class A
Chase Manhattan Corp. Transatlantic Holdings, Inc.
Green Tree Financial Corp. Chrysler Corp.
Ambac Financial Group, Inc. Norfolk Southern Corp.
Number of Positions ........................................... 59
Median Price/Earnings Ratio ................................... 15.5
Portfolio Turnover (5/28/97 - 3/31/98) ........................ 54%
BALANCED FUND
- --------------------------------------------------------------------------------
Top Equity Holdings
Ambac Financial Group, Inc. ECI Telecommunications Ltd.
News Corp. Ltd. Pfd. ADR Diamond Offshore Drilling
Tricon Global Restaurants Countrywide Credit Ind.
Chrysler Corp. NCR Corp.
Applied Materials Tidewater, Inc.
Number of Positions ........................................... 47
Median Price/Earnings Ratio ................................... 17.4
Portfolio Turnover (5/28/97 - 3/31/98) ........................ 64%
7
<PAGE>
FUND FACTS
- --------------------------------------------------------------------------------
INTERNATIONAL VALUE FUND
- --------------------------------------------------------------------------------
Top Countries
United Kingdom Germany
France Switzerland
Sweden Netherlands
Japan Italy
Canada Hong Kong
Top Holdings
BCE, Inc. Telefonica De Espana
Scudder Latin America INV TR Sanofi SA
Fuji Photo Film Bure Investment Aktiebola
Telecom Italia SPA Carrefour Supermarche
Novartis AG Telecomunicacoes Brazileiras SA
Number of Positions .......................................... 83
Median Price/Earnings Ratio .................................. 26.4
Portfolio Turnover (10/1/97 - 3/31/98) ....................... 109%
8
<PAGE>
LARGE CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1998
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 99.9% Value
- --------------------------------------------------------------------------------
Aerospace -- 1.5%
2,000 Rockwell International Corp. ...................... $ 114,750
-----------
Automotive -- 6.2%
4,500 Chrysler Corp. .................................... 187,031
1,500 Ford Motor Co. .................................... 97,219
1,300 General Motors Corp. .............................. 87,669
1,900 PACCAR Inc. ....................................... 113,168
-----------
485,087
-----------
Automotive Parts -- 1.0%
2,000 Genuine Parts Co. ................................. 76,250
-----------
Banking -- 2.1%
1,300 Republic New York Corp. ........................... 173,388
-----------
Building Products -- 3.2%
1,000 Armstrong World Industries, Inc. .................. 86,563
1,500 Vulcan Materials Co. .............................. 164,250
-----------
250,813
-----------
Capital Goods -- 5.6%
6,000 AGCO Corp. ........................................ 178,125
3,000 Caterpiller Inc. .................................. 165,188
2,000 York International Corp. .......................... 90,000
-----------
433,313
-----------
Chemicals -- 7.0%
1,000 Dow Chemical Co., (The) ........................... 97,250
3,000 Great Lakes Chemical Corp. ........................ 162,000
2,000 Potash Corp. of Saskatchewan Inc. ................. 181,750
1,000 Rohm & Haas Co. ................................... 103,313
-----------
544,313
-----------
Electronics -- 2.7%
1,000 Avnet, Inc. ....................................... 57,563
63 Raytheon Co. - Class A ............................ 3,583
2,500 Raytheon Co. - Class B ............................ 145,938
-----------
207,084
-----------
Energy -- 6.7%
1,500 Atlantic Richfield Co. ............................ 117,938
3,000 Phillips Petroleum Co. ............................ 149,812
4,000 Tidewater, Inc. ................................... 175,250
3,500 Union Texas Petroleum Holdings .................... 77,438
-----------
520,438
-----------
9
<PAGE>
LARGE CAP VALUE FUND (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 99.9% Value
- --------------------------------------------------------------------------------
Financial Services -- 12.8%
3,400 Ambac Financial Group, Inc. ....................... $ 198,687
4,000 Bear Stearns Cos., Inc. ........................... 205,500
1,500 Chase Manhattan Corp. ............................. 202,312
4,500 Edwards (A.G.), Inc. .............................. 196,875
7,000 Green Tree Financial Corp. ........................ 199,062
-----------
1,002,436
-----------
Health Care -- 1.0%
2,000 Mallinckrodt, Inc. ................................ 79,000
-----------
Housing -- 2.6%
10,000 Clayton Homes, Inc. ............................... 202,500
-----------
Insurance -- 13.0%
2,000 AFLAC, Inc. ....................................... 126,500
1,500 American National Insurance Co. ................... 146,437
800 General Re Corp. .................................. 176,500
2,000 Jefferson-Pilot Corp. ............................. 177,875
500 SAFECO Corp. ...................................... 27,328
1,500 Transamerica Corp. ................................ 174,750
2,500 Transatlantic Holdings, Inc. ...................... 189,062
-----------
1,018,452
-----------
Media -- 0.6%
2,000 News Corporation Ltd. (The) (ADR) ................. 46,000
-----------
Metals -- 4.2%
2,800 Phelps Dodge Corp. ................................ 180,775
2,000 USX-U.S. Steel Group, Inc. ........................ 75,500
4,000 Worthington Industries, Inc. ...................... 72,500
-----------
328,775
-----------
Mortgage Services -- 4.1%
2,500 Countrywide Credit Industries, Inc. ............... 132,969
2,400 MBIA, Inc. ........................................ 186,000
-----------
318,969
-----------
Retail -- 5.1%
3,500 Dillard's, Inc. ................................... 129,281
18,000 Food Lion, Inc. - Class A ......................... 192,375
2,500 Toys "R" Us, Inc.(a) .............................. 75,156
-----------
396,812
-----------
Technology -- 1.1%
2,500 NCR Corp.(a) ...................................... 82,656
-----------
Telecommunications -- 1.6%
3,000 Alltel Corp. ...................................... 131,063
-----------
10
<PAGE>
LARGE CAP VALUE FUND (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 99.9% Value
- --------------------------------------------------------------------------------
Tobacco -- 3.2%
1,700 Loews Corp. ....................................... $ 177,225
1,000 Philip Morris Cos., Inc. .......................... 41,688
1,000 UST, Inc. ......................................... 32,250
-----------
251,163
-----------
Transportation -- 4.7%
3,000 CSX Corp. ......................................... 178,500
5,000 Norfolk Southern Corp. ............................ 186,875
-----------
365,375
-----------
Utilities -- 9.9%
2,000 Consolidated Edison Co. of New York, Inc. ......... 93,500
6,000 DPL Inc. .......................................... 117,000
4,000 Houston Industries, Inc. .......................... 115,000
5,000 Illinova Corp. .................................... 150,937
6,000 NIPSCO Industries, Inc. ........................... 168,000
4,500 Southern Co. ...................................... 124,594
-----------
769,031
-----------
Total Common Stocks (Cost $6,718,817) ............. $ 7,797,668
-----------
- --------------------------------------------------------------------------------
Face Value MONEY MARKET -- 0.5% Value
- --------------------------------------------------------------------------------
$ 39,056 Star Treasury Fund (Cost $39,056) ................. $ 39,056
-----------
Total Investments at Value -- 100.4%
(Cost $6,757,873) ................................. $ 7,836,724
Liabilities in Excess of Other Assets -- (0.4)% ... (30,680)
-----------
Net Assets -- 100.0% .............................. $ 7,806,044
===========
(a) Non-income producing security.
ADR -- American Depository Receipt
See accompanying notes to financial statements.
11
<PAGE>
SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1998
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 97.7% Value
- --------------------------------------------------------------------------------
Automotive -- 2.5%
8,000 Excel Industries, Inc. ............................ $ 165,000
7,000 Global Motorsport Group, Inc.(a) .................. 126,875
7,000 Oshkosh Truck Corp. ............................... 133,000
2,000 Republic Automotive Parts, Inc.(a) ................ 36,250
5,000 TBC Corp.(a) ...................................... 50,000
-----------
511,125
-----------
Automotive Parts -- 0.9%
2,000 Arvin Industries, Inc. ............................ 81,875
10,000 R & B, Inc.(a) .................................... 103,750
-----------
185,625
-----------
Building Products -- 4.3%
5,000 American Residential Services, Inc.(a) ............ 49,688
2,000 Ameron International Corp. ........................ 116,875
8,000 Building Materials Holding Corp.(a) ............... 109,000
9,000 Cameron Ashley Building Products(a) ............... 164,810
28,000 Martin Industries, Inc. ........................... 152,250
13,000 Patrick Industries, Inc. .......................... 202,310
5,000 Ryerson Tull, Inc.(a) ............................. 96,250
-----------
891,183
-----------
Building Supplies -- 0.8%
13,000 Wolohan Lumber Co. ................................ 169,000
-----------
Capital Goods -- 4.7%
5,000 Amcast Industrial Corp. ........................... 108,125
5,000 Baldwin Technology Co., Inc. - Class A(a) ......... 27,500
11,000 Bridgeport Machines, Inc.(a) ...................... 129,250
4,000 Central Sprinkler Corp.(a) ........................ 56,000
15,000 Defiance, Inc. .................................... 123,750
10,000 Global Industrial Technologies, Inc.(a) ........... 165,000
3,000 Hardinge, Inc. .................................... 102,375
12,000 Perini Corp.(a) ................................... 108,000
8,000 Tractor Supply Co.(a) ............................. 165,000
-----------
985,000
-----------
Chemicals -- 0.7%
7,000 Mississippi Chemical Corp. ........................ 140,438
-----------
12
<PAGE>
SMALL CAP VALUE FUND (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 97.7% Value
- --------------------------------------------------------------------------------
Electronics -- 4.5%
13,760 Bell Industries, Inc.(a) .......................... $ 194,360
8,000 Cherry Corp. - Class A(a) ......................... 144,000
3,000 Cherry Corp. - Class B(a) ......................... 52,500
3,500 ESCO Electronics Corp.(a) ......................... 57,750
10,000 IEC Electronics Corp.(a) .......................... 91,250
2,000 Marshall Industries(a) ............................ 66,750
11,000 MicroAge, Inc.(a) ................................. 138,875
5,000 Petroleum Development Corp.(a) .................... 29,687
4,000 Providence Energy Corp. ........................... 83,750
6,000 SED International Holdings, Inc.(a) ............... 68,250
-----------
927,172
-----------
Energy -- 4.2%
7,300 BP Prudhoe Bay Royalty Trust ...................... 107,219
3,000 CMS Energy Corp. - Class G ........................ 75,938
16,000 Castle Energy Corp.(a) ............................ 280,000
6,000 Crown Central Petroleum Corp.(a) .................. 111,750
3,000 Giant Industries, Inc. ............................ 61,500
30,000 High Plains Corp.(a) .............................. 80,625
5,000 NUI Corp. ......................................... 136,875
3,000 Torch Energy Royalty Trust ........................ 21,938
-----------
875,845
-----------
Financial Services -- 1.2%
17,000 EZCORP, Inc. - Class A(a) ......................... 201,875
3,000 United Cos. Financial Corp. ....................... 53,438
-----------
255,313
-----------
Food -- 2.6%
9,000 Fleming Cos., Inc. ................................ 178,313
15,000 M&F Worldwide Corp.(a) ............................ 135,938
10,000 Mauna Loa Macadamia Partners, L.P. - Class A ...... 38,125
10,000 Nash-Finch Co. .................................... 198,750
-----------
551,126
-----------
Furniture -- 1.0%
12,000 Flexsteel Industries, Inc. ........................ 166,500
2,000 Pulaski Furniture Corp. ........................... 45,750
-----------
212,250
-----------
Gaming -- 0.9%
5,000 Ameristar Casinos(a) .............................. 28,750
9,000 Grand Casinos, Inc.(a) ............................ 153,563
-----------
182,313
-----------
Health Care -- 1.6%
16,000 Ramsay Health Care, Inc.(a) ....................... 50,000
10,000 Safeguard Health Enterprises, Inc.(a) ............. 87,500
85,000 Staff Builders, Inc. - Class A(a) ................. 191,250
-----------
328,750
-----------
13
<PAGE>
SMALL CAP VALUE FUND (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 97.7% Value
- --------------------------------------------------------------------------------
Housing -- 10.4%
10,000 Beazer Homes USA, Inc.(a) ......................... $ 256,875
10,000 Cavalier Homes, Inc. .............................. 114,375
8,000 Del Webb Corp. .................................... 244,000
12,000 Engle Homes, Inc. ................................. 201,000
24,000 Hovnanian Enterprises Inc. - Class A(a) ........... 253,500
7,966 Lennar Corp. ...................................... 274,329
17,000 M.D.C. Holdings, Inc. ............................. 301,750
12,200 M/I Schottenstein Homes, Inc.(a) .................. 266,875
1,100 Pulte Corp. ....................................... 51,150
20,000 Zaring National Corp.(a) .......................... 205,000
-----------
2,168,854
-----------
Insurance -- 8.6%
6,000 ALLIED Life Financial Corp. ....................... 129,000
2,500 Chartwell Re Corp. ................................ 84,688
1,300 Citizens Corp. .................................... 40,463
1,733 Donegal Group, Inc. ............................... 40,509
12,000 EMC Insurance Group, Inc. ......................... 160,500
3,000 FBL Financial Group, Inc. - Class A ............... 151,875
1,300 Farm Family Holdings, Inc.(a) ..................... 50,375
4,200 Harleysville Group, Inc. .......................... 109,200
6,000 LandAmerica Financial Group, Inc. ................. 271,500
600 Navigators Group, Inc. (The)(a) ................... 11,250
4,000 PXRE Corp. ........................................ 124,000
5,000 SCPIE Holdings Inc. ............................... 155,000
600 Selective Insurance Group, Inc. ................... 16,125
8,000 Stewart Information Services Corp. ................ 246,000
3,000 Terra Nova (Bermuda) Holdings Ltd. - Class A ...... 91,500
3,000 Trenwick Group Inc. ............................... 112,500
-----------
1,794,485
-----------
Metals -- 7.1%
6,000 Ampco-Pittsburgh Corp. ............................ 111,000
9,000 Atchison Casting Corp.(a) ......................... 140,625
15,000 Bayou Steel Corp.(a) .............................. 102,188
3,500 Cleveland-Cliffs Inc. ............................. 188,125
4,000 Commercial Metals Co. ............................. 140,000
14,000 National Steel Corp. - Class B(a) ................. 239,750
3,000 Pitt-Des Moines, Inc. ............................. 144,000
7,050 Roanoke Electric Steel Co. ........................ 145,406
10,000 Rouge Industries, Inc. - Class A .................. 155,625
11,000 Steel of West Virginia, Inc.(a) ................... 112,750
-----------
1,479,469
-----------
Miscellaneous -- 0.9%
8,000 Arctic Cat, Inc. .................................. 74,500
4,000 CTG Resources, Inc. ............................... 102,750
-----------
177,250
-----------
Mortgage Services -- 0.7%
6,000 MMI Cos., Inc. .................................... 144,375
-----------
14
<PAGE>
SMALL CAP VALUE FUND (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 97.7% Value
- --------------------------------------------------------------------------------
Paper and Containers -- 0.8%
17,000 Mercer International, Inc. ........................ $ 166,813
-----------
Real Estate -- 7.4%
9,000 Commercial Net Lease Realty ....................... 158,625
5,000 Criimi Mae, Inc. .................................. 77,188
13,000 Dynex Capital, Inc. ............................... 156,000
5,000 Health Care REIT, Inc. ............................ 137,500
10,000 Horizon Group, Inc. ............................... 123,125
19,000 Imperial Credit Commercial Mortgage Investment Corp. 285,000
3,000 PMC Commerical Trust .............................. 58,875
7,000 RFS Hotel Investors, Inc. ......................... 127,750
4,000 Ramco-Gershenson Properties Trust ................. 81,500
3,000 Redwood Trust, Inc. ............................... 70,500
9,000 Thornburg Mortgage Asset Corp. .................... 142,875
10,000 Winston Hotels, Inc. .............................. 132,500
-----------
1,551,438
-----------
Restaurants -- 2.6%
1,000 Bertucci's, Inc.(a) ............................... 7,687
14,000 Cooker Restaurant Corp. ........................... 140,875
11,000 Rare Hospitality International, Inc.(a) ........... 130,625
25,000 Ryan's Family Steak Houses, Inc.(a) ............... 226,563
4,000 Uno Restaurant Corp.(a) ........................... 28,500
-----------
534,250
-----------
Retail -- 16.1%
15,000 Advanced Marketing Services, Inc.(a) .............. 281,250
6,800 Blair Corp. ....................................... 155,550
5,000 Burlington Industries, Inc.(a) .................... 87,812
15,000 Dixie Group, Inc. (The) ........................... 173,438
15,000 Duckwall-ALCO Stores, Inc.(a) ..................... 228,750
15,000 Dyersburg Corp. ................................... 117,187
10,000 Farah Inc.(a) ..................................... 63,125
9,000 Friedman's Inc. - Class A(a) ...................... 182,813
25,000 GT Bicycles, Inc.(a) .............................. 154,688
15,000 Haverty Furniture Co., Inc. ....................... 281,250
13,000 Ingles Markets, Inc. - Class A .................... 175,500
62,900 Jan Bell Marketing, Inc.(a) ....................... 310,568
6,800 Lifetime Hoan Corp. ............................... 78,200
6,000 Marsh Supermarkets, Inc. - Class B ................ 93,750
11,000 Mikasa, Inc. ...................................... 148,500
13,000 Movie Gallery, Inc.(a) ............................ 99,125
12,000 REX Stores Corp.(a) ............................... 177,000
10,000 Rival Co. (The) ................................... 172,500
5,000 Sportman's Guide, Inc. (The)(a) ................... 30,000
3,000 Superior Surgical Manufacturing Co., Inc. ......... 52,500
3,000 Supreme International Corp.(a) .................... 37,500
8,000 Syms Corp.(a) ..................................... 113,000
15,000 Tultex Corp.(a) ................................... 57,187
15,000 Worldtex, Inc.(a) ................................. 113,438
-----------
3,384,631
-----------
15
<PAGE>
SMALL CAP VALUE FUND (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 97.7% Value
- --------------------------------------------------------------------------------
Semiconductor -- 2.1%
8,000 Kulicke & Soffa Industries, Inc.(a) ............... $ 174,000
10,000 Newcor, Inc. ...................................... 92,500
11,000 Tower Semiconductor Ltd.(a) ....................... 100,375
27,000 Xicor, Inc.(a) .................................... 70,875
-----------
437,750
-----------
Technology -- 1.7%
20,000 Kentek Information Systems, Inc. .................. 158,750
11,000 Nam Tai Electronics, Inc. ......................... 187,688
-----------
346,438
-----------
Telecommunications -- 2.2%
8,400 Atlantic Tele-Network, Inc.(a) .................... 92,400
42,000 Audiovox Corp. - Class A(a) ....................... 280,875
11,000 Emerging Communications, Inc.(a) .................. 77,000
-----------
450,275
-----------
Tobacco -- 0.7%
9,000 Standard Commercial Corp. ......................... 143,438
-----------
Transportation -- 0.5%
5,000 Pittson Burlington Group .......................... 78,125
500 Sea Containers, LTD. - Class A .................... 19,280
-----------
97,405
-----------
Utility -- 6.0%
5,000 Central Hudson Gas & Electric ..................... 218,125
10,000 Central Vermont Public Service .................... 148,750
4,000 Commonwealth Energy System ........................ 159,500
7,000 Eastern Utilities Associates ...................... 190,750
6,000 Rochester Gas & Electric Corp. .................... 195,000
7,000 TNP Enterprises, Inc. ............................. 231,438
2,500 United Illuminating Co. ........................... 120,937
-----------
1,264,500
-----------
Total Common Stocks (Cost $17,670,094) ............ $20,356,511
-----------
- --------------------------------------------------------------------------------
Face Value MONEY MARKET -- 0.4% Value
- --------------------------------------------------------------------------------
$ 71,682 Star Treasury Fund (Cost $71,682) ................. $ 71,682
-----------
Total Investments at Value -- 98.1%
(Cost $17,741,776) ................................ $20,428,193
Other Assets in Excess of Liabilities -- 1.9% ..... 401,397
-----------
Net Assets -- 100.0% .............................. $20,829,590
===========
(a) Non-income producing security.
See accompanying notes to financial statements.
