Registration Nos. 811-7987
333-18653
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No.
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Post-Effective Amendment No. 6
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 9
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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:
/ / immediately upon filing pursuant to Rule 485(b)
/ / on (date) pursuant to Rule 485(b)
/ / 75 days after filing pursuant to Rule 485(a)
/X/ on August 1, 1999 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. Front and Back Cover Pages Cover Pages
2. Risk/Return Summary: Investments, Risk/Return Summary
Risks, and Performance
3. Risk/Return Summary: Fee Table Expense Information
4. Investment Objectives, Principal Investment Objectives,
Investment Strategies, and Related Principal Investment
Risks Strategies and Risk
Considerations
5. Management's Discussion of Fund Inapplicable (Included
Performance in Annual Report)
6. Management, Organization, and Operation of the Funds
Capital Structure
7. Shareholder Information Buying Fund Shares;
Redeeming Your Shares;
Calculation of Share Price
and Public Offering Price;
Exchange Privilege;
Dividends and Distributions;
Taxes; Application
8. Distribution Arrangements Distribution Plans
9. Financial Highlights Information Financial Highlights
PART B
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Caption in Statement
of Additional
Item No. Registration Statement Caption Information
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10. Cover Page and Table of Contents Cover Page; Table of
Contents
11. Fund History The Trust
(i)
<PAGE>
12. Description of the Fund and Its Definitions, Policies and
Investments and Risks Risk Considerations; Quality
Ratings of Corporate Bonds
and Preferred Stocks;
Investment Limitations;
Portfolio Turnover
13. Management of the Fund Trustees and Officers
14. Control Persons and Principal Holders Principal Security
of Securities Holders
15. Investment Advisory and Other Services The Investment Adviser; The
Sub-Adviser; Distribution
Plans; Custodian; Auditors;
Countrywide Fund
Services, Inc.
16. Brokerage Allocation and Other Securities Transactions
Practices
17. Capital Stock and Other Securities The Trust
18. Purchase, Redemption and Pricing of Calculation of Share
Shares Price and Public Offering
Price; Other Purchase
Information; Redemption in
Kind
19. Taxation of the Fund Taxes
20. Underwriters The Underwriter
21. Calculation of Performance Data Historical Performance
Information
22. 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>
[Logo] DEAN
family of funds_______
[Logo]
Prospectus
August 1, 1999
<PAGE>
PROSPECTUS
August 1, 1999
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 capital appreciation and dividend
income 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.
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For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free) . . . . . . . . . . . . . . . 888-899-8343
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
RISK/RETURN SUMMARY
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
The LARGE CAP VALUE FUND seeks to provide capital appreciation and dividend
income 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.
WHAT ARE THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES?
Dean Investment Associates uses a disciplined, prudent "value" 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. 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.
Large Cap Value Fund
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The Large Cap Value Fund invests primarily in the common stocks of large
companies, specifically companies which have a market capitalization of greater
than $750 million at the time of investment.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in common stocks or securities convertible into common stocks of large
companies.
Small Cap Value Fund
- --------------------
The Small Cap Value Fund invests primarily in the common stocks of small
companies, those companies with 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 common stocks or securities convertible into common stocks of small
companies. However, the Fund may invest a portion of its assets in common stocks
of larger companies.
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<PAGE>
The Balanced Fund
- -----------------
The Balanced Fund attempts to achieve growth of capital through its investments
in equity securities. 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 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 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.
International Value Fund
- ------------------------
The International Value Fund invests 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 circumstances, the Fund will invest at least 65% of its total
assets in the common stocks of foreign companies and securities convertible into
the common stocks of foreign companies.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
Equity and fixed-income 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 and
Newton Capital. 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, there is a risk that you may
lose money by investing in the Funds.
Preferred stocks, bonds 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.
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<PAGE>
Investment in securities of foreign issuers involves somewhat different
investment risks from those affecting securities of domestic issuers. In
addition to credit and market risk, investments in foreign securities involve
sovereign risk, which includes local political and economic developments,
potential nationalization, withholding taxes on dividend or interest payments
and currency blockage. Foreign companies may have less public or less reliable
information available about them and may be subject to less governmental
regulation than U.S. companies. Securities of foreign companies may be less
liquid or more volatile than securities of U.S. companies.
The Small Cap Value Fund will typically invest a substantial portion of its
assets in small and medium-sized companies, which may be less liquid and more
volatile than investments in larger companies
Because the Balanced 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.
The degree of risks of investing in the Balanced 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.
An investment in the Funds is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
PERFORMANCE SUMMARY
The bar charts and performance tables shown below provide an indication of the
risks of investing in the Funds. The bar charts show each Fund's annual total
return for 1998, the first full year the Funds were operational. Sales loads are
not reflected in the bar chart. If they were, returns would be less than those
shown. The accompanying tables show each Fund's average annual total return for
1998 and since its inception and compares those returns with the performance of
a broad-based securities market index. How the Funds have performed in the past
is not necessarily an indication of how the Funds will perform in the future.
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<PAGE>
Large Cap Value Fund - Class A Shares
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1.40%
[bar chart]
1998
During the period shown in the bar chart, the highest return for a quarter was
11.60% during the quarter ended December 31, 1998 and the lowest return for a
quarter was -15.90% during the quarter ended September 30, 1998.
Small Cap Value Fund - Class A Shares
- --------------------
- -5.02%
[bar chart]
1998
During the period shown in the bar chart, the highest return for a quarter was
11.65% during the quarter ended March 31, 1998 and the lowest return for a
quarter was -17.72% during the quarter ended September 30, 1998.
Balanced Fund - Class A Shares
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6.19%
[bar chart]
1998
During the period shown in the bar chart, the highest return for a quarter was
7.69% during the quarter ended March 31, 1998 and the lowest return for a
quarter was -6.43% during the quarter ended September 30, 1998.
International Value Fund - Class A Shares
- ------------------------
20.28%
[bar chart]
1998
During the period shown in the bar chart, the highest return for a quarter was
17.38% during the quarter ended December 31, 1998 and the lowest return for a
quarter was -16.16% during the quarter ended September 30, 1998.
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<PAGE>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1998
Since
One Year Inception Inception Date
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Large Cap Value Fund - Class A -3.92% 4.46% May 28, 1997
Large Cap Value Fund - Class C 0.64% 2.83% August 19, 1997
Russell 1000 Index(1) ____% ____%
Russell 1000 Value Index(1) ____% ____%
Small Cap Value Fund - Class A -10.01% 4.89% May 28, 1997
Small Cap Value Fund - Class C -5.79% 2.01% August 1, 1997
Russell 2000 Index(2) ____% ____%
Russell 2000 Value Index(2) ____% ____%
Balanced Fund - Class A 0.61% 6.36% May 28, 1997
Balanced Fund - Class C 5.44% 5.29% August 1, 1997
Russell 1000 Index(1) ____% ____%
Lehman Brothers Intermediate
Government/Corporate Bond Index(3) ____% ____%
International Value Fund - Class A 13.96% 12.53% October 13, 1997
International Value Fund - Class C 19.41% 19.98% November 6, 1997
Europe, Australia and Far East Index(4) ____% ____%
(1) The Russell 1000 Index is an unmanaged index comprised of the 1,000 largest
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 representing approximately 98% of the U.S.
publicly-traded equity market). The Russell 1000 Value Index is [a value
oriented component of the Russell 1000 Index...]
(2) 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. The Russell 2000 Value Index is [a value oriented component of the
Russell 2000 Index...]
(3) The Lehman Brothers Intermediate Government/Corporate Bond Index is
_______.
(4) The Europe, Australia and Far East Index is compiled by Morgan Stanley and
is ___________.
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<PAGE>
EXPENSE INFORMATION
This table describes the fees and expenses that you would pay if you buy and
hold shares of the Funds.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Class A Class C
Shares Shares
------ ------
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 5.25% None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price) None* 1.00%
Maximum Sales Charge (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.
** A wire transfer fee is charged in the case of redemptions made by wire.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Total Annual
Fund
Other Operating
Management Fees 12b-1 Fees Expenses Expenses(A)
--------------- ---------- -------- -----------
Large Cap
Value Fund
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Class A Shares 1.00% .00% 1.29% 2.29%
Class C Shares 1.00% .00% 7.53% 8.53%
Small Cap
Value Fund
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Class A Shares 1.00% .05% .84% 1.89%
Class C Shares 1.00% .00% 1.70% 2.70%
Balanced Fund
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Class A Shares 1.00% .00% 1.09% 2.09%
Class C Shares 1.00% .00% 2.14% 3.14%
International
Value Fund
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Class A Shares 1.25% .00% 3.00% 4.25%
Class C Shares 1.25% .00% 4.66% 5.91%
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<PAGE>
(A) THE ADVISER HAS VOLUNTARILY AGREED TO WAIVE FEES AND/OR REIMBURSE FUND
EXPENSES IN ORDER TO LIMIT TOTAL ANNUAL FUND OPERATING EXPENSES TO 1.85%
FOR CLASS A SHARES AND 2.60% FOR CLASS C SHARES OF THE LARGE CAP VALUE
FUND, THE SMALL CAP VALUE FUND AND THE BALANCED FUND AND 2.09% FOR CLASS A
SHARES AND 2.84% FOR CLASS C SHARES OF THE INTERNATIONAL VALUE FUND. THIS
ARRANGEMENT MAY BE DISCONTINUED AT ANY TIME AT THE OPTION OF THE ADVISER.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in the Fund for the time periods indicated, reinvest all dividends and
distributions, and then redeem all of your shares at the end of those periods.
The Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Large Cap Small Cap Balanced International
Value Fund Value Fund Fund Value Fund
--------------- --------------- --------------- ---------------
Class A Class C Class A Class C Class A Class C Class A Class C
Shares Shares Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ $ $ $ $ $ $ $
3 Years
5 Years
10 Years
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Large Cap Value Fund - Class C Shares $ $ $ $
Small Cap Value Fund - Class C Shares
Balanced Fund - Class C Shares
International Value Fund - Class C Shares
</TABLE>
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<PAGE>
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND RISK CONSIDERATIONS
LARGE CAP VALUE FUND AND SMALL CAP VALUE FUND
- ---------------------------------------------
INVESTMENT OBJECTIVES
The LARGE CAP VALUE FUND seeks to provide capital appreciation and dividend
income 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.
PRINCIPAL INVESTMENT TECHNIQUES AND STRATEGIES
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 over 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. 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.
Under normal circumstances, at least 65% of the Large Cap Value Fund's total
assets will be invested in common stocks or securities convertible into common
stocks of large companies (such as convertible bonds, convertible preferred
stocks and warrants). A "large company" is one which has a market capitalization
of greater than $750 million at the time of investment.
Under normal circumstances, the Small Cap Value Fund will invest at least 65% of
its total assets in common stocks or securities convertible into common stocks
of small companies (such as convertible bonds, convertible preferred stocks and
warrants). A "small company" is one which has a market capitalization of $750
million or less at the time of investment. However, the Fund may invest a
portion of its assets in common stocks of larger companies.
BALANCED FUND
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INVESTMENT OBJECTIVE
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.
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<PAGE>
PRINCIPAL INVESTMENT TECHNIQUES AND STRATEGIES
Under normal circumstances, the asset mix of the Fund will 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.
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.
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-term (i.e., maturing in one year or less from the date of purchase)
dollar-denominated debt obligations which (1) are U.S. Government obligations,
(2) are issued by domestic banks, or (3) 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.
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<PAGE>
INTERNATIONAL VALUE FUND
- ------------------------
INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT TECHNIQUES AND STRATEGIES
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).
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 Newton Capital expects to
deliver superior earnings and dividend growth. This will often reflect the
company's market position and pricing power. Newton Capital looks for either a
dominant position in a competitive market or a well protected niche. The goal is
to be able to invest in these companies at valuation levels which do not reflect
their future prospects so a wider view is used when analyzing a company's
potential. Response to different phases of the market and economic cycle may be
made, for instance, through varying the Fund's exposure to more cyclical
companies ahead of an expected economic recovery. Other, more specific criteria
may also generate some stock selection decisions.
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<PAGE>
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
currency exchange contract to sell an amount of foreign currency approximating
the value of some or all of the 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 Fund between trade and settlement dates resulting from changes in such
rates.
INVESTMENT TECHNIQUES AND STRATEGIES APPLICABLE TO ALL FUNDS
PREFERRED STOCKS AND BONDS. Each 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. 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.
FOREIGN SECURITIES. Each 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.
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.
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
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<PAGE>
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.
TEMPORARY DEFENSIVE POSITION. When Dean Investment Associates, or with respect
to the International Value Fund, 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
Dean Investment Associates or Newton Capital it is otherwise warranted in
selling to manage a Fund's portfolio, each 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. When and to the extent
a Fund assumes such a temporary defensive position, it may not pursue or achieve
its investment objective.
PRINCIPAL INVESTMENT RISKS APPLICABLE TO ALL FUNDS
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 and Newton Capital. 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.
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.
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
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<PAGE>
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. and there is generally less governmental
supervision and regulation of exchanges, brokers and issuers than there is in
the U.S. The Funds 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 Small Cap Value 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.
Because the Balanced 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.
- 14 -
<PAGE>
Investors should be aware that the investment results of the Balanced 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 International Value Fund may have investments that are denominated in a
currency other than the U.S. dollar. These investments 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 International 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 International Value Fund presently
intends to limit its investments in emerging market countries to no more than
10% of its net assets. The Large Cap Value Fund, the Small Cap Value Fund and
the Balanced Fund will not invest in emerging market countries.
- 15 -
<PAGE>
BUYING FUND SHARES
You may open an account with the Funds by investing the minimum amount required
for the type of account you open. You may invest additional amounts in an
existing account at any time. Several different account options and minimum
investment amounts options are detailed below.
- --------------------------------------------------------------------------------
Account Options
Regular Accounts
- ----------------
Tax-Deferred Retirement Plans
- -----------------------------
TRADITIONAL IRA
Assets grow tax-deferred and contributions may be deductible. Withdrawals and
distributions are taxable in the year made.
ROTH IRA
An IRA with tax free growth of assets and distributions, if certain conditions
are met. Contributions are not deductible.
EDUCATION IRA
An IRA with____________
IRA stands for "Individual Retirement Account." IRAs are special types of
accounts that offer different tax advantages. You should consult your tax
professional to help decide which is right for you.
You may also open accounts for:
- - Keogh Plans for self-employed individuals
- - 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
Automatic Investment Plan
- -------------------------
You may make automatic monthly investments in the Funds from your bank,
savings and loan or other depository institution account on either the 15th or
the last business day of the month or both. The Funds pay the costs associated
with these transfers, but reserves the right, upon thirty days' written notice,
to make reasonable charges for this service. Your depository institution may
impose its own charge for debiting your account which would reduce your return
from an investment in the Funds.
- --------------------------------------------------------------------------------
Minimum Investment
Requirements
Initial Additional
------- ----------
Regular Accounts $1,000 None
Tax-Deferred $ 250 None
Retirement Plans
Automatic Investment Plans:
Regular Accounts $ 50 $ 50
Tax-Deferred
Retirement Plans $ 50 $ 50
- --------------------------------------------------------------------------------
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<PAGE>
Direct Deposit Plans
--------------------
You may purchase shares of the Funds through direct deposit plans offered by
certain employers and government agencies. These plans enable you to have all or
a portion of your payroll or social security checks transferred automatically to
purchase shares of the Funds.
- --------------------------------------------------------------------------------
OPENING A NEW ACCOUNT. To open an account with us, please follow the steps
outlined below.
1. Complete the enclosed Account Application. Be sure to indicate the Fund(s)
and type of account(s) you wish to open, the amount of money you wish to
invest, and which class of shares you wish to purchase. If you do not
indicate which class you wish to purchase, we will invest your purchase in
Class A shares.
2. Write a check for your initial investment to "Dean Family of Funds." Mail
your completed Account Application and your check to the following address:
DEAN FAMILY OF FUNDS
c/o COUNTRYWIDE FUND SERVICES, INC.
P.O. BOX 5354
CINCINNATI, OHIO 45201-5354
You may also establish an account through a broker-dealer that has a sales
agreement with the Trust's principal underwriter, 2480 Securities LLC (the
"Underwriter"). Since your broker-dealer may charge you fees for his or her
services other than those described in this Prospectus, you should ask your
broker-dealer about fees before investing.
ADDING TO YOUR ACCOUNT. You may make additional purchases for your account at
any time. These purchases may be made by mail, wire transfer or by contacting
your broker-dealer (ask your broker-dealer about any fees for his or her
services).
- 17 -
<PAGE>
Additional purchases must include your name and account number to ensure proper
crediting. Use the address above for additional purchases by mail, and call us
c/o our transfer agent, Countrywide Fund Services, Inc. (the "Transfer Agent"),
at 800-282-1581 for wiring instructions. Your additional purchase requests must
contain your account name and number to permit proper crediting.
MISCELLANEOUS. In connection with all purchases of Fund shares, we observe the
following policies and procedures:
o We price direct purchases based on the next public offering price (net
asset value plus any applicable sales load) or at net asset value ("NAV")
after your order is received. Direct purchase orders received by the
Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's
public offering price or NAV. Purchases 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 or NAV determined as of the close of the regular
session of trading on the New York Stock Exchange on that day.
o We do not accept third party checks for any investments.
o We may open accounts for less than the minimum investment or change minimum
investment requirements at any time.
o We may refuse to accept any purchase request for any reason or no reason.
o We mail you confirmations of all your purchases or redemptions of Fund
shares.
o Certificates representing shares are not issued.
o If your order to purchase shares is canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by
the Funds or the Transfer Agent incur in the transaction.
o There is no fee for purchases made by wire, but we may charge you for this
service upon thirty days' prior notice.
The Trust's Account Application contains provisions in favor of the Trust, the
Transfer Agent and certain of their affiliates, excluding such entities from
certain liabilities (including, among others, losses resulting from unauthorized
shareholder transactions) relating to the various services made available to
investors.
