As Filed With the Securities and Exchange Commission on December 10, 1999
Securities Act File No. 333-41237
Investment Company Act File No. 811-08523
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No.2
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4
(Check appropriate box or boxes)
U.S. GLOBAL LEADERS VARIABLE INSURANCE TRUST
(Exact Name of Registrant as Specified in Charter)
630 Fifth Ave., Ste. 2910
New York, NY 10111
(Address of Principal Executive Offices, including Zip Code)
(212) 765-5350
(Registrant's Telephone Number, including Area Code)
Julie Allecta, Esq.
Paul, Hastings, Janofsky & Walker
345 California St.
San Francisco, CA, 94104
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] Immediately upon filing pursuant to paragraph (b)
[X] On December 11, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
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U.S. GLOBAL LEADERS GROWTH VARIABLE INSURANCE FUND
U.S. Global Leaders Growth Variable Insurance Fund is a growth stock
mutual fund. The Fund seeks growth of capital. The Fund seeks to achieve its
investment goal through its investment in U.S. growth companies with a global
reach.
Shares of the Fund are offered only to insurance company separate
accounts to fund the benefits of variable life insurance policies or variable
annuity contracts owned by their respective policy holders or contract holders.
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION DOES NOT
APPROVE OR DISAPPROVE OF THESE SHARES OR DETERMINE WHETHER THE INFORMATION IN
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is December 13, 1999
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TABLE OF CONTENTS
An Overview of the Fund .................................................... 3
Fees and Expenses .......................................................... 4
Investment Objective and Principal Investment Strategies ................... 6
Principal Risks of Investing in the Fund ................................... 7
Investment Advisor ......................................................... 7
Purchases and Redemptions .................................................. 8
Pricing of Fund Shares ..................................................... 9
Dividends and Distributions ................................................ 9
Tax Consequences ........................................................... 9
2
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AN OVERVIEW OF THE FUND
THE FUND'S INVESTMENT GOAL
The Fund seeks long-term growth of capital.
THE FUND'S PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks to achieve its investment goal through its investment in growth
companies with a global reach. The Fund primarily invests in common stocks of
U.S. companies that have substantial international activities ("U.S. Global
Leaders"). The Advisor considers U.S. companies that have leading positions in
growing markets in developed countries and also derive a substantial portion of
their profits in fast-growing emerging markets as U.S. Global Leaders. The
Advisor considers U.S. Global Leaders companies typically to possess the
following qualities:
* Hold leading market shares of their relevant growth markets
* Supply consumable products or services
* Maintain strong balance sheets with relatively low debt to equity
ratios
Unlike mutual funds that are classified as "global" funds, the Fund does not
have a principal investment policy that calls for foreign investing.
The Fund is non-diversified. This means that with respect to 50% of its assets,
it may make larger investments in individual companies than a fund that is
diversified. However, with respect to the other 50% of its assets, the Fund may
only invest 5% of its assets in any individual security.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is the risk that you could lose money on your investment in the Fund. The
following risks could affect the value of your investment:
* The stock market goes down
* Interest rates rise which can result in a decline in the equity market
* Growth stocks fall out of favor with the stock market
* Stocks in the Fund's portfolio may not increase their earnings at the
rate anticipated
* Because the Fund has the ability to take larger positions in a small
number of issuers, the Fund's share price may be more volatile than
the share price of a diversified fund.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF THE BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
WHO MAY WANT TO INVEST IN THE FUND
The Fund may be appropriate for investors who:
* Are pursuing a long-term goal such as retirement
* Want to add an investment with growth potential to diversify their
investment portfolio
* Are willing to accept higher short-term risk
The Fund may not be appropriate for investors who:
* Need regular income or stability of principal
* Are pursuing a short-term goal
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FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases .................. None
Maximum deferred sales charge (load) .............................. None
ANNUAL FUND OPERATING EXPENSES*
(expenses that are deducted from Fund assets)
Management Fees ................................................... 1.00%
Other Expenses .................................................... 1.00%
Total Annual Fund Operating Expenses .............................. 2.00%
Fee Reduction and/or Expense Reimbursement ........................ (0.52)%
Net Expenses ...................................................... 1.48%
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* Other expenses are estimated for the first fiscal year of the Fund. The
Advisor has contractually agreed to reduce its fees and/or pay expenses of
the Fund for an indefinite period to ensure that Total Fund Operating
Expenses will not exceed the net expense amount shown. The Advisor reserves
the right to be reimbursed for any waiver of its fees or expenses paid on
behalf of the Fund if the Fund's expenses are less than the limit. The
Trustees may terminate this expense reimbursement arrangement at any time.
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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.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated 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 actual
costs may be higher or lower, under the assumptions, your costs would be:
One Year .................. $15
Three Years .............. $49
INSURANCE POLICIES AND CONTRACTS
Shares of the Fund are offered only to insurance company separate
accounts that fund the benefits of variable life insurance policies or variable
annuity contracts owned by their respective policy holders or contract holders
("Contracts"). An insurance company separate account's interest is limited to
the Fund(s) in which the separate account invests. Separate accounts may
purchase or redeem shares at net asset value without any sales or redemption
charge. Fees and charges imposed by the separate account, however, will affect
the actual return to the holder of a Contract. A separate account may also
impose certain restrictions or limitations on the allocation of purchase
payments or Contract value to the Fund. Prospective investors should read the
applicable Contract prospectus carefully for information regarding fees and
expenses of the Contract and separate account and any applicable restrictions or
limitations.
Shares of the Fund may be offered to the separate accounts of various
unrelated insurance companies ("shared funding"). Shares of the Fund may serve
as the underlying investments for both variable annuity and variable life
insurance contracts of the same or related insurance companies ("mixed
funding"). Due to the differences in tax treatment or other considerations to
such mixed and shared funding, the interests of various Contract owners might at
some time be in conflict. The Fund currently does not foresee any such conflict.
However, the Fund's Board of Trustees intends to monitor events to identify any
material irreconcilable conflict that may arise and to determine what action, if
any, should be taken in response to such conflict. If such a conflict were to
occur, one or more insurance companies' separate accounts might be required to
withdraw its investments in the Fund. This might force the Fund to sell
securities at disadvantageous prices.
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INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The goal of the U.S. Global Leaders Growth Variable Insurance Fund is
to seek growth of capital.
The Fund invests primarily in common stocks of United States companies
that have substantial international activities. ("U.S. Global Leaders"). Under
normal market conditions, at least 65% of the Fund's total assets will be
invested in stocks of companies the Advisor regards as
U.S. Global Leaders. U.S. Global Leaders companies typically:
* Hold leading market shares of their relevant growth markets, and hence
possess the pricing flexibility that results in high profit margins
and high investment returns.
* Supply consumable products or services so that their revenue streams
are recurring rather than derived from infrequent or postponable sales
of big-ticket items.
* Maintain strong balance sheets with relatively low debt to equity
ratios.
The Advisor believes that companies with these characteristics should
have relatively low business risk and relatively high sustainability of earnings
growth.