16
<PAGE>
BALANCED FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1998
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 60.2% Value
- --------------------------------------------------------------------------------
Airlines -- 0.8%
2,500 Comair Holdings, Inc. ............................. $ 66,250
-----------
Automotive -- 3.3%
3,500 Chrysler Corp. .................................... 145,469
2,000 Ford Motor Co. .................................... 129,625
-----------
275,094
-----------
Capital Goods -- 3.5%
3,000 AGCO Corp. ........................................ 89,063
2,100 Briggs & Stratton Corp. ........................... 96,206
2,000 Trinity Industries, Inc. .......................... 109,750
-----------
295,019
-----------
Chemicals -- 1.4%
1,250 Potash Corp. of Saskatchewan Inc. ................. 113,594
-----------
Data Storage -- 1.3%
4,150 Seagate Technology, Inc.(a) ....................... 104,787
-----------
Electronics -- 2.1%
1,000 Avnet, Inc. ....................................... 57,563
2,050 Raytheon Co. - Class B ............................ 119,669
-----------
177,232
-----------
Energy -- 3.2%
3,000 Diamond Offshore Drilling, Inc. ................... 136,125
3,000 Tidewater, Inc. ................................... 131,438
-----------
267,563
-----------
Financial Services -- 4.0%
3,000 Ambac Financial Group, Inc. ....................... 175,313
500 Chase Manhattan Corp. (The) ....................... 67,437
3,100 Green Tree Financial Corp. ........................ 88,156
-----------
330,906
-----------
Government Sponsored Enterprises -- 1.1%
1,500 Federal National Mortgage Association ............. 94,875
-----------
Health Care -- 1.2%
3,000 Columbia/HCA Healthcare Corp. ..................... 96,750
-----------
Housing -- 1.5%
6,200 Clayton Homes, Inc. ............................... 125,550
-----------
Insurance -- 2.8%
2,000 AFLAC, Inc. ....................................... 126,500
4,000 Frontier Insurance Group, Inc. .................... 110,500
-----------
237,000
-----------
17
<PAGE>
BALANCED FUND (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 60.2% Value
- --------------------------------------------------------------------------------
Media -- 3.8%
2,000 Comcast Corp. ..................................... $ 70,625
2,000 Cox Communications, Inc. - Class A(a) ............. 84,000
7,000 News Corporation Ltd. (The) (ADR) ................. 161,000
-----------
315,625
-----------
Mortgage Services -- 3.1%
2,500 Countrywide Credit Industries, Inc. ............... 132,969
1,600 PMI Group, Inc. (The) ............................. 129,200
-----------
262,169
-----------
Restaurants -- 2.9%
10,000 Ryan's Family Steak Houses, Inc.(a) ............... 90,625
5,000 Tricon Global Restaurants, Inc.(a) ................ 150,313
-----------
240,938
-----------
Retail -- 2.0%
1,000 Payless ShoeSource, Inc.(a) ....................... 75,250
3,000 Toys "R" Us, Inc.(a) .............................. 90,187
-----------
165,437
-----------
Real Estate -- 4.4%
2,500 Health Care Property Investors, Inc. .............. 92,343
4,000 Merry Land & Investment Co., Inc. ................. 89,500
3,000 Simon DeBartolo Group, Inc. ....................... 102,750
6,000 United Dominion Realty Trust, Inc. ................ 87,000
-----------
371,593
-----------
Semiconductor -- 3.1%
4,000 Applied Materials, Inc.(a) ........................ 141,250
1,500 Intel Corp. ....................................... 117,093
-----------
258,343
-----------
Technology -- 4.3%
4,500 ECI Telecommunications Ltd. ....................... 138,375
4,000 NCR Corp.(a) ...................................... 132,250
6,000 Wall Data, Inc.(a) ................................ 90,000
-----------
360,625
-----------
Telecommunications -- 2.3%
4,000 360 Communications Co.(a) ......................... 125,000
900 Sprint Corp. ...................................... 60,918
-----------
185,918
-----------
Tobacco -- 1.3%
2,650 Phillip Morris Cos., Inc. ......................... 110,472
-----------
Transportation -- 2.0%
1,500 CSX Corp. ......................................... 89,250
2,000 Norfolk Southern Corp. ............................ 74,750
-----------
164,000
-----------
18
<PAGE>
BALANCED FUND (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 60.2% Value
- --------------------------------------------------------------------------------
Utilities -- 4.8%
4,000 Houston Industries, Inc. .......................... $ 115,000
4,000 Illinova Corp. .................................... 120,750
3,000 NIPSCO Industries, Inc. ........................... 84,000
3,000 Southern Co. ...................................... 83,063
-----------
402,813
-----------
Total Common Stocks (Cost $4,341,672) ............. $ 5,022,553
-----------
- --------------------------------------------------------------------------------
Shares Fixed Income -- 33.8% Value
- --------------------------------------------------------------------------------
300,000 U.S. Treasury Note, 6.375%, 7/15/99 ............... $ 302,813
300,000 U.S. Treasury Note, 5.875%, 11/15/99 .............. 301,219
250,000 Federal National Mortgage Association,
5.620%, 3/15/01 ................................. 249,759
250,000 U.S. Treasury Note, 6.125%, 12/31/01 .............. 253,594
300,000 EI Dupont De Nemours, 6.500%, 9/01/02 ............. 304,857
300,000 Countrywide Credit Industries, Inc.,
6.280%, 1/15/03 ................................. 297,644
300,000 Federal National Mortgage Association,
5.250%, 1/15/03 ................................. 292,850
250,000 Hilton Hotels Corp., 7.000%, 7/15/04 .............. 248,222
300,000 U.S. Treasury Note, 6.500%, 10/15/06 .............. 314,625
250,000 Federal National Mortgage Association,
7.500%, 2/02/07 ................................. 255,377
-----------
Total Fixed Income (Cost $2,815,529) .............. $ 2,820,960
-----------
- --------------------------------------------------------------------------------
Face Value MONEY MARKET AND EQUIVALENTS -- 5.2% Value
- --------------------------------------------------------------------------------
402,000 KZH ING PP, CP 4/02/98 ............................ $ 401,937
32,347 Star Treasury Fund ................................ 32,347
-----------
Total Money Market and Equivalents (Cost $434,284) $ 434,284
-----------
Total Investments at Value -- 99.2%
(Cost $7,591,485) ............................... $ 8,277,797
Other Assets in Excess of Liabilities -- 0.8% ..... 68,763
-----------
Net Assets -- 100.0% .............................. $ 8,346,560
===========
(a) Non-income producing security.
ADR -- American Depository Receipt
See accompanying notes to financial statements.
19
<PAGE>
INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1998
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 99.2% Value
- --------------------------------------------------------------------------------
Argentina -- 0.6%
1,240 Perez Compac SA ................................... $ 8,395
-----------
Australia -- 3.4%
750 Brambles Industries Limited ....................... 15,642
1,280 Commonwealth Bank of Australia .................... 15,247
14,500 Pasminco Limited .................................. 15,866
-----------
46,755
-----------
Belgium -- 1.9%
48 Kredietbank NV .................................... 25,793
-----------
Brazil -- 3.3%
350,000 Telecomunicacoes Brazileiras SA ................... 45,434
-----------
Canada -- 7.0%
1,560 BCE, Inc. ......................................... 65,268
420 BCE Mobile Communications Inc.(a) ................. 12,537
1,010 National Bank of Canada ........................... 18,891
-----------
96,696
-----------
Denmark -- 1.0%
300 ISS International Service System A/S(a) ........... 14,341
-----------
Finland -- 0.8%
245 Pohjola Insurance Group ........................... 11,350
-----------
France -- 11.4%
370 AGF (Assurances Generales de France) .............. 20,824
116 Axa-UAP ........................................... 11,945
45 Carrefour SA ...................................... 26,510
140 Elf Aquitaine SA .................................. 18,348
40 L'OREAL ........................................... 18,593
120 Leon de Bruxelles(a) .............................. 12,493
244 Sanofi SA ......................................... 28,001
390 Transiciel SA(a) .................................. 21,087
-----------
157,801
-----------
Germany -- 6.8%
130 Axa Colonia Konzern AG ............................ 15,851
170 Deutsche Bank AG .................................. 12,745
160 Dis Deutscher Industrie Service AG(a) ............. 9,647
25 Karstadt AG ....................................... 9,733
26 Mannesmann AG ..................................... 19,036
50 Philipp Holzmann AG(a) ............................ 11,626
280 RWE AG ............................................ 15,103
-----------
93,741
-----------
Greece -- 1.0%
610 Goody's SA ........................................ 14,498
-----------
20
<PAGE>
INTERNATIONAL VALUE FUND (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 99.2% Value
- --------------------------------------------------------------------------------
Hong Kong -- 3.4%
1,000 Cheung Kong (Holdings) Ltd. ....................... $ 7,098
5,000 Cheung Kong Infrastructure Holdings ............... 14,907
2,000 Hutchison Whampoa Ltd. ............................ 14,068
2,000 Shanghai Industrial Holdings Ltd. ................. 8,183
10,000 Zhehuang Expressway Co. Ltd.(a) ................... 2,530
-----------
46,786
-----------
Italy -- 3.7%
1,290 Istituto Bancario San Paolo di Torino ............. 18,081
4,260 Telecom Italia SPA ................................ 33,571
-----------
51,652
-----------
Japan -- 8.3%
300 Acom Company, Ltd. ................................ 14,961
600 Aiwa Co., Ltd. .................................... 16,828
2,000 Dai-Ichi Kangyo Bank Ltd. ......................... 14,548
1,000 Fuji Photo Film ................................... 37,195
4,000 Sakura Bank Ltd. .................................. 14,188
200 Sony Corporation .................................. 16,948
-----------
114,668
-----------
Netherlands -- 3.9%
620 ABN AMRO Holding NV ............................... 14,305
2,700 AND International Publishers Plc(a) ............... 14,376
478 Koninklijke PTT Nederland NV ...................... 24,764
-----------
53,445
-----------
Norway -- 1.1%
3,600 Christiania Bank Og Kreditkasse ................... 15,299
-----------
Portugual -- 0.9%
250 Portugal Telecom SA ............................... 13,004
-----------
Singapore -- 1.2%
3,000 Oversea-Chinese Banking Corporation Ltd. .......... 16,905
-----------
Spain -- 3.0%
60 Grupo Acciona SA .................................. 12,076
655 Telefonica de Espana .............................. 28,868
-----------
40,944
-----------
Sweden -- 9.8%
950 Astra AB - Class A ................................ 19,608
1,770 Investment AB Bure ................................ 26,790
1,800 Nordbanken Holding AB ............................. 11,934
330 Pharmacia & Upjohn, Inc. .......................... 14,241
210 Skandia Forsakrings AB ............................ 13,686
286 Svenska Handelsbanken ............................. 13,237
490 Telefonaktiebolaget LM Ericsson ................... 23,292
380 Volvo AB .......................................... 12,097
-----------
134,885
-----------
21
<PAGE>
INTERNATIONAL VALUE FUND (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 99.2% Value
- --------------------------------------------------------------------------------
Switzerland -- 4.0%
17 Novartis .......................................... $ 30,086
9 Swiss Life ........................................ 7,610
11 UBS - Union Bank of Switzerland ................... 17,967
-----------
55,663
-----------
United Kingdom -- 20.6%
2,340 B.A.T. Industries Plc ............................. 23,511
600 Bank of Scotland .................................. 7,013
400 Barclays Plc ...................................... 11,970
470 British Aerospace Plc ............................. 15,466
870 British Energy Plc ................................ 7,645
1,800 British Telecommunications Plc .................... 19,563
540 Commercial Union Plc .............................. 10,517
850 Compass Group Plc ................................. 14,476
1,420 Energis Plc(a) .................................... 13,376
260 Glaxo Wellcome Plc ................................ 6,905
1,500 Imperial Tobacco Group Plc ........................ 11,040
300 National Westminster Bank Plc ..................... 5,491
580 Railtrack Group Plc ............................... 9,538
960 Reed International Plc ............................ 9,710
600 Royal & Sun Alliance Insurance Group Plc .......... 7,601
1,080 Royal Bank of Scotland Group Plc .................. 16,738
1,320 ScottishPower Plc ................................. 12,390
20,910 Scudder Latin America Investment Trust Plc ........ 37,905
800 SmithKline Beecham Plc ............................ 10,021
525 Smiths Industries Plc ............................. 7,649
1,640 Unilever Plc ...................................... 15,421
1,115 Vodafone Group Plc(a) ............................. 11,623
-----------
285,569
-----------
Closed-end Foreign Funds -- 2.1%
84 Societe Generale Baltic Republics Fund(a) ......... 18,582
120 Ukraine Fund Ltd.(a) .............................. 10,020
-----------
28,602
-----------
Total Investments at Value -- 99.2%
(Cost $1,226,254) ............................... $ 1,372,226
-----------
Other Assets in Excess of Liabilities -- 0.8% ..... 10,919
-----------
Net Assets -- 100.0% .............................. $ 1,383,145
===========
(a) Non-income producing security.
See accompanying notes to financial statements.
22
<PAGE>
DEAN FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Large Cap Small Cap Balanced International
Value Fund Value Fund Fund Value Fund
----------- ----------- ----------- -----------
ASSETS
Investments in securities:
<S> <C> <C> <C> <C>
At acquisition cost $ 6,757,873 $17,741,776 $ 7,591,485 $ 1,226,254
=========== =========== =========== ===========
At value (Note 2) $ 7,836,724 $20,428,193 $ 8,277,797 $ 1,372,226
Cash -- -- -- 101,067
Cash denominated in foreign currencies (at cost $42,783) -- -- -- 42,400
Net unrealized appreciation on forward foreign currency
exchange contracts (Note 6) -- -- -- 5,347
Dividends and interest receivable 8,098 29,479 45,452 1,654
Receivable for securities sold -- 431,581 -- 21,572
Receivable for capital shares sold 9,475 52,079 21,384 1,983
Receivable from Adviser (Note 4) 3,136 -- 1,946 3,317
Organization expenses, net (Note 2) 12,880 12,880 12,880 --
Other assets 8,166 16,428 8,335 15,756
----------- ----------- ----------- -----------
TOTAL ASSETS 7,878,479 20,970,640 8,367,794 1,565,322
----------- ----------- ----------- -----------
LIABILITIES
Dividends payable 298 -- 2,681 --
Payable for securities purchased -- -- -- 157,467
Payable for capital shares redeemed 59,962 111,187 1,975 --
Payable to affiliates (Note 4) 6,400 19,518 6,400 6,400
Other liabilities 5,775 10,345 10,178 18,310
----------- ----------- ----------- -----------
TOTAL LIABILITIES 72,435 141,050 21,234 182,177
----------- ----------- ----------- -----------
NET ASSETS $ 7,806,044 $20,829,590 $ 8,346,560 $ 1,383,145
=========== =========== =========== ===========
Net assets consist of:
Paid-in capital $ 6,621,536 $17,338,540 $ 7,452,425 $ 1,215,110
Undistributed net investment income -- 13,908 -- --
Accumulated net realized gains from security
transactions 105,657 790,725 207,823 15,487
Net unrealized appreciation on investments 1,078,851 2,686,417 686,312 145,972
Net unrealized appreciation on translation of assets and
liabilities in foreign currencies -- -- -- 6,576
----------- ----------- ----------- -----------
Net assets $ 7,806,044 $20,829,590 $ 8,346,560 $ 1,383,145
=========== =========== =========== ===========
</TABLE>
23
<PAGE>
DEAN FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1998 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Large Cap Small Cap Balanced International
Value Fund Value Fund Fund Value Fund
----------- ----------- ----------- -----------
PRICING OF CLASS A SHARES
<S> <C> <C> <C> <C>
Net assets applicable to Class A shares $ 7,669,807 $19,437,554 $ 7,262,670 $ 1,295,896
=========== =========== =========== ===========
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 628,288 1,514,344 629,043 110,223
=========== =========== =========== ===========
Net asset value and redemption price per share (Note 2) $ 12.21 $ 12.84 $ 11.55 $ 11.76
=========== =========== =========== ===========
Maximum offering price per share (Note 2) $ 12.89 $ 13.55 $ 12.19 $ 12.41
=========== =========== =========== ===========
PRICING OF CLASS C SHARES
Net assets applicable to Class C shares $ 136,237 $ 1,392,036 $ 1,083,890 $ 87,249
=========== =========== =========== ===========
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 11,205 108,873 94,079 7,443
=========== =========== =========== ===========
Net asset value, offering price and redemption price
per share (Note 2) $ 12.16 $ 12.79 $ 11.52 $ 11.72
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
DEAN FAMILY OF FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended March 31, 1998(A)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Large Cap Small Cap Balanced International
Value Fund Value Fund Fund Value Fund
----------- ----------- ----------- -----------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Dividends (net of foreign withholding taxes of $628
for the International Value Fund) $ 102,964 $ 257,025 $ 57,385 $ 2,729
Interest 10,462 24,945 155,346 --
----------- ----------- ----------- -----------
TOTAL INVESTMENT INCOME 113,426 281,970 212,731 2,729
----------- ----------- ----------- -----------
EXPENSES
Investment advisory fees (Note 4) 52,709 127,902 57,457 4,452
Registration fees - Common 6,730 9,443 6,944 12,782
Registration fees - Class A 11,063 11,960 11,098 6
Registration fees - Class C 11,113 11,113 11,096 6
Accounting services fees (Note 4) 27,000 27,000 27,000 15,000
Shareholder services and transfer agent fees -
Class A (Note 4) 10,800 10,800 10,800 6,000
Class C (Note 4) 9,600 9,600 9,600 6,000
Distribution expenses - Class A (Note 4) -- 5,533 -- --
Administration fees (Note 4) 9,000 12,639 9,000 5,000
Custodian fees 4,373 12,424 4,548 9,800
Postage and supplies 5,983 14,442 5,432 1,028
Trustees' fees and expenses 5,763 5,763 5,763 2,752
Insurance expense 3,758 3,758 3,758 --
Reports to shareholders 1,900 4,497 1,863 --
Amortization of organization expenses (Note 2) 2,892 2,892 2,892 --
Other expenses 2,151 4,325 2,544 3,916
----------- ----------- ----------- -----------
TOTAL EXPENSES 164,835 274,091 169,795 66,742
Fees waived and common expenses
reimbursed by Adviser (Note 4) (46,607) (17,445) (44,231) (53,501)
Class C expenses reimbursed by Adviser (Note 4) (20,468) (16,684) (16,291) (5,663)
----------- ----------- ----------- -----------
NET EXPENSES 97,760 239,962 109,273 7,578
----------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) 15,666 42,008 103,458 (4,849)
----------- ----------- ----------- -----------
REALIZEDAND UNREALIZED GAINS (LOSSES)
Net realized gains (losses) from: (Note 5)
Security transactions 199,457 1,496,720 263,495 21,655
Foreign currency transactions -- -- -- (1,319)
Net change in unrealized appreciation on: (Note 5)
Investments 1,078,851 2,686,417 686,312 145,972
Translation of assets and liabilities in foreign currencies -- -- -- 6,576
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS ON
INVESTMENTS AND FOREIGN CURRENCIES 1,278,308 4,183,137 949,807 172,884
----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 1,293,974 $ 4,225,145 $ 1,053,265 $ 168,035
=========== =========== =========== ===========
</TABLE>
(A) Except for the International Value Fund which represents the period from
October 13, 1997 to March 31, 1998.
See accompanying notes to financial statements.
25
<PAGE>
DEAN FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended March 31, 1998(A)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Large Cap Small Cap Balanced International
Value Fund Value Fund Fund Value Fund
------------ ------------ ------------ ------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) $ 15,666 $ 42,008 $ 103,458 $ (4,849)
Net realized gains from security transactions 199,457 1,496,720 263,495 21,655
Net realized losses from foreign currency transactions -- -- -- (1,319)
Net change in unrealized appreciation on investments 1,078,851 2,686,417 686,312 145,972
Net change in unrealized appreciation on translation
of assets and liabilities in foreign currencies -- -- -- 6,576
------------ ------------ ------------ ------------
Net increase in net assets from operations 1,293,974 4,225,145 1,053,265 168,035
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A (15,639) (27,790) (96,636) --
From net investment income, Class C (27) (310) (6,822) --
From net realized gains, Class A (93,134) (679,224) (50,850) --
From net realized gains, Class C (666) (26,771) (4,822) --
------------ ------------ ------------ ------------
Decrease in net assets from distributions
to shareholders (109,466) (734,095) (159,130) --
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Class A
Proceeds from shares sold 7,408,080 16,889,610 7,467,827 1,135,513
Net asset value of shares issued in
reinvestment of distributions to shareholders 100,180 609,751 142,246 --
Payments for shares redeemed (1,043,356) (1,485,185) (1,219,159) (308)
------------ ------------ ------------ ------------
Net increase in net assets from Class A
share transactions 6,464,904 16,014,176 6,390,914 1,135,205
------------ ------------ ------------ ------------
Class C
Proceeds from shares sold 125,961 1,324,235 1,017,191 79,905
Net asset value of shares issued in
reinvestment of distributions to shareholders 690 26,186 11,331 --
Payments for shares redeemed (4,019) (59,057) (11) --
------------ ------------ ------------ ------------
Net increase in net assets from Class C
share transactions 122,632 1,291,364 1,028,511 79,905
------------ ------------ ------------ ------------
Net increase in net assets from capital share transactions 6,587,536 17,305,540 7,419,425 1,215,110
------------ ------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS 7,772,044 20,796,590 8,313,560 1,383,145
NET ASSETS:
Beginning of year (Note 1) 34,000 33,000 33,000 --
------------ ------------ ------------ ------------
End of year $ 7,806,044 $ 20,829,590 $ 8,346,560 $ 1,383,145
============ ============ ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME $ -- $ 13,908 $ -- $ --
============ ============ ============ ============
</TABLE>
(A) Except for the International Value Fund which represents the period from
October 13, 1997 to March 31, 1998.
26
<PAGE>
DEAN FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended March 31, 1998 (continued)(A)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Large Cap Small Cap Balanced International
Value Fund Value Fund Fund Value Fund
---------- ---------- ---------- ----------
CAPITAL SHARE ACTIVITY:
Class A
<S> <C> <C> <C> <C>
Shares sold 711,149 1,585,565 725,255 110,251
Shares issued in reinvestment of distributions
to shareholders 9,315 53,022 13,140 --
Shares redeemed (95,576) (127,543) (112,652) (28)
---------- ---------- ---------- ----------
Net increase in shares outstanding 624,888 1,511,044 625,743 110,223
Shares outstanding, beginning of year 3,400 3,300 3,300 --
---------- ---------- ---------- ----------
Shares outstanding, end of year 628,288 1,514,344 629,043 110,223
========== ========== ========== ==========
Class C
Shares sold 11,518 111,598 93,039 7,443
Shares issued in reinvestment of distributions
to shareholders 64 2,283 1,041 --
Shares redeemed (377) (5,008) (1) --
---------- ---------- ---------- ----------
Net increase in shares outstanding 11,205 108,873 94,079 7,443
Shares outstanding, beginning of year -- -- -- --
---------- ---------- ---------- ----------
Shares outstanding, end of year 11,205 108,873 94,079 7,443
========== ========== ========== ==========
</TABLE>
(A) Except for the International Value Fund which represents the period from
October 13, 1997 to March 31, 1998.
See accompanying notes to financial statements.