Choosing a Share Class
----------------------
The Funds offers two classes of shares: Class A shares and Class C shares. These
Classes, which represent interests in the same
- 18 -
<PAGE>
portfolio of investments and have the same rights, differ primarily in sales
loads and expenses to which they are subject. Before choosing a Class, you
should consider the following factors, as well as any other relevant facts and
circumstances:
The decision as to which Class of shares is more beneficial to you depends on
the amount and intended length of your investment. You should consider Class A
shares if you prefer to pay an initial sales load. If you qualify for reduced
sales loads or, in the case of purchases of $500,000 or more, no initial sales
load, you may find Class A shares attractive because similar sales load
reductions are not available with respect to Class C shares. Moreover, Class A
shares are subject to lower ongoing expenses than are Class C shares over the
term of the investment. As an alternative, Class C shares are sold without any
initial sales load so the entire purchase price is immediately invested in the
Fund. Any investment return on these investments may partially or wholly offset
the higher annual expenses; however, because a Fund's future return cannot be
predicted, there can be no assurance that this would be the case.
Finally, you should consider the effect of the contingent deferred sales load in
the context of your investment timeline. For example, Class C shares are subject
to a 1.00% annual 12b-1 fee for an indefinite period of time, while Class A will
be subject to only a .25% annual 12b-1 fee. Thus, Class A shares may be more
attractive than Class C shares if you have a longer term investment outlook. On
the other hand, if you are unsure of the length of time you intend to invest,
you may wish to elect Class C shares.
Set forth below is a chart comparing the sales loads and 12b-1 fees applicable
to each Class of shares:
CLASS SALES LOAD 12B-1 FEE
- --------------------------------------------------------------------------------
A Maximum 5.25% initial 0.25%
sales load reduced for
purchases of $25,000 and
over; shares sold without
an initial sales load are
generally subject to a
1.00% contingent deferred
sales load during first year
- --------------------------------------------------------------------------------
C 1.00% contingent deferred 1.00%
sales load during first year
- --------------------------------------------------------------------------------
- 19 -
<PAGE>
If you are investing $500,000 or more, it is generally more beneficial for
you to buy Class A Shares because there is no front-end sales load and the
annual expenses are lower. Therefore, any purchase of $500,000 or more is
automatically invested in Class A Shares.
Class A Shares
--------------
Class A shares are sold at NAV plus an initial sales load. In some cases,
reduced initial sales loads for the purchase of Class A shares may be available,
as described below. For example, investments of $500,000 or more are not subject
to a sales load at the time of purchase but may be subject to a contingent
deferred sales load of up to 1.00% on redemptions made within one year after
purchase if a commission was paid by the Underwriter to a participating
unaffiliated dealer. Class A shares are also subject to an annual 12b-1 fee of
up to .25% of the Fund's average daily assets allocable to Class A shares. For
purchases of Class A shares of the Funds by qualified retirement plans with
greater than 100 participants, the Underwriter may pay a dealer's commission of
1.00% of such 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, the
Underwriter may 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 to participating
unaffiliated dealers through whom such purchases are effected.
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 to
determine a dealer's eligibility for the commission. Dealers should contact the
Underwriter concerning the applicability and calculation of the dealer's
commission in the case of combined purchases. An exchange from other funds will
not qualify for payment of the dealer's commission, unless such exchange is from
a fund with assets as to which a dealer's commission or similar payment has not
been previously paid. Redemptions of Class A shares may result in the imposition
of a contingent deferred sales load if the dealer's commission described in this
paragraph was paid in connection with the purchase of such shares. See
"Contingent Deferred Sales Load for Certain Purchases of Class A Shares" below.
- 20 -
<PAGE>
The following table illustrates the initial sales load breakpoints for the
purchase of Class A shares:
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 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. The Underwriter receives that portion of the initial
sales load which is not reallowed to the dealers who sell shares of the Fund.
The Underwriter retains the entire sales load on all direct initial investments
in the Fund and on all investments in accounts with no designated dealer of
record.
In addition to the compensation otherwise paid to 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.
REDUCED SALES LOAD. You may use the Right of Accumulation to combine the cost or
current NAV (whichever is higher) of your existing Class A shares of a Fund with
the amount of any current purchases in order to take advantage of the reduced
sales loads set forth in the table above. Purchases made 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. You should contact the Transfer
Agent for information about the Right of Accumulation and Letter of Intent.
- 21 -
<PAGE>
PURCHASES AT NET ASSET VALUE. Banks, bank trust departments and savings and loan
associations, in their fiduciary capacity or for their own accounts, may
purchase Class A shares of a Fund at NAV. To the extent permitted by regulatory
authorities, a bank trust department may charge fees to clients for whose
account it purchases shares at NAV. Federal and state credit unions may also
purchase Class A shares at NAV.
In addition, Class A shares of a Fund may be purchased at NAV 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 at NAV if their investment adviser or financial planner has made
appropriate arrangements with the Trust and the Underwriter. The investment
adviser or financial planner must notify the Fund that an investment qualifies
as a purchase at NAV.
Class A shares may also be purchased at NAV 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.
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 Fund at NAV.
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
NAV 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 one year 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
- 22 -
<PAGE>
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 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, you will be so notified on the
confirmation you receive for such purchase.
Redemptions of such Class A shares of the Fund held for at least one year 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 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".
Class C Shares
--------------
Class C shares are sold at NAV without an initial sales load so that the full
amount of your purchase payment may be immediately invested in a Fund. A
contingent deferred sales load of 1.00% will be imposed on redemptions of Class
C shares made within one year of their purchase. A contingent deferred sales
load will not be imposed upon redemptions of Class C shares held for at least
one year. Class C shares are subject to an annual 12b-1 fee of up to 1.00% of
the Fund's average daily net assets allocable to Class C shares. The Underwriter
intends to pay a commission of 1.00% of the purchase amount to your broker at
the time you purchase Class C shares.
Additional Information on the Contingent Deferred Sales Load
------------------------------------------------------------
The contingent deferred sales load is 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
- 23 -
<PAGE>
disabled is named. The Underwriter may require documentation prior to waiver of
the load, including death certificates, physicians' certificates, etc. The
contingent deferred sales load is also waived for any partial or complete
redemption of shares purchases by qualified retirement plans where the broker of
record and the Underwriter have agreed to such waiver.
All sales loads imposed on redemptions are paid to the Underwriter. In
determining whether the contingent deferred sales load is payable under each
Class of shares, 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.
The following example will illustrate the operation of the contingent deferred
sales load. Assume that you open an account and purchase 1,000 shares at $10 per
share and that six months later the NAV per share is $12 and, during such time,
you have acquired 50 additional shares through reinvestment of distributions. If
at such time you 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 NAV of $2 per share. Therefore, $4,000 of the
$5,400 redemption proceeds will be charged the load. At the rate of 5.00%, the
contingent deferred sales load would be $200. At the rate of 1.00%, 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 your account are aggregated.
REDEEMING YOUR SHARES
To redeem your shares, send a written request to us c/o our Transfer Agent,
Countrywide Fund Services, with your name, account number and the amount you
wish to redeem. You must sign your request exactly as your name appears on the
Fund's account records. Mail your written redemption request to:
Dean Family of Funds
c/o Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
- 24 -
<PAGE>
If you would like your redemption proceeds deposited free of charge directly
into your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction, contact the Transfer Agent for more
information.
We redeem shares based on the current NAV on the day we receive a valid request
for redemption, less any contingent deferred sales load due on the redeemed
shares. Be sure to review "Buying Fund Shares" above to determine whether your
redemption is subject to a contingent deferred sales load.
You may also place a wire redemption request through your broker-dealer to
redeem your shares. The broker-dealer is responsible for ensuring that
redemption requests are transmitted to us in proper form in a timely manner. The
broker-dealer may charge you additional or different fees for redeeming shares
than those described in this Prospectus. If you request a redemption by wire,
you will be charged a processing fee. We reserve the right to change the
processing fee upon thirty days' notice. All charges will be deducted from your
account by redemption of shares in your account. Your bank or brokerage firm may
also impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to your designated account.
- ----------------------------------------
A signature guarantee helps protect A signature guarantee is required
against fraud. You can obtain one from for any redemption which is $25,000
most banks or securities dealers, but or more, which is mailed to an
not from a notary public. For joint address other than your address of
accounts, each signature must be record or if your name(s) or
guaranteed. Please call us to ensure address on your account has been
that your signature guarantee will be changed within thirty days.
processed correctly.
- ----------------------------------------
ADDITIONAL INFORMATION ABOUT ACCOUNTS AND REDEMPTIONS
SMALL ACCOUNTS. Due to the high costs of maintaining small accounts, we may ask
that you increase your account balance if your account falls below $1,000 (or
$250 for a retirement account). If the account remains under $1,000 (or $250 for
a retirement account) thirty days after we notify you, we may close your account
and send you the proceeds, less any applicable sales load.
- 25 -
<PAGE>
AUTOMATIC WITHDRAWAL PLAN. If your account's value is at least $5,000, you may
be eligible for our automatic withdrawal program that allows you to withdraw a
fixed amount from your account each month, calendar quarter or year. Under the
program, we send withdrawals to you or to another person you designate. Each
withdrawal must be $50 or more, and you should note that a withdrawal involves a
redemption of shares that may result in a gain or loss for federal income tax
purposes. Please contact us for more information about the automatic withdrawal
program.
REINVESTMENT PRIVILEGE. If you have redeemed shares of a Fund, you may reinvest
all or part of the proceeds without any additional sales load. This reinvestment
must occur within ninety days of the redemption and the privilege may only be
exercised once per year.
MISCELLANEOUS. In connection with all redemptions of Fund
shares, we observe the following policies and procedures:
o We may refuse any redemption request involving recently purchased shares
until your check for the recently purchased shares has cleared. To
eliminate this delay, you may purchase shares of the Fund by certified
check or wire.
o We may delay mailing redemption proceeds for up to seven days (most
redemption proceeds are mailed within three days after receipt of a
request),
o We may process any redemption request that exceeds $250,000 or 1% of the
Fund's assets (whichever is less) by paying the redemption proceeds in
portfolio securities rather than cash (typically referred to as "redemption
in kind", see the Statement of Additional Information for further
discussion).
EXCHANGE PRIVILEGE
You may exchange shares of the Funds for each other or for shares of other funds
which have made appropriate arrangements with the Underwriter.
You may exchange Class A shares of a Fund which are not subject to a contingent
deferred sales load 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
- 26 -
<PAGE>
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.
You may request an exchange by sending a written request to the Transfer Agent.
The request must be signed exactly as your name appears on the Trust's account
records. Exchanges may also be requested by telephone. If you are unable to
execute a transaction by telephone (for example during times of unusual market
activity), you 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 your
request by the Transfer Agent.
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 indentification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
Exchanges may only be made for shares of funds then offered for sale in the your
state of residence and are subject to the applicable minimum initial investment
requirements. The exchange privilege may be modified or terminated by the Board
of Trustees upon 60 days' prior notice to shareholders. 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.
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<PAGE>
Income Option - income distributions and short-term capital gains
distributions paid in cash; long-term capital gains
distributions reinvested in additional shares.
Cash Option - income distributions and capital gains distributions paid
in cash.
You should indicate your choice of option on your application. If no option is
specified, distributions will automatically be reinvested in additional shares.
All distributions will be based on the net asset value in effect on the payable
date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six months,
your dividends may be reinvested in 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.
Any dividend or capital gains distribution you receive in cash from any Fund may
be returned within thirty days of the distribution date to the Transfer Agent
for reinvestment at the net asset value next determined after its return. You or
your 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.
- 28 -
<PAGE>
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. Capital gains distributions
may be taxable at different rates depending on the length of time a Fund holds
its assets.
Redemptions of shares of the Funds are taxable events on which you may realize a
gain or loss. An exchange of a Fund's shares for shares of another Fund will be
treated as a sale of such shares and any gain on the transaction may be subject
to federal income tax.
The Funds' use of hedging techniques, such as foreign currency forwards,
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
- 29 -
<PAGE>
variable annuity insurance products. The firm manages approximately $4 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 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 Investment Associates a fee for its services equal to the annual
rate of 1.25% of the average value of its daily net assets.
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.
Mr. Van Dijk is primarily responsible for managing the portfolio of the Small
Cap Value Fund and Mr. Sachdeva is primarily responsible for managing the
portfolio of the Balanced Fund.
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 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.
- 30 -
<PAGE>
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.
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
Pursuant to Rule 12b-1 under the 1940 Act, the Funds have adopted two separate
plans of distribution under which each of each Fund's two Classes of shares may
directly incur or reimburse the Underwriter for certain expenses related to the
distribution of its shares, including payments to securities dealers and other
persons, including the Underwriter and its affiliates, who are engaged in the
sale of shares of the Fund 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 or the Trust;
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 Fund; 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 each of the respective Classes.
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. The
annual limitation for payment of expenses pursuant to the Class C Plan is 1.00%
of each Fund's average daily net assets allocable to Class C shares. The
payments permitted by the Class C Plan fall into two categories.
- 31 -
<PAGE>
First, the Class C shares may directly incur or reimburse the Underwriter in an
amount not to exceed .75% per year of each Fund's average daily net assets
allocable to Class C shares for certain distribution-related expenses as
described above. The Class C Plan also provides for the payment of an account
maintenance fee of up to .25% per year of each Fund's average daily net assets
allocable to Class C shares, which may be paid to dealers based on the average
value of Fund shares owned by clients of such dealers. Because these fees are
paid out of the Funds' assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales loads. In the event a Plan is terminated by the Trust in
accordance with its terms, a Fund will not be required to make any payments for
expenses incurred after the date the 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.
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. Securities mainly traded on a
non-U.S. exchange are generally valued according to the preceding closing values
on that exchange. However, if an event that may change the value of a security
held in a Fund's portfolio occurs after the time when the closing value on the
non-U.S. exchange was determined, the Board of Trustees might decide to value
the security based on fair value. This may cause the value of the security on
the books of the Fund to be significantly different from the closing value on
the non-U.S. exchange and may affect the calculation of the Fund's net asset
value.
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. The net asset value per
share of each Fund will fluctuate with the value of the securities it holds.
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: (1) 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, (2) securities traded in the
over-the-counter market, and which are
- 32 -
<PAGE>
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, (3) 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 (4) 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.
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 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.
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
- 33 -
<PAGE>
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.
AVERAGE ANNUAL RETURNS FOR 1, 3, 5 AND 10 YEAR PERIODS ENDED MARCH 31, 1999
Average Performance of
Balanced Mutual Funds as
Separate reported by Morningstar
Accounts Mutual Fund Values
1 Year 1.46% _____%
3 Years 13.14% _____%
5 Years 13.93% _____%
10 Years 12.34% _____%
The average performance of balanced mutual funds as presented represents an
average of the annual returns of ___ balanced mutual funds tracked by
Morningstar Mutual Fund Values.
- 34 -
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Funds' financial performance. Certain information reflects financial results for
a single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Funds (assuming
reinvestment of all dividends and distributions). This information has been
audited by Ernst & Young LLP, whose report, along with the Funds' financial
statements, are included in the Statement of Additional Information, which is
available upon request.
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------
CLASS A CLASS C
---------------------------- ----------------------------
YEAR FROM YEAR FROM
ENDED INCEPTION(A) ENDED INCEPTION(A)
MARCH 31, THROUGH MARCH 31, THROUGH
1999 MARCH 31, 1998 1999 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ............ $ 12.21 $ 10.00 $ 12.16 $ 10.76
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss) ................... 0.05 0.03 (0.02) (0.01)
Net realized and unrealized gains (losses)
on investments .............................. (1.44) 2.36 (1.45) 1.56
----------- ----------- ----------- -----------
Total from investment operations .................. (1.39) 2.39 (1.47) 1.55
----------- ----------- ----------- -----------
Less distributions:
From net investment income ..................... (0.05) (0.03) (0.00) (0.00)
From net realized gains ........................ (0.12) (0.15) (0.12) (0.15)
----------- ----------- ----------- -----------
Total distributions ............................... (0.17) (0.18) (0.12) (0.15)
----------- ----------- ----------- -----------
Net asset value at end of period .................. $ 10.65 $ 12.21 $ 10.57 $ 12.16
=========== =========== =========== ===========
Total return(B) ................................... (11.48)% 24.11% (12.12)% 14.63%
=========== =========== =========== ===========
Net assets at end of period ....................... $ 9,315,112 $ 7,669,807 $ 531,871 $ 136,237
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before fee waivers and/or expense reimbursements
by Adviser .................................. 2.29% 2.72% 8.53% 52.73%
After fee waivers and/or expense reimbursements
by Adviser .................................. 1.85% 1.84% 2.60% 2.59%
Ratio of net investment income (loss)
to average net assets(C) ....................... 0.46% 0.30% (0.31)% (0.55)%
Portfolio turnover rate(C) ........................ 55% 54% 55% 54%
(A) Initial public offering date 5-28-97 8-19-97
</TABLE>
(B) Total returns shown exclude the effect of applicable sales loads and are
not annualized.
(C) Annualized.
- 35 -
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------
CLASS A CLASS C
---------------------------- ----------------------------
YEAR FROM YEAR FROM
ENDED INCEPTION(A) ENDED INCEPTION(A)
MARCH 31, THROUGH MARCH 31, THROUGH
1999 MARCH 31, 1998 1999 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ............ $ 12.84 $ 10.00 $ 12.79 $ 10.95
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss) ................... 0.08 0.03 0.01 (0.02)
Net realized and unrealized gains (losses)
on investments .............................. (3.03) 3.30 (3.03) 2.33
----------- ----------- ----------- -----------
Total from investment operations .................. (2.95) 3.33 (3.02) 2.31
----------- ----------- ----------- -----------
Less distributions:
From net investment income ..................... (0.06) (0.02) (0.04) (0.00)
From net realized gains ........................ (0.68) (0.47) (0.68) (0.47)
----------- ----------- ----------- -----------
Total distributions ............................... (0.74) (0.49) (0.72) (0.47)
----------- ----------- ----------- -----------
Net asset value at end of period .................. $ 9.15 $ 12.84 $ 9.05 $ 12.79
=========== =========== =========== ===========
Total return(B) ................................... (23.39)% 33.86% (24.00)% 21.63%
=========== =========== =========== ===========
Net assets at end of period ....................... $15,479,055 $19,437,554 $ 2,560,618 $ 1,392,036
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before fee waivers and/or expense reimbursements
by Adviser .................................. 1.89% 1.98% 2.70% 6.41%
After fee waivers and/or expense reimbursements
by Adviser .................................. 1.85% 1.84% 2.60% 2.59%
Ratio of net investment income (loss)
to average net assets(C) ....................... 0.83% 0.35% 0.17% (0.42)%
Portfolio turnover rate(C) ........................ 79% 62% 79% 62%
(A) Initial public offering date 5-28-97 8-1-97
</TABLE>
(B) Total returns shown exclude the effect of applicable sales loads and are
not annualized.