The Advisor believes that leading multinational companies traded
publicly in U.S. securities markets have a number of advantages that make them
attractive investments. U.S. capital markets are large and liquid. Accounting
practices are consistent and well regulated. Currency and political risks are
minimized, and the costs associated with investing abroad are reduced.
Companies that have leading positions in growing markets in the U.S.
and other developed countries and also derive a significant portion of their
profits in fast-growing emerging markets are relatively limited in number at
this time. Because of the difficulty and expense in building broad-based
distribution in newer global markets, it appears likely that the number of such
companies will not expand rapidly. Thus, the Advisor believes that the stocks of
multinational companies that can sustain superior global earnings growth are
likely to be accorded premium relative valuations.
The Advisor's investment policy is to identify U.S. Global Leaders
companies with superior long-term earnings prospects and to continue to own them
as long as their managements are fulfilling their mission. As long as the
Advisor believes that shares of such companies continue to enjoy favorable
prospects for capital growth and that they are not overvalued in the
marketplace, such shares are ordinarily retained.
The Fund anticipates that its portfolio turnover rate will not exceed
25%. This means that the Fund has the potential to be a tax efficient
investment. This should result in the realization and distribution to
shareholders of lower capital gains, which would be considered tax efficient.
This anticipated lack of frequent trading can also lead to lower transaction
costs, which could help to improve the Fund's performance.
Under normal market conditions, the Fund will stay fully invested in
stocks. However, the Fund may temporarily depart from its principal investment
strategies by making short-term investments in cash equivalents in response to
adverse market, economic or political conditions. This may result in the Fund
not achieving its investment objective.
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PRINCIPAL RISKS OF INVESTING IN THE FUND
The principal risks of investing in the Fund that may adversely affect
the Fund's net asset value or total return are summarized above in "An Overview
of the Fund." These risks are discussed
in more detail below.
MANAGEMENT RISK. Management risk means that your investment in the Fund
varies with the success and failure of the Advisor's investment strategies and
the Advisor's research, analysis and determination of portfolio securities. If
the Advisor's investment strategies do not produce the expected results, your
investment could be diminished or even lost.
MARKET RISK. Market risk means that the price of common stock may move
up or down (sometimes rapidly and unpredictably) in response to general market
and economic conditions, investor perception and anticipated events, as well as
the activities of the particular issuer. Market risk may affect a single issuer,
industry, section of the economy or the market as a whole. Since the Fund
invests in equity securities of undervalued companies, its share price will
change daily in response to stock market movements.
YEAR 2000 RISK. The risk that the Fund could be adversely affected if
the computer systems used by the Advisor and other service providers do not
properly process and calculate information related to dates beginning January 1,
2000. This is commonly known as the "Year 2000
Problem."
This situation may negatively affect the companies in which the Fund invests and
by extension the value of the Fund's shares. Although the Fund's service
providers are taking steps to address this
issue, there may still be some risk of adverse effects.
INVESTMENT ADVISOR
Yeager, Wood & Marshall Incorporated is the Fund's investment advisor.
The Advisor is located at 630 Fifth Avenue, New York, NY 10011. The Advisor has
been providing investment advisory services since 1968 and is controlled by Mr.
George M. Yeager, President. The Advisor provides investment advisory services
to individual and institutional investors with assets under management in excess
of $500 million. Mr. Yeager is responsible for the management of the Fund's
portfolio.
The Advisor supervises the Fund's investment activities and determines
which securities are purchased and sold by the Fund. The Advisor also furnishes
the Fund with office space and certain administrative services and provides most
of the personnel needed by the Fund. For its services, the Fund pays the Advisor
a monthly management fee based upon its average daily net assets at the rate of
1.00% annually.
FUND EXPENSES
The Fund is responsible for its own operating expenses. The Advisor has
contractually agreed to reduce its fees and/or pay expenses of the Fund to
ensure that the Fund's aggregate annual operating expenses (excluding interest
and tax expenses) will not exceed 1.48% of the Fund's average daily net assets.
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Any reduction in advisory fees or payment of expenses made by the Advisor may be
reimbursed by the Fund if the Advisor requests in subsequent fiscal years. This
reimbursement may be requested by the Advisor if the aggregate amount actually
paid by the Fund toward operating expenses for such fiscal year (taking into
account the reimbursement) does not exceed the applicable limitation on Fund
expenses. The Advisor is permitted to be reimbursed for fee reductions and/or
expense payments made in the prior three fiscal years. Any such reimbursement
will be reviewed by the Trustees. The Fund must pay its current ordinary
operating expenses before the Advisor is entitled to any reimbursement of fees
and/or expenses.
PERFORMANCE INFORMATION: RELATED MUTUAL FUND
Set forth below is the average annual total return for the U.S. Global
Leaders Growth Fund (the "U.S. Global Fund"), a registered open-end investment
company with the same investment adviser, investment objective and policies as
the Variable Insurance Fund. The portfolio manager for the U.S. Global Fund is
the same individual who manages the Variable Insurance Fund. The returns for the
U.S. Global Fund are net of advisory fees and other operating expenses; the U.S.
Global Fund does not impose any sales charges.
The U.S. Global Fund is offered to individual and institutional
investors and other taxable accounts generally and is not offered to separate
accounts of insurance companies funding Contracts.
As noted above, fees and charges are imposed pursuant to the terms of
the Contracts funded by the separate accounts that invest in the Variable
Annuity Fund. Performance information for the Variable Annuity Fund will be
presented in conjunction with performance information about these Contracts.
Purchasers should bear in mind that the total returns for the separate account
assets that relate to the Contracts will be lower than the total returns for the
U.S. Global Fund set forth below, which was not subject to the fees and charges
assessed under the Contracts. Purchasers should not rely on the past performance
for the U.S. Global Fund or for the Variable Annuity Fund itself as an
indication of future performance of the Contracts or the Variable Annuity Fund.
U.S. Global Leaders Growth Fund
Average Annual Total Return
Year Ended December 31, 1998 22.82%
Inception (September 29, 1995) through
September 30, 1999 23.28%
PURCHASES AND REDEMPTIONS
Shares of the Fund are offered only to the insurance company separate
accounts that fund the Contracts. All such shares may be purchased or redeemed
by the separate accounts without any sales or redemption charge at net asset
value next determined after receipt of a purchase order. Proceeds from
redemptions of shares in the Fund will be paid on or before the seventh day
following the request for redemption by a Contract holder.
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PRICING OF FUND SHARES
The price of the Fund's shares is based on the Fund's net asset value.
This is done by dividing the Fund's assets, minus its liabilities, by the number
of shares outstanding. The Fund's assets are the market value of securities held
in its portfolio, plus any cash and other assets. The Fund's liabilities are
fees and expenses owed by the Fund. The number of Fund shares outstanding
is the amount of shares which have been issued to shareholders.
The net asset value of the Fund's shares is determined as of the close
of regular trading on the NYSE. This is normally 4:00 p.m., Eastern time. Fund
shares will not be priced on days that
the NYSE is closed for trading (including certain U.S. holidays).
