<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON JULY 21, 1999
FILE NOS.
333-
811-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO.
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
AMENDMENT NO.
-------------------------------
USALLIANZ FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
55 GREENS FARMS ROAD
WESTPORT, CT 06881
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:(888) 247-9744
-----------------------------
GARY TENKMAN
BISYS FUND SERVICES
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES OF COMMUNICATIONS TO:
MATTHEW G. MALONEY, ESQ.
DICKSTEIN SHAPIRO MORIN & OSHINSKY LLP
2101 L STREET, N.W
WASHINGTON, D.C. 20037
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) 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.
The Registrant hereby amends this Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with the provisions of Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may determine.
<PAGE> 2
Cover Page
USALLIANZ FUNDS
- --------------------------------------------------------------------------
PROSPECTUS
SEPTEMBER , 1999
GROWTH FUND
GLOBAL OPPORTUNITIES FUND
INTERMEDIATE FIXED INCOME FUND
MONEY MARKET FUND
DIVERSIFIED ASSETS FUND
CLASS A SHARES
CLASS B SHARES
CLASS Y SHARES
QUESTIONS?
CALL 1-800-000-0000
OR YOUR INVESTMENT REPRESENTATIVE.
THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED THE SHARES DESCRIBED IN
THIS PROSPECTUS OR DETERMINED WHETHER
THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
- -----------------------------------------------------------------------------------------------
CAREFULLY REVIEW THIS IMPORTANT SECTION, 3 SUMMARY OF PRINCIPAL RISKS
WHICH SUMMARIZES EACH FUND'S
INVESTMENTS, RISKS, PAST PERFORMANCE, 4 - 5 GROWTH FUND
AND FEES.
6 GLOBAL OPPORTUNITIES FUND
7 - 8 INTERMEDIATE FIXED INCOME FUND
9 -10 MONEY MARKET FUND
11 - 12 DIVERSIFIED ASSETS FUND
13 - 14 FUND EXPENSES
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -----------------------------------------------------------------------------------------------
REVIEW THIS SECTION FOR SPECIFIC 15 INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INFORMATION ON EACH FUND'S INVESTMENT ,
STRATEGIES AND RISKS. 24 OTHER CONSIDERATIONS
24 YEAR 2000
FUND MANAGEMENT
- -----------------------------------------------------------------------------------------------
REVIEW THIS SECTION FOR DETAILS ON THE 25 THE INVESTMENT ADVISER
PEOPLE AND ORGANIZATIONS WHO OVERSEE THE
FUNDS. 25 PORTFOLIO MANAGERS
26 THE ADMINISTRATOR AND DISTRIBUTOR
SHAREHOLDER INFORMATION
- -----------------------------------------------------------------------------------------------
REVIEW THIS 27 PRICING OF FUND SHARES
SECTION FOR DETAILS ON HOW SHARES ARE
VALUED, HOW TO PURCHASE, SELL AND 28 PURCHASING AND ADDING TO YOUR SHARES
EXCHANGE SHARES, RELATED CHARGES AND
PAYMENTS OF DIVIDENDS AND DISTRIBUTIONS. 32 SELLING YOUR SHARES
35 DISTRIBUTION ARRANGEMENTS/SALES CHARGES
41 EXCHANGING YOUR SHARES
44 DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------------------------
BACK COVER
- -----------------------------------------------------------------------------------------------
43 WHERE TO LEARN MORE ABOUT THE USALLIANZ FUNDS
</TABLE>
2
<PAGE> 4
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
The following is a summary of certain key information about the USAllianz Funds.
The "Risk/Return Summary and Fund Expenses" describe each Fund's objectives,
principal investment strategies, principal investment risks and certain
performance information under "Risk/Return Summary" and the Funds' expenses
under "Fund Expenses." Additional information about the Funds can be found by
referring to pages 15-24 further back in the Prospectus. Please be sure to read
the more complete descriptions of the Funds' risks following this summary BEFORE
you invest. The Funds are managed by Allianz of America, Inc. (the "Adviser").
SUMMARY OF PRINCIPAL INVESTMENT RISKS
This summary describes certain kinds of risks that apply to one or more of the
Funds. These risks are:
- - MARKET RISK. This is the risk that the value of a Fund's investments will
fluctuate as the stock or bond markets fluctuate and that prices overall
will decline over short or long term periods.
- - INTEREST RATE RISK. This is the risk that changes in interest rates will
affect the value of a Fund's investments in income-producing or debt
securities. Increases in interest rates may cause the value of a Fund's
investments to decline.