(C) Annualized.
- 36 -
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
BALANCED FUND
FINANCIAL HIGHLIGHTS
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------
CLASS A CLASS C
---------------------------- ----------------------------
YEAR FROM YEAR FROM
ENDED INCEPTION(A) ENDED INCEPTION(A)
MARCH 31, THROUGH MARCH 31, THROUGH
1999 MARCH 31, 1998 1999 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ............ $ 11.55 $ 10.00 $ 11.52 $ 10.71
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income .......................... 0.19 0.17 0.11 0.07
Net realized and unrealized gains (losses)
on investments .............................. (0.56) 1.62 (0.55) 0.92
----------- ----------- ----------- -----------
Total from investment operations .................. (0.37) 1.79 (0.44) 0.99
----------- ----------- ----------- -----------
Less distributions:
From net investment income ..................... (0.19) (0.16) (0.11) (0.10)
From net realized gains ........................ (0.24) (0.08) (0.24) (0.08)
----------- ----------- ----------- -----------
Total distributions ............................... (0.43) (0.24) (0.35) (0.18)
----------- ----------- ----------- -----------
Net asset value at end of period .................. $ 10.75 $ 11.55 $ 10.73 $ 11.52
=========== =========== =========== ===========
Total return(B) ................................... (3.22)% 18.07% (3.81)% 9.37%
=========== =========== =========== ===========
Net assets at end of period ....................... $10,391,582 $ 7,262,670 $ 1,885,376 $ 1,083,890
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before fee waivers and/or expense reimbursements
by Adviser .................................. 2.09% 2.60% 3.14% 7.39%
After fee waivers and/or expense reimbursements
by Adviser .................................. 1.85% 1.84% 2.60% 2.59%
Ratio of net investment income
to average net assets(C) ....................... 1.79% 1.85% 1.04% 0.99%
Portfolio turnover rate(C) ........................ 60% 64% 60% 64%
(A) Initial public offering date 5-28-97 8-1-97
</TABLE>
(B) Total returns shown exclude the effect of applicable sales loads and are
not annualized.
(C) Annualized.
- 37 -
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
INTERNATIONAL VALUE FUND
FINANCIAL HIGHLIGHTS
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------
CLASS A CLASS C
---------------------------- ----------------------------
YEAR FROM YEAR FROM
ENDED INCEPTION(A) ENDED INCEPTION(A)
MARCH 31, THROUGH MARCH 31, THROUGH
1999 MARCH 31, 1998 1999 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ............ $ 11.76 $ 10.00 $ 11.72 $ 9.89
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment loss ............................ (0.01) (0.05) (0.10) (0.04)
Net realized and unrealized gains
on investments and foreign currency ......... 0.69 1.81 0.69 1.87
----------- ----------- ----------- -----------
Total from investment operations .................. 0.68 1.76 0.59 1.83
----------- ----------- ----------- -----------
Less distributions:
From net investment income ..................... -- -- -- --
From net realized gains ........................ (0.03) -- (0.03) --
----------- ----------- ----------- -----------
Total distributions ............................... (0.03) -- (0.03) --
----------- ----------- ----------- -----------
Net asset value at end of period .................. $ 12.41 $ 11.76 $ 12.28 $ 11.72
=========== =========== =========== ===========
Total return(B) ................................... 5.82% 17.60% 5.07% 18.50%
=========== =========== =========== ===========
Net assets at end of period ....................... $ 5,981,899 $ 1,295,896 $ 1,453,569 $ 87,249
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before fee waivers and/or expense reimbursements
by Adviser .................................. 4.25% 16.66% 5.91% 58.89%
After fee waivers and/or expense reimbursements
by Adviser .................................. 2.09% 2.04% 2.84% 2.82%
Ratio of net investment loss
to average net assets(C) ....................... (0.70)% (1.30)% (1.23)% (1.94)%
Portfolio turnover rate(C) ........................ 100% 109% 100% 109%
(A) Initial public offering date 10-13-97 11-6-97
</TABLE>
(B) Total returns shown exclude the effect of applicable sales loads and are
not annualized.
(C) Annualized.
- 38 -
<PAGE>
DEAN FAMILY OF FUNDS
2480 Kettering Tower
Dayton, Ohio 45423
Board of Trustees
- -----------------
Victor S. Curtis
Chauncey H. Dean
Dr. Robert D. Dean
Dr. Sam B. Gould
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
Risk/Return Summary. . . . . . . . . . . . . . . . . . . . .
Expense Information. . . . . . . . . . . . . . . . . . . . .
Investment Objectives, Principal Investment Strategies
and Risk Considerations . . . . . . . . . . . . . . . . .
Buying Fund Shares . . . . . . . . . . . . . . . . . . . . .
Redeeming Your Shares . . . . . . . . . . . . . . . . . . .
Exchange Privilege . . . . . . . . . . . . . . . . . . . . .
Dividends and Distributions. . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operation of the Funds . . . . . . . . . . . . . . . . . . .
Distribution Plans. . . . . . . . . . . . . . . . . . . . .
Calculation of Share Price and Public Offering Price . . . .
Prior Performance of the Adviser . . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . . . . . . . . . . . .
- 39 -
<PAGE>
Additional information about the Funds is included in the Statement of
Additional Information ("SAI"), which is incorporated by reference in its
entirety. Additional information about the Funds' investments is available in
the Funds' annual and semiannual reports to shareholders. In the Funds' annual
report, you will find a discussion of the market conditions and strategies that
significantly affected the Funds' performance during their last fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Funds, or to make shareholder inquiries about the Funds,
please call 1-888-899- 8343.
Information about the Funds (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's public reference room in Washington,
D.C. Information about the operation of the public reference room can be
obtained by calling the Commission at 1-800-SEC-0330. Reports and other
information about the Funds are available on the Commission's Internet site at
http://www.sec.gov. Copies of information on the Commission's Internet site may
be obtained, upon payment of a duplicating fee, by writing to: Securities and
Exchange Commission, Public Reference Section, Washington, D.C. 20549-6009.
File No. 811-7987
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DEAN FAMILY OF FUNDS
--------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
August 1, 1999
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 August
1, 1999. 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.
<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..................... 18
INVESTMENT LIMITATIONS...................................................... 20
TRUSTEES AND OFFICERS....................................................... 22
THE INVESTMENT ADVISER...................................................... 25
THE SUB-ADVISER............................................................. 26
THE UNDERWRITER............................................................. 27
DISTRIBUTION PLANS.......................................................... 28
SECURITIES TRANSACTIONS..................................................... 30
PORTFOLIO TURNOVER.......................................................... 31
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE........................ 32
OTHER PURCHASE INFORMATION.................................................. 33
TAXES....................................................................... 34
REDEMPTION IN KIND.......................................................... 36
HISTORICAL PERFORMANCE INFORMATION.......................................... 37
CUSTODIAN................................................................... 40
AUDITORS ................................................................... 40
PRINCIPAL SECURITY HOLDERS.................................................. 40
COUNTRYWIDE FUND SERVICES, INC.............................................. 41
ANNUAL REPORT............................................................... 42
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THE TRUST
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The Dean Family of Funds (the "Trust") was organized as an Ohio business
trust on December 18, 1996. The Trust is an open-end, diversified, management
investment company that 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. 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.
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.
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
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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.
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).
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.
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Treasury obligations are backed by the "full faith and credit" of the United
States Government. U.S. Treasury obligations include Treasury bills, Treasury
notes, and Treasury bonds. U.S. Treasury obligations also include the separate
principal and interest components of U.S. Treasury obligations which are traded
under the Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Agencies or instrumentalities established by the United
States Government include the Federal Home Loan Banks, the Federal Land Bank,
the Government National Mortgage Association, the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, the Student Loan
Marketing Association, the Small Business Administration, the Bank for
Cooperatives, the Federal Intermediate Credit Bank, the Federal Financing Bank,
the Federal Farm Credit Banks, the Federal Agricultural Mortgage Corporation,
the Resolution Funding Corporation, the Financing Corporation of America and the
Tennessee Valley Authority. Some of these securities are supported by the full
faith and credit of the United States Government while others are supported only
by the credit of the agency or instrumentality, which may include the right of
the issuer to borrow from the United States Treasury. In the case of securities
not backed by the full faith and credit of the United States, the investor must
look principally to the agency issuing or guaranteeing the obligation for
ultimate repayment, and may not be able to assert a claim against the United
States in the event the agency or instrumentality does not meet its commitments.
Shares of the Funds are not guaranteed or backed by the United States
Government.
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
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acceptance; liquidity; amount and quality of long-term debt; trend of earnings
over a period of 10 years; financial strength of the parent company and the
relationships which exist with the issuer; and recognition by the management of
obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated Prime-1 or
Prime-2. Commercial paper rated A-1 (highest quality) by S&P has the following
characteristics: liquidity ratios are adequate to meet cash requirements;
long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed; the issuer has access to at least two additional
channels of borrowing; basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances; typically, the issuer's 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.
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<PAGE>
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 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 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
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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.
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.
LOANS OF 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.
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
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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.
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. 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.
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. 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
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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 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. A Fund's
purchase of securities on a when-issued or to-be-announced basis may increase
its overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date or if the broker-dealer selling
the securities fails to deliver after the value of the securities has risen.
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).
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
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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.
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.
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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 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.
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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.
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.
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<PAGE>
WRITING COVERED CALL OPTIONS. Each Fund may write covered call options on
equity securities or futures contracts that the Fund is eligible to purchase to
earn premium income, to assure a definite price for a security it has considered
selling, or to close out options previously purchased. A call option gives the
holder (buyer) the right to purchase a security or futures contract at a
specified price (the exercise price) at any time until a certain date (the
expiration date). A call option is "covered" if a Fund owns the underlying
security subject to the call option at all times during the option period. A
covered call writer is required to deposit in escrow the underlying security in
accordance with the rules of the exchanges on which the option is traded and the
appropriate clearing agency.
The writing of covered call options is a conservative investment technique
which the investment adviser believes involves relatively little risk. 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. 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 that the Fund is eligible to purchase to
earn premium income or 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.
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<PAGE>
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.
The Funds may also write straddles (combinations of puts and calls on the
same underlying security.)
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 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. Each Fund may also purchase call options on relevant stock
indices. 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.
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<PAGE>
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
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 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.
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
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<PAGE>
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.
FUTURES CONTRACTS. Each Fund may purchase and sell futures contracts to
hedge against changes in prices. A Fund 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 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
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<PAGE>
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.
OPTIONS TRANSACTIONS GENERALLY. Option transactions in which the Funds may
engage involve the specific risks described above as well as the following
risks: the writer of an option may be assigned an exercise at any time during
the option period; disruptions in the markets for underlying instruments could
result in losses for options investors; imperfect or no correlation between the
option and the securities being hedged; the insolvency of a broker could present
risks for the broker's customers; and market imposed restrictions may prohibit
the exercise of certain options. In addition, the option activities of a Fund
may affect its portfolio turnover rate and the amount of brokerage commissions
paid by a Fund. The success of a Fund in using the option strategies described
above depends, among other things, on 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.
- 18 -
<PAGE>
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Standard & Poor's Ratings Group
-------------------------------
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group for preferred stocks in which the Funds may invest are as follows:
Moody's Investors Service, Inc.
-------------------------------
aaa - An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is reasonable
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<PAGE>
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.
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
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<PAGE>
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).
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
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<PAGE>
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.
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 Board of Trustees supervises the business activities of the Funds. Like
other mutual funds, various organizations are retained to perform specialized
services for the Funds.
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<PAGE>
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, 1999.
Each Trustee who is an "interested person" of the Trust, as defined by the
Investment Company Act of 1940, is indicated by an asterisk.
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
Sam B. Gould __ Trustee _____(1)
+Frank J. Perez 54 Trustee _____(1)
+David H. Ponitz 67 Trustee _____(1)
+Gilbert P. Williamson 61 Trustee _____(1)
Robert L. Bennett __ Treasurer 0
Tina D. Hosking 30 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. Gould, 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. Gould, 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.
- 23 -
<PAGE>
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.
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.
SAM B. GOULD, [TO BE INSERTED].
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 L. BENNETT, 312 Walnut Street, Cincinnati, Ohio, is First Vice
President and Chief Operations Officer of Countrywide Fund Services, Inc. (a
registered transfer agent). He is also Treasurer of Albemarle Investment Trust,
Atalanta/Sosnoff Investment Trust, Markman Multifund Trust, The New York State
Opportunity Funds, Profit Funds Investment Trust, Wells Family of Real Estate
Funds, Williamsburg Investment Trust and The Winter Harbor Fund and Assistant
Treasurer of Boyar Value Fund, Inc., Brundage, Story and Rose Investment Trust
and Schwartz Investment Trust (all of which are registered investment
companies).
TINA D. HOSKING, 312 Walnut Street, Cincinnati, Ohio, is Assistant Vice
President and Associate General Counsel of Countrywide Fund Services, Inc. She
is also Secretary of Albemarle Investment Trust, Atalanta/Sosnoff Investment
Trust, The Bjurman Funds, Brundage, Story and Rose Investment Trust, Boyar Value
Fund, Inc., The New York State Opportunity Funds, Profit Funds Investment Trust,
The Thermo Opportunity Fund, Inc., UC Investment Trust, Wells Family of Real
Estate Funds, Williamsburg Investment Trust and The Winter Harbor Fund and
Assistant Secretary of The Gannett Welsh & Kotler Funds, The James Advantage
Funds, Lake Shore Family of Funds, Schwartz Investment Trust 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.
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<PAGE>
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.
For the fiscal periods ended March 31, 1998 and 1999, the Large Cap Value
Fund accrued advisory fees of $52,709 and $93,051, the Small Cap Value Fund
accrued advisory fees of $127,902 and $201,945, the Balanced Fund accrued
advisory fees of $57,457 and $115,850, and the International Value Fund accrued
advisory fees of $4,452 and $68,092; however, in order to reduce the operating
expenses of the Fund, the Adviser voluntarily waived $46,607 and $40,548 of its
fees and reimbursed $20,468 and $17,974 of Class C expenses with respect to the
Large Cap Value Fund, voluntarily waived $17,445 and $8,323 of its fees and
reimbursed $16,684 and $1,297 of Class C expenses with respect to the Small Cap
Value Fund, voluntarily waived $44,231 and $27,553 of its fees and reimbursed
$16,291 and $5,073 of Class C expenses with respect to the Balanced Fund, and
voluntarily waived its entire advisory fee and reimbursed $49,049 and $49,746 of
common expenses and $5,663 and $8,363 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 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'
- 25 -
<PAGE>
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.
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, 2000 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.
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 and
subsidiary of Mellon Bank, 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 periods ended March 31, 1998 and
1999, Dean Investment Associates paid the Sub-Adviser fees of $1,780 and
$______.
- 26 -
<PAGE>
By its terms, the Sub-Advisory Agreement will remain in force until April
1, 2000 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"), 2480 Kettering Tower, Dayton, Ohio
45423, 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. Mr. Scott and Mr.
_______ are officers of both the Trust and the Distributor.
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.
For the fiscal periods ended March 31, 1998 and 1999, the aggregate
commissions collected on sales of Class A shares of the Trust were $326,654 and
$____, of which the Underwriter paid $311,410 and $_____ to unaffiliated
broker-dealers in the selling network and earned $15,244 and $13,557 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.
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<PAGE>
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
periods ended March 31, 1998 and 1999, the Class A shares of the Small Cap Value
Fund incurred $5,533 and $8,759 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 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
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<PAGE>
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 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.
- 29 -
<PAGE>
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 fiscal periods ended March 31, 1998 and 1999, the
Large Cap Value Fund paid brokerage commissions of $16,707 and $____, the Small
Cap Value Fund paid brokerage commissions of $92,954 and $____, the Balanced
Fund paid brokerage commissions of $12,687 and $_____, and the International
Value Fund paid brokerage commissions of $3,616 and $ .
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.
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.
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
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<PAGE>
of the brokerage and research services provided. The determination may be viewed
in terms of a particular transaction or Dean Investment Associates' overall
responsibilities with respect to the Funds and to accounts over which it
exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and Dean
Investment Associates, it is not possible to place a dollar value on it.
Research services furnished by brokers through whom the Funds effect securities
transactions may be used by Dean Investment Associates in servicing all of its
accounts and not all such services may be used by Dean Investment Associates in
connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, 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
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<PAGE>
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. Although a Fund's annual
portfolio turnover rate cannot be accurately predicted, Dean Investment
Associates anticipates that each Fund's portfolio turnover rate normally will
not exceed 100%, although it may be higher or lower. A 100% turnover rate would
occur if all of a Fund's portfolio securities were replaced once within 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").
The Funds do not intend to use short-term trading as a primary means of
achieving their investment objectives. 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 periods ended March 31, 1998 and March 31, 1999, the annualized portfolio
turnover rate was 54% and 55% for the Large Cap Value Fund, 62% and 79% for the
Small Cap Value Fund, 64% and 60% for the Balanced Fund, and 109% and 100% for
the International Value Fund, respectively.
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
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<PAGE>
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.
RIGHT OF ACCUMULATION. A "purchaser" 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.
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.
LETTER OF INTENT. The reduced sales loads set forth in the tables in the
Prospectus may also be available to any "purchaser" (as defined above) 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
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<PAGE>
the Letter of Intent. Upon acceptance of this Letter, the purchaser becomes
eligible for the reduced sales load applicable to the level of investment
covered by such Letter of Intent as if the entire amount were invested in a
single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Trust to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales load will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases at
the purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify Countrywide that an investment is being made pursuant to
an executed Letter of Intent.