DIVIDENDS AND DISTRIBUTIONS
The Fund will make distributions of dividends and capital gains, if
any, at least annually, typically after year end. The Fund may make another
distribution of any additional undistributed capital gains earned during the
12-month period ended October 31 on or about December 31. All distributions will
be reinvested in Fund shares unless the Fund's Transfer Agent is instructed
otherwise.
TAX CONSEQUENCES
You will not be subject to taxes as the result of purchases or sales of
Fund shares by the insurance company separate accounts, or receipt of Fund
dividends or other distributions by the insurance company separate accounts.
However, there are tax consequences associated with investing in the variable
annuity and variable life insurance contracts the premiums from which are
invested in the insurance company separate accounts. These are discussed in the
attached Separate Account prospectus.
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U.S. GLOBAL LEADERS GROWTH VARIABLE INSURANCE FUND
For investors who want more information about the Fund, the following document
is available free upon request:
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
Prospectus.
You can get free copies of the SAI, request other information and discuss your
questions about the Fund by contacting the Fund at:
U.S. Global Leaders Growth Variable Insurance Fund
630 Fifth Avenue
New York, NY 10011
Telephone: (212) 765-5350 (call collect)
You can review and copy information including the Fund's SAI at the Public
Reference Room of the Securities and Exchange Commission in Washington, D.C. You
can obtain information on the operation of the Public Reference Room by calling
1-800-SEC-0330. You can get text-only copies:
* For a fee, by writing to the Public Reference Room of the Commission,
Washington, DC 20549-6009, or
* For a fee, by calling 1-800-SEC-0330, or
* Free of charge from the Commission's Internet website at
http://www.sec.gov.
(The Fund's SEC Investment Company Act
file number is 811-08523)
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STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 13, 1999
U.S. GLOBAL LEADERS GROWTH VARIABLE INSURANCE FUND
630 FIFTH AVENUE
NEW YORK, NY 10111
(212) 765-5350
This Statement of Additional Information ("SAI") is not a prospectus
and it should be read in conjunction with the prospectus dated December 13,
1999, as may be revised, of the U.S. Global Leaders Growth Variable Insurance
Fund (the "Fund"). A copy of the Fund's prospectus is available by calling the
number listed above or (212) 633-9700.
TABLE OF CONTENTS
THE TRUST................................................................. B-2
INVESTMENT OBJECTIVE AND POLICIES......................................... B-2
INVESTMENT RESTRICTIONS................................................... B-6
DISTRIBUTIONS AND TAX INFORMATION......................................... B-7
TRUSTEES AND EXECUTIVE OFFICERS........................................... B-9
INVESTMENT ADVISOR........................................................ B-11
THE FUND'S ADMINISTRATOR.................................................. B-11
EXECUTION OF PORTFOLIO TRANSACTIONS....................................... B-12
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................ B-13
DETERMINATION OF SHARE PRICE.............................................. B-14
PERFORMANCE INFORMATION.................................................. B-15
GENERAL INFORMATION....................................................... B-15
FINANCIAL STATEMENTS...................................................... B-17
APPENDIX ................................................................ B-20
B-1
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THE FUND
The Fund is a series of U.S. Global Leaders Variable Insurance Trust
(the "Trust"), which is a registered, open-end management investment company
organized as a Delaware business trust. This SAI relates only to the Fund.
Shares of the Fund are offered only to insurance company separate
accounts to fund the benefits of variable life insurance policies or variable
annuity contracts owned by their respective policy holders or contract holders.
INVESTMENT OBJECTIVE AND POLICIES
The U.S. Global Leaders Growth Variable Insurance Fund is a mutual fund
with the investment objective of seeking growth of capital. The following
discussion supplements the discussion of the Fund's investment objective and
policies as set forth in the Prospectus. There can
be no assurance the objective of the Fund will be attained.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
with respect to its portfolio securities. Pursuant to such agreements, the Fund
acquires securities from financial institutions such as banks and broker-dealers
as are deemed to be creditworthy by the Advisor, subject to the seller's
agreement to repurchase and the Fund's agreement to resell such securities at a
mutually agreed upon date and price. The repurchase price generally equals the
price paid by the Fund plus interest negotiated on the basis of current
short-term rates (which may be more or less than the rate on the underlying
portfolio security). Securities subject to repurchase agreements will be held by
the Custodian or in the Federal Reserve/Treasury Book-Entry System or an
equivalent foreign system. The seller under a repurchase agreement will be
required to maintain the value of the underlying securities at not less than
102% of the repurchase price under the agreement. If the seller defaults on its
repurchase obligation, the Fund will suffer a loss to the extent that the
proceeds from a sale of the underlying securities are less than the repurchase
price under the agreement. Bankruptcy or insolvency of such a defaulting seller
may cause the Fund's rights with respect to such securities to be delayed or
limited. Repurchase agreements are considered to be loans under the Investment
Company Act (the "1940 Act").
INVESTMENT COMPANIES. The Fund may invest in shares of other investment
companies in pursuit of its investment objective. This may include investment in
money market mutual funds in connection with the Fund's management of daily cash
positions. In addition to the advisory and operational fees the Fund bears
directly in connection with its own operation, the Fund and its shareholders
will also bear the pro rata portion of each other investment company's advisory
and operational expenses.
B-2
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FOREIGN INVESTMENTS
The Advisor is permitted to invest up to 25% of the Fund's net assets
in foreign companies, although the level of such investment is not expected to
exceed 15% under normal circumstances. The Advisor intends to invest only in
large capitalization, well established foreign issuers the securities of which
are traded in the U.S., and which present their financial data in accordance
with generally accepted accounting principles in the U.S. Thus, the Advisor
expects that there will be little if any risk associated with its foreign
investments.
AMERICAN DEPOSITARY RECEIPTS. The Fund may invest its assets in
securities of foreign issuers in the form of ADRs, which are receipts for the
shares of a foreign-based corporation. The Fund treats ADRs as interests in the
underlying securities for purposes of its investment policies. A purchaser of an
unsponsored ADR may not have unlimited voting rights and may not receive as much
information about the issuer of the underlying securities as with a sponsored
ADR.
RISKS OF INVESTING IN FOREIGN SECURITIES. Investments in foreign
securities involve certain inherent risks, including the following:
POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, diversification and balance of payments
position. The internal politics of certain foreign countries may not be as
stable as those of the United States. Governments in certain foreign countries
also continue to participate to a significant degree, through ownership interest
or regulation, in their respective economies. Action by these governments could
include restrictions on foreign investment, nationalization, expropriation of
goods or imposition of taxes, and could have a significant effect on market
prices of securities and payment of interest. The economies of many foreign
countries are heavily dependent upon international trade and are accordingly
affected by the trade policies and economic conditions of their trading
partners. Enactment by these trading partners of protectionist trade legislation
could have a significant adverse effect upon the securities markets of such
countries.
CURRENCY FLUCTUATIONS. The Fund may invest in securities denominated in
foreign currencies. Accordingly, a change in the value of any such currency
against the U.S. dollar will result in a corresponding change in the U.S. dollar
value of the Fund's assets denominated in that currency. Such changes will also
affect the Fund's income. The value of the Fund's assets may also be affected by
currency restrictions and exchange control regulations enacted from time to
time.