- - PREPAYMENT RISK. A Fund's investments in mortgage-related securities are
subject to the risk that the principal amount of the underlying mortgage
may be repaid prior to the security's maturity date. Prepayment exposes the
Fund to the risk of lower return upon subsequent reinvestment of the
principal.
- - CREDIT RISK. This is the risk that the issuer of a security will be unable
or unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations.
- - FOREIGN RISK. This is the risk of investments in issuers located in foreign
countries, which may have greater price volatility and less liquidity.
Investments in foreign securities also are subject to political,
regulatory, and diplomatic risks. Changes in currency rates are an
additional risk of investments in foreign securities.
- - SELECTION RISK. Selection risk is the chance that poor security selection
will cause the Fund to underperform other funds with similar investment
objectives.
3
<PAGE> 5
RISK/RETURN SUMMARY OF THE GROWTH FUND
INVESTMENT OBJECTIVE Long-term growth of capital.
PRINCIPAL INVESTMENT The Fund normally invests at least 80%
STRATEGIES of its total assets in equity
securities. The Fund may invest in both
U.S. and foreign issuers whose
securities are traded on a U.S.
securities market. Although the Fund
invests primarily in equity securities
of larger capitalization companies, the
Fund is not limited to such investments.
The Adviser uses a fundamental, "bottom
-up" approach to selecting securities
for investment. Factors considered
include analysis of an issuer's
financial condition, industry position,
management, growth prospects, earnings
estimates and other general economic and
market conditions. The Adviser will
consider selling those securities which
no longer meet the Fund's criteria for
investing.
PRINCIPAL INVESTMENT RISKS The principal risks of investing in the
Fund are:
- Market Risk
- Selection Risk
WHO MAY WANT TO INVEST? Consider investing in the Fund if you
are:
/ / INVESTING FOR LONG-TERM GOALS,
SUCH AS RETIREMENT
/ / SEEKING TO ADD A GROWTH COMPONENT
TO YOUR PORTFOLIO
/ / WILLING TO ACCEPT THE HIGHER RISKS
OF INVESTING IN EQUITY SECURITIES IN
EXCHANGE FOR POTENTIALLY HIGHER
LONG-TERM RETURNS
This Fund will not be appropriate for
someone:
/ / SEEKING SAFETY OF PRINCIPAL
/ / INVESTING FOR THE SHORT-TERM OR
INVESTING EMERGENCY RESERVES
/ / LOOKING PRIMARILY FOR REGULAR
INCOME
4
<PAGE> 6
PERFORMANCE INFORMATION
While the Fund only commenced operations as of the date of this prospectus, it
has adopted the performance of a master trust portfolio ("Commingled Account")
advised by the Adviser and managed the same as the Fund in all material
respects, for periods dating back to June 1, 1989, as adjusted to reflect the
full contractual rate of expenses associated with the Fund and its classes of
shares at its inception.
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing performance of the Commingled Account from year to year and
as compared to a broad-based securities index.* The Standard and Poor's 500
Composite Stock Price Index (the "S&P 500(R)") in the table below is an
unmanaged index of 500 selected common stocks, most of which are listed on the
New York Stock Exchange.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
CLASS Y SHARES** (Both the chart and the table assume reinvestment of dividends
and distributions.)
The returns for Class A and B Shares will be lower than the Class Y Shares'
returns shown in the bar chart because expenses of the classes differ.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 3.12% 46.67% -4.06% 2.39% -2.91% 32.48% 21.35% 32.68% 26.32%
</TABLE>
Best quarter: 4th Quarter 1998 25.77%
Worst quarter: 3rd Quarter 1998 -11.63%
Past performance does not indicate how the Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
<S> <C> <C> <C> <C>
CLASS A SHARES
(with maximum sales charge) 6/1/89 26.01% 20.91% 16.78%
CLASS B SHARES
(with applicable CDSC) 6/1/89 25.09% 20.02% 15.92%
CLASS Y SHARES 6/1/89 26.32% 21.21% 17.07%
S&P 500(R) INDEX 6/1/89 28.75% 24.07% 18.22%
</TABLE>
*The quoted performance of the Fund represents the performance of the Commingled
Account as described above. The Commingled Account was not registered with the
Securities and Exchange Commission under the Investment Company Act of 1940 and
therefore was not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled account had been registered, the
Commingled Account's performance may have been adversely affected.
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Commingled Account adjusted for Class A, B,
and Y Shares' expenses were____%, ____% and ____%, respectively versus ____% for
the S&P 500(R) Index.