OTHER INFORMATION. The Trust either does not impose a front-end sales load
or imposes a reduced sales load in connection with purchases of shares of a Fund
made under the reinvestment privilege or the purchases described in the "Reduced
Sales Load," "Purchases at Net Asset Value" or "Exchange Privilege" sections in
the Prospectus because such purchases require minimal sales effort by Dean
Investment Associates. Purchases described in the "Purchases at Net Asset Value"
section may be made for investment only, and the shares may not be resold except
through redemption by or on behalf of the Trust.
TAXES
- -----
The Prospectus describes generally the tax treatment of distributions by
the Funds. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
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
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<PAGE>
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.
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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
return (excluding the effect of applicable sales loads) as of March 31, 1999 of
each of the Funds for the previous one-year period and since inception is as
follows:
One Year Since Inception*
-------- ----------------
Large Cap Value Fund-Class A _____% _____%
Large Cap Value Fund-Class C _____% _____%
Small Cap Value Fund-Class A _____% _____%
Small Cap Value Fund-Class A _____% _____%
Balanced Fund-Class A _____% _____%
Balanced Fund-Class C _____% _____%
International Value Fund-Class A _____% _____%
International Value Fund-Class C _____% _____%
* 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
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
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<PAGE>
increase or decrease to interest income during the period and discount or
premium on the remaining security is not amortized.
Both yield and average annual total return figures are based on historical
earnings and are not intended to indicate future performance.
From time to time, the Funds may advertise their performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS WEEK,
BARRON'S, FORTUNE or MORNINGSTAR MUTUAL FUND VALUES. The Funds may also compare
their performance to that of other selected mutual funds, averages of the other
mutual funds within their categories as determined by Lipper, or recognized
indicators such as the Dow Jones Industrial Average and the Standard & Poor's
500 Stock Index, the Russell 1000 Index, the Russell 2000 Index, the Lehman
Brothers Government/Corporate Bond Index and the Europe, Australia and Far East
Index compiled by Morgan Stanley.
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. 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.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Funds' portfolios, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Funds to calculate
their performance. In addition, there can be no assurance that the Funds will
continue this performance as compared to such other averages.
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<PAGE>
CUSTODIAN
- ---------
Firstar 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.
Boston Safe Deposit and Trust Company ("Boston Safe"), __________________,
Boston, Massachusetts, has been retained to act as Custodian for the investments
of the International Value Fund. Boston Safe 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. Boston Safe and Newton Capital are both subsidiaries
of Mellon Bank.
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 ______, 1999, 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 ____% of the outstanding
Class A shares and ____% of the outstanding Class C shares of the Large Cap
Value Fund, ____% of the outstanding Class A shares and ____% of the outstanding
Class C shares of the Small Cap Value Fund, ____% of the outstanding Class A
shares and ____% of the outstanding Class C shares of the Balanced Fund, and
____% of the outstanding Class A shares and ____% 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 ______, 1997, Chauncey H. Dean and Zada G. Dean, 7777
Taylorsville Road, Huber Heights, Ohio, owned of record ____% of the outstanding
Class A shares of the Large Cap Value Fund, ____% of the outstanding Class A
shares of the Small Cap Value Fund, ____% of the outstanding Class A shares of
the Balanced Fund and ____% 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
- 40 -
<PAGE>
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.
[OTHER 5% OWNERS TO BE INSERTED]
As of _____, 1999, the Trustees and officers of the Trust as a group owned
of record and beneficially ____% of the outstanding Class A shares of the Large
Cap Value Fund, ____% of the outstanding Class A shares of the Small Cap Value
Fund, ____% of the outstanding Class A shares of the Balanced Fund, ____% 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.
COUNTRYWIDE FUND SERVICES, INC.
- -------------------------------
The Trust retains Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio 45201-5354 ("Countrywide"), to serve as the Funds' transfer
agent, dividend paying agent and shareholder servicing agent. Countrywide is a
wholly-owned indirect subsidiary of Countrywide Credit Industries, Inc., a New
York Stock Exchange listed company principally engaged in residential mortgage
lending.
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:
- 41 -
<PAGE>
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.
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.
ANNUAL REPORT
- -------------
The Funds' financial statements as of March 31, 1999, which have been
audited by Ernst & Young LLP, are attached to this Statement of Additional
Information.
- 42 -
<PAGE>
[LOGO]
DEAN INVESTMENT ASSOCIATES
Large Cap Value Fund
Small Cap Value Fund
Balanced Fund
International Value Fund
[LOGO]
Annual Report
March 31, 1999
<PAGE>
CHAIRMAN AND PRESIDENT'S LETTER
================================================================================
TO INVESTORS IN THE DEAN FAMILY OF MUTUAL FUNDS:
You will find a consistent theme within the reports of each of our four Funds --
that despite the performance of the Dow Jones Industrial Average and the S&P 500
Index, the 12 months ended March 31, 1999 was not a good year for most stocks.
For a narrow segment of the market -- a relatively few stocks with huge market
capitalization (the mega-caps)-- it was a spectacular year. Their prices climbed
and climbed, regardless of earnings, book value or other proven yardsticks,
rocketing the Dow and the S&P 500 Stock Index past record after record. Yet,
most stocks declined.
During calendar year 1998, companies whose share prices declined outnumbered
gainers by 38% among all the companies on the New York Stock Exchange. Just how
narrow a market it was is demonstrated by the fact that while the S&P 500 Index
return was 28.6% in 1998, just 10 stocks accounted for 44.5% of the return of
the 500 companies in the Index. The price-to-earnings ratios of those 10 stocks
ranged from the mid-30s to well over 100!
Clearly, it was not a good year for value stocks. The results are evident in the
reports which follow. Only in the arena of international stocks were we able to
elude the effects of the U.S. market in which traditional measures of value were
so ignored.
Quite logically, investors will ask whether holding to the value approach to
stock selection makes sense in a market such as this. Our answer is emphatic:
stay the course. Over the long term, the value approach has rewarded investors
handsomely and with less risk than other styles. There have been other periods
when investor sentiment has swung away from prudent assessment of investment
value and risk. Over the long term, however, the market behaves rationally.
Most of the companies in which we have invested are operating quite well. Their
operating performance has confirmed the conclusions of our research, and there
have been relatively few disappointments.
Sooner, rather than later, we believe the market will step back from its
enchantment with mega-cap stocks with soaring prices. Recent developments
suggest this very change may now be underway. As that happens, our more
conservative approach, emphasizing companies which produce consistent earnings
growth, should reward investors in the Dean Family of Funds.
Sincerely,
/s/ Chauncey H. Dean /s/ Robert D. Dean
Chauncey H. Dean Robert D. Dean
Chairman of the Board and President and Chief Investment Officer
Chief Executive Officer C.H. Dean & Associates, Inc.
C.H. Dean & Associates, Inc.
1
<PAGE>
LARGE CAP VALUE FUND
================================================================================
FISCAL 1999: A YEAR WHEN "LARGE" WAS STILL TOO SMALL
Our fiscal year ended March 31, 1999 will be remembered as the year when
investors flocked to the few, the mighty, the very largest of mega-cap stocks.
Their rush not only exaggerating the performance of the Dow Jones and the S&P
500 indices, it left the shares of thousands of other companies languishing and
ignored. While large cap stocks did better than small caps, this was small
consolation.
IMPROVEMENT IN THE SECOND HALF
At least there was improvement in the second half. The Dean Large Cap Value Fund
gained 8.38% during the six months ended March 31, 1999. For the full year,
however, the Fund had a negative 11.48% return. The Fund's benchmark, the
Russell 1000 Index, was up 16.66% for the fiscal year. The Russell 1000 Value
Index, highly correlated with our value investment philosophy, was up 18.28% in
the final six months of the fiscal year and up 5.04% for the full year.
EXCELLENT VALUES WENT UNAPPRECIATED
Cyclical issues were a disappointment. We purchased strong companies, many of
them at bargain prices. The story was much the same in oil service industry
stocks. It was clear that declining oil industry prices and profits would
threaten the companies, which provide oil rigs, drilling supplies and a variety
of services. So it did; their share prices fell, often to below book value, even
though many remained profitable.
As value investors, the price you pay relative to earnings and book value
matters a great deal. As suggested, however, in fiscal 1999 the market was not
focused on value. Oddly, it was stocks with the highest valuations which brought
the greatest returns in the stock market.
Among large cap stocks (stocks with a market value of $3 billion or more), those
with a price-to-book value ratio above the median (3.6X) produced a median
return of 22.3%. Those with a price-to-book ratio below 3.6 had a median loss of
12.4%.
A similar pattern existed last year with regard to price-to-earnings ratios
(P/E). Among large cap stocks, the upper half in terms of P/E produced a median
return of 21.6%. The low P/E group produced a negative median return of 14.0%.
CONTINUING WITH A DISCIPLINED VALUE APPROACH
We do not believe a year like 1998 negates the merits of a disciplined approach
to value investing. The history of the stock market contains many incidents of
investor fads which are irrational in their disregard for fundamental principles
of investing.
The chase after mega-cap stocks with P/Es of 50, 70, even 100 or more is an
example of such a fad. We are confident the market will soon force investors to
return to sensible ways of evaluating risk and the fundamental elements required
to create value -- financial strength, market position, the ability to grow
earnings consistently and a realistic assessment of value.
- --------------------------------------------------------------------------------
Comparison of the Change in Value of a $10,000 Investment
in the Dean Large Cap Value Fund - Class A*, the Russell 1000 Index
and the Russell 1000 Value Index
3/31/99
-------
Dean Large Cap Value Fund - Class A $15,435
Russell 1000 Index $14,144
Russell 1000 Value Index $10,410
- --------------------------------------------------------------------------------
---------------------------------------
Average Annual Returns
1 Year Since Inception*
Class A (16.13)% 2.20%
Class C (12.12% 0.46%
---------------------------------------
Past performance is not predictive of future performance.
*The chart above represents performace 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 initial 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.
2
<PAGE>
SMALL CAP VALUE FUND
================================================================================
A BAFFLING AND DIFFICULT YEAR
The extent to which the past year's stock market has ignored time-proven rules
of value and risk has baffled most investment professionals. And, in the case of
the Dean Small Cap Value Fund, it led to discouraging results during the 12
months ended March 31, 1999. The Fund declined 23.39% during that period.
A comparison of the Fund's performance to comparable indices highlights the very
difficult environment faced by investors in smaller-capitalization,
value-oriented stocks. The Russell 2000 Index of small cap companies declined
16.26% during the fiscal year. The Russell 2000 Value Index, highly correlated
with our value investment philosophy, fell 22.03% for our fiscal year. Although
the decline in small cap value stocks moderated significantly during the second
half of the year, results were negative. The Fund had a decline of 4.12% and the
Russell 2000 Value Index declined 1.50%.
BIGGEST WAS BEST
Not only did the prices of the vast majority of small cap value stocks decline
significantly, they did so while a narrow band of mega-cap stocks have romped on
to a series of new highs.
Over the long term, small cap stocks have done very well. The rewards for being
small and low-priced have often enabled the small caps to outperform their
larger, costlier counterparts. However, the past year has been an aberration.
The smaller and cheaper a stock was, the worse it did. Conversely, the larger
and more expensive a stock was, the better it did.
No one expects perfect timing on every stock purchase, of course. Still, it is
disconcerting to wait as an interesting stock declines, for example, from $30 a
share to $10, where it becomes a compelling value, only to see it decline still
further. The bargain at $10 has slipped to $7, even though its real value is
closer to $20.
SOLID FUNDAMENTALS IGNORED IN MOST STOCKS
One of the classic measures of a stock's worth is the ratio between market price
and book value. Book value is the per share value of a company's assets (based
on historical cost) minus its liabilities. Historically, buying at low multiples
of book value has been a successful way to invest. Also, over the long term,
small companies have tended to outperform large companies.
Not so this year. If you look at all the companies which currently have market
capitalization of more than $10 billion and which are currently trading for more
than 30X book value, their median return is 116%. In a headlong rush toward
big-name, big companies, investors have ignored old ideas of price and value.
Meanwhile, small cap value stocks-- those with market capitalization of between
$30 million and $750 million and which currently have price-to-book ratios of
under 1.5X-- have been ignored. The median return for that universe of stocks
was -42.85% during the 12 months of this report.
Just when small cap value stocks will begin once again to get the attention and
command the prices they deserve is unclear. We are confident they will return to
favor. We intend to manage on that assumption, so that the Dean Small Cap Value
Fund will be in a position to participate fully, as considerations of value
resume their rightful place in the minds of investors.
- --------------------------------------------------------------------------------
Comparison of the Change in Value of a $10,000 Investment
in the Dean Small Cap Value Fund - Class A*, the Russell 2000 Index
and the Russell 2000 Value Index
3/31/99
-------
Dean Small Cap Value Fund - Class A $10,790
Russell 2000 Index $10,293
Russell 2000 Value Index $ 9,717
- --------------------------------------------------------------------------------
---------------------------------------
Average Annual Returns
1 Year Since Inception*
Class A (27.41)% (1.55)%
Class C (24.00)% (4.61)%
---------------------------------------
Past performance is not predictive of future performance.
*The chart above represents performace 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 initial 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>
BALANCED FUND
================================================================================
A DIFFICULT YEAR FOR THOSE WHO BELIEVE IN VALUE
The Fund's performance improved during the six months ended March 31, 1999,
returning 4.58%. For the full fiscal year, the Fund declined 3.22%. These
returns did not match the 16.18% and 12.62% respective returns of our Fund's
target index, a 60/40 mixture of appropriate stock and bond benchmark indices.
We use the Russell 1000 Index for the equity portion and the Lehman Brothers
Intermediate Government/Corporate Bond Index for fixed-income. A 60/40 blend of
the Russell 1000 Value Index, highly correlated with our value investment
philosophy, and the Lehman Index gained 11.01% in the final six months of the
fiscal year and 5.65% for the full year.
The performance of the portfolio was affected by weak performance in our
holdings in the oil service and REIT groups in particular. The companies we hold
in these sectors have turned in solid operating performance and maintained
strong balance sheets. They are true value stocks. Yet, value stocks have been
ignored during the past year, as investors have pursued a small number of
mega-cap stocks, apparently without regard for long-established measures of
value or risk.
POSSIBLE SIGNS OF CHANGE
While there are some indications that this situation may be changing, it is too
early to predict with certainty. Regardless of when market psychology takes a
more rational turn, we are confident that a disciplined and consistent
application of our investment philosophy will reward long-term investors.
On a positive note, the Fund's portfolio benefited from its position in the
telecommunications, financial and consumer groups. And, fixed-income holdings
made a solid contribution.
During the stock market decline last summer, we increased the Fund's stock
position toward 60% as the market created an attractive opportunity for
selective buying. In the ensuing rally toward 10,000 on the Dow Jones, our
forecasting models turned more cautious, and we have adjusted the stock position
toward the 50% level. The Fund's fixed-income portfolio remains in high-quality,
intermediate-term holdings.
OUTLOOK
Market volatility in both stocks and bonds was relatively high by historic
standards during the past year, and this appears likely to continue in the
months ahead. Corporate earnings growth has slowed to a very modest single-digit
level. Interest rates, which declined significantly in the latter half of 1998,
rose sharply in early 1999.
With modest earnings growth, poor technical conditions and high valuations, the
stock market is vulnerable to negative news, such as disappointing earnings by
industry leaders. It is our view that U.S. financial markets will experience
wild price swings. In such an environment, the benefits of the Fund's
disciplined tactical asset allocation strategy will be especially important.
- --------------------------------------------------------------------------------
Comparison of the Change in Value of a $10,000 Investment in the Dean Balanced
Fund - Class A*, the Russell 1000 Index, Russell 1000 Value Index and the Lehman
Brothers Intermediate Government/Corporate Bond Index
3/31/99
-------
Dean Balanced Fund - Class A $15,435
Russell 1000 Index $14,144
Russell 1000 Value Index $11,506
Lehman Brothers Intermediate
Government/Corporate Bond Index $10,827
- --------------------------------------------------------------------------------
---------------------------------------
Average Annual Returns
1 Year Since Inception*
Class A (8.30)% 4.40%
Class C (3.81)% 3.18%
---------------------------------------
Past performance is not predictive of future performance.
*The chart above represents performace 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 initial 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.
4
<PAGE>
INTERNATIONAL VALUE FUND
================================================================================
INTERNATIONAL STOCKS REBOUNDED
The Dean International Value Fund returned 19.89% during the six months ended
March 31, 1999, reflecting a sharp improvement in the market for international
stocks. That strong comeback from the negative returns in the previous six
months brought the return for the year ended March 31, 1999 to 5.82%. For the
final six months and the full year, the Fund's benchmark, the Morgan Stanley
EAFE Index, was up 22.34% and 6.04%, respectively.
Since its inception on October 13, 1997 through to March 31, 1999, the Fund has
returned 16.09% on an annualized basis.
The Fund entered fiscal 1999 having moved largely to European and Canadian
stocks and away from Asian stocks which had fallen sharply in the wake of the
Asian financial crisis. In mid-1998, the troubled Asian and Latin American
economies began to show signs of recovery.
THE RETURN TO ASIAN MARKETS
Given their improving economies, the stocks of Asian and Latin American
companies began again to be attractive. While solid value opportunities were
emerging in those markets, they were drying up in Continental Europe, where the
market had risen sharply. Consequently, the Fund shifted its investments toward
Asia in mid-year.
An improving outlook for the United Kingdom and Japanese economies has prompted
an increase in the Fund's weightings in those markets for 1999. As the outlook
for the global economy has improved, the Fund's weightings in cyclical sectors
have risen.
A DISCIPLINED APPROACH TO DEFINING VALUE
The Fund aims to buy the best-placed companies within favored sectors. Strong
management and focused strategy are key requirements for the Fund's investments,
and strict valuation criteria are applied when carrying out global sector
comparisons. Particular emphasis is given to valuation measures such as
price/cash flow, price/book, price/sales and the price/earnings multiples in
relation to the stock's expected rate of growth in earnings. A disciplined,
"bottom-up," value approach is used to manage the Fund.