EURO CONVERSION. Several European countries adopted a single uniform
currency known as the "euro," effective January 1, 1999. The euro conversion,
that will take place over a several-year period, could have potential adverse
effects on the Fund's ability to value its portfolio holdings in foreign
securities, and could increase the costs associated with the Fund's operations.
The Fund and the Advisor are working with providers of services to the Fund in
the areas of clearance and settlement of trade in an effect to avoid any
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material impact on the Fund due to the euro conversion; there can be no
assurance, however, that the steps taken will be sufficient to avoid any adverse
impact on the Fund.
LEGAL AND REGULATORY MATTERS. Certain foreign countries may have less
supervision of securities markets, brokers and issuers of securities, and less
financial information available to issuers, than is available in the United
States.
TAXES. The interest and dividends payable on certain of the Fund's
foreign portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to Fund
shareholders.
COSTS. To the extent that the Fund invests in foreign securities, its
expense ratio is likely to be higher than those of investment companies
investing only in domestic securities, since the cost of maintaining the custody
of foreign securities is higher.
EMERGING MARKETS. Some of the securities in which the Fund may invest
may be located in developing or emerging markets, which entail additional risks,
including less social, political and economic stability; smaller securities
markets and lower trading volume, which may result in less liquidity and greater
price volatility; national policies that may restrict the Fund's investment
opportunities, including restrictions on investments in issuers or industries,
or expropriation or confiscation of assets or property; and less developed legal
structures governing private or foreign investment.
BORROWING
The Fund may borrow money from banks in an aggregate amount not to
exceed one-third of the value of the Fund's total assets to meet temporary or
emergency purposes, and may pledge its assets in connection with such
borrowings. The Fund will not purchase any securities while any such
borrowings exceed 5% of the Fund's total assets.
ILLIQUID SECURITIES
The Fund may not invest more than 15% of the value of its net assets in
securities that at the time of purchase have legal or contractual restrictions
on resale or are otherwise illiquid. The Advisor will monitor the amount of
illiquid securities in the Fund's portfolio, under the supervision of the
Trust's Board of Trustees, to ensure compliance with the Fund's investment
restrictions.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 (the "Securities Act"), securities
which are otherwise not readily marketable and repurchase agreements having a
maturity of longer than seven days. Securities which have not been registered
under the Securities Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
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market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Fund might be unable
to dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemption requests
within seven days. The Fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act,
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments. These securities might be adversely affected if qualified
institutional buyers were unwilling to purchase such securities. If such
securities are subject to purchase by institutional buyers in accordance with
Rule 144A promulgated by the SEC under the Securities Act, the Trust's Board of
Trustees may determine that such securities are not illiquid securities
notwithstanding their legal or contractual restrictions on resale. However,
these may become illiquid if institutions become for a time disinterested in
buying these securities. In all other cases, however, securities subject to
restrictions on resale will be deemed illiquid.
SHORT-TERM INVESTMENTS. The Fund may invest in any of the following
securities and instruments:
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS. The
Fund may acquire certificates of deposit, bankers' acceptances and time
deposits. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Fund will be
dollar-denominated obligations of domestic banks, savings and loan associations
or financial institutions which, at the time of purchase, have capital, surplus
and undivided profits in excess of $100 million (including assets of both
domestic and foreign branches), based on latest published reports, or less than
$100 million if the principal amount of such bank obligations are fully insured
by the U.S.
Government.
In addition to purchasing certificates of deposit and bankers'
acceptances, to the extent permitted under its investment objective and policies
stated above and in its prospectus, the Fund may make interest-bearing time or
other interest-bearing deposits in commercial or savings banks. Time deposits
are non-negotiable deposits maintained at a banking institution for a specified
period of time at a specified interest rate.
B-5
<PAGE>
COMMERCIAL PAPER AND SHORT-TERM NOTES. The Fund may invest a portion of
its assets in commercial paper and short-term notes. Commercial paper consists
of unsecured promissory notes issued by corporations. Issues of commercial paper
and short-term notes will normally have maturities of less than nine months and
fixed rates of return, although such instruments may have maturities of up to
one year.
Commercial paper and short-term notes will consist of issues rated at
the time of purchase "A-2" or higher by Standard & Poor's Ratings Group,
"Prime-1" or "Prime-2" by Moody's Investors Service, Inc., or similarly rated by
another nationally recognized statistical rating organization or, if unrated,
will be determined by the Advisor to be of comparable quality. These rating
symbols are described in the Appendix.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by
the Fund and (unless otherwise noted) are fundamental and cannot be changed
without the affirmative vote of a majority of the Fund's outstanding voting
securities as defined in the 1940 Act. The Fund may not:
1. Make loans to others, except (a) through the occasional purchase of
debt securities in accordance with its investment objectives and policies, (b)
to the extent the entry into a repurchase
agreement is deemed to be a loan.
2. (a) Borrow money, except as stated in the Prospectus and this
Statement of Additional Information. Any such borrowing will be made only if
immediately thereafter there is an asset
coverage of at least 300% of all borrowings.
(b) Mortgage, pledge or hypothecate any of its assets except in
connection with any such borrowings.
3. Purchase securities on margin, participate on a joint or joint and
several basis in any securities trading account, or underwrite securities. (Does
not preclude the Fund from obtaining such short-term credit as may be necessary
for the clearance of purchases and sales of its portfolio securities.)
4. Purchase or sell real estate, commodities or commodity contracts
(the Board of Trustees may in the future authorize the Fund to engage in certain
activities regarding futures contracts for bona fide hedging purposes; any such
authorization will be accompanied by appropriate notification to shareholders).
5. Invest 25% or more of the market value of its assets in the
securities of companies engaged in any one industry. (Does not apply to
investment in the securities of the U.S. Government, its agencies or
instrumentalities.)
B-6
<PAGE>
6. Issue senior securities, as defined in the 1940 Act, except that
this restriction shall not be deemed to prohibit the Fund from (a) making any
permitted borrowings, mortgages or pledges, or (b) entering into repurchase
transactions.
7. Invest in any issuer for purposes of exercising control or
management.
The Fund observes the following policies, which are not deemed
fundamental and which may be changed without shareholder vote. The Fund may not:
8. Invest in securities of other investment companies which would
result in the Fund owning more than 3% of the outstanding voting securities of
any one such investment company, the Fund owning securities of another
investment company having an aggregate value in excess of 5% of the value of the
Fund's total assets, or the Fund owning securities of investment companies in
the aggregate which would exceed 10% of the value of the Fund's total assets.
9. Invest, in the aggregate, more than 15% of its total assets in
securities with legal or contractual restrictions on resale, securities which
are not readily marketable and repurchase agreements with more than seven days
to maturity.
If a percentage restriction is adhered to at the time of investment, a
subsequent increase or decrease in a percentage resulting from a change in the
values of assets will not constitute a violation
of that restriction, except as otherwise noted.