27
<PAGE>
DEAN FAMILY OF FUNDS
FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Throughout the Period
From Initial Public Offering of Shares(A) through March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Large Cap Value Fund Small Cap Value Fund
---------------------------- ----------------------------
Class A Class C Class A Class C
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.00 $ 10.76 $ 10.00 $ 10.95
----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) 0.03 (0.01) 0.03 (0.02)
Net realized and unrealized gains
on investments 2.36 1.56 3.30 2.33
----------- ----------- ----------- -----------
Total from investment operations 2.39 1.55 3.33 2.31
----------- ----------- ----------- -----------
Less distributions:
From net investment income (0.03) (0.00) (0.02) (0.00)
From net realized gains (0.15) (0.15) (0.47) (0.47)
----------- ----------- ----------- -----------
Total distributions (0.18) (0.15) (0.49) (0.47)
----------- ----------- ----------- -----------
Net asset value at end of period $ 12.21 $ 12.16 $ 12.84 $ 12.79
=========== =========== =========== ===========
Total return(B) 24.11% 14.63% 33.86% 21.63%
=========== =========== =========== ===========
Net assets at end of period $ 7,669,807 $ 136,237 $19,437,554 $ 1,392,036
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before waiver of fees by Adviser 2.72% 52.73% 1.98% 6.41%
After waiver of fees by Adviser 1.84% 2.59% 1.84% 2.59%
Ratio of net investment income (loss)
to average net assets(C) 0.30% (0.55%) 0.35% (0.42%)
Portfolio turnover rate(C) 54% 54% 62% 62%
Average commission rate per share $ 0.0600 $ 0.0600 $ 0.0589 $ 0.0589
(A) Initial public offering date 5-28-97 8-19-97 5-28-97 8-1-97
</TABLE>
(B) Total returns shown exclude the effect of applicable sales loads and are not
annualized.
(C) Annualized.
See accompanying notes to financial statements.
28
<PAGE>
DEAN FAMILY OF FUNDS
FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Throughout the Period
From Initial Public Offering of Shares(A) through March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund International Value Fund
---------------------------- ----------------------------
Class A Class C Class A Class C
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.00 $ 10.71 $ 10.00 $ 9.89
----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) 0.17 0.07 (0.05) (0.04)
Net realized and unrealized gains
on investments and foreign currency 1.62 0.92 1.81 1.87
----------- ----------- ----------- -----------
Total from investment operations 1.79 0.99 1.76 1.83
----------- ----------- ----------- -----------
Less distributions:
From net investment income (0.16) (0.10) -- --
From net realized gains (0.08) (0.08) -- --
----------- ----------- ----------- -----------
Total distributions (0.24) (0.18) -- --
----------- ----------- ----------- -----------
Net asset value at end of period $ 11.55 $ 11.52 $ 11.76 $ 11.72
=========== =========== =========== ===========
Total return(B) 18.07% 9.37% 17.60% 18.50%
=========== =========== =========== ===========
Net assets at end of period $ 7,262,670 $ 1,083,890 $ 1,295,896 $ 87,249
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before waiver of fees by Adviser 2.60% 7.39% 16.66% 58.89%
After waiver of fees by Adviser 1.84% 2.59% 2.04% 2.82%
Ratio of net investment income (loss)
to average net assets(C) 1.85% 0.99% (1.30%) (1.94%)
Portfolio turnover rate(C) 64% 64% 109% 109%
Average commission rate per share $ 0.0600 $ 0.0600 $ 0.0368 $ 0.0368
(A) Initial public offering date 5-28-97 8-1-97 10-13-97 11-6-97
</TABLE>
(B) Total returns shown exclude the effect of applicable sales loads and are not
annualized.
(C) Annualized.
See accompanying notes to financial statements.
29
<PAGE>
DEAN FAMILY OF FUNDS
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
- --------------------------------------------------------------------------------
1. Organization
The Dean Family of Funds (the Trust) is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management investment
company. The Trust was organized as an Ohio business trust under a Declaration
of Trust dated December 18, 1996. The Trust has established four fund series,
the Large Cap Value Fund, the Small Cap Value Fund, the Balanced Fund, and the
International Value Fund (the Funds). The Trust was capitalized on March 17,
1997, when the initial shares of each Fund (except for the International Value
Fund) were purchased at $10.00 per share. The initial public offering of shares
of the International Value Fund commenced on October 13, 1997. The Trust had no
operations prior to the public offering of shares except for the initial
issuance of shares.
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 instruments.
The International Value Fund seeks to provide long-term capital growth by
investing primarily in the common stocks of foreign companies.
The Funds each offer two classes of shares: Class A shares (sold subject to a
maximum front-end sales load of 5.25% and a distribution fee of up to 0.25% of
the average daily net assets) and Class C shares (sold subject to a 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 a 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.
2. Significant Accounting Policies
The following is a summary of the Trust's significant accounting policies:
Security valuation -- The Funds' portfolio securities are valued as of the close
of business of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time). Securities traded on a national stock
exchange or quoted by NASDAQ are valued based upon the closing price on the
principal exchange where the security is traded, or, if not traded on a
particular day, at the closing bid price. 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. With respect to the International Value Fund, the
U.S. dollar value of foreign securities and forward foreign currency exchange
contracts is determined using spot and forward currency exchange rates,
respectively, supplied by a quotation service.
Share valuation -- The net asset value per share of each class of shares of each
Fund is calculated daily by dividing the total value of a Fund's assets
attributable to that class, less liabilities attributable to that class, by the
number of shares of that class outstanding. The maximum offering price of Class
A shares of each Fund is equal to the net asset value per share plus a sales
load equal to 5.54% of the net asset value (or 5.25% of the offering price). The
offering price of Class C shares of each Fund is equal to the net asset value
per share.
The redemption price per share of Class A shares and Class C shares of each Fund
is equal to net asset value per share. However, Class C shares of each Fund are
subject to a contingent deferred sales load of 1% of the original purchase price
if redeemed within a one-year period from the date of purchase.
30
<PAGE>
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned. Discounts and premiums on securities
purchased are amortized in accordance with income tax regulations which
approximate generally accepted accounting principles.
Distributions to shareholders -- The Large Cap Value Fund, the Balanced Fund and
the International Value 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.
Organization expenses -- Expenses of organization have been capitalized and are
being amortized on a straight-line basis over five years. In the event any of
the initial shares of a Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by a pro rata portion of any unamortized
organization expenses in the same proportion as the number of initial shares
being redeemed bears to the number of initial shares of the Fund outstanding at
the time of the redemption.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
The following information is based upon the federal income tax cost of portfolio
investments as of March 31, 1998:
<TABLE>
<CAPTION>
Large Cap Small Cap Balanced International
Value Fund Value Fund Fund Equity Fund
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross unrealized appreciation ..... $ 1,193,332 $ 3,215,867 $ 829,199 $ 161,973
Gross unrealized depreciation ..... (114,481) (529,450) (142,887) (16,001)
----------- ----------- ----------- -----------
Net unrealized appreciation ....... $ 1,078,851 $ 2,686,417 $ 686,312 $ 145,972
=========== =========== =========== ===========
</TABLE>
The Federal income tax cost of portfolio investments is equal to book cost as
shown on the statement of assets and liabilities.
3. Investment Transactions
For the period ended March 31, 1998, purchases and proceeds from sales of
portfolio securities, other than short-term investments, amounted to $9,392,502
and $2,873,183, respectively, for the Large Cap Value Fund, $24,425,156 and
$8,251,829, respectively, for the Small Cap Value Fund, $10,371,359 and
$3,477,375, respectively, for the Balanced Fund and $1,607,781 and $403,182 for
the International Value Fund.
4. Transactions with Affiliates
Certain trustees and officers of the Trust are also officers of C.H. Dean &
Associates, Inc. (the Adviser) or of Countrywide Fund Services, Inc. (CFS), the
administrative services agent, shareholder servicing and transfer agent, and
accounting services agent for the Trust.
31
<PAGE>
INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENT
The Funds' investments are managed by the Adviser pursuant to the terms of an
Advisory Agreement. Each Fund pays the Adviser an investment management fee,
computed and accrued daily and paid monthly, at an annual rate of 1.00% of its
average daily net assets for the Large Cap Value Fund, Small Cap Value Fund and
Balanced Fund and 1.25% of its average daily net assets for the International
Value Fund.
Newton Capital Management Ltd. (Newton Capital) has been retained by the Adviser
to manage the investments of the International Value Fund. The Adviser (not the
Fund) pays Newton Capital a fee for its services equal to the rate of 0.50% of
its average value of the Fund's daily net assets.
In order to voluntarily reduce operating expenses during the year ended March
31, 1998, the Adviser waived $46,607 of its advisory fees and reimbursed $20,468
of Class C expenses for the Large Cap Value Fund; waived $17,445 of its advisory
fees and reimbursed $16,684 of Class C expenses for the Small Cap Value Fund;
waived $44,231 of its advisory fees and reimbursed $16,291 of Class C expenses
for the Balanced Fund; and waived its entire advisory fee of $4,452 and
reimbursed $49,049 of common expenses and $5,663 of Class C expenses for the
International Value Fund.
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, CFS supplies non-investment
related administrative and compliance services for the Funds. CFS supervises the
preparation of tax returns, reports to shareholders, reports to and filings with
the Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For these services, CFS
receives a monthly fee from each Fund at an annual rate of 0.10% on its average
daily net assets up to $100 million; 0.075% on the next $100 million of such net
assets; and 0.05% on such net assets in excess of $200 million, subject to a
$1,000 minimum monthly fee.
TRANSFER AGENT AND SHAREHOLDER SERVICING AGREEMENT
Under the terms of a Transfer, Dividend, Shareholder Service and Plan Agency
Agreement, CFS 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. For these services, CFS
receives a monthly fee based on the number of shareholder accounts in each class
of each Fund, subject to a $1,200 minimum monthly fee for each class of shares
of a Fund. In addition, each Fund pays out-of-pocket expenses, including but not
limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement, CFS calculates the daily
net asset value per share and maintains the financial books and records of the
Funds. For these services, CFS receives a monthly fee of $3,000 from each Fund.
In addition, each Fund pays certain out-of-pocket expenses incurred by CFS in
obtaining valuations of such Fund's portfolio securities.
UNDERWRITING AGREEMENT
2480 Securities LLC (Underwriter), an affiliate of the Adviser, serves as
principal underwriter for the Funds and, as such, is the exclusive agent for the
distribution of shares of the Funds. Under the terms of the Underwriting
Agreement between the Trust and the Underwriter, the Underwriter earned $1,840,
$10,480, $2,068 and $856 from underwriting and broker commissions on the sale of
shares of the Large Cap Value Fund, Small Cap Value Fund, Balanced Fund, and
International Value Fund, respectively, during the period ended March 31, 1998.
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution (Class A Plan) under which Class A shares
may directly incur or reimburse the Adviser for expenses related to the
distribution and promotion of shares. The annual limitation for payment of such
expenses under the Class A Plan is 0.25% of average daily net assets
attributable to such shares.
The Trust also has a Plan of Distribution (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 0.25% of a Fund's average daily net assets allocable to Class C shares. In
addition, the Class C shares may directly incur or reimburse the Underwriter in
an amount not to exceed 0.75% 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.
32
<PAGE>
5. Foreign Currency Translation
With respect to the International Value Fund, amounts denominated in or expected
to settle in foreign currencies are translated into U.S. dollars based on
exchange rates on the following basis:
A. The market values of investment securities and other assets and
liabilities are translated at the closing rate of exchange each day.
B. Purchases and sales of investment securities and income and expenses
are translated at the rate of exchange prevailing on the respective
dates of such transactions.
C. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
those resulting from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gains
or losses from investments. Reported net realized foreign exchange
gains or losses arise from 1) sales of foreign currencies, 2) currency
gains or losses realized between the trade and settlement dates on
securities transactions, and 3) the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the
Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Reported net unrealized foreign exchange gains or
losses arise from changes in the value of assets and liabilities,
other than investments, resulting from changes in exchange rates.
6. Forward Foreign Currency Exchange Contracts
The International Value Fund enters into foreign currency exchange contracts as
a way of managing foreign exchange rate risk. The Fund may enter into these
contracts for the purchase or sale of a specific foreign currency at a fixed
price on a future date as a hedge or cross-hedge against either specific
transactions or portfolio positions. The objective of the Fund's foreign
currency hedging transactions is to reduce the risk that the U.S. dollar value
of the Fund's securities denominated in foreign currency will decline in value
due to changes in foreign currency exchange rates. All foreign currency exchange
contracts are "marked-to-market" daily at the applicable translation rates
resulting in unrealized gains or losses. Realized and unrealized gains or losses
are included in the Fund's Statement of Assets and Liabilities and Statement of
Operations. Risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts and
from unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
As of March 31, 1998, the International Value Fund had forward foreign currency
exchange contracts outstanding as follows:
<TABLE>
<CAPTION>
Net Unrealized
Settlement To Receive Initial Market Appreciation
Date (To Deliver) Value Value (Depreciation)
- ------------------------- --------------- ---------- ---------- ------------
Contracts To Sell
<S> <C> <C> <C> <C>
04/02/98 ............ (82,026) DKK $ (11,651) $ (11,635) $ 16
04/15/98 ............ (23,000) AUD (15,507) (15,237) 270
05/15/98 ............ (292,000) FRF (48,402) (47,298) 1,104
05/15/98 ............ (25,800) GBP (41,979) (43,176) (1,197)
05/15/98 ............ (32,500) NLG (15,873) (15,646) 227
06/15/98 ............ (12,409,000) JPY (99,842) (94,285) 5,557
07/15/98 ............ (60,300) CHF (42,791) (40,088) 2,703
08/14/98 ............ (121,400) CAD (84,784) (85,515) (731)
08/14/98 ............ (152,700) HKD (19,420) (17,998) 1,422
09/15/98 ............ (57,400) DEM (31,707) (31,364) 343
10/15/98 ............ (22,000) AUD (14,643) (14,610) 33
03/15/99 ............ (185,300) HKD (23,329) (23,207) 122
--------- --------- ---------
Total sell contracts .... (449,928) (440,059) 9,869
--------- --------- ---------
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Net Unrealized
Settlement To Receive Initial Market Appreciation
Date (To Deliver) Value Value (Depreciation)
- ------------------------- ------------- --------- --------- ------------
Contracts To Buy
<S> <C> <C> <C> <C>
04/01/98 ............ 7,294 CHF $ 4,797 $ 4,784 $ (13)
04/01/98 ............ 16,370 DEM 8,882 8,852 (30)
04/01/98 ............ 1,347,871 JPY 10,223 10,108 (115)
04/01/98 ............ 92,136 SEK 11,575 11,525 (50)
04/02/98 ............ 5,521 AUD 3,666 3,661 (5)
04/02/98 ............ 14,787 GBP 24,898 24,762 (136)
05/15/98 ............ 292,000 FRF 48,926 47,299 (1,627)
07/15/98 ............ 60,300 CHF 42,687 40,088 (2,599)
08/14/98 ............ 34,300 CAD 24,189 24,161 (28)
08/14/98 ............ 2,414 GBP 3,941 4,022 81
--------- --------- ---------
Total buy contracts 183,784 179,262 (4,522)
--------- --------- ---------
NET CONTRACTS $(266,144) $(260,797) $ 5,347
========= ========= =========
</TABLE>
AUD -- Australian Dollar GBP -- British Pound Sterling
CAD -- Canadian Dollar HKD -- Hong Kong Dollar
CHF -- Swiss Franc JPY -- Japanese Yen
DEM -- German Mark NLG -- Netherland Guilder
DKK -- Danish Krone SEK -- Swedish Krona
FRF -- French Franc
34
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Trustees of
Dean Family of Funds
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of Dean Family of Funds (comprising,
respectively, Large Cap Value Fund, Small Cap Value Fund, Balanced Fund, and
International Value Fund) (the Funds) as of March 31, 1998, and the related
statements of operations, statements of changes in net assets, and the financial
highlights presented herein for the periods ended March 31, 1998. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights 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 financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of March 31, 1998, by correspondence with the custodian and
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting Dean Family of Funds as of March
31, 1998, and the results of their operations, the changes in their net assets,
and their financial highlights presented herein for the periods ended March 31,
1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
May 19, 1998
35
<PAGE>
DEAN FAMILY OF FUNDS
2480 Kettering Tower
Dayton, Ohio 45423
BOARD OF TRUSTEES
Victor S. Curtis
Chauncey H. Dean
Dr. 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
- --------------------------------------------------------------------------------
Chairman and President's Letter .......................................... 1
Discussions of Performance:
Small Cap Value Fund .................................................. 3
Large Cap Value Fund .................................................. 4
Balanced Fund ......................................................... 5
International Value Fund .............................................. 6
Fund Facts ............................................................... 7
Portfolios of Investments:
Large Cap Value Fund .................................................. 9
Small Cap Value Fund .................................................. 12
Balanced Fund ......................................................... 17
International Value Fund .............................................. 20
Financial Statements ..................................................... 23
Notes to Financial Statements ............................................ 30
Auditor's Report ......................................................... 35
- --------------------------------------------------------------------------------
<PAGE>
DEAN FAMILY OF FUNDS
--------------------
PART C. OTHER INFORMATION
- ------- -----------------
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) (i) Financial Statements included in Part A:
Financial Highlights for the Periods Ended March 31, 1998
(ii) Financial Statements included in Part B:
Statements of Assets & Liabilities, March 31, 1998
Statements of Operations for the Periods Ended March 31, 1998
Statements of Changes in Net Assets for the Periods ended March
31, 1998
Financial Highlights for the Periods Ended March 31, 1998
Portfolio of Investments, March 31, 1998
(b) Exhibits
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) (i) Advisory Agreement with C.H. Dean & Associates, Inc. for the
Large Cap Fund, the Small Cap Fund and the Balanced Fund*
(ii) Advisory Agreement with C.H. Dean & Associates, Inc. for the
International Value Fund
(iii)Sub-Advisory Agreement with Newton Capital Management Ltd.
(6) Underwriting Agreement with 2480 Securities LLC*
(7) Directors Deferred Compensation Plan*
-1-
<PAGE>
(8) (i) Custody Agreement with Star Bank, N.A.
(ii) Custody Agreement with The Fifth Third Bank
(9) (i) Administration Agreement with Countrywide Fund Services,
Inc.*
(ii) Accounting Services Agreement with Countrywide Fund
Services, Inc.*
(iii)Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement with Countrywide Fund Services, Inc.*
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Auditors
(12) Inapplicable
(13) Agreement Relating to Initial Capital*
(14) Inapplicable
(15)(i) Plan of Distribution Pursuant to Rule 12b-1 for Class A
Shares*
(ii) Plan of Distribution Pursuant to Rule 12b-1 for Class C
Shares*
(16) Inapplicable
(17)(i) Financial Data Schedule for Large Cap Value Fund - Class A
Shares
(ii) Financial Data Schedule for Large Cap Value Fund - Class C
Shares
(iii) Financial Data Schedule for Small Cap Value Fund - Class A
Shares
(iv) Financial Data Schedule for Small Cap Value Fund - Class C
Shares
(v) Financial Data Schedule for Balanced Fund - Class A Shares
(vi) Financial Data Schedule for Balanced Fund - Class C Shares
(vii) Financial Data Schedule for International Value Fund -
Class A Shares
(viii)Financial Data Schedule for International Value Fund -
Class C Shares
(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.
- -------- --------------------------------------------------------------
None.
-2-
<PAGE>
Item 26. Number of Holders of Securities.
- -------- --------------------------------
As of April 30, 1998, there are 618 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:
"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.
- 3 -
<PAGE>
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person may be entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors and
administrators. Nothing contained in this article shall affect
any rights to indemnification to which personnel of the Trust,
other than Trustees and officers, and other persons may be
entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of
any such person.
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
- 4 -
<PAGE>
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 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 Value 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
Value Fund in connection with the matters to which the Sub-Advisory
Agreement relates, except a loss resulting from the Sub-Adviser's
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 the 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 1973 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.
- 5 -
<PAGE>
(b) The directors and officers of Dean Investment Associates and any
other business, profession, vocation or employment of a
substantial nature engaged in at any time during the past two
years:
(i) Chauncey H. Dean - Chairman of the Board, Chief Executive
Officer and controlling shareholder of Dean Investment
Associates.
A Trustee of the Trust.
(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.
A Trustee of the Trust.
(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:
(i) Guy Bowles - Chairman of the Sub-Adviser.
(ii) Colin R. Harris - Director and Chief Operating Officer of
the Sub-Adviser.
(iii)Shreekant P. Panday - Director of the Sub-Adviser.
(iv) Andrew J.W. Powell - Director of the Sub-Adviser.
- 6 -
<PAGE>
Item 29. Principal Underwriters
- -------- ----------------------
(a) Inapplicable
(b) Position with Position with
Name Underwriter Registrant
---- ----------- ----------
Frank H. Scott President President and a
Trustee
Edward J. Blake Vice President None
Stephen M. Miller Treasurer None
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) Inapplicable
(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 meets all of
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf, thereunto duly authorized, in
the City of Dayton and State of Ohio, on the 15th day of July, 1998.
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 15, 1998
- ----------------------------- and Trustee
Frank H. Scott
/s/ Mark J. Seger Treasurer July 15, 1998
- -----------------------------
Mark J. Seger
/s/ Chauncey H. Dean Trustee July 15, 1998
- -----------------------------
Chauncey H. Dean
/s/ Robert D. Dean Trustee July 15, 1998
- -----------------------------
Robert D. Dean
/s/ Victor S. Curtis Trustee July 15, 1998
- -----------------------------
Victor S. Curtis
Trustee
- ----------------------------- By: /s/ Tina S. Hosking
Frank J. Perez* -------------------
Tina D. Hosking
Attorney-in-Fact*
Trustee July 15, 1998
- -----------------------------
David H. Ponitz*
Trustee
- -----------------------------
Gilbert P. Williamson*
-8-
<PAGE>
INDEX TO EXHIBITS
-----------------
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) (i) Advisory Agreement for the Large Cap Value Fund, the Small Cap Value
Fund and the Balanced Fund*
(ii) Advisory Agreement for the International Value Fund
(iii) Sub-Advisory Agreement for the International Value Fund
(6) Underwriting Agreement*
(7) Directors Deferred Compensation Plan*
(8) (i) Custody Agreement with Star Bank, N.A.