- --------------------------------------------------------------------------------
Comparison of the Change in Value of a $10,000 Investment in the Dean
International Value Fund - Class A* and the Morgan Stanley EAFE Index
3/31/99
-------
Dean International Value Fund - Class A $11,791
Morgan Stanley EAFE Index $11,263
- --------------------------------------------------------------------------------
---------------------------------------
Average Annual Returns
1 Year Since Inception*
Class A (0.27)% 11.90%
Class C (5.07)% 16.95%
---------------------------------------
Past performance is not predictive of future performance.
*The chart above represents performace 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 initial 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.
5
<PAGE>
FUND FACTS
================================================================================
LARGE CAP VALUE FUND
- --------------------------------------------------------------------------------
TOP HOLDINGS
Diamond Offshore Drilling, Inc. Vulcan Materials Co.
AT&T Corp. Berkshire Hathaway, Inc. -- Class B
Philip Morris Cos., Inc. Conseco, Inc.
Alltel Corp. News Corp. Ltd. (The) (ADR)
Tidewater, Inc. Ambac Financial Group, Inc.
NUMBER OF POSITIONS ............................................ 50
MEDIAN PRICE/EARNINGS RATIO .................................... 15.0
PORTFOLIO TURNOVER (4/1/98 - 3/31/99) .......................... 55%
SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
TOP HOLDINGS
American Residential Services, Inc. M/I Schottenstein Homes, Inc.
Kentek Information Systems, Inc. Offshore Logistics, Inc.
Pool Energy Services Co. Veritas DGC, Inc.
America West Holdings Corp. -- Class B Winston Hotels, Inc.
Friedman's, Inc. -- Class A RFS Hotel Investors, Inc.
NUMBER OF POSITIONS ............................................ 134
MEDIAN PRICE/EARNINGS RATIO .................................... 8.7
PORTFOLIO TURNOVER (4/1/98 - 3/31/99) .......................... 79%
6
<PAGE>
FUND FACTS
================================================================================
BALANCED FUND
- --------------------------------------------------------------------------------
TOP EQUITY HOLDINGS
Philip Morris Cos., Inc. Diamond Offshore Drilling, Inc.
News Corp. Ltd. (The)(ADR) NCR Corp.
AT&T Corp. AFLAC, Inc.
Tricon Global Restaurants, Inc. Conseco, Inc.
Allstate Corp. (The) Tidewater, Inc.
NUMBER OF POSITIONS ............................................ 34
MEDIAN PRICE/EARNINGS RATIO .................................... 15.4
PORTFOLIO TURNOVER (4/1/98 - 3/31/99) .......................... 60%
INTERNATIONAL VALUE FUND
- --------------------------------------------------------------------------------
TOP HOLDINGS
Novartis Shell Transport & Trading Co.
Ing Groep NV Hoechst AG
Telecom Italia SPA UBS AG
Telefonica de Espana Transiciel SA
BCE, Inc. National Grid Group Plc
NUMBER OF POSITIONS ............................................ 96
MEDIAN PRICE/EARNINGS RATIO .................................... 26.2
PORTFOLIO TURNOVER (4/1/98 - 3/31/99) .......................... 100%
7
<PAGE>
LARGE CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31,1999
================================================================================
SHARES COMMON STOCKS -- 96.8% VALUE
- --------------------------------------------------------------------------------
AEROSPACE -- 1.7%
2,000 AlliedSignal Inc. ........................... $ 98,375
1,000 General Dynamics Corp. ...................... 64,250
------------
162,625
------------
AUTOMOTIVE -- 7.3%
2,805 DaimlerChrysler Ag (ADR) .................... 240,704
4,000 Ford Motor Co. .............................. 227,000
1,000 General Motors Corp. ........................ 86,875
4,000 PACCAR Inc. ................................. 164,750
------------
719,329
------------
BANKING -- 2.2%
4,000 Bank One Corp. .............................. 220,250
------------
BUILDING PRODUCTS -- 3.1%
7,500 Vulcan Materials Co. ........................ 309,843
------------
CAPITAL GOODS -- 4.7%
5,000 Caterpillar Inc. ............................ 229,687
6,000 Deere & Co. ................................. 231,750
------------
461,437
------------
CHEMICALS -- 2.2%
4,000 Potash Corp. of Saskatchewan Inc. (ADR) ..... 214,000
------------
ELECTRONICS -- 1.8%
63 Raytheon Co. - Class A ...................... 3,638
3,000 Raytheon Co. - Class B ...................... 175,875
------------
179,513
------------
ENERGY -- 9.3%
12,000 Diamond Offshore Drilling, Inc. ............. 379,500
4,000 Texaco Inc. ................................. 227,000
12,000 Tidewater, Inc. ............................. 310,500
------------
917,000
------------
FINANCIAL SERVICES -- 6.6%
5,000 Ambac Financial Group, Inc. ................. 270,000
2,000 Associates First Capital Corp. - Class A .... 90,000
3,000 Chase Manhattan Corp. ....................... 243,938
1,500 Edwards (A.G.), Inc. ........................ 49,031
------------
652,969
------------
HEALTH CARE -- 1.5%
8,000 Columbia/HCA Healthcare Corp. ............... 151,500
------------
HOUSING -- 1.9%
17,000 Clayton Homes, Inc. ......................... 188,062
------------
8
<PAGE>
LARGE CAP VALUE FUND (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 96.8% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
INSURANCE -- 14.9%
4,000 AFLAC, Inc. ................................. $ 217,750
7,000 Allstate Corp. (The) ........................ 259,438
2,000 American National Insurance Co. ............. 133,750
126 Berkshire Hathaway, Inc. - Class B .......... 296,226
9,415 Conseco, Inc. ............................... 290,688
3,600 Transamerica Corp. .......................... 255,600
------------
1,453,452
------------
MEDIA -- 2.8%
10,000 News Corp. Ltd. (The) (ADR) ................. 275,000
------------
MISCELLANEOUS -- 3.1%
7,500 Convergys Corp. ............................. 128,437
2,500 Minnesota Mining and Manufacturing Co. ...... 176,875
------------
305,312
------------
MORTGAGE SERVICES -- 6.3%
2,500 Countrywide Credit Industries, Inc. ......... 93,750
2,400 MBIA, Inc. .................................. 139,200
7,000 MGIC Investment Corp. ....................... 245,438
3,000 PMI Group, Inc. (The) ....................... 139,125
------------
617,513
------------
REAL ESTATE -- 1.7%
6,000 Simon Property Group, Inc. .................. 164,625
------------
RESTAURANTS -- 1.4%
2,000 Tricon Global Restaurants, Inc. ............. 140,500
------------
RETAIL -- 0.6%
2,500 Dillard's, Inc. ............................. 63,437
------------
SEMI-CONDUCTORS -- 1.2%
1,000 Intel Corp. ................................. 119,125
------------
TECHNOLOGY -- 2.5%
7,000 Computer Associates International, Inc. ..... 248,938
------------
TELECOMMUNICATIONS-- 11.1%
5,000 Alltel Corp. ................................ 311,875
4,000 AT&T Corp. .................................. 319,250
6,000 ECI Telecom Ltd. (ADR) ...................... 210,000
3,000 NCR Corp. ................................... 150,000
1,000 Sprint Corp. ................................ 98,125
------------
1,089,250
------------
9
<PAGE>
LARGE CAP VALUE FUND (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 96.8% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
TOBACCO -- 4.9%
1,500 Loews Corp. ................................. $ 111,938
9,000 Philip Morris Cos., Inc. .................... 316,687
2,000 UST, Inc. ................................... 52,250
------------
480,875
------------
UTILITIES -- 4.0%
9,000 Reliant Energy, Inc. ........................ 234,563
7,000 Southern Co. ................................ 163,188
------------
397,751
------------
TOTAL COMMON STOCKS (COST $9,418,432) $ 9,532,306
------------
================================================================================
FACE AMOUNT MONEY MARKET AND EQUIVALENTS -- 4.0% VALUE
- --------------------------------------------------------------------------------
$ 300,000 Countrywide Home Loans CP, 04/01/99 ......... $ 299,876
97,055 Firstar Treasury Fund ....................... 97,055
------------
TOTAL MONEY MARKET AND EQUIVALENTS
(COST $396,931) ............................. $ 396,931
------------
TOTAL INVESTMENTS AT VALUE -- 100.8%
(COST $9,815,363) ........................... $ 9,929,237
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.8)% (82,254)
------------
NET ASSETS -- 100.0% ........................ $ 9,846,983
============
ADR - American Depository Receipt
CP - Commercial Paper
See accompanying notes to financial statements.
10
<PAGE>
SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31,1999
================================================================================
SHARES COMMON STOCKS -- 96.8% VALUE
- --------------------------------------------------------------------------------
AIRLINES -- 1.6%
15,000 American West Holdings Corp. - Class B(a) ... $ 285,937
------------
AUTOMOTIVE -- 0.7%
20,000 TBC Corp.(a) ................................ 121,250
------------
AUTOMOTIVE PARTS -- 0.2%
5,000 R & B, Inc.(a) .............................. 40,000
------------
BUILDING PRODUCTS -- 5.3%
6,000 Ameron International Corp. .................. 213,000
60,000 American Residential Services, Inc.(a) ...... 326,250
5,000 Building Materials Holding Corp.(a) ......... 50,625
20,000 Cameron Ashley Building Products(a) ......... 182,500
14,000 Patrick Industries, Inc. .................... 189,000
------------
961,375
------------
BUILDING SUPPLIES -- 1.1%
15,000 Wolohan Lumber Co. .......................... 191,250
------------
CAPITAL GOODS -- 7.9%
10,000 AGCO Corp. .................................. 65,625
6,000 Amcast Industrial Corp. ..................... 96,750
10,000 Baldwin Technology Co., Inc. - Class A(a) ... 32,500
20,000 Bridgeport Machines, Inc.(a) ................ 123,750
6,000 Central Sprinkler Corp.(a) .................. 85,500
10,000 Exponent, Inc. .............................. 56,250
10,000 Foster Wheeler Corp. ........................ 121,250
13,000 Gehl Co.(a) ................................. 191,750
20,000 Global Industrial Technologies, Inc.(a) ..... 210,000
10,000 Hardinge, Inc. .............................. 141,250
10,000 Kennametal, Inc. ............................ 175,000
30,000 Perini Corp.(a) ............................. 131,250
------------
1,430,875
------------
CHEMICALS -- 0.9%
20,000 Wellman, Inc. ............................... 177,500
------------
ELECTRONICS -- 3.5%
16,760 Bell Industries, Inc.(a) .................... 173,885
10,000 CHS Electronics, Inc.(a) .................... 31,875
8,000 Cherry Corp. - Class A(a) ................... 108,000
6,000 Cherry Corp. - Class B(a) ................... 74,250
12,000 ESCO Electronics Corp.(a) ................... 108,000
20,000 Pioneer-Standard Electronics, Inc. .......... 131,250
------------
627,260
------------
11
<PAGE>
SMALL CAP VALUE FUND (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 96.8% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
ENERGY -- 3.3%
14,000 Castle Energy Corp.(a) ...................... $ 224,000
20,000 Trico Marine Services, Inc.(a) .............. 113,750
18,000 Veritas DGC, Inc.(a) ........................ 255,375
------------
593,125
------------
FINANCIAL SERVICES -- 0.8%
20,000 EZCORP, Inc. - Class A(a) ................... 137,500
------------
FOOD -- 1.9%
12,000 Fleming Cos., Inc. .......................... 102,750
20,000 M&F Worldwide Corp.(a) ...................... 140,000
12,000 Nash-Finch Co. .............................. 100,500
------------
343,250
------------
FURNITURE -- 0.9%
12,000 Flexsteel Industries, Inc. .................. 157,500
------------
HEALTH CARE -- 2.2%
23,000 Beverley Enterprises, Inc.(a) ............... 117,875
5,000 Integrated Health Services, Inc. ............ 27,500
50,000 NovaCare, Inc.(a) ........................... 87,500
33,000 PhyCor, Inc.(a) ............................. 156,750
------------
389,625
------------
HOUSING -- 6.5%
11,000 Beazer Homes USA, Inc.(a) ................... 231,000
18,000 Engle Homes, Inc. ........................... 189,000
30,000 Hovnanian Enterprises Inc. - Class A(a) ..... 225,000
15,000 M/I Schottenstein Homes, Inc.(a) ............ 266,250
6,000 Ryland Group, Inc. (The) .................... 151,875
20,000 Southern Energy Homes, Inc.(a) .............. 107,500
------------
1,170,625
------------
INSURANCE -- 1.8%
5,000 Chartwell Re Corp. .......................... 86,250
2,000 LandAmerica Financial Group, Inc. ........... 58,000
3,000 Stewart Information Services Corp. .......... 100,688
3,000 Trenwick Group, Inc. ........................ 84,375
------------
329,313
------------
METALS -- 5.5%
20,000 Ampco-Pittsburgh Corp. ...................... 197,500
15,000 Atchison Casting Corp.(a) ................... 120,937
30,000 Bayou Steel Corp.(a) ........................ 93,750
3,500 Cleveland-Cliffs, Inc. ...................... 119,219
4,000 Commercial Metals Co. ....................... 80,000
8,000 National Steel Corp. - Class B(a) ........... 66,000
7,000 Quanex Corp. ................................ 108,500
8,000 Texas Industries, Inc. ...................... 198,500
------------
984,406
------------
12
<PAGE>
SMALL CAP VALUE FUND (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 96.8% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
MISCELLANEOUS -- 12.0%
14,000 Boykin Lodging Co. .......................... $ 168,000
30,000 CNS, Inc.(a) ................................ 97,500
25,000 Eagle Geophysical, Inc.(a) .................. 95,312
12,000 Gibson Greetings, Inc.(a) ................... 87,750
30,000 Heilig - Meyers Co. ......................... 155,625
15,000 Hvide Marine, Inc.(a) ....................... 64,688
12,000 Industrial Distribution Group, Inc.(a) ...... 63,000
17,000 K2, Inc. .................................... 133,875
2,250 Lakes Gaming, Inc.(a) ....................... 18,422
60,000 Loewen Group, Inc. (The) .................... 108,750
9,000 Park Place Entertainment Corp.(a) ........... 68,062
20,000 Pool Energy Services Co.(a) ................. 306,250
20,000 Pride International, Inc.(a) ................ 165,000
25,000 Stolt Comex Seaway, SA(a) (ADR) ............. 209,375
20,000 Stolt-Nielsen SA ............................ 216,250
10,000 Titanium Metals Corp. ....................... 57,500
20,000 York Group, Inc. (The) ...................... 147,500
------------
2,162,859
------------
OFFICE SUPPLIES-- 0.2%
5,000 Olsten Corp. ................................ 30,937
------------
POLLUTION -- 0.6%
25,000 Kaneb Services, Inc.(a) ..................... 101,562
------------
PUBLISHING -- 0.4%
12,000 PrimeSource Corp. ........................... 67,500
------------
REAL ESTATE -- 16.2%
12,000 Berkshire Realty Company, Inc. .............. 134,250
11,000 Brandywine Realty Trust ..................... 178,750
5,000 Commercial Net Lease Realty ................. 55,938
8,000 Crown American Realty Trust ................. 52,000
7,000 EastGroup Properties, Inc. .................. 112,875
20,000 Equity Inns, Inc. ........................... 170,000
2,000 First Washington Realty Trust, Inc. ......... 42,875
5,000 Health Care REIT, Inc. ...................... 107,500
3,407 Healthcare Realty Trust, Inc. ............... 64,733
22,000 Jameson Inns, Inc. .......................... 199,375
3,000 Kranzco Realty Trust ........................ 35,437
5,000 Mid-America Apartment Communities, Inc. ..... 106,875
2,400 New Plan Excel Realty Trust ................. 46,050
7,000 Pacific Gulf Properties, Inc. ............... 126,000
3,970 Prime Retail, Inc. .......................... 34,738
10,000 Prison Realty Corp. ......................... 174,375
20,000 RFS Hotel Investors, Inc. ................... 231,250
12,000 Ramco-Gershenson Properties Trust ........... 191,250
3,000 Sovran Self Storage, Inc. ................... 69,938
30,000 Sunstone Hotel Investors, Inc. .............. 215,625
13
<PAGE>
SMALL CAP VALUE FUND (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 96.8% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
21,000 Thornburg Mortgage Asset Corp. .............. $ 181,125
5,000 TriNet Corporate Realty Trust, Inc. ......... 126,875
35,000 Winston Hotels, Inc. ........................ 282,187
------------
2,940,021
------------
RESTAURANTS -- 1.9%
31,000 Cooker Restaurant Corp. ..................... 160,813
28,000 Landry's Seafood Restaurants, Inc.(a) ....... 179,375
------------
340,188
------------
RETAIL -- 11.1%
10,000 Blair Corp. ................................. 157,500
28,000 Bon-Ton Stores, Inc. (The)(a) ............... 206,500
14,000 Burlington Industries, Inc.(a) .............. 92,750
20,000 CompuCom Systems, Inc.(a) ................... 58,750
18,000 Duckwall-ALCO Stores, Inc.(a) ............... 175,500
30,000 Friedman's, Inc. - Class A(a) ............... 270,000
15,000 HomeBase, Inc.(a) ........................... 66,563
17,900 Jan Bell Marketing, Inc.(a) ................. 76,075
6,000 Marsh Supermarkets, Inc. - Class B .......... 71,250
15,000 Movie Gallery, Inc.(a) ...................... 79,687
40,000 PharMerica, Inc.(a) ......................... 200,000
14,000 REX Stores Corp.(a) ......................... 161,875
7,000 Sportman's Guide, Inc. (The)(a) ............. 48,125
3,000 Supreme International Corp.(a) .............. 29,250
25,000 Syms Corp.(a) ............................... 185,937
18,000 Windmere-Durable Holdings, Inc. ............. 126,000
------------
2,005,762
------------
TECHNOLOGY -- 3.4%
47,000 Kentek Information Systems, Inc. ............ 317,250
7,000 Miami Computer Supply Corp.(a) .............. 139,563
15,000 Nam Tai Electronics, Inc. (ADR) ............. 150,000
------------
606,813
------------
TOBACCO -- 0.4%
17,000 Standard Commercial Corp. ................... 80,750
------------
TRANSPORTATION -- 3.8%
15,000 Halter Marine Group, Inc.(a) ................ 87,188
23,000 Offshore Logistics, Inc.(a) ................. 267,375
11,000 Pittston BAX Group .......................... 76,312
10,000 RailTex, Inc.(a) ............................ 113,750
18,000 Rural/Metro Corp.(a) ........................ 142,875
------------
687,500
------------
TRUCKING -- 2.4%
30,000 Arkansas Best Corp.(a) ...................... 204,375
10,000 Old Dominion Freight Line, Inc.(a) .......... 113,750
7,000 Roadway Express, Inc. ....................... 119,438
------------
437,563
------------
14
<PAGE>
SMALL CAP VALUE FUND (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 96.8% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
UTILITY -- 0.3%
12,500 York Research Corp.(a) ...................... $ 61,719
------------
TOTAL COMMON STOCKS (COST $20,325,434) ...... $ 17,463,965
------------
================================================================================
SHARES PREFERRED STOCK -- 0.7% VALUE
- --------------------------------------------------------------------------------
4,200 Bradley Real Estate, Inc., 8.400% ........... $ 94,500
2,000 Prime Retail, Inc., 8.500% .................. 32,000
------------
TOTAL PREFERRED STOCKS (COST $147,512) ...... $ 126,500
------------
TOTAL INVESTMENTS AT VALUE -- 97.5%
(COST $20,472,946) ........................ $ 17,590,465
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.5% 449,208
------------
NET ASSETS -- 100.0% ........................ $ 18,039,673
============
(a) Non-income producing security.