DISTRIBUTIONS AND TAX INFORMATION
DISTRIBUTIONS
Dividends from net investment income and distributions from net profits
from the sale of securities are generally made annually. Also, the Fund expects
to distribute any undistributed net investment income on or about December 31 of
each year. Any net capital gains realized through the period ended October 31 of
each year will also be distributed by December 31 of each year.
TAX INFORMATION
Shares of the Fund are offered only to insurance company separate
accounts that fund the Contracts. Under the Internal Revenue Code of 1986, as
amended (the "Code"), no tax is imposed on an insurance company with respect to
income of a qualifying separate account properly allocable to the value of
eligible variable annuity or variable insurance contracts. See the applicable
Contract prospectus for a discussion of the federal income tax status of (1) the
separate accounts that purchase and hold shares of the Funds and (2) the holders
of Contracts funded through those accounts.
B-7
<PAGE>
Net investment income consists of interest and dividend income, less
expenses. Net realized capital gains for a fiscal period are computed by taking
into account any capital loss carryforward of the Fund.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months will be deemed to have been paid by the Fund and received
by shareholders on December 31 of that year if the
distributions are paid by the Fund during the succeeding January.
In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Code, the Fund must distribute to shareholders for
each taxable year at least 90% of its investment company taxable income
(consisting generally of net investment income, and net short-term capital gain)
and must meet several other requirements. The Fund must (1) derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures or forward currency contracts) derived from the business of investing in
securities or those currencies; (2) at the close of each quarter of the Fund's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, U.S. government securities, securities of other RICs and
other securities, with these other securities limited, in respect of any one
issuer, to an amount that does not exceed 5% of the value of the Fund's total
assets and that does not represent more than 10% of the issuer's outstanding
voting securities; and; (3) at the close of each quarter of the Fund's taxable
year, not more than 25% of the value of its total assets may be invested in
securities (other than U.S. government securities or the securities of other
RICs) of any one issuer.
The Fund intends to comply with the diversification requirements
imposed by section 817(h) of the Code and the requirements thereunder. These
requirements, in addition to the diversification requirements that apply to the
Fund Subchapter M of the Code, place certain limitations on the assets of the
Fund that may be invested in securities of a single issuer. Specifically, the
regulations provide that as of the end of each calendar quarter or within 30
days thereafter, no more than 55% of the total assets of the Fund may be
represented by any one investment, no more than 70% by any two investments, no
more than 80% by any three investments and no more than 90% by any four
investments. For this purpose, all securities of the same issuer are considered
a single investment, and each U.S. Government agency and instrumentality is
considered a separate issuer. Section 817(h) provides a "safe harbor," that a
separate account will be treated as being adequately diversified if the
diversification requirements under Subchapter M are satisfied and no more than
55% of the value of the account's total assets are cash and cash items,
government securities and securities of other regulated investment companies.
Failure of the Fund to satisfy the Section 817(h) requirements would result in
taxation of the insurance company issuing the Contracts and treatment of the
Contract holders other than as described in the applicable Contract prospectus.
Even if the diversification requirements of section 817(h) are met, a Contract
owner might be subject to current federal income taxation if the owner has
excessive control over the investments underlying the Contract. The Treasury
Department has indicated that guidelines might be forthcoming that address this
issue. At this time, it is impossible to predict what the guidelines will
include and the extent, if any, to which they may be retroactive.
B-8
<PAGE>
The foregoing is only a general summary of some of the important
federal income tax considerations generally affecting the Fund and its
shareholders. No attempt is made to present a complete explanation of the
federal tax treatment of the Fund's activities or of the Contracts, and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential investors are urged to consult their own tax advisers for
more detailed information and for information regarding any state, local or
foreign taxes applicable to the Fund and to dividends and other distributions
therefrom.
This discussion and the related discussion in the prospectus have been
prepared by Fund management, and counsel to the Fund has expressed no opinion in
respect thereof.
TRUSTEES AND EXECUTIVE OFFICERS
The Trustees of the Trust, who were elected for an indefinite term by
the initial shareholders of the Trust, are responsible for the overall
management of the Trust, including general supervision and review of the
investment activities of the Fund. The Trustees, in turn, elect the officers of
the Trust, who are responsible for administering the day-to-day operations of
the Trust and its separate series. The current Trustees and officers and their
affiliations and principal occupations for the past five years are set forth
below. Unless noted otherwise, each person has held the position listed for a
minimum of five years.
Steven J. Paggioli,* 04/03/50 President and Trustee
915 Broadway, New York, New York 10010. Executive Vice President, The Wadsworth
Group (consultants); Executive Vice President of Investment Company
Administration L.L.C. ("ICA") (mutual fund administrator and the Trust's
administrator),and Vice President of First Fund Distributors, Inc. ("FFD") (a
registered broker-dealer and the Fund's Distributor).
Dorothy A. Berry, 08/12/43 Chairman and Trustee
14 Five Roses East, Ancram, NY 12502. President, Talon Industries (venture
capital and business consulting); formerly Chief Operating Officer, Integrated
Asset Management (investment adviser and manager) and formerly President, Value
Line, Inc., (investment advisory and financial publishing firm).
Wallace L. Cook 09/10/39 Trustee
One Peabody Lane, Darien, CT 06820. Retired. Formerly Senior Vice President,
Rockefeller Trust Co. Financial Counselor, Rockefeller & Co.
B-9
<PAGE>
Carl A. Froebel 05/23 /38 Trustee
2 Crown Cove Lane, Savannah, GA 31411. Private Investor. Formerly Managing
Director, Premier Solutions, Ltd. (computer software); formerly President and
Founder, National Investor Data Services, Inc. (investment related computer
software).
Rowley W.P. Redington 06/01/44 Trustee
1191 Valley Road, Clifton, New Jersey 07103. President; Intertech (consumer
electronics and computer service and marketing); formerly Vice President, PRS of
New Jersey, Inc. (management consulting), and Chief Executive Officer, Rowley
Associates (consultants).
Robert M. Slotky* 6/17/47 Treasurer
2020 E. Financial Way, Suite 100, Glendora, California 91741. Senior Vice
President, ICA since May 1997; former instructor of accounting at California
State University-Northridge (1997); Chief Financial Officer, Wanger Asset
Management L.P. and Treasurer of Acorn Investment Trust (1992- 1996).
Robin Berger* 11/17/56 Secretary
915 Broadway, New York, New York 10010. Vice President, The Wadsworth Group.
Robert H. Wadsworth* 01/25/40 Vice President
4455 E. Camelback Road, Suite 261E, Phoenix, Arizona 85018. President of The
Wadsworth Group; President of ICA and FFD.
* Indicates an "interested person" of the Trust as defined in the 1940 Act.
Set forth below is the rate of compensation received by the following
Trustees from the Fund and all other portfolios of the Trust. This total amount
is allocated among the portfolios. Disinterested trustees receive an annual
retainer of $1000. Trustees also receive a fee of $1000 for any special meeting
attended. Disinterested trustees are also reimbursed for expenses in connection
with each Board meeting attended. No other compensation or retirement benefits
are received by any Trustee or officer from the Fund or any other portfolios of
the Trust.