(ii) Custody Agreement with The Fifth Third Bank
(9) (i) Administration Agreement*
(ii) Accounting Services Agreement*
(iii) Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement*
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Auditors
(12) Inapplicable
(13) Agreement Relating to Initial Capital*
(14) Inapplicable
(15) (i) Plan of Distribution Pursuant to Rule 12b-1 for Class A Shares*
(ii) Plan of Distribution Pursuant to Rule 12b-1 for Class C Shares*
(16) Inapplicable
-9-
<PAGE>
(17) (i) Financial Data Schedule for Large Cap Value Fund - Class A Shares
(ii) Financial Data Schedule for Large Cap Value Fund - Class C Shares
(iii) Financial Data Schedule for Small Cap Value Fund - Class A Shares
(iv) Financial Data Schedule for Small Cap Value Fund - Class C Shares
(v) Financial Data Schedule for Balanced Fund - Class A Shares
(vi) Financial Data Schedule for Balanced Fund - Class C Shares
(vii) Financial Data Schedule for International Value Fund - Class A
Shares
(viii)Financial Data Schedule for International Value Fund - Class C
Shares
(18) Rule 18f-3 Multi-Class Plan*
- ----------------------------
* Incorporated by reference to the Trust's Registration Statement on Form
N-1A.
-10-
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 Value 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
- 2 -
<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 The Northern Trust Company 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 5, 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
- 8 -
<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).
- 12 -
<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
- 14 -
<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: /s/ Frank H. Scott
----------------------------------
Title: /s/ President
-------------------------------
Date: October 1, 1997
ACCEPTANCE
----------
The foregoing Agreement is hereby accepted.
C.H. DEAN & ASSOCIATES, INC.
By: /s/ Robert D. Dean
----------------------------------
Title: /s/ President, CIO
-------------------------------
Date: October 1, 1997
- 15 -
SUB-ADVISORY AGREEMENT
----------------------
Newton Capital Management Limited
71 Queen Victoria Street
London EC4V 4DR
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 Value 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
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<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
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<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 the Fund's custodian (the "Custodian"), or such
depositories or agents as may be designated by the Custodian in writing, as
custodian for the
- 6 -
<PAGE>
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. Provided
that the Sub-Adviser is able to identify the relevant transactions, it shall be
the responsibility of the Sub-Adviser to take reasonable appropriate action if
the Custodian fails to properly execute 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
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<PAGE>
fees to the Sub-Adviser, and the Sub-Adviser agrees to seek payment of the
Sub-Adviser's fees solely from the Adviser. The 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 and shall not in any
way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities for its or
their own accounts or for the accounts of others for whom it or they may be
acting, other than to the extent such activity is otherwise limited by the
Trust's Code of Ethics.
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
- 8 -
<PAGE>
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 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.
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<PAGE>
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 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.
- 10 -
<PAGE>
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 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
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<PAGE>
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.
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 pursuant to this Agreement.
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
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<PAGE>
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 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
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<PAGE>
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.
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.
- 14 -
<PAGE>
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 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 and legally organized and existing in good
standing.
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
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<PAGE>
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.
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.
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<PAGE>
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.
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 until April 1, 1999,
and from year to year
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<PAGE>
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 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: /s/ Robert D. Dean By: /s/ Frank H. Scott
------------------------------- --------------------------------
Title: President Title: President
Date: October 1, 1997 Date: October 1, 1997
ACCEPTANCE
----------
The foregoing Agreement is hereby accepted.
NEWTON CAPITAL MANAGEMENT LIMITED
By: /s/ Colin R. Harris
--------------------------------
Title: Director
-----------------------------
Date: October 1, 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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CUSTODY AGREEMENT
This AGREEMENT, dated as of December 1, 1997, by and between the DEAN
FAMILY OF FUNDS (the "Trust"), a business trust organized under the laws of the
State of Ohio, acting with respect to its existing series as of the date of this
Agreement, and such other series as shall be designated from time to time by the
Trust (individually, a "Fund" and, collectively, the "Funds"), each of them a
series of the Trust and each of them operated and administered by the Trust, and
STAR BANK, N.A., a national banking association (the "Custodian").
W I T N E S S E T H:
WHEREAS, the Trust desires that the Funds' Securities and cash be held and
administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Trust and the Custodian hereby agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly authorized
by resolution of the Board of Trustees to give Oral Instructions and Written
Instructions on behalf
<PAGE>
of the Funds and named in Exhibit A hereto or in such resolutions of the Board
of Trustees, certified by an Officer, as may be received by the Custodian from
time to time.
1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time serving
under the Trust's Agreement and Declaration of Trust, as from time to time
amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day by
The New York Stock Exchange, Inc. and any other day for which the Trust computes
the net asset value of Shares of any Fund.
1.5 "FUND CUSTODY ACCOUNT" shall mean any of the accounts in the name of
the Trust, which is provided for in Section 3.2 below.
1.6 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.7 "OFFICER" shall mean the Chairman, the President, any Vice President,
any Assistant Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer of the Trust.
1.8 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Trust shall cause all Oral
Instructions to be confirmed by Written Instructions prior to the end of the
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next Business Day. If such Written Instructions confirming Oral Instructions are
not received by the Custodian prior to a transaction, it shall in no way affect
the validity of the transaction or the authorization thereof by the Trust. If
Oral Instructions vary from the Written Instructions which purport to confirm
them, the Custodian shall notify the Trust of such variance but such Oral
Instructions will govern unless the Custodian has not yet acted.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and
(provided that Custodian shall have received a copy of a resolution of the Board
of Trustees, certified by an Officer, specifically approving the use of such
clearing agency as a depository for the Funds) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 as amended (the "1934 Act"), which acts as a
system for the central handling of Securities where all Securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities or other
obligations, and any certificates, receipts, warrants or other instruments or
documents representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein, or any similar
property or assets that the Custodian has the facilities to clear and to
service.
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1.12 "SHARES" shall mean, with respect to a Fund, the units of beneficial
interest issued by the Trust on account of such Fund.
1.13 "SUB-CUSTODIAN" shall mean and include (i) any branch of a "U.S.
Bank," as that term is defined in Rule 17f-5 under the 1940 Act, (ii) any
"Eligible Foreign Custodian," as that term is defined in Rule 17f-5 under the
1940 Act, having a contract with the Custodian which the Custodian has
determined will provide reasonable care of assets of the Funds based on the
standards specified in Section 3.3 below. Such contract shall include provisions
that provide: (i) for indemnification or insurance arrangements (or any
combination of the foregoing) such that the Funds will be adequately protected
against the risk of loss of assets held in accordance with such contract; (ii)
that the Funds' assets will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the Sub-Custodian or its
creditors except a claim of payment for their safe custody or administration, in
the case of cash deposits, liens or rights in favor of creditors of the
Sub-Custodian arising under bankruptcy, insolvency, or similar laws; (iii) that
beneficial ownership of the Funds' assets will be freely transferable without
the payment of money or value other than for safe custody or administration;
(iv) that adequate records will be maintained identifying the assets as
belonging to the Funds or as being held by a third party for the benefit of the
Funds; (v) that the Funds' independent public accountants will be given access
to those records or confirmation of the contents of those records; and (vi) that
the Funds will receive periodic reports with respect to the safekeeping of the
Funds' assets, including, but not limited to, notification of any transfer to or
from a Fund's account or a third party account containing assets held for the
benefit of the Fund. Such contract may contain, in lieu of any or all of the
provisions specified above, such other provisions that the Custodian determines
will
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provide, in their entirety, the same or greater level of care and protection for
Fund assets as the specified provisions, in their entirety.
1.14 "WRITTEN INSTRUCTIONS" shall mean (i) written communications actually
received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof shall have been
approved by resolutions of the Board of Trustees, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 APPOINTMENT. The Trust hereby constitutes and appoints the Custodian
as custodian of all Securities and cash owned by or in the possession of the
Funds at any time during the period of this Agreement.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
2.3 DOCUMENTS TO BE FURNISHED. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of the
Agreement to the Custodian by the Trust:
a. A copy of the Declaration of Trust of the Trust certified by the
Secretary or an Assistant Secretary;
b. A copy of the Bylaws of the Trust certified by the Secretary or
an Assistant Secretary;
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c. A copy of the resolution of the Board of Trustees of the Trust
appointing the Custodian, certified by the Secretary or an
Assistant Secretary;
d. A copy of the then current Prospectus of each Fund; and
e. A certification of the President and Secretary of the Trust
setting forth the names and signatures of the current Officers of
the Trust and other Authorized Persons.
2.4 NOTICE OF APPOINTMENT OF DIVIDEND AND TRANSFER AGENT. The Trust
agrees to notify the Custodian in writing of the appointment, termination or
change in appointment of any Dividend and Transfer Agent of the Funds.
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 SEGREGATION. All Securities and non-cash property held by the
Custodian for the account of a Fund (other than Securities maintained in a
Securities Depository or Book-Entry System) shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian
(including the Securities and non-cash property of the other Funds) and shall be
identified as subject to this Agreement.
3.2 FUND CUSTODY ACCOUNTS. As to each Fund, the Custodian shall open and
maintain in its trust department a custody account in the name of the Trust
coupled with the name of such Fund, subject only to draft or order of the
Custodian, in which the Custodian shall enter and carry all Securities, cash and
other assets of such Fund which are delivered to it.
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3.3 APPOINTMENT OF AGENTS. (a) In its discretion, the Custodian may
appoint one or more Sub-Custodians to act as Securities Depositories or as
sub-custodians to hold Securities and cash of the Funds and to carry out such
other provisions of this Agreement as it may determine, provided, however, that
the appointment of any such agents and maintenance of any Securities and cash of
the Funds shall be at the Custodian's expense and shall not relieve the
Custodian of any of its obligations or liabilities under this Agreement.
(b) If, after the initial approval of Sub-Custodians by the Board of
Trustees in connection with this Agreement, the Custodian wishes to appoint
other Sub-Custodians to hold property of the Funds, it will so notify the Trust
and provide it with information reasonably necessary to determine any such new
Sub-Custodian's eligibility under Rule 17f-5 under the 1940 Act, including a
copy of the proposed agreement with such Sub-Custodian. The Trust shall at the
meeting of the Board of Trustees next following receipt of such notice and
information give a written approval or disapproval of the proposed action.
(c) The Agreement between the Custodian and each Sub-Custodian acting
hereunder shall contain the required provisions set forth in Rule
17f-5(a)(1)(iii).
(d) At the end of each calendar quarter, the Custodian shall provide
written reports notifying the Board of Trustees of the placement of the
Securities and cash of the Funds with a particular Sub-Custodian and of any
material changes in the Funds' arrangements. The Custodian shall promptly take
such steps as may be required to withdraw assets of the Funds from any
Sub-Custodian that has ceased to meet the requirements of Rule 17f-5 under the
1940 Act.
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(e) With respect to its responsibilities under this Section 3.3, the
Custodian hereby warrants to the Trust that it agrees to exercise reasonable
care, prudence and diligence such as a person having responsibility for the
safekeeping of property of the Funds. The Custodian further warrants that a
Fund's assets will be subject to reasonable care, based on the standards
applicable to custodians in the relevant market, if maintained with each
Sub-Custodian, after considering all factors relevant to the safekeeping of such
assets, including, without limitation: (i) the Sub-Custodian's practices,
procedures, and internal controls, including, but not limited to, the physical
protections available for certificated securities (if applicable), the method of
keeping custodial records, and the security and data protection practices; (ii)
whether the Sub-Custodian has the requisite financial strength to provide
reasonable care for Fund assets; (iii) the Sub-Custodian's general reputation
and standing and, in the case of a Securities Depository, the Securities
Depository's operating history and number of participants; and (iv) whether the
Funds will have jurisdiction over and be able to enforce judgments against the
Sub-Custodian, such as by virtue of the existence of any offices of the
Sub-Custodian in the United States or the Sub-Custodian's consent to service of
process in the United States.
(f) The Custodian shall establish a system to monitor the appropriateness
of maintaining the Funds' assets with a particular Sub-Custodian and the
contract governing the Funds' arrangements with such Sub-Custodian.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Trust shall deliver, or cause to
be delivered, to the Custodian all of the Funds' Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Funds with respect to such Securities, cash or
other assets owned by the Funds at any time during the period of this Agreement,
and (b) all cash received by the Funds for the issuance, at any time during such
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period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
Depository or Book-Entry System, the Trust shall deliver to the
Custodian a resolution of the Board of Trustees, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of collateral consisting of Securities.
(b) Securities of the Funds kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the Custodian as a fiduciary, custodian
or otherwise for customers.
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(c) The records of the Custodian with respect to Securities of a Fund
maintained in a Book-Entry System or Securities Depository shall, by
book-entry, identify such Securities as belonging to such Fund.
(d) If Securities purchased by a Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the account
of such Fund. If Securities sold by a Fund are held in a Book-Entry
System or Securities Depository, the Custodian shall transfer such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that payment for such Securities has been
transferred to the Depository Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment
for the account of such Fund.
(e) The Custodian shall provide the Trust with copies of any report
(obtained by the Custodian from a Book-Entry System or Securities
Depository in which Securities of the Funds are kept) on the internal
accounting controls and procedures for safeguarding Securities
deposited in such Book-Entry System or Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to a
Fund resulting (i) from the use of a Book-Entry System or Securities
Depository by reason of any negligence or
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willful misconduct on the part of Custodian or any Sub-Custodian
appointed pursuant to Section 3.3 above or any of its or their
employees, or (ii) from failure of Custodian or any such Sub-Custodian
to enforce effectively such rights as it may have against a Book-Entry
System or Securities Depository. At its election, the Trust shall be
subrogated to the rights of the Custodian with respect to any claim
against a Book-Entry System or Securities Depository or any other
person from any loss or damage to the Funds arising from the use of
such Book-Entry System or Securities Depository, if and to the extent
that the Funds have not been made whole for any such loss or damage.
3.6 DISBURSEMENT OF MONEYS FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from a Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in accordance
with Section 4.1 of this Agreement and only (i) in the case of
Securities (other than options on Securities, futures contracts and
options on futures contracts), against the delivery to the Custodian
(or any Sub-Custodian appointed pursuant to Section 3.3 above) of such
Securities registered as provided in Section 3.9 below or in proper
form for transfer, or if the purchase of such Securities is effected
through a Book-Entry System or Securities Depository, in accordance
with the conditions set forth in Section 3.5 above; (ii) in the case
of options on Securities, against delivery to the Custodian (or such
Sub-Custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case of futures
contracts and
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<PAGE>
options on futures contracts, against delivery to the Custodian (or
such Sub-Custodian) of evidence of title thereto in favor of the Fund
or any nominee referred to in Section 3.9 below; and (iv) in the case
of repurchase or reverse repurchase agreements entered into between
the Trust and a bank which is a member of the Federal Reserve System
or between the Trust and a primary dealer in U.S. Government
securities, against delivery of the purchased Securities either in
certificate form or through an entry crediting the Custodian's account
at a Book-Entry System or Securities Depository with such Securities;
(b) In connection with the conversion, exchange or surrender, as set forth
in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in Section
5.1 below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest; taxes; administration, investment advisory,
accounting, auditing, transfer agent, custodian, trustee and legal
fees; and other operating expenses of the Fund; in all cases, whether
or not such expenses are to be in whole or in part capitalized or
treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with rules of The
Options Clearing Corporation
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and of any registered national securities exchange (or of any similar
organization or organizations) regarding escrow or other arrangements
in connection with transactions by the Fund;
(g) For transfer in accordance with the provision of any agreement among
the Trust, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any contract
market (or any similar organization or organizations) regarding
account deposits in connection with transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purpose, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Fund Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund but only
against receipt of payment therefor in cash, by certified or cashiers
check or bank credit;
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<PAGE>
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;
(c) To an offeror's depository agent in connection with tender or other
similar offers for Securities of the Fund; provided that, in any such
case, the cash or other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name of
the Fund, the Custodian or any Sub-Custodian appointed pursuant to
Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of certificates
or other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new Securities
are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance with
the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities in connection
with the issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by the Fund;
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(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of the Fund,
but only against receipt of such collateral as the Trust shall have
specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Trust, but only against receipt by
the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Trust;
(l) For delivery in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with transactions
by the Fund;
(m) For delivery in accordance with the provisions of any agreement among
the Trust, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any contract
market (or any
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<PAGE>
similar organization or organizations) regarding account deposits in
connection with transactions by the Fund; or
(n) For any other proper corporate purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Trustees, certified by an Officer, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such Securities
shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise instructed
by the Trust, the Custodian shall with
respect to all Securities held for a Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all income and
other payments to which the Fund is entitled either by law or pursuant
to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature
or be called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or regulations
of any other taxing
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authority now or hereafter in effect, and prepare and submit reports
to the Internal Revenue Service ("IRS") and to the Trust at such time,
in such manner and containing such information as is prescribed by the
IRS;
(f) Hold for the Fund, either directly or, with respect to Securities held
therein, through a Book-Entry System or Securities Depository, all
rights and similar securities issued with respect to Securities of the
Fund; and
(g) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with the sale,
exchange, substitution, purchase, transfer and other dealings with
Securities and assets of the Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for a
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System if eligible therefor. All other Securities held for a Fund may
be registered in the name of such Fund, the Custodian, or any Sub-Custodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any of
them, or in the name of a Book-Entry System, Securities Depository or any
nominee of either thereof. The Trust shall furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of any of the nominees hereinabove referred
to or in the name of a Book-Entry System or Securities Depository, any
Securities registered in the name of a Fund.
3.10 RECORDS. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Funds, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and
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deliveries of Securities and all receipts and disbursements of cash; (ii)
ledgers (or other records) reflecting (A) Securities in transfer, (B) Securities
in physical possession, (C) moneys and Securities borrowed and moneys and
Securities loaned (together with a record of the collateral therefor and
substitutions of such collateral), (D) dividends and interest received, and (E)
dividends receivable and interest receivable; and (iii) canceled checks and bank
records related thereto. The Custodian shall keep such other books and records
of the Funds as the Trust shall reasonably request, or as may be required by the
1940 Act, including, but not limited to, Section 31 of the 1940 Act and Rule
31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust with
a daily activity statement by Fund and a summary of all transfers to or from
each Fund Custody Account on the day following such transfers. At least monthly
and from time to time, the Custodian shall furnish the Trust with a detailed
statement, by Fund, of the Securities and moneys held by the Custodian and the
Sub-Custodians for the Funds under this a Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust with
such reports, as the Trust may reasonably request from time to time, on the
internal accounting
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controls and procedures for safeguarding Securities, which are employed by the
Custodian or any Sub-Custodian appointed pursuant to Section 3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of a Fund, to be
promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Trust such proxies, all proxy soliciting materials and
all notices relating to such Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. The Custodian shall promptly deliver
to the Trust all information received by the Custodian and pertaining to
Securities being held by the Funds with respect to optional tender or exchange
offers, calls for redemption or purchase, or expiration of rights as described
in the Standards of Service Guide attached as Exhibit B. If the Trust desires to
take action with respect to any tender offer, exchange offer or other similar
transaction, the Trust shall notify the Custodian at least five Business Days
prior to the date on which the Custodian is to take such action. The Trust will
provide or cause to be provided to the Custodian all relevant information for
any Security which has unique put/option provisions at least five Business Days
prior to the beginning date of the tender period.
ARTICLE IV
----------
PURCHASE AND SALE OF INVESTMENTS OF THE FUNDS
---------------------------------------------
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for
a Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the Fund for which the purchase was made, (b) the name of the issuer or writer
of such Securities, and the title or other description thereof, (c) the number
of shares, principal amount (and accrued interest, if any) or
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other units purchased, (d) the date of purchase and settlement, (e) the purchase
price per unit, (f) the total amount payable upon such purchase, and (g) the
name of the person to whom such amount is payable. The Custodian shall upon
receipt of such Securities purchased by a Fund pay out of the moneys held for
the account of such Fund the total amount specified in such Written Instructions
to the person named therein. The Custodian shall not be under any obligation to
pay out moneys to cover the cost of a purchase of Securities for a Fund, if in
the relevant Fund Custody Account there is insufficient cash available to the
Fund for which such purchase was made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
In any and every case where payment for the purchase of Securities for a Fund is
made by the Custodian in advance of receipt of the Securities purchased but in
the absence of specified Written Instructions to so pay in advance, the
Custodian shall be liable to the Fund for such Securities to the same extent as
if the Securities had been received by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by a Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
Fund for which the sale was made, (b) the name of the issuer or writer of such
Securities, and the title or other description thereof, (c) the number of
Shares, principal amount (and accrued interest, if any), or other units sold,
(d) the date of sale and settlement, (e) the sale price per unit, (f) the total
amount payable upon such sale, and (g) the person to whom such Securities are to
be delivered. Upon receipt of the total amount payable to the Fund as specified
in such Written Instructions, the Custodian shall deliver such Securities to the
person specified in such Written Instructions. Subject to the
- 20 -
<PAGE>
foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and arrange for payment in
accordance with the customs prevailing among dealers in Securities.
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund for which such Securities
were delivered shall bear the risk that final payment for such Securities may
not be made or that such Securities may be returned or otherwise held or
disposed of by or through the person to whom they were delivered, and the
Custodian shall have no liability for any for the foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from time
to time, the Custodian may credit the relevant Fund Custody Account, prior to
actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Fund, and
(iii) income from cash, Securities or other assets of the Fund. Any such credit
shall be conditional upon actual receipt by Custodian of final payment and may
be reversed if final payment is not actually received in full. The Custodian
may, in its sole discretion and from time to time, permit a Fund to use funds so
credited to its Fund Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Fund Custody Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its sole
discretion and from time to time, advance funds to the Trust to facilitate the
settlement of a Fund's
- 21 -
<PAGE>
transactions in its Fund Custody Account. Any such advance shall be repayable
immediately upon demand made by Custodian.
ARTICLE V
---------
REDEMPTION OF FUND SHARES
-------------------------
5.1 TRANSFER OF FUNDS. From such funds as may be available for the purpose
in the relevant Fund Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the Custodian
shall wire each amount specified in such Proper Instructions to or through such
bank as the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 5.1 above of any amount paid by the
Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
----------
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of a Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Trust,
the Custodian and a broker-dealer registered under the 1934 Act and a
member of the
- 22 -
<PAGE>
NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by a Fund,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by a Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by a Fund,
(c) which constitute collateral for loans of Securities made by a Fund,
(d) for purposes of compliance by a Fund with requirements under the 1940
Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase agreements
and when-issued, delayed delivery and firm commitment transactions,
and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Trustees, certified by an Officer, setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
Each segregated account established under this Article VI shall be
established and maintained for a single Fund only. All Proper Instructions
relating to a segregated account shall specify the Fund involved.