See accompanying notes to financial statements.
15
<PAGE>
BALANCED FUND
PORTFOLIO OF INVESTMENTS
MARCH 31,1999
================================================================================
SHARES COMMON STOCKS -- 51.6% VALUE
- --------------------------------------------------------------------------------
AIRLINES -- 1.0%
5,250 Comair Holdings, Inc. ....................... $ 124,031
------------
AUTOMOTIVE -- 2.6%
3,000 Ford Motor Co. .............................. 170,250
3,500 PACCAR Inc. ................................. 144,156
------------
314,406
------------
BUILDING MATERIALS -- 0.9%
2,000 Martin Marietta Materials, Inc. ............. 114,125
------------
CAPITAL GOODS -- 1.1%
7,500 AGCO Corp. .................................. 49,218
2,000 Caterpillar, Inc. ........................... 91,875
------------
141,093
------------
CHEMICALS -- 0.9%
2,000 Potash Corp. of Saskatchewan Inc. (ADR) ..... 107,000
------------
ELECTRONICS -- 1.5%
3,050 Raytheon Co. - Class B ...................... 178,806
------------
ENERGY -- 4.0%
8,000 Diamond Offshore Drilling, Inc. ............. 253,000
8,500 Tidewater, Inc. ............................. 219,937
------------
472,937
------------
FINANCIAL SERVICES -- 2.6%
3,000 Ambac Financial Group, Inc. ................. 162,000
2,000 Chase Manhattan Corp. (The) ................. 162,625
------------
324,625
------------
GOVERNMENT SPONSORED ENTERPRISES -- 1.1%
2,000 Federal National Mortgage Association ....... 138,500
------------
HEALTH CARE -- 1.1%
7,000 Columbia/HCA Healthcare Corp. ............... 132,563
------------
HOUSING -- 1.4%
15,625 Clayton Homes, Inc. ......................... 172,851
------------
INSURANCE -- 6.6%
4,000 AFLAC, Inc. ................................. 217,750
8,000 Allstate Corp. (The) ........................ 296,500
6,382 Conseco, Inc. ............................... 197,044
8,800 Frontier Insurance Group, Inc. .............. 104,500
------------
815,794
------------
16
<PAGE>
BALANCED FUND (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 51.6% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
MEDIA -- 3.9%
17,500 News Corp. Ltd. (The) (ADR) ................. $ 481,250
------------
MISCELLANEOUS -- 1.3%
9,500 Convergys Corp. ............................. 162,687
------------
MORTGAGE SERVICES -- 2.3%
3,000 Countrywide Credit Industries, Inc. ......... 112,500
5,000 MGIC Investment Corp. ....................... 175,313
------------
287,813
------------
RESTAURANTS -- 4.0%
7,000 Tricon Global Restaurants, Inc.(a) .......... 491,750
------------
REAL ESTATE -- 3.9%
8,000 Duke Realty Investments, Inc. ............... 172,000
6,000 Simon Property Group, Inc. .................. 164,625
5,000 Storage USA, Inc. ........................... 141,875
------------
478,500
------------
TECHNOLOGY -- 3.2%
4,000 ECI Telecommunications Ltd. (ADR) ........... 140,000
5,000 NCR Corp.(a) ................................ 250,000
------------
390,000
------------
TELECOMMUNICATIONS -- 3.4%
5,000 AT&T Corp. .................................. 399,063
450 Sprint Corp. (PCS Group) .................... 19,941
------------
419,004
------------
TOBACCO -- 2.6%
9,000 Philip Morris Cos., Inc. .................... 316,688
------------
UTILITIES -- 2.2%
9,000 DPL Inc. .................................... 148,500
5,000 Southern Co. ................................ 116,563
------------
265,063
------------
TOTAL COMMON STOCKS (COST $6,018,451) ....... $ 6,329,486
------------
17
<PAGE>
BALANCED FUND (CONTINUED)
================================================================================
PAR VALUE FIXED INCOME OBLIGATIONS -- 34.0% VALUE
- --------------------------------------------------------------------------------
$ 300,000 U.S. Treasury Note, 5.875%, 11/15/99 ........ $ 301,875
300,000 Federal Home Loan Bank, 5.500%, 7/14/00 ..... 300,869
250,000 Federal National Mortgage Association,
5.620%, 3/15/01 ........................... 251,856
250,000 Merrill Lynch & Co., 6.050%, 5/11/01 ........ 251,813
300,000 PHH Corp., 7.020%, 11/9/01 .................. 307,272
300,000 EI Dupont De Nemours, 6.500%, 9/01/02 ....... 308,564
300,000 Federal National Mortgage Association,
5.250%, 1/15/03 ........................... 297,678
300,000 Federal Home Loan Bank, 5.620%, 2/25/04 ..... 296,250
300,000 Federal Home Loan Bank, 6.100%, 4/29/04 ..... 298,794
300,000 Commercial Credit Co., 6.500%, 8/01/04 ...... 305,280
300,000 U.S. Treasury Note, 7.250%, 8/15/04 ......... 327,469
300,000 U.S. Treasury Note, 6.500%, 8/15/05 ......... 318,469
300,000 U.S. Treasury Note, 6.500%, 10/15/06 ........ 319,688
300,000 Washington Water Power, 5.990%, 12/10/07 .... 291,360
------------
TOTAL FIXED INCOME OBLIGATIONS (COST $4,153,786) $ 4,177,237
------------
================================================================================
FACE AMOUNT MONEY MARKET AND EQUIVALENTS -- 12.3% VALUE
- --------------------------------------------------------------------------------
$ 600,000 Armstrong Funding CP, 4/1/99 ................ $ 600,000
300,000 Vulcan Materials CP, 4/14/99 ................ 299,464
296,000 Progress Funding CP, 4/19/99 ................ 295,201
309,725 Firstar Treasury Fund ....................... 309,725
------------
TOTAL MONEY MARKET AND EQUIVALENTS
(COST $1,502,637) ........................... $ 1,504,390
------------
TOTAL INVESTMENTS AT VALUE -- 97.9%
(COST $11,674,874) .......................... $ 12,011,113
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.1% 265,845
------------
NET ASSETS -- 100.0% ........................ $ 12,276,958
============
(a) Non-income producing security.
ADR - American Depository Receipt
CP - Commercial Paper
See accompanying notes to financial statements.
18
<PAGE>
INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31,1999
================================================================================
SHARES COMMON STOCKS -- 98.6% VALUE
- --------------------------------------------------------------------------------
AUSTRALIA -- 1.5%
2,900 Brambles Industries Limited ................. $ 73,410
15,000 Cable & Wireless Optus Limited(a) ........... 34,764
------------
108,174
------------
BRAZIL -- 5.3%
43,105,000 Tele Celular Sul Participacoes SA--Pfd ...... 83,194
1,500,000 Tele Centro Sul Participacoes SA(a) ......... 7,085
1,105,000 Tele Centro Sul Participacoes SA--Pfd ....... 10,309
84,105,000 Tele Nordeste Celular Participacoes SA--Pfd . 90,726
1,500,000 Tele Norte Leste Participacoes SA ........... 12,393
1,105,000 Tele Norte Leste Participacoes SA--Pfd ...... 16,881
2,150,000 Telerj Celular SA ........................... 36,105
1,500,000 Telesp Celular Participacoes SA ............. 8,475
1,105,000 Telesp Celular Participacoes SA--Pfd ........ 9,214
2,790,200 Telesp Celular SA ........................... 66,704
1,500,000 Telesp Celular Participacoes SA ............. 19,679
1,105,000 Telesp Participacoes SA--Pfd ................ 23,202
1,500,000 Tele Sudeste Celular Participacoes SA ....... 5,335
1,105,000 Tele Sudeste Celular Participacoes SA--Pfd .. 4,633
------------
393,935
------------
CANADA -- 6.5%
7,800 Abitibi Consolidated Inc. ................... 69,606
4,690 BCE, Inc. ................................... 206,939
3,740 BCE Mobile Communications Inc.(a) ........... 99,878
1,740 Northern Telecom Limited .................... 108,117
------------
484,540
------------
DENMARK -- 0.6%
380 Columbus IT Partner A/S(a) .................. 44,047
------------
EUROPEAN COMMUNITY -- 5.2%
2,560 Banco Santander SA .......................... 52,512
260 Castorama Dubois ............................ 54,455
1,400 Fortis (NL) NV .............................. 53,732
5,400 Lusomundo-SGPS SA ........................... 58,298
600 Societe Generale ............................ 115,301
180 SAP AG ...................................... 57,424
------------
391,722
------------
FINLAND -- 0.6%
910 Pohjola Insurance Group ..................... 48,139
------------
19
<PAGE>
INTERNATIONAL VALUE FUND (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 98.6% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
FRANCE -- 8.2%
500 Axa ......................................... $ 66,287
330 Bouygues SA ................................. 91,561
92 Carrefour SA ................................ 70,917
1,100 Equant(a) ................................... 57,896
870 France Telecom SA ........................... 70,350
470 Total SA - Class B .......................... 168,223
1,400 Transiciel SA(a) ............................ 83,604
------------
608,838
------------
GERMANY -- 5.0%
380 Fresenius AG ................................ 75,075
4,100 Hoechst AG .................................. 177,718
940 Mannesmann AG ............................... 120,054
------------
372,847
------------
GREECE -- 0.3%
900 Panafon Hellenic Telecom SA(a) .............. 23,357
------------
HONG KONG -- 2.3%
26,000 China Telecom (HK) Ltd.(a) .................. 43,280
8,000 Hutchison Whampoa Ltd. ...................... 62,971
5,000 Johnson Electric Holdings Limited ........... 14,098
18,000 SmarTone Telecommunications Holdings Limited 52,145
------------
172,494
------------
ITALY -- 5.5%
26,000 Banca Nazionale del Lavoro(a) ............... 90,946
6,430 Istituto Bancario San Paolo di Torino ....... 104,475
20,100 Telecom Italia SPA .......................... 213,528
------------
408,949
------------
JAPAN -- 11.1%
20 DDI Corp. ................................... 94,571
8,000 Fujitsu Limited ............................. 128,481
38,000 Kawasaki Steel Corp. ........................ 64,173
11,000 Komatsu Limited ............................. 56,565
6 Nippon Telegraph & Telephone Corp. .......... 58,769
14,000 Nissan Motor Co., Limited(a) ................ 54,378
3,000 Pioneer Electronic Corp. .................... 55,729
900 Softbank Corp. .............................. 100,920
700 Sony Corporation ............................ 64,722
1,000 Tokyo Electron Limited ...................... 51,761
3,000 Yamanouchi Pharmaceutical Co., Limited ...... 94,993
------------
825,062
------------
MEXICO --1.1%
24,600 Telefonos De Mexico SA ...................... 81,088
------------
20
<PAGE>
INTERNATIONAL VALUE FUND (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 98.6% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
NETHERLANDS -- 3.6%
3,300 ING Groep NV ................................ $ 181,875
400 TNT Post Group NV ........................... 12,048
1,800 VNU NV ...................................... 70,152
------------
264,075
------------
NEW ZEALAND -- 1.6%
34,000 Auckland International Airport Ltd. ......... 49,682
14,000 Telecom Corporation of New Zealand Ltd. ..... 68,092
------------
117,774
------------
PORTUGAL -- 0.6%
300 Telecel-Communicacaoes Pessoais SA .......... 47,772
------------
SINGAPORE -- 1.4%
6,000 Oversea-Chinese Banking Corporation Ltd. .... 40,613
9,000 Singapore Airlines Ltd. ..................... 65,085
------------
105,698
------------
SOUTH KOREA -- 1.5%
103 SK Telecom Co. Limited ...................... 68,331
1,800 Korea Electric Power Corporation ............ 43,423
------------
111,754
------------
SPAIN -- 3.4%
1,338 Acciona SA .................................. 68,600
4,391 Telefonica de Espana ........................ 186,238
------------
254,838
------------
SWEDEN -- 4.1%
8,530 Investment AB Bure .......................... 105,808
5,300 Skandia Forsakrings AB ...................... 98,614
4,000 Telefonaktiebolaget LM Ericsson ............. 97,288
------------
301,710
------------
SWITZERLAND -- 4.4%
116 Novartis .................................... 188,174
440 UBS AG ...................................... 138,234
------------
326,408
------------
21
<PAGE>
INTERNATIONAL VALUE FUND (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 98.6% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
UNITED KINGDOM -- 23.8%
1,800 Astrazeneca Group Plc ....................... $ 85,022
2,200 Barclays Plc ................................ 63,962
10,180 British Aerospace Plc ....................... 67,994
8,000 British Airways Plc ......................... 55,758
6,000 British Telecommunications Plc .............. 98,601
2,100 EMAP Plc .................................... 41,257
3,900 Energis Plc ................................. 105,706
4,000 GKN Plc ..................................... 60,988
2,900 Glaxo Wellcome Plc .......................... 97,047
20,400 National Grid Group Plc ..................... 148,687
4,000 National Westminster Bank Plc ............... 92,984
14,900 Rentokil Initial Plc ........................ 92,304
4,000 Reuters Group Plc ........................... 58,535
4,390 Royal Bank of Scotland Group Plc ............ 95,742
26,600 Shell Transport & Trading Co. ............... 179,812
4,160 SmithKline Beecham Plc ...................... 60,876
13,800 Stagecoach Holding Plc ...................... 49,846
28,000 Taylor Nelson Sofres Plc .................... 62,490
8,500 Unilever Plc ................................ 79,379
5,000 Vodafone Group Plc(a) ....................... 93,387
6,500 W.H. Smith Group Plc ........................ 69,723
------------
1,760,100
------------
CLOSED-END FOREIGN FUNDS -- 1.0%
890 Societe Generale Baltic Republics Fund(a) ... 75,650
------------
TOTAL INVESTMENTS AT VALUE -- 98.6%
(COST $6,620,209) ......................... $ 7,328,971
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.4% 106,497
------------
NET ASSETS -- 100% .......................... $ 7,435,468
============
(a) Non-income producing security.