Name of Trustee Estimated Total Annual Compensation*
--------------- ------------------------------------
Dorothy A. Berry $1,000
Wallace L. Cook $1,000
Carl A. Froebel $1,000
Rowley W.P. Redington $1,000
* The Trust is commencing operations as of the date of this SAI. Therefore
compensation amounts shown in the table are estimates for the Trust's initial
year of operations.
B-10
<PAGE>
INVESTMENT ADVISOR
The Board of Trustees of the Trust establishes the Fund's policies and
supervises and reviews the management of the Fund. The Advisor is located at 630
Fifth Avenue, New York, NY 10111. The Advisor was founded in 1968 and is
controlled by Mr. George M. Yeager, President. The Advisor provides investment
advisory services to individual and institutional investors with assets of over
$500 million. Mr. Yeager is responsible for management of the Fund's portfolio.
Under the Investment Advisory Agreement with the Fund, the Advisor provides the
Fund with advice on buying and selling securities, manages the investments of
the Fund, furnishes the Fund with office space and certain administrative
services, and provides most of the personnel needed by the Fund. As
compensation, the Fund pays the Advisor a monthly investment advisory fee
(accrued daily) based upon the average daily net assets of the Fund at the rate
of 1.00% annually.
The Investment Advisory Agreement continues in effect for successive
annual periods so long as such continuation is approved at least annually by the
vote of (1) the Board of Trustees of the Trust (or a majority of the outstanding
shares of the Fund to which the agreement applies), and (2) a majority of the
Trustees who are not interested persons of any party to the Agreement, in each
case cast in person at a meeting called for the purpose of voting on such
approval. Any such agreement may be terminated at any time, without penalty, by
either party to the agreement upon sixty days' written notice and is
automatically terminated in the event of its "assignment," as defined in the
1940 Act.
THE FUND'S ADMINISTRATOR
The Fund has an Administration Agreement with Investment Company
Administration, LLC (the "Administrator"), a corporation partly owned and
controlled by Messrs. Paggioli and Wadsworth with offices at 4455 E. Camelback
Rd., Ste. 261-E, Phoenix, AZ 85018. The Administration Agreement provides that
the Administrator will prepare and coordinate reports and other materials
supplied to the Trustees; prepare and/or supervise the preparation and filing of
all securities filings, periodic financial reports, prospectuses, statements of
additional information, marketing materials, tax returns, shareholder reports
and other regulatory reports or filings required of the Fund; prepare all
required filings necessary to maintain the Fund's qualification and/or
registration to sell shares in all states where the Fund currently does, or
intends to do business; coordinate the preparation, printing and mailing of all
materials (e.g., Annual Reports) required to be sent to shareholders; coordinate
the preparation and payment of Fund related expenses; monitor and oversee the
activities of the Fund's servicing agents (i.e., transfer agent, custodian, fund
accountants, etc.); review and adjust as necessary the Fund's daily expense
accruals; and perform such additional services as may be agreed upon by the Fund
and the Administrator. For its services, the Administrator receives a monthly
fee at the following annual rate:
Average net assets Fee or fee rate
------------------ ---------------
Under $15 million $30,000
$15 to $50 million 0.20% of average net assets
$50 to $100 million 0.15% of average net assets
$100 million to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
B-11
<PAGE>
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Advisor determines
which securities are to be purchased and sold by the Fund and which
broker-dealers are eligible to execute the Fund's portfolio transactions.
Purchases and sales of securities in the over-the-counter market will generally
be executed directly with a "market-maker" unless, in the opinion of the
Advisor, a better price and execution can otherwise be obtained by using a
broker for the transaction.
Purchases of portfolio securities for the Fund also may be made
directly from issuers or from underwriters. Where possible, purchase and sale
transactions will be effected through dealers (including banks) which specialize
in the types of securities which the Fund will be holding, unless better
executions are available elsewhere. Dealers and underwriters usually act as
principal for their own accounts. Purchases from underwriters will include a
concession paid by the issuer to the underwriter and purchases from dealers will
include the spread between the bid and the asked price. If the execution and
price offered by more than one dealer or underwriter are comparable, the order
may be allocated to a dealer or underwriter that has provided research or other
services as discussed below.
In placing portfolio transactions, the Advisor will use its reasonable
efforts to choose broker-dealers capable of providing the services necessary to
obtain the most favorable price and execution available. The full range and
quality of services available will be considered in making these determinations,
such as the size of the order, the difficulty of execution, the operational
facilities of the firm involved, the firm's risk in positioning a block of
securities, and other factors. In those instances where it is reasonably
determined that more than one broker-dealer can offer the services needed to
obtain the most favorable price and execution available, consideration may be
given to those broker-dealers which furnish or supply research and statistical
information to the Advisor that it may lawfully and appropriately use in its
investment advisory capacities, as well as provide other services in addition to
execution services. The Advisor considers such information, which is in addition
to and not in lieu of the services required to be performed by it under its
Agreement with the Fund, to be useful in varying degrees, but of indeterminable
value. Portfolio transactions may be placed with broker-dealers who sell shares
of the Fund subject to rules adopted by the National Association of Securities
Dealers, Inc.
While it is the Fund's general policy to seek first to obtain the most
favorable price and execution available in selecting a broker-dealer to execute
portfolio transactions for the Fund, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services to the Fund or to the
Advisor, even if the specific services are not directly useful to the Fund and
may be useful to the Advisor in advising other clients. In negotiating
commissions with a broker or evaluating the spread to be paid to a dealer, the
Fund may therefore pay a higher commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services, provided
that the amount of such commission or spread has been determined in good faith
by the Advisor to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. The standard of reasonableness
is to be measured in light of the Advisor's overall responsibilities to the
Fund.
B-12
<PAGE>
Investment decisions for the Fund are made independently from those of
other client accounts or mutual funds ("Funds") managed or advised by the
Advisor. Nevertheless, it is possible that at times identical securities will be
acceptable for both the Fund and one or more of such client accounts or Funds.
In such event, the position of the Fund and such client account(s) or Funds in
the same issuer may vary and the length of time that each may choose to hold its
investment in the same issuer may likewise vary. However, to the extent any of
these client accounts or Funds seeks to acquire the same security as the Fund at
the same time, the Fund may not be able to acquire as large a portion of such
security as it desires, or it may have to pay a higher price or obtain a lower
yield for such security. Similarly, the Fund may not be able to obtain as high a
price for, or as large an execution of, an order to sell any particular security
at the same time. If one or more of such client accounts or Funds simultaneously
purchases or sells the same security that the Fund is purchasing or selling,
each day's transactions in such security will be allocated between the Fund and
all such client accounts or Funds in a manner deemed equitable by the Advisor,
taking into account the respective sizes of the accounts and the amount being
purchased or sold. It is recognized that in some cases this system could have a
detrimental effect on the price or value of the security insofar as the Fund is
concerned. In other cases, however, it is believed that the ability of the Fund
to participate in volume transactions may produce better executions for the
Fund.