- 23 -
<PAGE>
ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust or any Fund for any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim unless
such loss, damage, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any Sub-Custodian
appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely
on and may act upon advice of counsel on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall promptly notify the Trust of any action taken or omitted by
the Custodian pursuant to advice of counsel. The Custodian shall not be under
any obligation at any time to ascertain whether the Trust or a Fund is in
compliance with the 1940 Act, the regulations thereunder, the provisions of the
Trust's charter documents or bylaws, or its investment objectives and policies
as then in effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to a Fund or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
- 24 -
<PAGE>
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for a Fund if such Securities are in
default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 CO-OPERATION. The Custodian shall cooperate with and supply necessary
information, by Fund, to the entity or entities appointed by the Trust to keep
the books of account of the Funds and/or compute the value of the assets of the
Funds. The Custodian shall take all such reasonable actions as the Trust may
from time to time request to enable the Trust to obtain, from year to year,
favorable opinions from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Trust's reports on Form N-1A and Form N-SAR and any other reports required by
the Securities and Exchange Commission, and (b) the fulfillment by the Trust of
any other requirements of the Securities and Exchange Commission.
- 25 -
<PAGE>
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION BY TRUST. The Trust shall indemnify and hold harmless
the Custodian and any Sub-Custodian appointed pursuant to Section 3.3 above, and
any nominee of the Custodian or of such Sub-Custodian, from and against any
loss, damage, cost, expense (including attorneys' fees and disbursements),
liability (including, without limitation, liability arising under the Securities
Act of 1933, the 1934 Act, the 1940 Act, and any state or foreign securities
and/or banking laws) or claim arising directly or indirectly (a) from the fact
that Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such Sub-Custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a Sub-Custodian appointed
pursuant to Section 3.3 above, provided that neither the Custodian nor any such
Sub-Custodian shall be indemnified and held harmless from and against any such
loss, damage, cost, expense, liability or claim arising from the Custodian's or
such Sub-Custodian's negligence, bad faith or willful misconduct.
8.2 INDEMNIFICATION BY CUSTODIAN. The Custodian shall indemnify and hold
harmless the Trust from and against any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability (including without limitation,
liability arising under the Securities Act of 1933, the 1934 Act, the 1940 Act,
and any state or foreign securities and/or banking laws) or claim arising from
the negligence, bad faith or willful misconduct of the Custodian or any
- 26 -
<PAGE>
Sub-Custodian appointed pursuant to Section 3.3 above, or any nominee of the
Custodian or of such Sub-Custodian.
8.3 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
8.4 SECURITY. If the Custodian advances cash or Securities to a Fund for
any purpose, either at the Trust's request or as otherwise contemplated in this
Agreement, or in the event that the Custodian or its nominee incurs, in
connection with its performance under this Agreement, any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim
(except such as may arise from its or its nominee's negligence, bad faith or
willful misconduct), then, in any such event, any property at any time held for
the account of such Fund shall be security therefor, and should such Fund fail
promptly to repay or indemnify the Custodian, the Custodian shall be entitled to
utilize available cash of such Fund and to dispose of other assets of such Fund
to the extent necessary to obtain reimbursement or indemnification.
ARTICLE IX
----------
FORCE MAJEURE
-------------
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God;
- 27 -
<PAGE>
earthquakes; fires; floods; wars; civil or military disturbances; sabotage;
strikes; epidemics; riots; power failures; computer failure and any such
circumstances beyond its reasonable control as may cause interruption, loss or
malfunction of utility, transportation, computer (hardware or software) or
telephone communication service; accidents; labor disputes; acts of civil or
military authority; governmental actions; or inability to obtain labor,
material, equipment or transportation; provided, however, that the Custodian in
the event of a failure or delay (i) shall not discriminate against the Funds in
favor of any other customer of the Custodian in making computer time and
personnel available to input or process the transactions contemplated by this
Agreement and (ii) shall use its best efforts to ameliorate the effects of any
such failure or delay.
ARTICLE X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of its
execution and shall continue in full force and effect until terminated as
hereinafter provided.
10.2 TERMINATION. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the
Funds and held by the Custodian as custodian, and (b) transfer any Securities
held in a Book-Entry System or Securities Depository to an account of or for the
benefit of the Funds at the successor custodian, provided that the Trust shall
- 28 -
<PAGE>
have paid to the Custodian all fees, expenses and other amounts to the payment
or reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian is
not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which (a) is a "bank"
as defined in the 1940 Act and (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, all Securities, cash and other property held by Custodian under this
Agreement and to transfer to an account of or for the Funds at such bank or
trust company all Securities of the Funds held in a Book-Entry System or
Securities Depository. Upon such delivery and transfer, such bank or trust
company shall be the successor custodian under this Agreement and the Custodian
shall be relieved of all obligations under this Agreement.
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Trust and the Custodian. The fees and other charges in effect on the
date hereof and applicable to the Funds are set forth in Exhibit C attached
hereto.
ARTICLE XII
-----------
LIMITATION OF LIABILITY
-----------------------
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 shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust, as from time to time amended. The execution and delivery of this
Agreement have been authorized by the Trustees, and this Agreement has been
signed and delivered by an authorized officer of the Trust, acting as such, and
neither such authorization by the 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 as provided in the above-mentioned Agreement and
Declaration of Trust.
ARTICLE XIII
------------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to the recipient at the address set forth after its name
hereinbelow:
To the Trust:
-------------
Dean Family of Funds
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Telephone: (513) 629-2000
Facsimile: (513) 629-2008
- 29 -
<PAGE>
To Custodian:
-------------
Star Bank, N.A.
425 Walnut Street, M.L. 6118
Sixth Floor
Cincinnati, Ohio 45202
Attention: Mutual Fund Custody Services
Telephone: (800) 485-8510
Facsimile: (513) 632-3299
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for a Fund and such other printed matter as
merely identifies Custodian as custodian for one or more Funds. The Trust shall
submit printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
14.3 NO WAIVER. No failure by either party hereto to exercise, and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the
- 30 -
<PAGE>
remedies provided herein are cumulative and not exclusive of any remedies
provided at law or in equity.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
14.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; PROVIDED, HOWEVER, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
- 31 -
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: DEAN FAMILY OF FUNDS
/s/ Tina D. Hosking By: /s/ Frank H. Scott
- ------------------------------ -------------------------------
President
ATTEST: STAR BANK, N.A.
/s/ Lynette C. Gibson By: /s/ Marsha A. Croxton
- ------------------------------ -------------------------------
Senior Vice President
- 32 -
<PAGE>
APPENDIX A
-----------
AUTHORIZED PERSONS
------------------
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Fund Custody Accounts.
Authorized Persons Specimen Signatures
------------------ -------------------
President: /s/ Frank H. Scott
---------------------------
Secretary: /s/ Tina D. Hosking
---------------------------
Treasurer: /s/ Mark J. Seger
---------------------------
Vice President: /s/ Robert G. Dorsey
---------------------------
Adviser Employees: /s/ Joseph Gudorf
---------------------------
/s/ Tina M. Pamer
---------------------------
/s/ Carmie Grooms
---------------------------
Transfer Agent/Fund Accountant
Employees: Robert G. Dorsey /s/ Robert G. Dorsey
---------------------------
John Splain /s/ John F. Splain
---------------------------
Mark Seger /s/ Mark J. Seger
---------------------------
Christina Kelso /s/ Christina Kelso
---------------------------
M. Kathleen Leugers /s/ M. Kathleen Leugers
---------------------------
- 33 -
<PAGE>
APPENDIX B
----------
STAR BANK, N.A.
STANDARDS OF SERVICE GUIDE
Star Bank, N.A., is committed to providing superior quality service to all
customers and their agents at all times. We have compiled this guide as a tool
for our clients to determine our standards for the processing of security
settlements, payment collection, and capital change transactions. Deadlines
recited in this guide represent the times required for Star Bank to guarantee
processing. Failure to meet these deadlines will result in settlement at our
client's risk. In all cases, Star Bank will make every effort to complete all
processing on a timely basis.
Star Bank is a direct participant of the Depository Trust Company, a direct
member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers Trust
Company as its agent for ineligible and foreign securities.
For corporate reorganizations, Star Bank utilizes SEI's Reorg Source,
Financial Information, Inc., XCITEK, DTC Important Notices, and the WALL STREET
JOURNAL,
For bond calls and mandatory puts, Star Bank utilizes SEI's Bond Source,
Kenny Information Systems, Standard & Poor's Corporation, and DTC Important
Notices. Star Bank will not notify clients of optional put opportunities.
Any securities delivered free to Star Bank or its agents must be received
three (3) business days prior to any payment or settlement in order for the Star
Bank standards of service to apply.
Should you have any questions regarding the information contained in this
guide, please feel free to contact your account representative.
The information contained in this Standards of Service Guide is
subject to change. Should any changes be made Star Bank will provide
you with an updated copy of its Standards of Service Guide.
- 34 -
<PAGE>
STAR BANK SECURITY SETTLEMENT STANDARDS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Transaction Type Instructions Deadlines* Delivery Instructions
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DTC 1:30 P.M. on Settlement Date DTC Participant #2219
Agent Bank ID #27895
Institutional #_______
For Account #_________
Federal Reserve Book Entry 12:30 P.M. on Settlement Date Federal Reserve Bank of Cinti/Trust
for Star Bank, N.A. ABA# 042000013
For Account #_________
Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of Cinti/Spec
(Repurchase Agreement for Star Bank, N.A. ABA# 042000013
Collateral Only) For Account #_________
PTC Securities 12:00 P.M. on Settlement Date PTC For Account BTRST/CUST
(GNMA Book Entry) Sub Account: Star Bank, N.A. #090334
Physical Securities 9:30 A.M. EST on Settlement Date Bankers Trust Company
(for Deliveries, by 4:00 P.M. on 16 Wall Street 4th Floor, Window 43
Settlement Date minus 1) for Star Bank Account #090334
CEDEL/EURO-CLEAR 11:00 A.M. on Settlement Date minus 2 Euroclear Via Cedel Bridge
In favor of Bankers Trust Comp
Cedel 53355
For Star Bank Account #501526354
Cash Wire Transfer 3:00 P.M. Star Bank, N.A. Cinti/Trust ABA# 042000013
Credit Account #9901877
Further Credit to ________
Account #_________________
</TABLE>
*All times listed are Cincinnati time.
<PAGE>
STAR BANK PAYMENT STANDARDS
- --------------------------------------------------------------------------------
SECURITY TYPE INCOME PRINCIPAL
- --------------------------------------------------------------------------------
Equities Payable Date
Municipal Bonds* Payable Date Payable Date
Corporate Bonds* Payable Date Payable Date
Federal Reserve Bank
Book Entry* Payable Date Payable Date
PTC GNMA's (P&I) Payable Date + 1 Payable Date + 1
CMOs*
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
SBA Loan Certificates When Received When Received
Unit Investment Trust
Certificates* Payable Date Payable Date
Certificates of Deposit* Payable Date Payable Date
Limited Partnerships When Received When Received
Foreign Securities When Received When Received
*Variable Rate Securities
Federal Reserve Bank
Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
NOTE: If a payable date falls on a weekend or bank holiday, payment will be
made on the immediately following business day.
<PAGE>
STAR BANK CORPORATE REORGANIZATION STANDARDS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION
TO STAR BANK POSTING
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rights, Warrants, Later of 10 business days prior 5 business days prior to expiration Upon receipt
and Optional Mergers to expiration or receipt of notice
Mandatory Puts with Later of 10 business days prior 5 business days prior to expiration Upon receipt
Option to Retain to expiration or receipt of notice
Class Actions 10 business days prior 5 business days prior to expiration Upon receipt
expiration date
Voluntary Tenders, Later of 10 business days prior to 5 business days prior to expiration Upon receipt
Exchanges, expiration or receipt of notice
and Conversions
Mandatory Puts, Defaults, At posting of funds or securities None Upon receipt
Liquidations, Bankruptcies, received
Stock Splits, Mandatory
Exchanges
Full and Partial Calls Later of 10 business days prior None Upon receipt
to expiration or receipt of notice
</TABLE>
NOTE: Fractional shares/par amounts resulting from any of the above will be
sold.
<PAGE>
APPENDIX C
----------
STAR BANK, N.A.
DOMESTIC CUSTODY FEE SCHEDULE
DEAN FAMILY OF FUNDS
Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. PORTFOLIO TRANSACTION FEES:
--------------------------
(a) For each repurchase agreement trade not
executed by Star Bank, N.A. $ 7.00
(b) For each portfolio transaction processed
through DTC or Federal Reserve $ 9.00
(c) For each portfolio transaction processed
through our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $16.00
(e) For each GNMA/Prin/Int Paydown, GNMA Sales $ 8.00
(f) For each option/future contract written,
exercised or expired $40.00
(g) For each Cedel/Euroclear transaction $80.00
(h) For each Disbursement (Fund expenses only) $ 5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange.
II. MARKET VALUE FEE
----------------
Based upon an annual rate of: Million
-------
.0003 (3.0 Basis Points) on First $20
.0002 (2.0 Basis Points) on Next $20
.00015 (1.5 Basis Points) on Balance
III. MONTHLY MINIMUM FEE-PER FUND $400.00
----------------------------
IV. OUT-OF-POCKET EXPENSES
----------------------
The only out-of-pocket expenses charged to your account will be shipping
fees or transfer fees.
V. EARNINGS CREDITS
----------------
On a monthly basis any earnings credits generated from uninvested custody
balances will be applied against any cash management service fees
generated. Earnings credits are based on a Cost of Funds Tiered Earnings
Credit Rate.
THIS FEE SCHEDULE IS QUOTED BASED ON EXCLUSIVE UTILIZATION OF STAR TREASURY, OR
STAR TAX-FREE MONEY MARKET FUNDS FOR INVESTMENT OF SHORT TERM CASH.
<PAGE>
STAR BANK, N.A.
PROPOSED CASH MANAGEMENT FEE SCHEDULE
SERVICES UNIT COST($) MONTHLY COST($)
- -------- ------------ ---------------
D.D.A. Account Maintenance 14.00
Deposits .399
Deposited Items .109
Checks Paid .159
Balance Reporting - P.C. Access 50.00 1st Acct
35.00 each add'l
ACH Transaction .105
ACH Monthly Maintenance 40.00
ACH Additions, Deletions, Changes 3.50
ACH Debits .12
Controlled Disbursement
(1st account) 110.00
Each additional account 25.00
Deposited Items Returned 6.00
International Returned Items 10.00
NSF Returned Check 25.00
Stop Payments 22.00
Data Transmission per account 110.00
Data Capture* .10
Drafts Cleared .179
Lockbox Maintenance** 55.00
Lockbox items Processed
with copy of check .32
without copy of check .26
Checks Printed .20
Positive Pay .06
Issued Items .015
ARP Tape/Transmission/Diskette 25.00
Special Statements 6.00
Invoicing for Service Charge 15.00
Wires Incoming
Domestic 10.00
International 10.00
Wires Outgoing
Domestic International
Repetitive 12.00 Repetitive 35.00
Non-Repetitive 13.00 Non-Repetitive 40.00
PC - Initiated Wires:
Domestic International
Repetitive 9.00 Repetitive 25.00
Non-Repetitive 9.00 Non-Repetitive 25.00
***Uncollected Charge Star Bank Prime Rate as of first of month plus 4%
* Price can vary depending upon what information needs to be captured
** With the use of lockbox, the collected balance in the demand deposit
account will be significantly increased and therefore earnings to offset
cash managment service fees will be maximized.
*** Fees for uncollected balances are figured on the MONTHLY AVERAGE of all
combined accounts.
**** Other available cash management services are priced separately.
Revised October, 1997
CUSTODY AGREEMENT
-----------------
THIS AGREEMENT, is made as of October 1, 1997, by and between DEAN FAMILY
OF FUNDS, a business trust organized under the laws of the State of Ohio (the
"Trust"), and THE FIFTH THIRD BANK, a banking company organized under the laws
of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that the Securities and cash of each of the
investment portfolios identified in Exhibit A hereto (such investment portfolios
and individually referred to herein as a "Fund" and collectively as the
"Funds"), be held and administered by the Custodian pursuant to this Agreement;
and
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Trust and the Custodian hereby agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly authorized
by resolution of the Board of Trustees to give Oral Instructions and Written
Instructions on behalf of the Trust and named in Exhibit B hereto or in such
resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time serving
under the Trust's Agreement and Declaration of Trust, dated December 18, 1996,
as from time to time amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day by
The New York Stock Exchange, Inc. and any other day for which the Fund computes
the net asset value of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.6 "OFFICER" shall mean the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Trust.
1.7 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Trust shall cause all Oral
Instructions to be confirmed by Written Instructions. If such Written
Instructions confirming Oral Instructions are not received by the Custodian
prior to a transaction, it shall in no way affect the validity of
<PAGE>
the transaction or the authorization thereof by the Trust. If Oral Instructions
vary from the Written Instructions which purport to confirm them, the Custodian
shall notify the Trust of such variance but such Oral Instructions will govern
unless the Custodian has not yet acted.
1.8 "CUSTODY ACCOUNT" shall mean any account in the name of the Trust,
which is provided for in Section 3.2 below.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "SECURITIES DEPOSITORY" shall mean The Participants Trust Company or
The Depository Trust Company and (provided that Custodian shall have received a
copy of a resolution of the Board of Trustees, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Trust) any other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of 1934 (the
"1934 Act"), which acts as a system for the central handling of Securities where
all Securities of any particular class or series of an issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities, other money market
instruments or other obligations, and any certificates, receipts, warrants or
other instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or any similar property or assets that the Custodian has the
facilities to clear and to service.
1.12 "SHARES" shall mean the units of beneficial interest issued by the
Trust.
1.13 "WRITTEN INSTRUCTIONS" shall mean (i) written communications actually
received by the Custodian and signed by one or more persons as the Board of
Trustees shall have from time to time authorized, or (ii) communications by
telex or any other such system from a person or persons reasonably believed by
the Custodian to be Authorized, or (iii) communications transmitted
electronically through the Institutional Delivery System (IDS), or any other
similar electronic instruction system acceptable to Custodian and approved by
resolutions of the Board of Trustees, a copy of which, certified by an Officer,
shall have been delivered to the Custodian.
ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 APPOINTMENT. The Trust hereby constitutes and appoints the Custodian
as custodian of all Securities and cash owned by or in the possession of the
Trust at any time during the period of this Agreement, provided that such
Securities or cash at all times shall be and remain the property of the Trust.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth and in
accordance with the 1940 Act as amended. Except as specifically set forth
herein, the Custodian shall have no liability and assumes no responsibly for any
non-compliance by the Trust or a Fund of any laws, rules or regulations.
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 SEGREGATION. All Securities and non-cash property held by the
Custodian for the account of the Fund, except Securities maintained in a
Securities Depository or Book-Entry System, shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
2
<PAGE>
3.2 CUSTODY ACCOUNT. The Custodian shall open and maintain in its trust
department a custody account in the name of each Fund, subject only to draft or
order of the Custodian, in which the Custodian shall enter and carry all
Securities, cash and other assets of the Fund which are delivered to it.
3.3 APPOINTMENT OF AGENTS. In its discretion, the Custodian may appoint,
and at any time remove, any domestic bank or trust company, which has been
approved by the Board of Trustees and is qualified to act as a custodian under
the 1940 Act, as sub-custodian to hold Securities and cash of the Funds and to
carry out such other provisions of this Agreement as it may determine, and may
also open and maintain one or more banking accounts with such a bank or trust
company (any such accounts to be in the name of the Custodian and subject only
to its draft or order), provided, however, that the appointment of any such
agent shall not relieve the Custodian of any of its obligations or liabilities
under this Agreement.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Fund shall deliver, or cause to
be delivered, to the Custodian all of the Fund's Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
Depository or Book-Entry System, the Fund shall deliver to the
Custodian a resolution of the Board of Trustees, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of collateral consisting of Securities. So long as such Securities
Depository or Book-Entry System shall continue to be employed for the
deposit of Securities of the Funds, the Trust shall annually re-adopt
such resolution and deliver a copy thereof, certified by an Officer,
to the Custodian.
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the Custodian as a fiduciary, custodian
or otherwise for customers.
(c) The records of the Custodian and the Custodian's account on the books
of the Book-Entry System and Securities Depository as the case may be,
with respect to Securities of a Fund maintained in a Book-Entry System
or Securities Depository shall, by book-entry, or otherwise identify
such Securities as belonging to the Fund.
(d) If Securities purchases by the Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a Book-Entry
System or Securities Depository, the Custodian shall transfer such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities depository that payment for such Securities has been
transferred to the Depository Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment
for the account of the Fund.
3
<PAGE>
(e) Upon request, the Custodian shall provide the Fund with copies of any
report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Fund is kept) on the
internal accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or Securities
Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to the
Trust resulting (i) from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful misconduct on the
part of Custodian or any sub-custodian appointed pursuant to Section
3.3 above or any of its or their employees, or (ii) from failure of
Custodian or any such sub-custodian to enforce effectively such rights
as it may have against a Book-Entry System or Securities Depository.
At its election, the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry System or
Securities Depository or any other person for any loss or damage to
the Funds arising from the use of such Book-Entry System or Securities
Depository, if and to the extent that the Trust has been made whole
for any such loss or damage.