Pfd - Preferred
See accompanying notes to financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31,1999
===========================================================================================================================
LARGE CAP SMALL CAP BALANCED INTERNATIONAL
VALUE FUND VALUE FUND FUND VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities:
<S> <C> <C> <C> <C>
At amortized cost ................................... $ 9,815,363 $ 20,472,946 $ 11,674,874 $ 6,620,209
============ ============ ============ ============
At value (Note 2) ................................... $ 9,929,237 $ 17,590,465 $ 12,011,113 $ 7,328,971
Cash ................................................... -- -- -- 18,873
Net unrealized appreciation on forward
foreign currency exchange contracts (Note 6) ........ -- -- -- 7,238
Dividends and interest receivable ...................... 15,688 49,378 75,311 29,293
Receivable for securities sold ......................... 54,878 428,898 224,367 183,899
Receivable for capital shares sold ..................... 948 6,883 19,669 6,580
Receivable from Adviser (Note 4) ....................... -- -- -- 11,240
Organization expenses, net (Note 2) .................... 9,726 9,726 9,726 --
Other assets ........................................... 17,043 27,557 16,498 10,408
------------ ------------ ------------ ------------
TOTAL ASSETS ........................................ 10,027,520 18,112,907 12,356,684 7,596,502
------------ ------------ ------------ ------------
LIABILITIES
Bank overdraft denominated in foreign currencies
(at cost $92,523) ................................... -- -- -- 92,586
Dividends payable ...................................... 237 -- 3,605 --
Payable for securities purchased ....................... 153,425 -- 35,370 35,564
Payable for capital shares redeemed .................... -- 29,469 3,327 --
Payable to affiliates (Note 4) ......................... 8,013 18,777 12,916 8,150
Other liabilities ...................................... 18,862 24,988 24,508 24,734
------------ ------------ ------------ ------------
TOTAL LIABILITIES ................................... 180,537 73,234 79,726 161,034
------------ ------------ ------------ ------------
NET ASSETS ............................................. $ 9,846,983 $ 18,039,673 $ 12,276,958 $ 7,435,468
============ ============ ============ ============
Net assets consist of:
Paid-in capital ........................................ $ 9,903,628 $ 21,390,769 $ 12,148,183 $ 6,841,967
Undistributed net investment income .................... -- 50,200 -- --
Accumulated net realized losses from security
transactions ........................................ (170,519) (518,815) (207,464) (118,634)
Net unrealized appreciation (depreciation)
on investments ...................................... 113,874 (2,882,481) 336,239 708,762
Net unrealized appreciation on translation of assets and
liabilities in foreign currencies ................... -- -- -- 3,373
------------ ------------ ------------ ------------
Net assets ............................................. $ 9,846,983 $ 18,039,673 $ 12,276,958 $ 7,435,468
============ ============ ============ ============
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
MARCH 31,1999
===========================================================================================================================
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 ................ $ 9,315,112 $ 15,479,055 $ 10,391,582 $ 5,981,899
============ ============ ============ ============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) .......... 874,485 1,692,130 966,243 482,029
============ ============ ============ ============
Net asset value and redemption price per share (Note 2). $ 10.65 $ 9.15 $ 10.75 $ 12.41
============ ============ ============ ============
Maximum offering price per share (Note 2) .............. $ 11.24 $ 9.66 $ 11.35 $ 13.10
============ ============ ============ ============
PRICING OF CLASS C SHARES
Net assets applicable to Class C shares ................ $ 531,871 $ 2,560,618 $ 1,885,376 $ 1,453,569
============ ============ ============ ============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) .......... 50,312 282,856 175,776 118,347
============ ============ ============ ============
Net asset value, offering price and redemption price
per share (Note 2) .................................. $ 10.57 $ 9.05 $ 10.73 $ 12.28
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31,1999
========================================================================================================================
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 $10,788
for the International Value Fund) ................. $ 212,107 $ 532,481 $ 139,858 $ 78,025
Interest ............................................. 3,042 10,459 282,087 --
----------- ----------- ----------- -----------
TOTAL INVESTMENT INCOME ........................... 215,149 542,940 421,945 78,025
----------- ----------- ----------- -----------
EXPENSES
Investment advisory fees (Note 4) .................... 93,051 201,945 115,850 68,092
Accounting services fees (Note 4) .................... 36,000 36,000 36,000 36,000
Shareholder services and transfer agent fees -
Class A (Note 4) .................................. 14,400 14,400 14,400 14,400
Class C (Note 4) .................................. 14,400 14,400 14,400 14,400
Custodian fees ....................................... 10,563 26,678 11,168 35,706
Registration fees - Common ........................... 4,074 4,724 4,429 17,015
Registration fees - Class A .......................... 6,731 7,315 7,034 4,764
Registration fees - Class C .......................... 6,797 7,064 6,878 4,656
Administration fees (Note 4) ......................... 12,000 20,246 12,403 12,000
Postage and supplies ................................. 7,996 19,032 8,198 5,832
Trustees' fees and expenses .......................... 7,769 7,769 7,769 7,769
Professional fees .................................... 7,500 7,500 7,500 7,500
Reports to shareholders .............................. 5,170 12,157 5,356 5,282
Insurance expense .................................... 1,600 3,445 1,669 548
Amortization of organization expenses (Note 2) ....... 3,154 3,154 3,154 --
Distribution expenses - Class A (Note 4) ............. -- 8,759 -- --
Other expenses ....................................... 1,872 5,058 3,308 13,460
----------- ----------- ----------- -----------
TOTAL EXPENSES .................................... 233,077 399,646 259,516 247,424
Fees waived and/or common expenses
reimbursed by Adviser (Note 4) .................... (40,548) (8,323) (27,553) (117,838)
Class C expenses reimbursed by Adviser (Note 4) ...... (17,974) (1,297) (5,073) (8,363)
----------- ----------- ----------- -----------
NET EXPENSES ...................................... 174,555 390,026 226,890 121,223
----------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) ............................ 40,594 152,914 195,055 (43,198)
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES)
Net realized losses from:
Security transactions ............................. (170,647) (32,334) (127,866) (115,075)
Foreign currency transactions (Note 5) ............ -- -- -- (124,824)
Net change in unrealized appreciation/depreciation on:
Investments ....................................... (964,977) (5,568,898) (350,073) 562,790
Foreign currency translation (Note 5) ............. -- -- -- (3,203)
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS AND
FOREIGN CURRENCIES ................................... (1,135,624) (5,601,232) (477,939) 319,688
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS ...................................... $(1,095,030) $(5,448,318) $ (282,884) $ 276,490
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
=============================================================================================================================
LARGE CAP VALUE FUND SMALL CAP VALUE FUND
----------------------------- -----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ................................. $ 40,594 $ 15,666 $ 152,914 $ 42,008
Net realized gains (losses) from security
transactions ....................................... (170,647) 199,457 (32,334) 1,496,720
Net change in unrealized appreciation/depreciation
on investments ..................................... (964,977) 1,078,851 (5,568,898) 2,686,417
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from operations .... (1,095,030) 1,293,974 (5,448,318) 4,225,145
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A ................... (40,478) (15,639) (105,005) (27,790)
From net investment income, Class C ................... (116) (27) (11,617) (310)
From net realized gains, Class A ...................... (101,336) (93,134) (1,122,796) (679,224)
From net realized gains, Class C ...................... (4,193) (666) (154,410) (26,771)
------------ ------------ ------------ ------------
Decrease in net assets from distributions
to shareholders ....................................... (146,123) (109,466) (1,393,828) (734,095)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Class A
Proceeds from shares sold ............................. 3,174,933 7,408,080 3,036,967 16,889,610
Net asset value of shares issued in
reinvestment of distributions to shareholders ...... 129,680 100,180 1,100,297 609,751
Payments for shares redeemed .......................... (447,120) (1,043,356) (2,030,441) (1,485,185)
------------ ------------ ------------ ------------
Net increase in net assets from Class A
share transactions .................................... 2,857,493 6,464,904 2,106,823 16,014,176
------------ ------------ ------------ ------------
Class C
Proceeds from shares sold ............................. 422,413 125,961 1,994,365 1,324,235
Net asset value of shares issued in
reinvestment of distributions to shareholders ...... 4,298 690 157,601 26,186
Payments for shares redeemed .......................... (2,112) (4,019) (206,560) (59,057)
------------ ------------ ------------ ------------
Net increase in net assets from Class C
share transactions ................................. 424,599 122,632 1,945,406 1,291,364
------------ ------------ ------------ ------------
Net increase in net assets from capital share transactions 3,282,092 6,587,536 4,052,229 17,305,540
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................. 2,040,939 7,772,044 (2,789,917) 20,796,590
NET ASSETS:
Beginning of year ..................................... 7,806,044 34,000 20,829,590 33,000
------------ ------------ ------------ ------------
End of year ........................................... $ 9,846,983 $ 7,806,044 $ 18,039,673 $ 20,829,590
============ ============ ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ...................... $ -- $ -- $ 50,200 $ 13,908
============ ============ ============ ============
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
=============================================================================================================================
LARGE CAP VALUE FUND SMALL CAP VALUE FUND
----------------------------- -----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE ACTIVITY:
Class A
<S> <C> <C> <C> <C>
Shares sold ........................................... 276,753 711,149 270,810 1,585,565
Shares issued in reinvestment of distributions
to shareholders .................................... 11,659 9,315 110,385 53,022
Shares redeemed ....................................... (42,215) (95,576) (203,409) (127,543)
------------ ------------ ------------ ------------
Net increase in shares outstanding .................... 246,197 624,888 177,786 1,511,044
Shares outstanding, beginning of year ................. 628,288 3,400 1,514,344 3,300
------------ ------------ ------------ ------------
Shares outstanding, end of year ....................... 874,485 628,288 1,692,130 1,514,344
============ ============ ============ ============
Class C
Shares sold ........................................... 38,912 11,518 178,737 111,598
Shares issued in reinvestment of distributions
to shareholders .................................... 388 64 15,961 2,283
Shares redeemed ....................................... (193) (377) (20,715) (5,008)
------------ ------------ ------------ ------------
Net increase in shares outstanding .................... 39,107 11,205 173,983 108,873
Shares outstanding, beginning of year ................. 11,205 -- 108,873 --
------------ ------------ ------------ ------------
Shares outstanding, end of year ....................... 50,312 11,205 282,856 108,873
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
=============================================================================================================================
BALANCED FUND INTERNATIONAL VALUE FUND
----------------------------- -----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1998 1999 1998(a)
- -----------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) .......................... $ 195,055 $ 103,458 $ (43,198) $ (4,849)
Net realized gains (losses) from:
Security transactions .............................. (127,866) 263,495 (115,075) 21,655
Foreign currency transactions ...................... -- -- (124,824) (1,319)
Net change in unrealized appreciation/depreciation on:
Investments ........................................ (350,073) 686,312 562,790 145,972
Foreign currency translation ....................... -- -- (3,203) 6,576
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from operations . (282,884) 1,053,265 276,490 168,035
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A ................... (176,745) (96,636) -- --
From net investment income, Class C ................... (18,310) (6,822) -- --
From net realized gains, Class A ...................... (243,853) (50,850) (15,554) --
From net realized gains, Class C ...................... (43,568) (4,822) (3,492) --
------------ ------------ ------------ ------------
Decrease in net assets from distributions
to shareholders ....................................... (482,476) (159,130) (19,046) --
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Class A
Proceeds from shares sold ............................. 4,763,587 7,467,827 4,672,561 1,135,513
Net asset value of shares issued in
reinvestment of distributions to shareholders ...... 391,315 142,246 14,769 --
Payments for shares redeemed .......................... (1,361,306) (1,219,159) (223,152) (308)
------------ ------------ ------------ ------------
Net increase in net assets from Class A
share transactions .................................... 3,793,596 6,390,914 4,464,178 1,135,205
------------ ------------ ------------ ------------
Class C
Proceeds from shares sold ............................. 1,087,900 1,017,191 1,334,040 79,905
Net asset value of shares issued in
reinvestment of distributions to shareholders ...... 56,830 11,331 3,359 --
Payments for shares redeemed .......................... (242,568) (11) (6,698) --
------------ ------------ ------------ ------------
Net increase in net assets from Class C
share transactions .................................... 902,162 1,028,511 1,330,701 79,905
------------ ------------ ------------ ------------
Net increase in net assets from capital share transactions 4,695,758 7,419,425 5,794,879 1,215,110
------------ ------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS ............................. 3,930,398 8,313,560 6,052,323 1,383,145
NET ASSETS:
Beginning of period ................................... 8,346,560 33,000 1,383,145 --
------------ ------------ ------------ ------------
End of period ......................................... $ 12,276,958 $ 8,346,560 $ 7,435,468 $ 1,383,145
============ ============ ============ ============
</TABLE>
(a) Represents the period from the initial public offering of shares (October
13, 1997) to March 31, 1998.
28
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
=============================================================================================================================
BALANCED FUND INTERNATIONAL VALUE FUND
----------------------------- -----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1998 1999 1998(a)
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE ACTIVITY:
Class A
<S> <C> <C> <C> <C>
Shares sold ........................................... 425,764 725,255 389,709 110,251
Shares issued in reinvestment of distributions
to shareholders .................................... 35,797 13,140 1,216 --
Shares redeemed ....................................... (124,361) (112,652) (19,119) (28)
------------ ------------ ------------ ------------
Net increase in shares outstanding .................... 337,200 625,743 371,806 110,223
Shares outstanding, beginning of period ............... 629,043 3,300 110,223 --
------------ ------------ ------------ ------------
Shares outstanding, end of period ..................... 966,243 629,043 482,029 110,223
============ ============ ============ ============
Class C
Shares sold ........................................... 98,933 93,039 111,186 7,443
Shares issued in reinvestment of distributions
to shareholders .................................... 5,214 1,041 279 --
Shares redeemed ....................................... (22,450) (1) (561) --
------------ ------------ ------------ ------------
Net increase in shares outstanding .................... 81,697 94,079 110,904 7,443
Shares outstanding, beginning of period ............... 94,079 -- 7,443 --
------------ ------------ ------------ ------------
Shares outstanding, end of period ..................... 175,776 94,079 118,347 7,443
============ ============ ============ ============
</TABLE>
(a) Represents the period from intial public offering of shares (October 13,
1997) to March 31, 1998.
See accompanying notes to financial statements.
29
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------
CLASS A CLASS C
---------------------------- ----------------------------
YEAR FROM YEAR FROM
ENDED INCEPTION(A) ENDED INCEPTION(A)
MARCH 31, THROUGH MARCH 31, THROUGH
1999 MARCH 31, 1998 1999 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ............ $ 12.21 $ 10.00 $ 12.16 $ 10.76
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss) ................... 0.05 0.03 (0.02) (0.01)
Net realized and unrealized gains (losses)
on investments .............................. (1.44) 2.36 (1.45) 1.56
----------- ----------- ----------- -----------
Total from investment operations .................. (1.39) 2.39 (1.47) 1.55
----------- ----------- ----------- -----------
Less distributions:
From net investment income ..................... (0.05) (0.03) (0.00) (0.00)
From net realized gains ........................ (0.12) (0.15) (0.12) (0.15)
----------- ----------- ----------- -----------
Total distributions ............................... (0.17) (0.18) (0.12) (0.15)
----------- ----------- ----------- -----------
Net asset value at end of period .................. $ 10.65 $ 12.21 $ 10.57 $ 12.16
=========== =========== =========== ===========
Total return(B) ................................... (11.48)% 24.11% (12.12)% 14.63%
=========== =========== =========== ===========
Net assets at end of period ....................... $ 9,315,112 $ 7,669,807 $ 531,871 $ 136,237
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before fee waivers and/or expense reimbursements
by Adviser .................................. 2.29% 2.72% 8.53% 52.73%
After fee waivers and/or expense reimbursements
by Adviser .................................. 1.85% 1.84% 2.60% 2.59%
Ratio of net investment income (loss)
to average net assets(C) ....................... 0.46% 0.30% (0.31)% (0.55)%
Portfolio turnover rate(C) ........................ 55% 54% 55% 54%
(A) Initial public offering date 5-28-97 8-19-97
</TABLE>
(B) Total returns shown exclude the effect of applicable sales loads and are
not annualized.
(C) Annualized.
See accompanying notes to financial statements.
30
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------
CLASS A CLASS C
---------------------------- ----------------------------
YEAR FROM YEAR FROM
ENDED INCEPTION(A) ENDED INCEPTION(A)
MARCH 31, THROUGH MARCH 31, THROUGH
1999 MARCH 31, 1998 1999 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ............ $ 12.84 $ 10.00 $ 12.79 $ 10.95
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss) ................... 0.08 0.03 0.01 (0.02)
Net realized and unrealized gains (losses)
on investments .............................. (3.03) 3.30 (3.03) 2.33
----------- ----------- ----------- -----------
Total from investment operations .................. (2.95) 3.33 (3.02) 2.31
----------- ----------- ----------- -----------
Less distributions:
From net investment income ..................... (0.06) (0.02) (0.04) (0.00)
From net realized gains ........................ (0.68) (0.47) (0.68) (0.47)
----------- ----------- ----------- -----------
Total distributions ............................... (0.74) (0.49) (0.72) (0.47)
----------- ----------- ----------- -----------
Net asset value at end of period .................. $ 9.15 $ 12.84 $ 9.05 $ 12.79
=========== =========== =========== ===========
Total return(B) ................................... (23.39)% 33.86% (24.00)% 21.63%
=========== =========== =========== ===========
Net assets at end of period ....................... $15,479,055 $19,437,554 $ 2,560,618 $ 1,392,036
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before fee waivers and/or expense reimbursements
by Adviser .................................. 1.89% 1.98% 2.70% 6.41%
After fee waivers and/or expense reimbursements
by Adviser .................................. 1.85% 1.84% 2.60% 2.59%
Ratio of net investment income (loss)
to average net assets(C) ....................... 0.83% 0.35% 0.17% (0.42)%
Portfolio turnover rate(C) ........................ 79% 62% 79% 62%
(A) Initial public offering date 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.
31
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
BALANCED FUND
FINANCIAL HIGHLIGHTS
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------
CLASS A CLASS C
---------------------------- ----------------------------
YEAR FROM YEAR FROM
ENDED INCEPTION(A) ENDED INCEPTION(A)
MARCH 31, THROUGH MARCH 31, THROUGH
1999 MARCH 31, 1998 1999 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ............ $ 11.55 $ 10.00 $ 11.52 $ 10.71
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income .......................... 0.19 0.17 0.11 0.07
Net realized and unrealized gains (losses)
on investments .............................. (0.56) 1.62 (0.55) 0.92
----------- ----------- ----------- -----------
Total from investment operations .................. (0.37) 1.79 (0.44) 0.99
----------- ----------- ----------- -----------
Less distributions:
From net investment income ..................... (0.19) (0.16) (0.11) (0.10)
From net realized gains ........................ (0.24) (0.08) (0.24) (0.08)
----------- ----------- ----------- -----------
Total distributions ............................... (0.43) (0.24) (0.35) (0.18)
----------- ----------- ----------- -----------
Net asset value at end of period .................. $ 10.75 $ 11.55 $ 10.73 $ 11.52
=========== =========== =========== ===========
Total return(B) ................................... (3.22)% 18.07% (3.81)% 9.37%
=========== =========== =========== ===========
Net assets at end of period ....................... $10,391,582 $ 7,262,670 $ 1,885,376 $ 1,083,890
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before fee waivers and/or expense reimbursements
by Adviser .................................. 2.09% 2.60% 3.14% 7.39%
After fee waivers and/or expense reimbursements
by Adviser .................................. 1.85% 1.84% 2.60% 2.59%
Ratio of net investment income
to average net assets(C) ....................... 1.79% 1.85% 1.04% 0.99%
Portfolio turnover rate(C) ........................ 60% 64% 60% 64%
(A) Initial public offering date 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.