The Fund does not effect securities transactions through brokers in
accordance with any formula, nor does it effect securities transactions through
brokers solely for selling shares of the Fund, although the Fund may consider
the sale of shares as a factor in allocating brokerage. However, as stated
above, broker-dealers who execute brokerage transactions may effect purchase of
shares of the Fund for their customers. The Fund does not use the Distributor to
execute its portfolio transactions.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Trust reserves the right in its sole discretion (I) to suspend the
continued offering of the Fund's shares, (ii) to reject purchase orders in whole
or in part when in the judgment of the Advisor such rejection is in the best
interest of the Fund, and (iii) to reduce or waive the minimum for initial and
subsequent investments for certain fiduciary accounts or under circumstances
where certain economies can be achieved in sales of the Fund's shares.
B-13
<PAGE>
Payments to shareholders for shares of the Fund redeemed directly from
the Fund will be made as promptly as possible but no later than seven days after
receipt by the Fund's Transfer Agent of the written request in proper form, with
the appropriate documentation as stated in the Prospectus, except that the Fund
may suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the New York Stock Exchange ("NYSE") is restricted as
determined by the SEC or the NYSE is closed for other than weekends and
holidays; (b) an emergency exists as determined by the SEC making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable; or (c) for such other period as the SEC may permit for the
protection of the Fund's shareholders. At various times, the Fund may be
requested to redeem shares for which it has not yet received confirmation of
good payment; in this circumstance, the Fund may delay the redemption until
payment for the purchase of such shares has been collected and confirmed to the
Fund.
The Fund intends to pay cash (U.S. dollars) for all shares redeemed,
but, under abnormal conditions which make payment in cash unwise, the Fund may
make payment partly in securities with a current market value equal to the
redemption price. Although the Fund does not anticipate that it will make any
part of a redemption payment in securities, if such payment were made, an
investor may incur brokerage costs in converting such securities to cash. The
Fund has elected to be governed by the provisions of Rule 18f-1 under the 1940
Act, which contains a formula for determining the minimum redemption amounts
that must be paid in cash.
The value of shares on redemption or repurchase may be more or less
than the investor's cost, depending upon the market value of the Fund's
portfolio securities at the time of redemption or repurchase.
DETERMINATION OF SHARE PRICE
As noted in the Prospectus, the net asset value of shares of the Fund
will be determined once daily as of the close of public trading on the NYSE
(normally 4:00 p.m. Eastern time) on each day that the NYSE is open for trading.
It is expected that the NYSE will be closed on Saturdays and Sundays and on New
Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas. The Fund does
not expect to determine the net asset value of shares on any day when the NYSE
is not open for trading even if there is sufficient trading in its portfolio
securities on such days to materially affect the net asset value per share.
However, the net asset value of Fund shares may be determined on days the NYSE
is closed or at times other than 4:00 p.m. if the Board of Trustees decides it
is necessary.
In valuing the Fund's assets for calculating net asset value, readily
marketable portfolio securities listed on a national securities exchange or on
NASDAQ are valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such exchange or on
NASDAQ on such day, the security is valued at the closing bid price on such day.
Readily marketable securities traded only in the over-the-counter market and not
on NASDAQ are valued at the last reported bid price. If no bid is quoted on such
day, the security is valued by such method as the Board of Trustees of the Trust
shall determine in good faith to reflect the security's fair value. All other
assets of each Fund are valued in such manner as the Board of Trustees in good
faith deems appropriate to reflect their fair value.
B-14
<PAGE>
The net asset value per share of the Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
which includes accrued but undistributed income; the resulting net assets are
divided by the number of shares of the Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
PERFORMANCE INFORMATION
From time to time the Fund may advertise its total return. These
figures are based on historical earnings and are not intended to indicate future
performance. Total return shows how much an investment in the Fund would have
increased (or decreased) over a specified period of time (i.e., one, five or ten
years or since inception of the Fund) assuming that all distributions and
dividends by the Fund to investors were invested on the reinvestment dates
during the period. Total return takes into account any applicable sales charges,
but does not take into account any federal or state income taxes which may be
payable. The Fund may include comparative information in advertising or
marketing its shares. Such performance information may include data from Lipper
Analytical Services, Inc., other industry publications, business periodicals,
rating services and market indices.
Performance figures for the Fund will not reflect charges made pursuant
to the terms of the Contracts funded by the separate accounts that invest in the
Fund. Fund performance information will be presented in conjunction with
performance information about these Contracts. Purchasers of Contracts,
therefore, should recognize that the total return on the separate account assets
relating to such Contracts will would be lower than the total return of the Fund
for the same period.
GENERAL INFORMATION
Investors in the Fund will be informed of the Fund's progress through
periodic reports. Financial statements certified by independent public
accountants will be submitted to shareholders
at least annually.
Firstar Institutional Custody Services, 425 Walnut Street, Cincinnati,
OH 45202 acts as Custodian of the securities and other assets of the Fund. The
Custodian does not participate in decisions relating to the purchase and sale of
securities by the Fund. ICA Fund Services Corp., 4455 East Camelback Rd., Ste.
261-E, Phoenix, AZ 85018 is the Fund's Transfer and Dividend Disbursing Agent.
Ernst & Young LLP, 725 South Figueroa Street, Los Angeles, CA 90017,
are the independent auditors for the Fund.
Paul, Hastings, Janofsky & Walker LLP , 345 California St., 29th floor,
San Francisco, California 94104, are legal counsel to the Fund.
B-15
<PAGE>
The Trust is registered with the SEC as a management investment
company. Such a registration does not involve supervision of the management or
policies of the Fund. The Prospectus of the Fund and this SAI omit certain of
the information contained in the Registration Statement filed with the SEC.
Copies of such information may be obtained from the SEC upon payment of the
prescribed fee.
The Trust was organized as a Delaware business trust on October 6,
1997. The Agreement and Declaration of Trust permits the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest,
without par value, which may be issued in any number of series. The Board of
Trustees may from time to time issue other series, the assets and liabilities of
which will be separate and distinct from any other series. The fiscal year of
the Fund ends on December 31
Shares issued by the Fund have no preemptive, conversion, or
subscription rights. Shareholders have equal and exclusive rights as to
dividends and distributions as declared by the Fund and to the net assets of the
Fund upon liquidation or dissolution. The Fund, as a separate series of the
Trust, votes separately on matters affecting only the Fund (e.g., approval of
the Advisory Agreement); all series of the Trust vote as a single class on
matters affecting all series jointly or the Trust as a whole (e.g., election or
removal of Trustees). Voting rights are not cumulative, so that the holders of
more than 50% of the shares voting in any election of Trustees can, if they so
choose, elect all of the Trustees. While the Trust is not required and does not
intend to hold annual meetings of shareholders, such meetings may be called by
the Trustees in their discretion, or upon demand by the holders of 10% or more
of the outstanding shares of the Trust, for the purpose of electing or removing
Trustees.
Shareholders of the Fund will vote share in the separate accounts as
required by law, as amended or changed from time to time. Under current law, an
insurance company that sponsors a separate account investing the Fund is
required to request voting instructions from Contract owners and must vote
shares held by the separate account in proportion to the voting instructions
received. For further information regarding voting rights of Contract owners,
see the Contract prospectus.