3.6 DISBURSEMENT OF MONEYS FROM CUSTODY ACCOUNTS. Upon receipt of Proper
Instructions, the Custodian shall disburse moneys from a Fund Custody Account
but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon compliance
with Section 4.1 of this Agreement and only (i) in the case of
Securities (other than options on Securities, futures contracts and
options on futures contracts), against the delivery to the Custodian
(or any sub-custodian appointed pursuant to Section 3.3 above) of such
Securities registered as provided in Section 3.9 below in proper form
for transfer, or if the purchase of such Securities is effected
through a Book-Entry System or Securities Depository, in accordance
with the conditions set forth in Section 3.5 above; (ii) in the case
of options on Securities, against delivery to the Custodian (or such
sub-custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case of futures
contracts and options on futures contracts, against delivery to the
Custodian (or such sub-custodian) of evidence of title thereto in
favor of the Trust or any nominee referred to in Section 3.9 below;
and (iv) in the case of repurchase or reverse repurchase agreements
entered into between the Trust and a bank which is a member of the
Federal Reserve System or between the Trust and a primary dealer in
U.S. Government securities, against delivery of the purchased
Securities either in certificate form or through an entry crediting
the Custodian's account at a Book-Entry System or Securities
Depository for the account of the Fund with such Securities;
(b) In connection with the conversion, exchange or surrender, as set forth
in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in Section
5.1 below;
(e) For the payment of any expense or liability incurred by the Trust,
including but not limited to the following payments for the account of
a Fund: interest; taxes; administration, investment management,
investment advisory, accounting, auditing, transfer agent, custodian,
trustee and legal fees; and other operating expenses of a Fund; in all
cases, whether or not such expenses are to be in whole or in part
capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered national securities
exchange (or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions by the
Trust;
4
<PAGE>
(g) For transfer in accordance with the provisions of any agreement among
the Trust, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any contract
market (or any similar organization or organizations) regarding
account deposits in connection with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purposes, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of a Fund but only against
receipt of payment therefor in cash, by certified or cashiers check or
bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;
(c) To an Offeror's depository agent in connection with tender or other
similar offers for Securities of a Fund; provided that, in any such
case, the cash or other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name of
the Trust, the Custodian or any sub-custodian appointed pursuant to
Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of certificates
or other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new Securities
are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance with
the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities in connection
with the issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by a Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of a Fund, but
only against receipt of such collateral as the Trust shall have
specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the
Trust on behalf of a Fund requiring a pledge of assets by such Fund,
but only against receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Trust or a Fund;
5
<PAGE>
(l) For delivery in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with transactions
by the Trust on behalf of a Fund;
(m) For delivery in accordance with the provisions of any agreement among
the Trust on behalf of a Fund, the Custodian, and a futures commission
merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission
and/or any contract market (or any similar organization or
organizations) regarding account deposits in connection with
transactions by the Trust on behalf of a Fund; or
(n) For any other proper corporate purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Trustees, certified by an Officer, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such Securities
shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise instructed
by the Trust, the Custodian shall with respect to all Securities held for a
Fund;
(a) Subject to Section 7.4 below, collect on a timely basis all income and
other payments to which the Trust is entitled either by law or
pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature
or be called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Trust, checks, drafts and
other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or regulations
of any other taxing authority now or hereafter in effect, and prepare
and submit reports to the Internal Revenue Service ("IRS") and to the
Trust at such time, in such manner and containing such information as
is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to Securities held
therein, through a Book-Entry System or Securities Depository, all
rights and similar securities issued with respect to Securities of the
Fund; and
(g) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with sale,
exchange, substitution, purchase, transfer and other dealings with
Securities and assets of the Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for a
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System for the account of the Trust on behalf of a Fund, if eligible
therefor. All other Securities held for a Fund may be registered in the name of
the Trust on behalf of such Fund, the Custodian, or any sub-custodian appointed
pursuant to Section 3.3 above, or in the name of any nominee of any of them, or
in the name of a Book-Entry System, Securities Depository or any nominee of
either thereof; provided, however, that such Securities are held specifically
for the account of the Trust on behalf of a Fund. The Trust shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or Securities
Depository, any Securities registered in the name of a Fund.
6
<PAGE>
3.10 RECORDS. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Trust, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) canceled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Trust as the Trust
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to Section 3.1 and Rule 31a-1 and Rule 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust with
a daily activity statement by Fund and a summary of all transfers to or from the
Custody Account on the day following such transfers. At least monthly and from
time to time, the Custodian shall furnish the Trust with a detailed statement,
by Fund, of the Securities and moneys held for the Trust under this Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust with
such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any sub-custodian appointed pursuant to Section
3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies if
any, relating to Securities which are not registered in the name of a Fund, to
be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any, promptly deliver to the Trust such
proxies, all proxy soliciting materials, which should include all other proxy
materials, if any, and all notices to such Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. Custodian will promptly notify the
Trust of corporate actions, limited to those Securities registered in nominee
name and to those Securities held at a Depository or sub-Custodian acting as
agent for Custodian. Custodian will be responsible only if the notice of such
corporate actions is published by the Financial Daily Card Service, J.J. Kenny
Called Bond Service, DTC, or received by first class mail from the agent. For
market announcements not yet received and distributed by Custodian's services,
Trust will inform its custody representative with appropriate instructions.
Custodian will, upon receipt of Trust's response within the required deadline,
affect such action for receipt or payment for the Trust. For those responses
received after the deadline, Custodian will affect such action for receipt or
payment, subject to the limitations of the agent(s) affecting such actions.
Custodian will promptly notify Trust for put options only if the notice is
received by first class mail from the agent. The Trust will provide or cause to
be provided to Custodian with all relevant information contained in the
prospectus for any security which has unique put/option provisions and provide
Custodian with specific tender instructions at least ten business days prior to
the beginning date of the tender period. With respect to tender or exchange
offers, the Custodian shall promptly transmit to the Trust all written
information received by the Custodian from issuers of Securities whose tender or
exchange is sought and from the party (or its agents) making the tender or
exchange offer. If the Trust desires to take action with respect to any tender
offer, exchange offer or other similar transaction, the Trust shall notify the
Custodian at least five Business Days prior to the date on which the Custodian
is to take such action.
ARTICLE IV
----------
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for
the Trust, Written Instructions shall be delivered to the Custodian, specifying
(a) the name of the issuer or writer of such Securities, and the title or other
7
<PAGE>
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, and (f) the name of the person to whom such amount is payable.
The Custodian shall upon receipt of such Securities purchased by a Fund pay out
of the moneys held for the account of such Fund the total amount specified in
such Written Instructions to the person named therein. The Custodian shall not
be under any obligation to pay out moneys to cover the cost of a purchase of
Securities for a Fund, if in the relevant Custody Account there is insufficient
cash available to the Fund for which such purchase was made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
In any and every case where payment for the purchase of Securities for a Fund is
made by the Custodian in advance of receipt for the account of the Fund of the
Securities purchased but in the absence of specific Written or Oral Instructions
to so pay in advance, the Custodian shall be liable to the Fund for such
Securities to the same extent as if the Securities had been received by the
Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by a Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Trust as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in Securities.
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Trust shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from time
to time, the Custodian may credit the relevant Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Trust, and (iii) income from
cash, Securities or other assets of the Trust. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Trust to use funds so
credited to its Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its sole
discretion and from time to time, advance funds to the Trust to facilitate the
settlement of a Trust transactions on behalf of a Fund in its Custody Account.
Any such advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
---------
REDEMPTION OF TRUST SHARES
--------------------------
TRANSFER OF FUNDS. From such funds as may be available for the purpose in
the relevant Custody Account, and upon receipt of Proper Instructions specifying
that the funds are required to redeem Shares of a Fund, the Custodian shall wire
each amount specified in such Proper Instructions to or through such bank as the
Trust may designate with respect to such amount in such Proper Instructions.
Upon effecting payment or distribution in accordance with proper Instruction,
the Custodian shall not be under any obligation or have any responsibility
thereafter with respect to any such paying bank.
8
<PAGE>
ARTICLE VI
----------
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Trust,
the Custodian and a broker-dealer registered under the 1934 Act and a
member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Trust,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by a Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by a Fund,
(c) which constitute collateral for loans of Securities made by a Fund,
(d) for purposes of compliance by the Trust with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase agreements
and when-issued, delayed delivery and firm commitment transactions,
and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Trustees, certified by an Officer, setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
Each segregated account established under this Article VI shall be
established and maintained for a single Fund only. All Proper Instructions
relating to a segregated account shall specify the Fund involved.
ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust for any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability or claim unless such loss,
damages, cost, expense, liability or claim arises from negligence, bad faith,
reckless or willful misconduct on its part or on the part of any sub-custodian
appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely
on and may act upon advice of counsel on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall promptly notify the Trust of any action taken or omitted by
the Custodian pursuant to advice of counsel. The Custodian shall not be under
any obligation at any time to ascertain whether the Trust is in compliance with
the 1940 Act, the regulations thereunder, the provisions of the Trust's charter
documents or by-laws, or its investment objectives and policies as then in
effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Trust or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
9
<PAGE>
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Trust if such Securities are
in default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 COOPERATION. The Custodian shall cooperate with and supply necessary
information, by the Trust, to the entity or entities appointed by the Trust to
keep the books of account of the Trust and/or compute the value of the assets of
the Trust. The Custodian shall take all such reasonable actions as the Trust may
from time to time request to enable the Trust to obtain, from year to year,
favorable opinions from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Trust's report on Form N-1A and Form N-SAR and any other reports required by the
Securities and Exchange Commission, and (b) the fulfillment by the Trust of any
other requirements of the Securities and Exchange Commission.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION. The Trust shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any
nominee of the Custodian or of such sub-custodian from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (a) from the fact that
Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such sub-custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement, provided that
neither the Custodian nor any such sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's negligence, bad faith
or willful misconduct.
8.2 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
----------
FORCE MAJEURE
-------------
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes, acts of civil or military authority;
governmental actions; or inability to obtain labor, material,
10
<PAGE>
equipment or transportation; provided, however, that the Custodian in the event
of a failure or delay (i) shall not discriminate against the Funds in favor of
any other customer of the Custodian in making computer time and personnel
available to input or process the transactions contemplated by the Agreement and
(ii) shall use its best efforts to ameliorate the effects of any such failure or
delay. Notwithstanding the foregoing, the Custodian shall maintain sufficient
disaster recovery procedures to minimize interruptions.
ARTICLE X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of the date
first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 TERMINATION. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the
Trust and held by the Custodian as custodian, and (b) transfer any Securities
held in a Book-Entry System or Securities Depository to an account of or for the
benefit of the Trust at the successor custodian, provided that the Trust shall
have paid to the Custodian all fees, expenses and other amounts to the payment
or reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities in the State of Ohio or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian is
not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "Bank"
as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Trust at such bank or trust company all Securities of the
Trust held in a Book-Entry System or Securities Depository. Upon such delivery
and transfer, such bank or trust company shall be the successor custodian under
this Agreement and the Custodian shall be relieved of all obligations under this
Agreement. If, after reasonable inquiry, Custodian cannot find a successor
custodian as contemplated in this Section 10.3, then Custodian shall have the
right to deliver to the Trust all Securities and cash then owned by the Trust
and to transfer any Securities held in a Book-Entry System or Securities
Depository to an account of or for the Trust. Thereafter, the Trust shall be
deemed to be its own custodian with respect to the Trust and the Custodian shall
be relieved of all obligations under this Agreement.
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Trust and the Custodian. The fees and other charges in effect on the
date hereof and applicable to the Funds are set forth in Exhibit B attached
hereto.
ARTICLE XII
-----------
LIMITATION OF LIABILITY
-----------------------
The Trust is a business trust organized under Ohio law and under a
Declaration of Trust, to which reference is hereby made a copy of which is on
file at the office of the Secretary of State of Ohio as required by law, and to
any and all amendments thereto so filed or hereafter filed. The obligations of
the Trust entered into in the name of the Trust or on behalf thereof by any of
the Trustees, officers, employees or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, officers,
employees, agents or shareholders of the Trust or the Funds personally, but bind
only the assets of the Trust, and all persons dealing with any of
11
<PAGE>
the Funds of the Trust must look solely to the assets of the Trust belonging to
such Fund for the enforcement of any claims against the Trust.
ARTICLE XIII
------------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to The receipt at the address set forth after its name herein
below:
To the Trust:
-------------
Dean Family of Funds
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attn: Robert Dorsey
Telephone: (513) 629-2000
Facsimile: (513) 629-2041
To the Custodian:
-----------------
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Trust Operations
Telephone: (513) 579-5300
Facsimile: (513) 579-4312
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information or its registration statement for the Trust
and such other printed matter as merely identifies Custodian as custodian for
the Trust. The Trust shall submit printed matter requiring approval to Custodian
in draft form, allowing sufficient time for review by Custodian and its counsel
prior to any deadline for printing.
14.3 NO WAIVER. No failure by either party hereto to exercise and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
14.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on
12
<PAGE>
separate counterparts, each of which shall be deemed an original but all of
which together shall constitute but one and the same instrument.
14.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: DEAN FAMILY OF FUNDS
/s/ Toni D. Kimmel By: /s/ Frank H. Scott
- ---------------------------- --------------------------------
Frank H. Scott
Its: President
THE FIFTH THIRD BANK
/s/ Elizabeth M. Goldthwaite By: /s/ Tracie D. Hoffman
- ---------------------------- --------------------------------
Tracie D. Hoffman
Its: Vice President
13
<PAGE>
Dated: October 1, 1997
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
DEAN FAMILY OF FUNDS AND THE FIFTH THIRD BANK
OCTOBER 1, 1997
Name of Fund Date
------------ ----
Dean International Value Fund 10/1/97
By: /s/ Frank H. Scott
--------------------------------
Frank Scott
Its: President
THE FIFTH THIRD BANK
By: /s/ Tracie D. Hoffman
--------------------------------
Tracie D. Hoffman
Its: Vice President
14
<PAGE>
Dated: October 1, 1997
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
DEAN FAMILY OF FUNDS AND THE FIFTH THIRD BANK
OCTOBER 1, 1997
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to Administer each Custody Account.
Name Signature
---- ---------
Frank H. Scott /s/ Frank H. Scott
- -------------------------- ----------------------------
Robert G. Dorsey /s/ Robert G. Dorsey
- -------------------------- ----------------------------
John F. Splain /s/ John F. Splain
- -------------------------- ----------------------------
Tina D. Hosking /s/ Tina D. Hosking
- -------------------------- ----------------------------
Mark J. Seger /s/ Mark J. Seger
- -------------------------- ----------------------------
M. Kathleen Leugers /s/ M. Kathleen Leugers
- -------------------------- ----------------------------
15
<PAGE>
SIGNATURE RESOLUTION
--------------------
RESOLVED, That all of the following officers of DEAN FAMILY OF FUNDS and any of
them, namely the Chairman, President, Vice President, Secretary and Treasurer,
are hereby authorized as signers for the conduct of business for an on behalf of
the Funds with THE FIFTH THIRD BANK:
N/A CHAIRMAN
- --------------------- -------------------------
Frank H. Scott PRESIDENT /s/ Frank H. Scott
- --------------------- -------------------------
Robert G. Dorsey VICE PRESIDENT /s/ Robert G. Dorsey
- --------------------- -------------------------
John F. Splain ASST. SECRETARY /s/ John F. Splain
- --------------------- -------------------------
VICE PRESIDENT
- --------------------- -------------------------
VICE PRESIDENT
- --------------------- -------------------------
Mark J. Seger TREASURER /s/ Mark J. Seger
- --------------------- -------------------------
Tina D. Hosking SECRETARY /s/ Tina D. Hosking
- --------------------- -------------------------
In addition, the following Assistant Treasurer is authorized to sign on behalf
of the Trust for the purpose of effecting securities transactions:
ASSISTANT TREASURER
- --------------------- -------------------------
The undersigned officers of DEAN FAMILY OF FUNDS hereby certify that the
foregoing is within the parameters of a Resolution adopted by Trustees of the
Trust in a meeting held _________, 19___ , directing and authorizing preparation
of documents and to do everything necessary to effect the Custody Agreement
between DEAN FAMILY OF FUNDS and THE FIFTH THIRD BANK.
By: /s/ Frank H. Scott
-------------------------------
Frank Scott
Its: President
By:
-------------------------------
Tina D. Hosking
Its: Secretary
17
<PAGE>
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
_________________ AND THE FIFTH THIRD BANK
_______________, 19___
MUTUAL FUND CUSTODY FEE SCHEDULE
BASIC ACCOUNT CHARGE
FUND SIZE:
Less than $50MM $
$50MM - $99MM $
$100MM - $199MM $
$200MM - $349MM $
Greater than $350MM $
TRANSACTION FEES
DTC/FED Eligible Trades $
DTC/FED Ineligible Trades $
Amortized Security Trades $
Repurchase Agreements (purchase and maturity) $
Third Party Repo's (purchase and maturity) $
Physical Commercial Paper Trades $
(purchase and maturity)
Book-Entry Commercial Paper Trades $
(purchase and maturity)
Options, each transaction $
Amortized Security Receipts $
A transaction is a purchase, sale, maturity, redemption, tender, exchange,
dividend reinvestment, deposit or withdrawal of a security (with the exception
of Fifth Third Certificates of Deposit, Commercial Paper & Repo's).