5
<PAGE> 7
RISK/RETURN SUMMARY OF THE GLOBAL OPPORTUNITIES FUND
INVESTMENT OBJECTIVE Long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES Under normal
circumstances, the Fund invests at
least 80% of its total assets in equity
securities of U.S. and foreign
companies. The Adviser organizes its
research of equity securities into
seven internally-defined sectors based
on global economic or industry themes.
Based upon such research, the Adviser
selects the best companies in those
sectors for investment.
The Adviser uses a fundamental "bottom
up" approach to selecting securities
for investment. Factors considered may
include analysis of an issuer's
financial condition, industry position,
management, growth prospects, earnings
estimates and other general economic
and market conditions.
The Adviser will consider selling
securities when the securities no
longer meet the Adviser's criteria for
purchase.
PRINCIPAL INVESTMENT RISKS The principal risks that apply to the
Fund are:
- Market Risk
- Foreign Risk
- Concentration Risk. This is the
risk that concentrating investments
in a single country could expose
the Fund to economic and political
risks associated with such country.
- Emerging Market Risk. This is the
risk that investments in emerging
markets may be more volatile and
subject the Fund to greater risk of
loss.
- Selection Risk
- Sector Style Risk. This is the risk
that investments in a particular
sector may experience risks
different from and greater than
risks associated with equity
investments in general.
- Currency Risk. This is the risk
that fluctuations in the exchange
rates between the U.S. dollar and
foreign currencies may negatively
affect the value of the Fund's
investments.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you
are an individual:
/ / INVESTING FOR LONG-TERM GOALS,
SUCH AS RETIREMENT
/ / SEEKING TO ADD A GLOBAL GROWTH
COMPONENT TO YOUR PORTFOLIO
/ / SEEKING CAPITAL APPRECIATION AND
ARE WILLING TO ACCEPT THE HIGHER
VOLATILITY ASSOCIATED WITH
INVESTING IN FOREIGN STOCKS
This Fund will not be appropriate for
someone:
/ / SEEKING SAFETY OF PRINCIPAL
/ / INVESTING FOR THE SHORT-TERM OR
INVESTING EMERGENCY RESERVES
/ / LOOKING PRIMARILY FOR REGULAR
INCOME
PERFORMANCE INFORMATION
This is a new Fund for which performance information is not yet available.
The NAV of the Fund will fluctuate with market conditions.
6
<PAGE> 8
RISK/RETURN SUMMARY OF THE INTERMEDIATE FIXED INCOME FUND
INVESTMENT OBJECTIVE To maximize total return with
secondary emphasis on income.
PRINCIPAL The Fund invests primarily in high
INVESTMENT STRATEGIES quality fixed income securities such as
U.S. Government Securities, corporate
bonds and asset-backed and
mortgage-backed securities.
The Fund's portfolio normally includes:
(1) government and investment grade
corporate bonds, (2) mortgage backed
securities, (3) asset backed
securities, (4) high yield securities
and (5) money market securities. The
Adviser's management team uses a
"bottom up" approach to selecting asset
classes and securities with a goal of
maximizing total return. The team
analyzes the risk profile of the Fund's
benchmark, the Lehman Intermediate
Government/Corporate Bond Index, then
adjusts the portfolio to enhance long
term returns over its benchmark target
while minimizing exposure to interest
rate, credit, volatility, yield curve
and bond specific risks.
Under normal conditions, the Fund
intends to hold securities with
maturities primarily between 1 and 10
years with an average maturity of
between 3 and 8 years, when weighted
according to the Fund's holdings.
The Adviser may sell a security if its
fundamental qualities deteriorate or to
take advantage of more attractive
investment opportunities.
PRINCIPAL INVESTMENT RISKS The principal risks of investing in
the Fund are:
- Income Risk
- Selection Risk
- Interest Rate Risk
- Credit Risk
- Prepayment Risk.
WHO MAY WANT TO INVEST? Consider investing in the Fund if
you are:
/ / SEEKING TO ADD A MONTHLY INCOME
COMPONENT TO YOUR PORTFOLIO
/ / SEEKING HIGHER POTENTIAL RETURNS
THAN PROVIDED BY MONEY MARKET
FUNDS
/ / WILLING TO ACCEPT THE RISKS OF
PRICE AND INCOME FLUCTUATIONS
/ / WANTING TO ADD STABILITY AND
DIVERSIFICATION TO A PORTFOLIO
INVESTED PRIMARILY IN STOCKS
This Fund will not be appropriate for
someone:
/ / INVESTING EMERGENCY RESERVES
/ / SEEKING A STABLE SHARE PRICE
7
<PAGE> 9
PERFORMANCE INFORMATION
While the Fund only commenced operations as of the date of this prospectus, it
has adopted the performance of a master trust portfolio ("Commingled Account")
advised by the Adviser and managed the same as the Fund in all material
respects, for periods dating back to January 1, 1992, as adjusted to reflect the
full contractual rate of expenses associated with the Fund and its classes of
shares at its inception.