B-16
<PAGE>
U. S. GLOBAL LEADERS GROWTH VARIABLE INSURANCE FUND
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999
ASSETS
Cash $100,000
Total assets 100,000
LIABILITIES --
--------
NET ASSETS $100,000
========
Net asset value, offering and redemption price per share
($100,000/10,000 shares pending issuance; unlimited
number of shares authorized without par value) $ 10.00
========
See accompanying Notes To Financial Statement.
B-17
<PAGE>
U. S. GLOBAL LEADERS GROWTH VARIABLE INSURANCE FUND
NOTES TO FINANCIAL STATEMENT
November 30, 1999
Note 1. Organization:
U.S. Global Leaders Growth Variable Insurance Fund (the "Fund") is
currently the only series of U.S. Global Leaders Variable Insurance Trust (the
"Trust"). The Trust was organized in Delaware on October 6, 1997 and is
registered with the Securities and Exchange Commission as a non-diversified
series of U.S. Global Leaders Growth Variable Insurance Trust (the "Trust"), an
open-end management investment company. The investment objective of the Fund is
to seek growth of capital.
Note 2. Agreements:
The Fund intends to enter into an investment advisory agreement with
Yeager, Wood, & Marshall, Inc. (the "Investment Advisor") pursuant to which the
Investment Advisor will be responsible for providing investment advisory
services to the Fund (the "Advisory Agreement"). For services under the
Investment Advisory Agreements, the Fund will pay the Investment Advisor at an
annual rate of 1.00% of the average daily net asset value of the Fund.
The Fund intends to enter into an administrative agreement with
Investment Company Administration Corporation (the "Administrator") pursuant to
which the Administrator will provide the Fund with certain administrative
services. For its services, the Administrator will receive a monthly fee at the
following annual rate:
Under $15 million..................$30,000
$15 to $50 million.................0.20% of average daily net assets
$50 to $100 million................0.15% of average daily net assets
$100 to $150 million..............0.10% of average daily net assets
Over $150 million..................0.05% of average daily net assets
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator.
The Fund intends to enter into a custody agreement with Firstar Bank
(the "Custodian") pursuant to which the Custodian will provide the Fund with
custody services for the Fund's assets. The custody agreement provides for
custodial fees computed and paid monthly at an annual rate based on the amount
of assets under custody, plus transactional fees.
The Fund intends to enter into an agreement with American Data
Services, Inc. (the Fund Accountant") pursuant to which the Fund Accountant will
provide the Fund with accounting services. The agreement provides for accounting
services computed and paid monthly at an annual rate based on the average net
assets of the Fund, plus out-of-pocket expenses.
B-18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
U.S. Global Leaders Growth Variable Insurance Fund
We have audited the accompanying statement of assets and liabilities of
U.S. Global Leaders Growth Variable Insurance Fund (the "Fund") as of November
30, 1999. This financial statement is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to
above presents fairly, in all material respects, the financial position of the
Fund as of November 30, 1999, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Los Angeles, California
December 8, 1999
B-19
<PAGE>
APPENDIX
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
Prime-1--Issuers (or related supporting institutions) rated "Prime-1"
have a superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2"
have a strong ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.
STANDARD & POOR'S RATINGS GROUP
A-1--This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with
a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
B-20
<PAGE>
U.S. GLOBAL LEADERS VARIABLE INSURANCE TRUST
FORM N-1A
PART C
ITEM 23 EXHIBITS.
(1) Agreement and Declaration of Trust (1)
(2) By-Laws (1)
(3) Specimen Share Certificate (2)
(4) Form of Investment Advisory Agreement (1)
(5) Not applicable
(6) Not applicable
(7) (1) Form of Custodian Agreement(2)
(2) Form of Transfer Agent Agreement (2)
(3) Form of Fund Accounting Service Agreement (2)
(4) Form of Administration Agreement (1)
(9) Consent and Opinion of Counsel as to legality of shares (2)
(10) Consent of Accountants
(11) Not applicable
(12) Letter of Understanding relating to initial capital (2)
(13) Not applicable
(14) Not Applicable
(15) Not applicable
- ----------
(1) Filed with Registration Statement on Form N-1A on November 28, 1997.
(2) Filed with Pre-Effective Amendment No. 2 to Registrant's Registration
Statement (File No. 333-41237) on May 20, 1998.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
As of the date of this Amendment to the Registration Statement, there
are no persons controlled or under common control with the Registrant.
ITEM 25. INDEMNIFICATION
Article VII, Section 2 of the Trust's Declaration of Trust provides as follows:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Securities Act") may be permitted to directors, 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 Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than payment by
the Registrant of expenses incurred or paid by a director, officer or
<PAGE>
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
With respect to the Investment Adviser, the response to this item is
incorporated by reference to the Adviser's Form ADV as amended, File No.
801-4995.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Not applicable
(b) Not applicable
(c) Not applicable
ITEM 29. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession the Registrant's
custodian and transfer agent, except those records relating to portfolio
transactions and the basic organizational and Trust documents of the Registrant
(see Subsections (2) (iii). (4), (5), (6), (7), (9), (10) and (11) of Rule
31a-1(b)), which, with respect to portfolio transactions are kept by each Fund's
Advisor at its address set forth in the prospectus and statement of additional
information and with respect to trust documents by its administrator at 2020 E.
Financial Way, Ste. 100, Glendora, CA 91741.
ITEM 29. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in
Parts A and B.
ITEM 30. UNDERTAKINGS
The registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Fund's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant represents that this amendment
meets the requirements for effectiveness pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of New York, and state of New York, on the 10th day
of December, 1999.
U.S. GLOBAL LEADERS VARIABLE INSURANCE TRUST
By: Steven J. Paggioli
------------------------------------
/s/ Steven J. Paggioli
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 date indicated.
/s/ Steven J. Paggioli Trustee December 10, 1999
- -------------------------------
Steven J. Paggioli
/s/ Robert M. Slotky Principal December 10, 1999
- ------------------------------- Financial Officer
Robert M. Slotky
/s/ Dorothy A. Berry Trustee December 10, 1999
- -------------------------------
Dorothy A. Berry
/s/ Wallace L. Cook Trustee December 10, 1999
- -------------------------------
Wallace L. Cook
/s/ Carl A. Froebel Trustee December 10, 1999
- -------------------------------
Carl A. Froebel
/s/ Rowley W. P. Redington Trustee December 10, 1999
- -------------------------------
Rowley W. P. Redington
<PAGE>
EXHIBITS
Number Description
------ -----------
99B.10 Consent of Accountants
CONSENT OF ERNST & YOUNG LLP. INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "General Information"
and to the use of our report dated November 8, 1999 in Post-Effective Amendment
No. 2 under the Securities Act of 1933 and Amendment No. 4 under the Investment
Company Act of 1940 to the Registration Statement (Form N-1A, No. 33-41237) and
related Prospectus and Statement of Additional Information of U.S. Global
Leaders Growth Variable Insurance Fund.
/s/ Ernst & Young LLP
Los Angeles, California
December 8, 1999