32
<PAGE>
<TABLE>
<CAPTION>
DEAN FAMILY OF FUNDS
INTERNATIONAL VALUE FUND
FINANCIAL HIGHLIGHTS
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------
CLASS A CLASS C
---------------------------- ----------------------------
YEAR FROM YEAR FROM
ENDED INCEPTION(A) ENDED INCEPTION(A)
MARCH 31, THROUGH MARCH 31, THROUGH
1999 MARCH 31, 1998 1999 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ............ $ 11.76 $ 10.00 $ 11.72 $ 9.89
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment loss ............................ (0.01) (0.05) (0.10) (0.04)
Net realized and unrealized gains
on investments and foreign currency ......... 0.69 1.81 0.69 1.87
----------- ----------- ----------- -----------
Total from investment operations .................. 0.68 1.76 0.59 1.83
----------- ----------- ----------- -----------
Less distributions:
From net investment income ..................... -- -- -- --
From net realized gains ........................ (0.03) -- (0.03) --
----------- ----------- ----------- -----------
Total distributions ............................... (0.03) -- (0.03) --
----------- ----------- ----------- -----------
Net asset value at end of period .................. $ 12.41 $ 11.76 $ 12.28 $ 11.72
=========== =========== =========== ===========
Total return(B) ................................... 5.82% 17.60% 5.07% 18.50%
=========== =========== =========== ===========
Net assets at end of period ....................... $ 5,981,899 $ 1,295,896 $ 1,453,569 $ 87,249
=========== =========== =========== ===========
Ratio of expenses to average net assets:(C)
Before fee waivers and/or expense reimbursements
by Adviser .................................. 4.25% 16.66% 5.91% 58.89%
After fee waivers and/or expense reimbursements
by Adviser .................................. 2.09% 2.04% 2.84% 2.82%
Ratio of net investment loss
to average net assets(C) ....................... (0.70)% (1.30)% (1.23)% (1.94)%
Portfolio turnover rate(C) ........................ 100% 109% 100% 109%
(A) Initial public offering date 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.
33
<PAGE>
DEAN FAMILY OF FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31,1999
================================================================================
1. ORGANIZATION
The Dean Family of Funds (the Trust) is registered under the Investment Company
Act of 1940, 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 capital appreciation and dividend
income 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
(normally 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.
34
<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.
Allocations between classes -- Investment income earned, realized capital gains
and losses, and unrealized appreciation and depreciation for the Funds are
allocated daily to each class of shares based upon its proportionate share of
total net assets of the Fund. Class specific expenses are charged directly to
the class incurring the expense. Common expenses which are not attributable to a
specific class are allocated daily to each class of shares based upon its
proportionate share of total net assets of the Fund.
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 income 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, 1999:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Large Cap Small Cap Balanced International
Value Fund Value Fund Fund Value Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized appreciation ............... $ 1,023,973 $ 1,102,251 $ 1,139,053 $ 1,005,311
Gross unrealized depreciation ............... (910,099) (3,984,732) (802,814) (298,627)
----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) .. $ 113,874 $(2,882,481) $ 336,239 $ 706,684
=========== =========== =========== ===========
Federal income tax cost ..................... $ 9,815,363 $20,472,946 $11,674,874 $ 6,622,287
=========== =========== =========== ===========
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The difference between the federal income tax cost of portfolio investments and
financial statement cost for the International Value Fund is due to certain
timing differences in the recognition of capital losses under income tax
regulations and generally accepted accounting principles.
35
<PAGE>
As of March 31, 1999, the Large Cap Value Fund, Small Cap Value Fund and
International Value Fund had capital loss carryforwards for federal income tax
purposes of $39,697, $1,127 and $31,792, respectively, which expire through the
year 2007. In addition, the Large Cap Value Fund, Small Cap Value Fund, Balanced
Fund and International Value Fund had net realized capital losses of $130,822,
$517,688, $207,464 and $81,205, respectively, during the period from November 1,
1998 through March 31, 1999, which are treated for federal income tax purposes
as arising during the Fund's tax year ending March 31, 2000. These capital loss
carryforwards and "post-October" losses may be utilized in future years to
offset net realized capital gains prior to distributing such gains to
shareholders.
Reclassification of capital accounts -- As of March 31, 1999, the International
Value Fund reclassified $43,198 from accumulated net investment loss and
$124,824 from accumulated net realized losses from foreign currency transactions
to paid-in capital. These reclassifications, which were the result of permanent
differences between financial statement and income tax reporting requirements,
have no effect on the Fund's net assets or net asset value per share.
3. INVESTMENT TRANSACTIONS
Investment transactions, other than short-term investments, were as follows for
the year ended March 31, 1999:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Large Cap Small Cap Balanced International
Value Fund Value Fund Fund Value Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases of portfolio securities ........................ $ 7,798,091 $18,315,717 $ 9,308,341 $10,678,483
=========== =========== =========== ===========
Proceeds from sales and maturities of portfolio securities $ 4,927,827 $15,480,531 $ 6,159,435 $ 5,167,469
=========== =========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
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 the
average daily net assets for the Large Cap Value Fund, the Small Cap Value Fund
and the Balanced Fund and 1.25% of the 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
the Fund's average daily net assets.
In order to voluntarily reduce operating expenses during the year ended March
31, 1999, the Adviser waived $40,548 of its advisory fees and reimbursed $17,974
of Class C expenses for the Large Cap Value Fund; waived $8,323 of its advisory
fees and reimbursed $1,297 of Class C expenses for the Small Cap Value Fund;
waived $27,553 of its advisory fees and reimbursed $5,073 of Class C expenses
for the Balanced Fund; and waived its entire advisory fee of $68,092 and
reimbursed $49,746 of common expenses and $8,363 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.
36
<PAGE>
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 (the 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 $1,192,
$5,325, $2,893 and $4,147 from underwriting and broker commissions on the sale
of shares of the Large Cap Value Fund, the Small Cap Value Fund, the Balanced
Fund, and the International Value Fund, respectively, during the year ended
March 31, 1999.
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 attributable 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
attributable to Class C shares for certain distribution-related expenses
incurred in the distribution and promotion of the Fund's Class C shares.
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.
37
<PAGE>
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, 1999, 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>
06/15/99 ........ (52,616,000) JPY $ (455,702) $ (449,005) $ 6,697
08/13/99 ........ (1,579,800) HKD (202,180) (203,084) (904)
08/13/99 ........ (112,835) GBP (183,390) (182,017) 1,373
------------ ------------ ------------
Total sell contracts (841,272) (834,106) 7,166
------------ ------------ ------------
Contracts To Buy
04/01/99 ........ 55,016 HKD 7,103 7,099 (4)
04/07/99 ........ 54,208 HKD 6,995 6,994 (1)
08/13/99 ........ 447,800 HKD 57,488 57,565 77
------------ ------------ ------------
Total buy contracts 71,586 71,658 72
------------ ------------ ------------
Net Contracts ...... $ (769,686) $ (762,448) $ 7,238
============ ============ ============
</TABLE>
GBP - British Pound Sterling
HKD - Hong Kong Dollar
JPY - Japanese Yen
38
<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, 1999, the related
statements of operations for the year then ended, and the statements of changes
in net assets and financial highlights for the year ended March 31, 1999 and the
period 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 audits.
We conducted our audits 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, 1999, 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 audits provide 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, 1999, and the results of their operations for the year then ended, and
the changes in their net assets and their financial highlights for the year
ended March 31, 1999 and the period ended March 31, 1998, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
May 5, 1999
39
<PAGE>
DEAN FAMILY OF FUNDS
2480 Kettering Tower
Dayton, Ohio 45423
BOARD OF TRUSTEES
Victor S. Curtis
Chauncey H. Dean
Dr. Robert D. Dean
Dr. Sam B. Gould
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:
Large Cap Value Fund ........... 2
Small Cap Value Fund ........... 3
Balanced Fund .................. 4
International Value Fund ....... 5
Fund Facts ........................ 6
Portfolios of Investments:
Large Cap Value Fund ........... 8
Small Cap Value Fund ........... 11
Balanced Fund .................. 16
International Value Fund ....... 19
Financial Statements .............. 23
Notes to Financial Statements ..... 34
Report of Independent Auditors .... 39
- -----------------------------------------
<PAGE>
DEAN FAMILY OF FUNDS
--------------------
PART C. OTHER INFORMATION
- ------- -----------------
Item 23.
- --------
(a) Agreement and Declaration of Trust*
(b) Bylaws*
(c) Incorporated by reference to the Agreement and Declaration
of Trust and Bylaws
(d)(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.
(e) Underwriting Agreement with 2480 Securities LLC*
(f) Directors Deferred Compensation Plan*
(g)(i) Custody Agreement with Firstar Bank, N.A.*
(ii) Custody Agreement with Boston Safe Deposit and Trust
Company**
(h)(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.*
(i) Opinion and Consent of Counsel*
(j) Consent of Independent Auditors
(k) Inapplicable
(l) Agreement Relating to Initial Capital*
(m)(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*
<PAGE>
(n) Inapplicable
(o) Rule 18f-3 Multi-Class Plan*
- --------------------------------------
* Incorporated by reference to the Trust's Registration Statement on Form
N-1A.
** To be filed by amendment.
Item 24. Persons Controlled by or Under Common Control with Registrant.
- -------- --------------------------------------------------------------
None.
Item 25. 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
<PAGE>
action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party
or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, and
except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's
office.
Section 6.5 ADVANCES OF EXPENSES. The Trust shall advance
attorneys' fees or other expenses incurred by a Covered Person in
defending a proceeding to the full extent permitted by the
Securities Act of 1933, as amended, the 1940 Act, and Ohio
Revised Code Chapter 1707, as amended. In the event any of these
laws conflict with Ohio Revised Code Section 1701.13(E), as
amended, these laws, and not Ohio Revised Code Section
1701.13(E), shall govern.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person may be entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors and
administrators. Nothing contained in this article shall affect
any rights to indemnification to which personnel of the Trust,
other than Trustees and officers, and other persons may be
entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of
any such person.
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
<PAGE>
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability
policy. The policy provides coverage to the Registrant, its
Trustees and officers, C.H. Dean & Associates, Inc. ("Dean
Investment Associates") and 2480 Securities LLC. Coverage under
the policy will include losses by reason of any act, error,
omission, misstatement, misleading statement, neglect or breach
of duty.
The Advisory Agreements with Dean Investment Associates each
provide that Dean Investment Associates shall not be liable for
any action taken, omitted or suffered to be taken by it in its
reasonable judgment, in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred
upon it by the applicable Advisory Agreement, or in accordance
with (or in the absence of) specific directions or instructions
from the Trust; provided, however, that such acts or omissions
shall not have resulted from Dean Investment Associates' willful
misfeasance, bad 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.
<PAGE>
Item 26. 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.
(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,
<PAGE>
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.
Item 27. Principal Underwriters
- -------- ----------------------
(a) Inapplicable
(b) Position with Position with
Name Underwriter Registrant
---- ----------- ----------
Frank H. Scott President President and a
Trustee
Stephen M. Miller Treasurer None
The address of the above-named persons is 2480 Kettering Tower,
Dayton, Ohio 45423.
(c) Inapplicable
Item 28. 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 29. Management Services Not Discussed in Parts A or B
- -------- -------------------------------------------------
Inapplicable
Item 30. Undertakings
- -------- ------------
Inapplicable
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Registration Statement to be signed on its behalf, thereunto duly
authorized, in the City of Dayton and State of Ohio, on the 2nd day of June,
1999.
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 June 2, 1999
- ----------------------------- and Trustee
Frank H. Scott
/s/ Mark J. Seger Treasurer June 2, 1999
- -----------------------------
Mark J. Seger
/s/ Chauncey H. Dean Trustee June 2, 1999
- -----------------------------
Chauncey H. Dean
/s/ Robert D. Dean Trustee June 2, 1999
- -----------------------------
Robert D. Dean
/s/ Victor S. Curtis Trustee June 2, 1999
- -----------------------------
Victor S. Curtis
- ----------------------------- Trustee
Sam B. Gould*
- ----------------------------- Trustee
Frank J. Perez* By: /s/ Tina D. Hosking
--------------------
Tina D. Hosking
Attorney-in-Fact*
- ----------------------------- Trustee June 2, 1999
David H. Ponitz*
- ----------------------------- Trustee
Gilbert P. Williamson*
<PAGE>
INDEX TO EXHIBITS
(a) Agreement and Declaration of Trust*
(b) Bylaws*
(c) Incorporated by reference to the Agreement and Declaration of Trust
and Bylaws
(d)(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
(e) Underwriting Agreement*
(f) Directors Deferred Compensation Plan*
(g)(i) Custody Agreement with Firstar Bank, N.A.*
(ii) Custody Agreement with Boston Safe Deposit and Trust Company**
(h)(i) Administration Agreement*
(ii) Accounting Services Agreement*
(iii) Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement*
(i) Opinion and Consent of Counsel*
(j) Consent of Independent Auditors
(k) Inapplicable
(l) Agreement Relating to Initial Capital*
(m)(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*
(n) Inapplicable
(o) Rule 18f-3 Multi-Class Plan*
- ----------------------------
* Incorporated by reference to the Trust's Registration Statement on Form
N-1A.
** To be filed by amendment.
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
- 2 -
<PAGE>
Sub-Adviser shall be subject to such investment restrictions as are set forth in
the Act and the rules thereunder, the Internal Revenue Code of 1986, applicable
state securities laws, the supervision and control of the Board of Trustees of
the Trust, such specific instructions as the Board of Trustees may adopt and
communicate to the Sub-Adviser, the investment objectives, policies and
restrictions of the Fund furnished pursuant to paragraph 4, the provisions of
Schedule A hereto and general instructions from the Adviser. The Sub-Adviser is
not authorized by the Fund to take any action, including the purchase or sale of
securities for the Fund, in contravention of any restriction, limitation,
objective, policy or instruction described in the previous sentence. The
Sub-Adviser shall maintain on behalf of the Fund the records listed in Schedule
A hereto (as amended from time to time). At the Trust's reasonable request, the
Sub-Adviser will consult with the Adviser with respect to any decision made by
it with respect to the investments of the Fund.
4. Investment Objectives, Policies and Restrictions. The Trust will provide
the Sub-Adviser with the statement of investment objectives, policies and
restrictions applicable to the Fund as contained in the Fund's registration
statements under the Act and the Securities Act of 1933, and any instructions
adopted by the Board of Trustees supplemental thereto. The Trust will provide
the Sub-Adviser with such further information concerning the investment
objectives, policies and restrictions applicable thereto as the Sub-Adviser may
from time to time
- 3 -
<PAGE>
reasonably request. The Trust retains the right, on written notice to the
Sub-Adviser from the Trust or the Adviser, to modify any such objectives,
policies or restrictions in any manner at any time.
5. Allocation of Brokerage. The Sub-Adviser shall have the authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Sub-Adviser, and for the selection of the markets on or in
which the transactions will be executed.
A. In doing so, the Sub-Adviser will give primary consideration to
securing the best execution, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), the execution
capability, financial responsibility and responsiveness of the broker or dealer
and the brokerage and research services provided by the broker or dealer.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking most favorable price and
efficient execution, the Sub-Adviser may (i) pay commissions to brokers or
dealers other than its affiliates which are higher than might be charged by
another qualified broker to obtain brokerage and/or research services considered
by the Sub-Adviser to be useful or desirable in the performance of its duties
hereunder and for the investment management of other advisory accounts over
which it or its affiliates exercise investment discretion and (ii) consider
sales by brokers or dealers (other than its affiliates) of shares of
- 4 -
<PAGE>
the Fund as a factor in its selection of brokers and dealers for the Fund's
portfolio transactions. It is understood that neither the Trust, the Adviser nor
the Sub-Adviser have adopted a formula for allocation of the Fund's investment
transaction business. It is also understood that it is desirable for the Fund
that the Sub-Adviser have access to supplemental investment and market research
and security and economic analyses provided by certain brokers who may execute
brokerage transactions at a higher commission to the Fund than may result when
allocating brokerage to other brokers on the basis of seeking the lowest
commission. Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Fund with such certain brokers, subject
to review by the Trust's Board of Trustees from time to time with respect to the
extent and continuation of this practice, provided that the Sub-Adviser
determines in good faith that the amount of the commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker or dealer. The determination may be viewed in terms of either a
particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund and to the other accounts over which it exercises investment
discretion. It is understood that although the information may be useful to the
Trust and the Sub-Adviser, it is not possible to place a dollar value on such
information.
On occasions when the Sub-Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients, the
Sub-Adviser, to the extent permitted by
- 5 -
<PAGE>
applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as expenses
incurred in the transaction, will be made by the Sub-Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund with respect to the Fund and to such other clients.
For each fiscal quarter of the Fund, the Sub-Adviser shall prepare and
render reports to the Adviser and the Trust's Board of Trustees of the total
brokerage business placed and the manner in which the allocation has been
accomplished. Such reports shall set forth at a minimum the information required
to be maintained by Rule 31a-1(b)(9) under the Act.
B. The Sub-Adviser agrees that it will not execute any portfolio
transactions for the Fund's account with a broker or dealer which is an
"affiliated person" (as defined in the Act) of the Trust, the Adviser, the
Sub-Adviser or any portfolio manager of the Trust without the prior written
approval of the Adviser. The Adviser agrees that it will provide the Sub-Adviser
with a list of brokers and dealers which are "affiliated persons" of the Trust,
the Adviser or the Sub-Adviser.
6. Transaction Procedures. All transactions will be consummated by payment
to or delivery by 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
- 7 -
<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.
- 9 -
<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
- 11 -
<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
- 12 -
<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
- 13 -
<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
- 15 -
<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.
- 16 -
<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, 2000,
and from year to year
- 17 -
<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.
- 18 -
<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: Robert D. Dean By: Frank H. Scott
-------------------------- -------------------------
Title: President Title: President
Date: October 16, 1998 Date: October 16, 1998
ACCEPTANCE
The foregoing Agreement is hereby accepted.
NEWTON CAPITAL MANAGEMENT
LIMITED
By: /s/ Roger Butler
------------------------
Title: Director
Date: October 16, 1998
- 19 -
<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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(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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Consent Of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the prospectus and "Auditors" and "Annual Report" in the
Statement of Additional Information, both included in Post-Effective Amendment
No. 6 to the Registration Statement on Form N-1A (No. 333-18653) of The Dean
Family of Funds and to the use of our report dated May 5, 1999, incorporated
therein.
/s/ Ernst & Young LLP
Cincinnati, Ohio
May 28, 1999