MISCELLANEOUS FEES
Wire Transfers & Check Disbursements $
Depository/Transfer Agent Reject $
17
<PAGE>
FIFTH THIRD BANK
MUTUAL FUND SERVICES FEE SCHEDULE
CUSTODY AND FUND ACCOUNTING
SYSTEMS - THREE OPTIONS
- -----------------------
ASW $150.00
Mainframe to Mainframe $150.00
Access $50.00
CUSTODY
- -------
MARKET VALUE CHARGE Under $25 MM 0.01000%
- ------------------- $25-$100 MM 0.00750%
$100-$200 MM 0.00050%
Over $200 MM 0.00025%
Minimum Fee $2,400.00
TRANSACTION CHARGES
- -------------------
Book Entry Settlements $9.00
Physical/Ineligible Settlements $25.00
PTC (GNMAs) Settlements $25.00
Futures & Options $25.00
Euroclear Settlements $25.00
Other Foreign See Attached
Mutual Fund Settlements $15.00
MAINTENANCE CHARGES
- -------------------
Amortized Securities $5.00
MISCELLANEOUS CHARGES
- ---------------------
5/3 Repurchase Agreement Sweep (monthly) $50.00
Per additl issue Repo collateral $5.00
Voluntary Corporate Actions $25.00
Wire Transfers $7.00
Check Requests $6.00
Special Services (per hour) $75.00
Cash Offsets Based on amounts and rates
Maximum of 50% off Fee Offset
<PAGE>
FIFTH THIRD BANK
INTERNATIONAL FEE SCHEDULE
BASIS POINT TRANSACTION BASIS POINT TRANSACTION
COUNTRY CHARGE CHARGE COUNTRY CHARGE CHARGE
- ------- ------ ------ ------- ------ ------
Argentina 10.00 45.00 Russia 10.00 65.00
Australia 1.30 40.00 Singapore 3.00 45.00
Austria 3.60 40.00 Slovak Republic 21.00 125.00
Bangladesh 43.00 175.00 South Africa 1.50 15.00
Belgium 2.20 55.00 Spain 3.00 45.00
Botswana 1.35 30.00 Sri Lanka 15.00 65.00
Brazil 15.00 30.00 Swaziland 29.00 55.00
Canada 1.00 15.00 Sweden 2.00 55.00
Chile 17.00 70.00 Switzerland 1.60 35.00
China 11.50 70.00 Taiwan 17.00 135.00
Columbia 47.00 110.00 Thailand 5.00 50.00
Czech Republic 20.00 55.00 Turkey 15.00 65.00
Denmark 1.30 60.00 U.K. 1.30 30.00
Euroclear 1.75 15.00 Uruguay 52.00 75.00
Ecuador 15.00 70.00 Venezuela 43.00 145.00
Egypt 43.00 115.00 Zambia 29.00 55.00
Estonia 4.50 15.00 Zimbabwa 29.00 55.00
Finland 5.00 50.00
France 2.10 55.00
Germany 1.30 35.00
Ghana 29.00 55.00
Greece 19.00 120.00
Hong Kong 7.25 35.00
Hungary 36.00 145.00
India 58.00 145.00
Indonesia 12.00 115.00
Ireland 3.00 35.00
Israel 15.00 25.00
Italy 3.00 65.00
Japan 3.50 7.00
Jordan 43.00 145.00
Kenya 29.00 55.00
Korea 10.00 20.00
Luxembourg 4.50 30.00
Malaysia 6.50 100.00
Mexico 1.75 20.00
Morocco 39.00 125.00
Namibia 25.00 45.00
Netherlands 2.50 15.00
New Zealand 2.50 50.00
Nigeria 25.00 45.00
Norway 1.50 55.00
Pakistan 29.00 130.00
Peru 55.00 120.00
Philippines 8.00 130.00
Poland 21.00 55.00
Portugal 12.75 95.00
<PAGE>
SCHEDULE 1
----------
BANK MANDATE SIGNING AUTHORITIES
--------------------------------
ALL DIRECTORS OF NEWTON INVESTMENT MANAGEMENT LIMITED
-----------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FULL NAME OF DESIGNATION/TITLE SPECIMEN SIGNATURE SPECIMEN SIGNATURE LIMIT OF AUTHORITY
AUTHORIZED
SIGNATORY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Howard Beaufort Fund Manager /s/ Howard Beaufort /s/ Howard Beaufort Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen H. Burgess Fund Manager /s/ S. H. Burgess /s/ S. H. Burgess Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Roger Butler Chief Executive /s/ Roger Butler /s/ Roger Butler Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Graham Maitland Fuller Fund Manager /s/ Graham Maitland Fuller /s/ Graham Maitland Fuller Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence Barrie Green Dealing Director /s/ Lawrence Barrie Green /s/ Lawrence Barrie Green Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Colin Harris Group Company /s/ Colin R. Harris /s/ Colin R. Harris Unlimited/Signing
Secretary together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Raymond Henley Head of Private Clients /s/ Raymond Henley /s/ Raymond Henley Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFIED CORRECT /s/ Roger Butler
- ------------------------------------------------------------------------------------------------------------------------------------
Chief Executive Company Secretary
====================================================================================================================================
</TABLE>
Newton Investment Management Confidential Page 1 of 6
<PAGE>
SCHEDULE 1 (continued)
----------------------
BANK MANDATE SIGNING AUTHORITIES
--------------------------------
ALL DIRECTORS OF NEWTON INVESTMENT MANAGEMENT LIMITED
-----------------------------------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
FULL NAME OF DESIGNATION/TITLE SPECIMEN SIGNATURE SPECIMEN SIGNATURE LIMIT OF AUTHORITY
AUTHORIZED
SIGNATORY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David McEuen Fund Manager /s/ David McEuen /s/ David McEuen Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Jonathan Christopher Monnery International Dealing /s/ Johnathan Christopher /s/ Johnathan Christopher Unlimited/Signing
Director Monnery Monnery together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Johnathan Powell Managing Director- /s/ Johnathan Powell /s/ Johnathan Powell Unlimited/Signing
Marketing Division together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Mark Rayward Fund Manager /s/ Mark Rayward /s/ Mark Rayward Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Charles Richardson Chief Investment /s/ Charles Richardson /s/ Charles Richardson Unlimited/Signing
Officer together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Iain Stewart Fund Manager /s/ Iain Stewart /s/ Iain Stewart Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Russell Vaizey Head of Finance /s/ Russell Vaizey /s/ Russell Vaizey Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFIED CORRECT /s/ Roger Butler
- ------------------------------------------------------------------------------------------------------------------------------------
Chief Executive Company Secretary
====================================================================================================================================
</TABLE>
Newton Investment Management Confidential Page 2 of 6
<PAGE>
SCHEDULE 2
----------
PERSONS AUTHORISED TO GIVE ORAL AND WRITTEN CORPORATE ACTION INSTRUCTIONS
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
FULL NAME OF DESIGNATION/TITLE SPECIMEN SIGNATURE SPECIMEN SIGNATURE LIMIT OF AUTHORITY
AUTHORIZED
SIGNATORY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Andrew Downs Head of Investment /s/ Andrew Downs /s/ Andrew Downs Unlimited/Signing
Operations together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Gwyneth Davies Investment /s/ Gwyneth Davies /s/ Gwyneth Davies Unlimited/Signing
Administration together with any
Manager other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Ian Webb Supervisor Corporate /s/ Ian Webb /s/ Ian Webb Unlimited/Signing
Actions together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Lisa Holmes Corporate Actions Unlimited/Signing
Controller together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Dave Weston Transitions Manager /s/ Dave Weston /s/ Dave Weston Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
/s/ Roger Butler
- ------------------------------------------------------------------------------------------------------------------------------------
Name Signature Name Signature
====================================================================================================================================
</TABLE>
Newton Investment Management Confidential Page 3 of 6
<PAGE>
SCHEDULE 3
----------
PERSONS AUTHORISED TO GIVE ORAL INSTRUCTIONS IN RELATION
--------------------------------------------------------
TO FOREIGN EXCHANGE TRANSACTIONS
---------------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
FULL NAME OF DESIGNATION/TITLE SPECIMEN SIGNATURE SPECIMEN SIGNATURE LIMITOF AUTHORITY
AUTHORIZED
SIGNATORY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lawrence Barrie Green Dealing Director NOT REQUIRED NOT REQUIRED Unlimited
- ------------------------------------------------------------------------------------------------------------------------------------
Jon Monnery International Dealing NOT REQUIRED NOT REQUIRED Unlimited
Director
- ------------------------------------------------------------------------------------------------------------------------------------
Greg Lord Fixed Interest & NOT REQUIRED NOT REQUIRED Unlimited
Currency Dealer
- ------------------------------------------------------------------------------------------------------------------------------------
Nigel Davis Foreign Exchange NOT REQUIRED NOT REQUIRED Unlimited
Dealer
- ------------------------------------------------------------------------------------------------------------------------------------
Danny Bourne Dealer NOT REQUIRED NOT REQUIRED Unlimited
- ------------------------------------------------------------------------------------------------------------------------------------
Philip England Dealer NOT REQUIRED NOT REQUIRED Unlimited
- ------------------------------------------------------------------------------------------------------------------------------------
Edward Godden Dealer NOT REQUIRED NOT REQUIRED Unlimited
- ------------------------------------------------------------------------------------------------------------------------------------
Name Signature Name Signature
====================================================================================================================================
</TABLE>
Newton Investment Management Confidential Page 4 of 6
<PAGE>
SCHEDULE 4
----------
PERSONS AUTHORISED TO GIVE WRITTEN INSTRUCTIONS IN RELATION
-----------------------------------------------------------
TO FOREIGN EXCHANGE TRANSACTIONS
--------------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
FULL NAME OF DESIGNATION/TITLE SPECIMEN SIGNATURE SPECIMEN SIGNATURE LIMIT OF AUTHORITY
AUTHORIZED
SIGNATORY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter Hillman Trade Operations /s/ Peter Hillman /s/ Peter Hillman Unlimited/Signing
Manager together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew Downs Head of Investment /s/ Andrew Downs /s/ Andrew Downs Unlimited/Signing
Operations together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Gwyneth Davies Investment /s/ Gwyneth Davies /s/ Gwyneth Davies Unlimited/Signing
Administration together with any
Manager other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Brian Bradley Confirmations /s/ Brian Bradley /s/ Brian Bradley Unlimited/Signing
Supervisor together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Mohsin Siddiqui Foreign Exchange /s/ Mohsin Siddiqui /s/ Mohsin Siddiqui Unlimited/Signing
Administrator together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
/s/ Roger Butler
- ------------------------------------------------------------------------------------------------------------------------------------
Name Signature Name Signature
====================================================================================================================================
</TABLE>
Newton Investment Management Confidential Page 5 of 6
<PAGE>
SCHEDULE 5
----------
PERSONS AUTHORISED TO GIVE WRITTEN INSTRUCTIONS
-----------------------------------------------
IN RELATION TO STOCK TRANSACTIONS
---------------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
FULL NAME OF DESIGNATION TITLE SPECIMEN SIGNATURE SPECIMEN SIGNATURE LIMITED AUTHORITY
AUTHORIZED
SIGNATORY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter Hillman Trade Operations /s/ Peter Hillman /s/ Peter Hillman Unlimited/Signing
Manager together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew Downs Head of Investment /s/ Andrew Downs /s/ Andrew Downs Unlimited/Signing
Operations together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Gwyneth Davies Investment /s/ Gwyneth Davies /s/ Gwyneth Davies Unlimited/Signing
Administration together with any
Manager other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Brian Bradley Confirmations /s/ Brian Bradley /s/ Brian Bradley Unlimited/Signing
Supervisor together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence Barrie Green Director /s/ Lawrence Barrie Green /s/ Lawrence Barrie Green Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
David Weston Transititions Manager /s/ David Weston /s/ David Weston Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence Inman Deal Admin. Manager /s/ Lawrence Inman /s/ Lawrence Inman Unlimited/Signing
together with any
other signatory
- ------------------------------------------------------------------------------------------------------------------------------------
/s/ Roger Butler
- ------------------------------------------------------------------------------------------------------------------------------------
Name Signature Name Signature
====================================================================================================================================
</TABLE>
Newton Investment Management Confidential Page 6 of 6
<PAGE>
FIFTH THIRD BANK
GLOBAL CUSTODY ADDENDUM
This GLOBAL CUSTODY ADDENDUM ("ADDENDUM") dated as of October 1, 1997 by and
between DEAN FAMILY OF FUNDS/INTERNATIONAL VALUE FUND, an Ohio business trust,
(the "Fund"), and FIFTH THIRD BANK, a banking corporation organized pursuant to
the laws of the State of Ohio, ("Custodian"), is made as an addendum to the
Custody Agreement dated October 1, 1997, (the "Custody Agreement") between the
Fund and Custodian;
WHEREAS, Custodian has been appointed by Fund as the Custodian of the Assets of
the Portfolios of the Fund and the Fund desires to establish one or more custody
accounts through Custodian for global custody;
NOW, THEREFORE, in consideration of the premises and of the mutual promises and
covenants contained herein, the parties hereto agree as follows:
1. APPOINTMENT OF CUSTODIAN AS GLOBAL CUSTODIAN. Custodian is hereby
authorized and directed to, and shall, open and maintain one or more custody
accounts (each, the "Account" or collectively, the "Accounts") in such name or
names as Fund may, from time to time, direct; and will accept, in accordance
with the terms hereof, all cash and currency (collectively referred to herein as
"Cash") and all securities, instruments and other intangible assets as may be
agreed upon by Custodian and Fund which shall from time to time be delivered to
or received by it or any sub-custodian in the United States or in a country
approved by Fund for deposit in or otherwise held in the Account (collectively
referred to herein as "Securities") (Cash and Securities are collectively
referred to herein as "Assets"). Custodian assumes no obligation to review
investments in the Account or to recommend the purchase, retention or sale of
any Assets unless provided for by a separate written agreement between the
parties.
2. MAINTENANCE OF ASSETS OUTSIDE THE UNITED STATES. The Fund hereby
authorizes and instructs the Custodian to employ as sub-custodians, for the
Portfolios' Assets maintained outside the United States, the foreign banking
institutions and foreign securities depositories designated by the Foreign
Custody Manager as the Fund's delegate, (Foreign Sub-custodians). The Custodian
shall cease the employment of any one or more such Foreign Sub-custodians for
maintaining custody of the Portfolios' Assets as required pursuant to the
Foreign Custody Manager Agreement (or upon Proper Instructions from the Fund or
its delegate if the Foreign Custody Manager Agreement is no longer in effect).
3. FOREIGN SUB-CUSTODIANS. Assets of the Fund shall at all times be
maintained in custody of an "Eligible Foreign Custodian" as defined in the 1940
Act or the rules and regulations promulgated thereunder. With respect to holding
Assets with an Eligible Foreign Custodian, it is expressly understood and agreed
that:
(a) Custodian will endeavor, to the extent feasible, to hold
Securities in the country or other jurisdiction in which the principal
trading market for such Securities is located, where such Securities
are to be presented for cancellation and/or payment and/or
registration, or where such Securities are acquired;
(b) Cash which is maintained in a foreign country will be in any
currency which may be legally held in such country and may be held in
non-interest bearing accounts;
(c) Foreign Sub-custodians may hold Securities in central securities
depositories or clearing agencies in which such participates;
(d) The Custodian shall identify on its books as belonging to each
applicable Portfolio of the Fund, the foreign securities of such
Portfolios held by each Foreign Sub-custodian. Unless otherwise
required by local law or practice, a particular sub-custodian
agreement, or expressly instructed by the Fund, Assets deposited with
a Foreign Sub-custodian will be held in a commingled account in the
name of Custodian or its designee Sub-custodian as custodian for its
customers;
(e) Settlement of and payment for Securities received for, and
delivered from the Account may be made in accordance with the
customary or established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including without limitation, the delivery of
Securities to a purchaser, broker, dealer or their prospective agents
either against a receipt for future payment or without any payment
(so-called "free delivery"); and
1
<PAGE>
(f) The Fund is solely responsible for the payment of and the
reclamation, where applicable, of taxes. Custodian will, however,
cooperate with Funds in connection with Fund's payment or reclamation
of taxes and shall make the necessary filings in connection with
obtaining tax exemptions and tax reclamations which are available to
the Fund.
4. POWERS OF CUSTODIAN.
(a) GENERAL POWERS. Subject to and in accordance with Proper Instructions
from the Fund, or its delegated Foreign Custody Manager, Custodian, as Fund's
agent, and for the account and risk of the Fund, is hereby authorized and
empowered, with respect to Securities held outside the United States with
Foreign Sub-custodians, to authorize and empower Foreign Sub-custodians to:
(i) receive and deliver Assets;
(ii) receive all payments of principal, interest, dividends and other
income and distributions payable with respect to Assets;
(iii) exchange Securities in temporary or bearer form for Securities
in definitive or registered form; effect an exchange of shares where
the par value of stock is changed; and surrender Securities at
maturity or earlier when advised of a call for redemption (provided,
however, that Custodian shall not be liable for failure to so exchange
or surrender any security or take other action (A) if notice of such
exchange or call for redemption or other action was not actually
received by Custodian from the issuer (with respect to Securities
issued in the United States) or from one of the nationally or
internationally recognized bond or corporate action services to which
Custodian subscribes or from the Fund or (B) if, at the time of
deposit, any Security so deposited is subject to call, exchange,
redemption or similar action, unless specifically instructed to do so
by Fund);
(iv) hold Assets (A) in its vaults, (B) at a domestic or foreign
entity that provides handling, clearing or safekeeping service, (C)
with issuer in non-certificated form, (D) on Federal Book Entry at the
Federal Reserve Custodian or (E) with the prior approval of Fund at
any other location;
(v) register and/or hold Assets in the name of any nominee of
Custodian or its Foreign Sub-custodians or any of their respective
nominees or any authorized agent, subsidiary or other entity,
including (without limiting the generality of the foregoing) the
nominee of any central depository, clearing corporation or other
entity with which securities may be deposited (and Fund hereby
indemnifies and holds harmless Custodian and any such nominee against
any liability as a holder of record);
(vi) hold any investment in bearer form;
(vii) in connection with the receipt of Assets, accept documents in
lieu of such Assets as long as such documents contain the agreement of
the issuer thereof to hold such Assets subject to Custodian's sole
order;
(viii) make, execute, acknowledge and deliver as agent, any and all
documents or instruments (including but not limited to all
declarations, affidavits and certificates of ownership) that may be
necessary or appropriate to carry out the powers granted herein;
(ix) employ and consult with, and obtain advice from, suitable agents,
including auditors and legal counsel (who may be counsel to Fund or
the Custodian or other advisers) and Custodian shall incur no
liability in acting in good faith in accordance with the reasonable
advice and opinion of such agents or advisers;
(x) make any payments incidental to or in connection with this
paragraph 3(a); and
(xi) exercise all other rights and powers and to take any action it
deems necessary in carrying out the purposes of this Agreement.
(b) DISCRETIONARY CORPORATE ACTION. Whenever Custodian receives
information concerning the Securities or instruments (including, but not limited
to, warrants, options, tenders, options to tender or non-mandatory puts or
calls) which requires discretionary action by the beneficial owner of the
Securities (other than a proxy) such as subscription rights, bonus issues, stock
repurchase plans and rights offerings, or legal notice of the
2
<PAGE>
material intended to be transmitted to securities holders, or which confer
optional rights on the Fund or provide for discretionary action or alternative
courses of action by Fund ("Corporate Actions"), Custodian shall promptly give
the Fund notice of such Corporate Actions to the extent that Custodian has
actual knowledge of a Corporate Action. The Fund shall be responsible for making
any decisions relating thereto and for instructing Custodian to act. In order
for Custodian to act, it must receive Fund's Proper Instructions at Custodian's
offices, addressed as Custodian may from time to time request, by no later than
noon (Eastern Standard Time) AT LEAST TWO (2) BUSINESS DAYS PRIOR TO the last
scheduled date to act with respect to such securities or instruments (or such
earlier date or time as Custodian may notify Fund). Absent Custodian's timely
receipt of such instruction, Custodian shall not be liable for failure to take
any action relating to or to exercise any rights conferred by such securities or
instruments.
(c) VOTING. With respect to all Securities, however registered, the voting
rights are to be exercised by Fund or its designee. With respect to Securities
issued in the United States, Custodian's only duty shall be to mail to Fund any
documents (including proxy statements, annual reports and signed proxies)
relating to the exercise of such voting rights. With respect to Securities
issued outside the United States at the request of Fund, Custodian will provide
Fund with access to a provider of global proxy services. If Fund determines not
to utilize the services of such global proxy services provider, Custodian will
provide the Fund with proxy material actually received by Custodian from
Sub-Custodians, but otherwise shall have no obligations with respect to voting.
(d) FOREIGN EXCHANGE TRANSACTIONS. Custodian, as principal, is authorized
to enter into spot or forward foreign exchange contracts with Fund and may
provide such foreign exchange services to Fund through Foreign Sub-Custodians.
Instructions, including standing instructions, may be issued with respect to
such contracts, but Custodian may establish rules or limitations concerning any
foreign exchange facility made available to Fund. In all cases where Custodian
or Foreign Sub-custodians enter into foreign exchange contracts relating to the
Account, the terms and conditions of such foreign exchange contracts shall apply
to such transaction. Neither Custodian nor any Foreign Sub-custodian shall be
liable for any fluctuations or changes in foreign exchange rates, which shall be
the sole risk and liability of Fund.
5. AGREEMENTS WITH FOREIGN SUB-CUSTODIANS. Each agreement with a Foreign
Sub-custodian shall be substantially in the form previously made available to
the Fund and shall provide that:
(a) indemnification or insurance arrangements are made (or any combination
thereof) such that the Fund will be adequately protected against the risk of
loss of assets held in accordance with such agreement;
(b) the assets of the Fund will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the Foreign
Sub-custodian or its creditors except a claim of payment for their safe custody
or administration or, in the case of cash deposits, liens, or rights in favor of
creditors of the Foreign Sub-custodian arising under bankruptcy, insolvency, or
similar laws;
(c) beneficial ownership of the assets of each Fund will be freely
transferable without the payment of money or value other than for custody or
administration;
(d) adequate records will be maintained identifying the assets as
belonging to the Fund or as being held by a third party for the benefit of the
Fund;
(e) the Fund's independent public accountants will be given access to
those records or confirmation of the contents of those records; and
(f) the Fund will receive periodic reports with respect to the safekeeping
of the Fund's assets, including, but not limited to, notification of any
transfer to or from the Fund's account or a third party account containing
assets held for the benefit of the Fund.
6. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
(a) Except as otherwise provided in Paragraph (b) of this Section 6, the
provisions of Section 3 of the Custody Agreement shall apply, equally to the
Securities of the Fund held outside the United States by Foreign Sub-custodian.
(b) Notwithstanding any provision of this Addendum to the contrary,
settlement and payment for Securities received for the account of each
applicable Portfolio and delivery of Securities maintained for the account of
each applicable Portfolio may be effected in accordance with the customary
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with expectation of receiving later payment for such securities from such
purchaser or dealer.
3
<PAGE>
(c) Securities maintained in the custody of a Foreign Sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set forth
in Section 3 of this Addendum, and the Fund agrees to hold any such nominee
harmless from any liability as a holder of record of such securities.
7. LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian or its Sub-custodian employs a foreign banking institution as a
Foreign Sub-custodian shall require the institution to exercise a reasonable
standard of care as is customary in such country in the performance of its
duties and to indemnify, and hold harmless, the Custodian and any Sub-custodian
for the benefit of the Fund for and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to any
claims against a Foreign Sub-custodian as a consequence of any such loss,
damage, cost, expense, liability or claim if and to the extent that the Fund has
not been made whole for any such loss, damage, cost, expense, liability or
claim.
8. TAX LAW. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or any Sub-custodian by the
tax law of the United States of America or any state or political subdivision
thereof. It shall be the responsibility of the Custodian to notify the Fund of
the obligations imposed on the Fund or any as sub-custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above sentence,
including responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. Custodian shall
use reasonable efforts to assist the fund with respect to any claim for
exemption or refund.
9. COMPENSATION, FEES, EXPENSES AND TAXES.
(a) In consideration of the services to be rendered pursuant to this
Addendum, Fund shall compensate Custodian in accordance with and pursuant to the
Fee Schedule annexed hereto as Schedule A, which Fee Schedule may be amended
from time to time upon thirty (30) days' prior written notice to Fund.
(b) Fees and reimbursement for costs and expenses shall be paid monthly
after the last business day of each calendar month, with the first payment for
the calendar month following any activity. Custodian is hereby authorized to
charge the Account for such fees, costs and expenses after review and approval
by the Fund.
(c) In the event services are rendered for less than a calendar month or
this Addendum is terminated prior to the end of a calendar month, Fund shall pay
Custodian's fee prorated for the portion of the calendar month such services are
rendered, plus any costs and expenses incurred by Custodian for Fund's Account
up to or subsequent to the date of termination.
10. LIMITATION OF LIABILITY; INDEMNIFICATION.
(a) Custodian shall be liable for the acts or omissions of its
Sub-custodian and Foreign Sub-custodians to the same extent as set forth with
respect to sub-custodians generally in the Custody Agreement, regardless of
whether assets are maintained in the custody of a foreign banking institution, a
foreign securities depository or a branch of a U.S. bank as contemplated by this
Addendum. In no event shall Custodian or any Sub-custodian be liable (i) for
acting in accordance with Proper Instructions from Fund, (ii) for special or
consequential damages, (iii) for holding Assets in any particular country,
including, but not limited to, loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions or acts of
war or terrorism or any loss where the Custodian, Sub-custodian or Foreign
Sub-custodian has otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of the paragraph, in delegating custody duties to a
Sub-custodian or Foreign Sub-custodian, the Custodian shall not be relieved of
any responsibility to the Fund for any loss due to such delegation, except such
loss as may result from political risk (including but not limited to, exchange
control restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or other losses (excluding
bankruptcy or insolvency of a Foreign Sub-custodian not caused by political
risk) due to Acts of God, nuclear incident or other losses under circumstances
where the Custodian and Sub-custodian or Foreign Sub-custodian have exercised
reasonable care.
(b) Fund shall indemnify Custodian and hold it harmless against any
losses, damages, costs or expenses (including reasonable attorneys' fees and
disbursements) liability (including, without limitation, liability arising under
the applicable securities laws, and any state or foreign securities and/or
banking laws) or claim arising (i) from the status as a mere record holder of
securities in the Account; or (ii) from any action or inaction by the Custodian
upon Proper Instructions in connection with this Addendum, or (iii) from the
performance of its obligations under the Addendum, provided, however, that
nothing contained herein shall limit or in any way impair the right of Custodian
to indemnification under any other provision of the Custody Agreement and
further provided that the Custodian shall
4
<PAGE>
not be indemnified and held harmless from any against any such loss or damage,
cost expense, liability or claim arising from the Custodian's negligence, lack
of good faith or willful misconduct or failure to act with reasonable care.
(c) Fund understands that, due to certain foreign market practices, when a
Sub-custodian is instructed to deliver Assets against payment, it may deliver
such Assets prior to actually receiving final payment and that, as a matter of
bookkeeping convenience, it may credit Fund's Account with anticipated proceeds
of sale prior to actual receipt of final payment. All credits to the Account of
the Fund of anticipated proceeds of sales and redemptions of Assets and of
anticipated income from Assets shall be conditional upon receipt of final
payment and may be reversed to the extent final payment is not received. In the
event that Custodian in its description advances funds to Fund to facilitate the
settlement of any transaction, or elects to permit Fund to use funds credited to
the Account in anticipation of final payment, Fund shall reimburse Custodian for
such amounts plus any interest thereon.
11. REPORTS; STATEMENTS OF ACCOUNT; COMPUTER SERVICES. Custodian shall
provide the Fund on a quarterly basis, no later than 15 days after the end of
each calendar quarter, with Statements of Assets in the Account ("Statement of
Assets") and Statements of Account showing all transactions in the Account
("Statement of Account"). Statement of Assets, Statement of Account and
Confirmations shall identify the Assets held, and transactions involving, each
Foreign Sub-custodian. The Custodian will supply to the Foreign Sub-custodians,
including but not limited to an identification of entities having possession of
the Portfolio(s) Assets and advices or notifications of any transfers of Assets
to or from each custodian account maintained by a foreign banking institution
for the Custodian on behalf of each applicable Portfolio indicating, as to
Securities acquired for a Portfolio, the identity of the entity having physical
possession of such Securities.
12. REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a Portfolio
including the purchase or sale of foreign exchange or of contracts for foreign
exchange, or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Addendum, except such as may arise from
Custodian's or Custodian's nominee's own negligent action, negligent failure to
act or willful misconduct, any Assets at any time held for the Account of the
applicable Portfolio shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's Assets to the extent necessary
to obtain reimbursement.
13. MONITORING RESPONSIBILITIES. Monitoring of Foreign Sub-custodians
shall be governed by the Foreign Custody Manager Agreement, where applicable.
Custodian shall promptly inform the Foreign Custody Manager, in the event that
the Custodian is notified by a selected Foreign Sub-custodian that there appears
to be a substantial likelihood that its shareholders' equity will decline below
$200 million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles) or any other capital adequacy
test applicable to it by exemptive order, or if the Custodian has actual
knowledge of any material loss of the assets of the Fund held by a Foreign
Sub-custodian.
14. NOTICES, INSTRUCTIONS AND OTHER COMMUNICATIONS. Unless otherwise
specified herein, all Statements of Assets, Statements of Account and
Confirmations shall be in writing and all notices, instructions or other
communications may be given either orally or in writing (including by tested
telex, telecopy or other electronic transmission, which may include Trade
Reports issued by the Institutions Delivery System or Depository Trust Company).
All Statements of Assets, Statements of Account, Confirmations, notices,
instructions and other communications shall be delivered to the address (post
office, telephone, telex or other electronic address) set forth on Schedule B
annexed hereto, which address may be changed upon thirty (30) days' prior
written notice to the other party. Fund shall furnish, and shall cause each
Investment Manager to furnish, to Custodian a certificate indicating those
persons who are authorized to give Custodian instructions hereunder and with
specimen signatures of such persons. Custodian is authorized to comply with and
rely upon any such notices, instructions or other communications believed by it
to have been sent or given by an authorized person. Custodian's understanding of
any oral notice, instruction or other communication shall be deemed controlling
(whether given or received by Custodian), notwithstanding any discrepancy
between such understanding and any subsequent confirming document or
communication.
15. APPOINTMENT OF INVESTMENT MANAGER. Fund may, from time to time,
appoint one or more investment managers (each an "Investment Manager") to manage
the Assets in the Account, to vote securities in the Account, to purchase, sell
or otherwise acquire or dispose of Assets in the Account, and to engage in
foreign exchange transactions on behalf of Fund. Custodian is to rely upon and
comply with (and shall have no liability for relying upon and complying with)
Proper Instructions and directions from the Investment Manager (including
instructions and directions with respect to the voting of securities in the
Account, the purchase, sale or other acquisition or disposition of Assets in the
Account and the furnishing of information and records relating to the Account to
the Investment Manager) to the same extent as if such instructions and
directions were given by Fund and
5
<PAGE>
Custodian shall have no duty or obligation to determine the propriety or
appropriateness of such instructions or directions. Any such appointment shall
remain in full force and effect unless and until Custodian receives written
notice from Fund to the contrary.
16. TERMINATION. This Addendum shall be continuing and shall remain in
full force and effect until terminated by Custodian or Fund or upon the
termination of the Custody Agreement between the Fund and Custodian.
17. ASSIGNMENT. Neither Custodian nor Fund shall assign this Addendum
without first obtaining the written consent of the other party hereto.
18. HEADINGS AND CAPITAL TERMS. The section and paragraph headings
contained herein are for convenience and reference only and are not intended to
define or limit the scope of any provision of this Addendum. All capitalized
terms used in this Addendum but not defined shall have the meanings assigned to
such terms in the Custody Agreement.
19. ENTIRE AGREEMENT; AMENDMENT. This Addendum shall constitute the entire
agreement of the parties with respect to the subject matter and supersedes all
prior oral or written agreements in regard thereto. Except as otherwise
provided, this Addendum may be amended only by an instrument in writing duly
executed by both parties hereto.
20. GOVERNING LAW; JURISDICTION; CERTAIN WAIVERS. (a) This Addendum shall
be interpreted and construed in accordance with the internal substantive laws
(and not the choice of law rules) of the State of Ohio.
(b) The invalidity, illegality or unenforceability of any provision of
this Addendum shall in no away affect the validity, legality or enforceability
of any other provision; and if any provision is held to be unenforceable as a
matter of law, the other provisions shall not be affected thereby and shall
remain in full force and effect.
21. RIGHTS AND REMEDIES. The rights and remedies conferred upon the
parties hereto shall be cumulative, and the exercise of waiver of any such
rights or remedy shall not preclude or inhibit the exercise or any additional
rights or remedies. The waiver of any right or remedy hereunder shall not
preclude or inhibit the subsequent exercise of such right or remedy.
IN WITNESS WHEREOF, this Addendum has been executed and attested as of the
day and year first above written, by the duly authorized offices of Fund and
Custodian.
DEAN FAMILY OF FUNDS/
Attest: INTERNATIONAL VALUE FUND
/s/ Tina D. Hosking By: /s/ Frank H. Scott
- ---------------------------- --------------------------------
Name: Tina D. Hosking Name: Frank H. Scott
Title: Secretary Title: President
Attest: THE FIFTH THIRD BANK
/s/ Elizabeth M Goldthwaite By: /s/ Tracie D. Hoffman
- ---------------------------- --------------------------------
Name: Elizabeth M. Goldthwaite Name: Tracie D. Hoffman
Title: Officer Title: Vice President
6
<PAGE>
SCHEDULE A
THE FIFTH THIRD BANK
GLOBAL CUSTODY AGREEMENT
FEE SCHEDULE
7
<PAGE>
SCHEDULE B
THE FIFTH THIRD BANK
GLOBAL CUSTODY AGREEMENT
NOTICES
_____________, 19___
TO THE FIFTH THIRD BANK:
Post Office Address: Fifth Third Center
511 Walnut Street
Cincinnati, Ohio 45263
Attention:
Telephone:
Telex:
Telecopy:
TO ______________________________
Post Office Address:
8
<PAGE>
FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT, made as of October 1, 1997, between DEAN FAMILY OF FUNDS/
INTERNATIONAL VALUE FUND (the "Fund") and THE FIFTH THIRD BANK ("Fifth Third").
W I T N E S S E T H :
WHEREAS, the Fund desires to appoint Fifth Third as a Foreign Custody
Manager on the terms and conditions contained herein;
WHEREAS, Fifth Third desires to serve as a Foreign Custody Manager and
perform the duties set forth herein on the terms and conditions contained
herein;
NOW, THEREFORE, in consideration of the mutual promises hereinafter
contained in this Agreement, the Fund and Fifth Third hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings;
1. Capitalized terms used in the Agreement and not otherwise defined in
the Agreement shall have the meanings given such terms in the Rule.
2. "Board" shall mean the board of directors or board of trustees, as the
case may be, of the Fund.
3. "Eligible Foreign Custodian" shall have the meaning provided in the
rule, except that it shall not include any Securities Depository the use of
which is mandatory (i) by law or regulation, or (ii) because securities cannot
be withdrawn from such Securities Depository, or (iii) because maintaining
securities outside such Securities Depository is not consistent with prevailing
custodial practices.
4. "Monitoring System" shall mean a system established by Fifth Third to
fulfill the Responsibilities specified in clauses (1)(d) and (1)(e) of Article
III of this Agreement.
5. "Responsibilities" shall mean the responsibilities delegated to Fifth
Third as a Foreign Custody Manager with respect to each Specified Country, as
such responsibilities are more fully described in Article III of this Agreement.
6. "Rule" shall mean Rule 17f-5 under the Investment Company Act of 1940,
as amended, as such Rule became effective on June 16, 1997.
7. "Specified Country" shall mean each country, other than United States,
constituting the primary market for a security with respect to which the Fund
has given settlement instruction to The Fifth Third Bank as custodian (the
"Custodian") under its Custody Agreement with the Fund.
ARTICLE II
FIFTH THIRD AS FOREIGN CUSTODY MANAGER
1. The Fund on behalf of its Board hereby delegates to Fifth Third with
respect to each Specified Country the Responsibilities.
<PAGE>
2. Fifth Third accepts the Board's delegation of Responsibilities with
respect to each Specified Country and agrees in performing the Responsibilities
as a Foreign Custody Manager to exercise reasonable care, prudence and diligence
such as a person having responsibility for the safekeeping of the Fund's assets
would exercise.
3. Fifth Third shall provide to the Board, no later than 15 days after
the end of each calendar quarter, written reports notifying the Board of the
placement of assets of the Fund with a particular Eligible Foreign Custodian
within a Specified Country selected by Fifth Third and of any material change in
the Arrangements with respect to the Fund with any such Eligible Foreign
Custodian.
ARTICLE III
RESPONSIBILITIES
1. Fifth Third shall with respect to each Specified Country and each
Eligible Foreign Custodian selected by Fifth Third: (a) determine that assets of
the Fund held by such Eligible Foreign Custodian will be subject to reasonable
care, based on the standards applicable to custodians in the relevant market in
which such Eligible Foreign Custodian operates, after considering all factors
relevant to the safekeeping of such assets, including, without limitation, those
contained in Section (c)(1) of the Rule; (b) determine that the Fund's foreign
custody arrangements with each Eligible Foreign Custodian selected by Fifth
Third are governed by a written contract with the Custodian (or, in the case of
an Eligible Foreign Custodian selected by Fifth Third which is a Securities
Depository, by such a contract, by the rules or established practices or
procedures of the Securities Depository, or by any combination of the foregoing)
which will provide reasonable care for the Fund's assets based on the standards
specified in paragraph (c)(1) of the Rule; (c) determine that each contract
described in the preceding clause (b) (or, in the case of an Eligible Foreign
Custodian selected by Fifth Third which is a Securities Depository, by such a
contract, by the rules or established practices or procedures of the Securities
Depository, or by any combination of the foregoing) shall include the provisions
specified in paragraph (c)(2)(i)(A) through (F) of the Rule or , alternatively,
in lieu of any or all of such (c)(2)(i)(A) through (F) provisions, such other
provisions as Fifth Third determines will provide, in their entirety, the same
or a greater level of care and protection for the assets of the Fund as such
specified provisions; (d) monitor pursuant to the Monitoring System the
appropriateness of maintaining the assets of the Fund with a particular Eligible
Foreign Custodian selected by Fifth Third and the contract governing the
arrangement; and (e) advise the Fund whenever an arrangement described in the
preceding clause (d) no longer meets the requirements of the Rule that the Fund
must withdraw its assets from such Eligible Foreign Custodian as soon as
reasonably practicable. The Fund agrees that Fifth Third may employ, consult and
obtain advice from suitable advisors, agents and third parties as Fifth Third
deems appropriate in its sole discretion in connection with actions taken by
Fifth Third hereunder to fulfill the Responsibilities.
2. For purposes of clause (d) of the preceding Section 1 of this Article,
appropriateness shall not include, nor be deemed to include, any risks
associated with investment in a particular country. Maintaining assets of the
Fund with an Eligible Foreign Custodian selected by Fifth Third will on any day
be considered appropriate; if Fifth Third on such day would select such Eligible
Foreign custodian in accordance with Articles II and III of this Agreement.
ARTICLE IV
REPRESENTATIONS
1. The Fund hereby represents that: (a) this Agreement has been duly
authorized, executed and delivered by the Fund, constitutes a valid and legally
binding obligation of the Fund enforceable in accordance with its terms, and no
statute, regulation, rule, order, judgment or contract binding on the Fund
prohibits the Fund's execution or performance of this Agreement; (b) this
Agreement has been approved and ratified by the Board at a meeting duly called
and at which a quorum was at all times present; and (c) the Board has considered
the risks associated with investment in each Specified Country.
2
<PAGE>
2. Fifth Third hereby represents that: (a) Fifth Third is duly organized
and existing under the laws of the State of Ohio, with full power to carry on
its businesses as now conducted, and to enter into this Agreement and to perform
its obligations hereunder; (b) this Agreement has been duly authorized, executed
and delivered by Fifth Third, constitutes a valid and legally binding obligation
of Fifth Third enforceable in accordance with its terms, and no statute,
regulation, rule, order, judgment or contract binding on Fifth Third prohibits
Fifth Third's execution or performance of this Agreement; and (c) Fifth Third
has established the Monitoring System.
ARTICLE V
CONCERNING FIFTH THIRD
1. Fifth Third shall not be liable for any costs, expenses, damages,
liabilities or claims, including attorneys' and accountants' fees, sustained or
incurred by, or asserted against, the Fund except to the extent the same arises
out of the failure of Fifth Third to exercise the care, prudence and diligence
required by Section 2 of Article II hereof. In no event shall Fifth Third be
liable to the Fund, the Board, or any third party for special, indirect or
consequential damages, or for lost profits or loss of business, arising in
connection with this Agreement.
2. The Fund agrees to indemnify Fifth Third and holds it harmless from
and against any and all costs, expenses, damages, liabilities or claims,
including attorneys' and accountants' fees, sustained or incurred by or asserted
against Fifth Third by reason or as a result of any action or inaction, arising
out of Fifth Third's performance hereunder, provided that the Fund shall not
indemnify Fifth Third to the extent any such costs, expenses, damages,
liabilities or claims arise out of Fifth Third's failure to exercise the
reasonable care, prudence and diligence required by Section 2 of Article II
hereof.
3. Fifth Third shall only have such duties as are expressly set forth
herein. Without limiting the generality of the foregoing, in no event shall
Fifth Third be liable for any risks associated with investments in a particular
country, but shall only be liable for the risks associated in placing assets of
the Fund with a particular Eligible Foreign custodian selected by Fifth Third.
ARTICLE VI
MISCELLANEOUS
1. This Agreement constitutes the entire agreement between the Fund and
Fifth Third, and no provision in the Custody Agreement between the Fund and the
Custodian shall affect the duties and obligations of Fifth Third hereunder, nor
shall any provision in this Agreement affect the duties or obligations of the
Custodian under the Custody Agreement.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to Fifth Third, shall be sufficiently given if
received by it at its offices at Fifth Third Center, 511 Walnut Street,
Cincinnati, Ohio 45263, Attention: Mutual Fund Client Services, or at such other
place as Fifth Third may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if received
by it at its offices at Dean Family of Funds, 2480 Kettering Tower, Dayton, Ohio
45243, Attention: Frank Scott.
4. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties. This Agreement shall extend to and
be binding upon the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by either party
without the written consent of the other.
3
<PAGE>
5. This Agreement shall be construed in accordance with the internal
substantive laws of the State of Ohio, without regard to conflicts of laws
principles thereof. The Fund and Fifth Third each hereby irrevocably waive any
and all rights to a trial by jury in any legal proceeding arising out of or
relating to this Agreement.
6. The parties hereto agree that in performing hereunder, Fifth Third is
acting solely on behalf of the Fund and no contractual or service relationship
shall be deemed to be established hereby between Fifth Third and any other
person.
7. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
8. This Agreement shall terminate simultaneously with the termination of
the Custody Agreement between the Fund and the Custodian, and may otherwise be
terminated by either party giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than thirty
(30) days after the date of such notice.
9. In consideration of the service provided by Fifth Third hereunder, the
Fund shall pay to Fifth Third such compensation and out-of-pocket expenses as
may be agreed upon from time to time.
IN WITNESS WHEREOF, the Fund and Fifth Third have caused this Agreement to
be executed by their respective officers, thereunto duly authorized, as of the
date first above written.
DEAN FAMILY OF FUNDS/
INTERNATIONAL VALUE FUND
By: /s/ Frank H. Scott
-------------------------------
Title: President
----------------------------
THE FIFTH THIRD BANK
By: /s/ Tracie Hoffman
-------------------------------
Title: Vice President
----------------------------
4
<PAGE>
RESOLUTION
The undersigned hereby certifies to The Fifth Third Bank that the Board of
Trustees of Dean Family of Funds, a business trust organized under the laws of
the State of Ohio, duly adopted the following resolutions on the 20th day of
November, 1997, and that such resolutions are in full force and effect:
"WHEREAS, management of Dean Family of Funds (the "Trust") proposes
that the Trust retain The Fifth Third Bank ("Fifth Third") as the
primary custodian for the International Value Fund (the "Fund"); and
WHEREAS, based upon the expertise and financial strength of Fifth
Third, it is reasonable to rely on Fifth Third to select, contract
with, and monitor foreign custodians;
NOW, THEREFORE, BE IT RESOLVED, that the Trust's Custody Agreement
with Fifth Third be, and it hereby is, approved; and
FURTHER RESOLVED, that the President of the Trust be, and he hereby
is, authorized to execute, on behalf of the Trust, the Custody
Agreement in substantially the same form as presented at this meeting;
and
FURTHER RESOLVED, that Fifth Third be, and it hereby is, authorized
and instructed to select eligible foreign custodians in the countries
in which the Fund is permitted to invest, to determine the adequacy of
and execute contracts with such foreign custodians, and to monitor the
arrangements with such foreign custodians; and
FURTHER RESOLVED, that prior to the placing of Fund assets with a
particular foreign custodian, Fifth Third shall have determined, based
on all factors relevant to the safekeeping of Fund assets, that the
Fund's assets will be subject to "reasonable care" if maintained with
such custodian; and
FURTHER RESOLVED, that Fifth Third shall establish a system to monitor
the appropriateness of maintaining the Fund's assets with a particular
custodian and under the foreign custody contract and, if a foreign
custody arrangement no longer meets the requirements of Rule 17f-5,
shall notify the Trust immediately; and
<PAGE>
FURTHER RESOLVED, that the Board of Trustees will be provided, on a
quarterly basis, with written reports notifying the Board of the
placement of Fund assets with a particular custodian, and of any
changes in the Fund's foreign custody arrangements; and
FURTHER RESOLVED, that the officers of the Trust be, and they hereby
are, authorized to do each and every thing whatsoever necessary to
implement these resolutions." IN WITNESS WHEREOF, I have hereunto set
my hand as secretary of said trust this 1st day of October, 1997.
/s/ Tina D. Hosking
------------------------------
Secretary
Consent Of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the prospectus and "Auditors" in the Statement of Additional
Information and to the use of our report dated May 19, 1998 in Post-Effective
Amendment No. 5 to the Registration Statement (Form N-1A No. 333-18653).
/s/ Ernst & Young LLP
Cincinnati, Ohio
July 13, 1998
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<SHARES-COMMON-STOCK> 11,205
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<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 105,657
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,078,851
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<DIVIDEND-INCOME> 102,964
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<EXPENSES-NET> 97,760
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<NET-CHANGE-FROM-OPS> 1,293,974
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<DISTRIBUTIONS-OF-INCOME> 27
<DISTRIBUTIONS-OF-GAINS> 666
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<NUMBER-OF-SHARES-SOLD> 11,518
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<SHARES-REINVESTED> 64
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 52,709
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<GROSS-EXPENSE> 164,835
<AVERAGE-NET-ASSETS> 67,705
<PER-SHARE-NAV-BEGIN> 10.76
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> 1.56
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<AVG-DEBT-PER-SHARE> 0
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<PERIOD-END> MAR-31-1998
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<INVESTMENTS-AT-VALUE> 20,428,193
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<OTHER-ITEMS-LIABILITIES> 141,050
<TOTAL-LIABILITIES> 141,050
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<PAID-IN-CAPITAL-COMMON> 17,338,540
<SHARES-COMMON-STOCK> 1,514,344
<SHARES-COMMON-PRIOR> 3,300
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 790,725
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,686,417
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<DIVIDEND-INCOME> 257,025
<INTEREST-INCOME> 24,945
<OTHER-INCOME> 0
<EXPENSES-NET> 239,962
<NET-INVESTMENT-INCOME> 42,008
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<DISTRIBUTIONS-OF-GAINS> 679,224
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<NET-INVESTMENT-INCOME> 42,008
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</TABLE>
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<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
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<INVESTMENTS-AT-VALUE> 8,277,797
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<SENIOR-EQUITY> 0
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<SHARES-COMMON-PRIOR> 3,300
<ACCUMULATED-NII-CURRENT> 0
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<OVERDISTRIBUTION-GAINS> 0
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<OTHER-INCOME> 0
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<NET-INVESTMENT-INCOME> 103,458
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<NET-CHANGE-FROM-OPS> 1,053,265
<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> 50,850
<DISTRIBUTIONS-OTHER> 0
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<SHARES-REINVESTED> 13,140
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<GROSS-EXPENSE> 169,795
<AVERAGE-NET-ASSETS> 6,375,881
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> 1.62
<PER-SHARE-DIVIDEND> .16
<PER-SHARE-DISTRIBUTIONS> .08
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<TABLE> <S> <C>
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<CIK> 0001027624
<NAME> DEAN FAMILY OF FUNDS
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<NUMBER> 33
<NAME> BALANCED FUND - CLASS C
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001027624
<NAME> DEAN FAMILY OF FUNDS
<SERIES>
<NUMBER> 41
<NAME> INTERNATIONAL VALUE FUND -CLASS A
<S> <C>
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<FISCAL-YEAR-END> MAR-31-1998
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001027624
<NAME> DEAN FAMILY OF FUNDS
<SERIES>
<NUMBER> 43
<NAME> INTERNATIONAL VALUE FUND -CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
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</TABLE>