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing performance of the Commingled Account from year to year and
as compared to a broad-based securities index.* The Lehman Intermediate
Government/Corporate Index in the table below, is a widely recognized, unmanaged
index comprised of U.S. government and corporate debt securities and is
generally representative of the intermediate bond market as a whole.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
CLASS Y SHARES** (Both the chart and the table assume reinvestment of dividends
and distributions.)
The returns for Class A and B Shares will be lower than the Class Y Shares'
returns shown in the bar chart because expenses of the classes differ.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage 7.27% 6.17% -2.77% 14.79% 3.55% 7.00% 7.17%
</TABLE>
Best quarter: 2nd Quarter 1995 5.19%
Worst quarter: 1st Quarter 1994 -2.14%
Past performance does not indicate how the Fund will perform
in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
<S> <C> <C> <C> <C>
CLASS A SHARES
(with maximum sales charge) 1/1/92 6.91% 5.53% 5.79%
CLASS B SHARES
(with applicable CDSC) 1/1/92 6.11% 4.75% 5.01%
CLASS Y SHARES 1/1/92 7.17% 6.00% 6.06%
LEHMAN INTERMEDIATE
GOVERNMENT/CORPORATE INDEX 1/1/92 8.42% 6.59% 6.99%
</TABLE>
*The quoted performance of the Fund represents the performance of the Commingled
Account as described above. The Commingled Account was not registered with the
Securities and Exchange Commission under the Investment Company Act of 1940 and
therefore was not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled Account had been registered, the
Commingled Account's performance may have been adversely affected.
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Commingled Account adjusted for Class A, B,
and Y Shares' expenses were ____%, ____% and ____%, respectively versus ____%
for the Lehman Intermediate Government Index.
8
<PAGE> 10
RISK/RETURN SUMMARY OF THE MONEY
MARKET FUND
INVESTMENT OBJECTIVE Current income consistent with stability
of principal.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in high
quality, U.S. dollar-denominated
short-term obligations, including
commercial paper, asset-backed
securities, obligations of financial
institutions and other high-quality
money market instruments issued by U.S.
and foreign issuers. These securities
will be rated in the two highest
short-term rating categories of at least
two rating agencies or will be unrated
securities of comparable quality. The
Adviser evaluates investments based on
credit analysis and interest rate
outlook.
PRINCIPAL INVESTMENT RISKS Although investments in mutual funds
involve risk, investing in money market
portfolios like the Fund is generally
less risky than investing in other types
of funds. This is because money market
funds are subject to strict federal
requirements which restrict the Fund's
investments to high-quality securities,
limit the average maturity of the
portfolio to 90 days or less, and limit
the maturity of any security to no more
than 397 days.
Investors in the Fund should also be
aware of the following risks:
- Interest rate risk
- Credit risk
ADDITIONAL RISKS Although the Fund seeks to preserve the
value of your investment at $1.00 per
share, it is possible to lose money by
investing in the Fund.
The Fund is not insured or guaranteed by
the Federal Deposit Insurance
Corporation or any other government
agency.
WHO MAY WANT TO INVEST? Consider investing in the Money Market
Fund if you:
/ / ARE SEEKING PRESERVATION OF CAPITAL
/ / HAVE A LOW RISK TOLERANCE
/ / ARE WILLING TO ACCEPT LOWER
POTENTIAL RETURNS IN EXCHANGE FOR
A HIGH DEGREE OF SAFETY ARE
INVESTING SHORT-TERM RESERVES
The Money Market Fund will not be
appropriate for anyone:
/ / SEEKING HIGH TOTAL RETURNS
/ / PURSUING A LONG-TERM GOAL OR
INVESTING FOR RETIREMENT
9
<PAGE> 11
RISK/RETURN SUMMARY AND FUND EXPENSES
PERFORMANCE INFORMATION
While the Fund only commenced operations as of the date of this prospectus, it
has adopted the performance of a master trust portfolio ("Commingled Account")
advised by the Adviser and managed the same as the Fund in all material
respects, for periods dating back to January 1, 1992, as adjusted to reflect the
full contractual rate of expenses associated with the Fund and its classes of
shares at its inception.
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing performance of the Commingled Account from year to year.*
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
CLASS Y SHARES** (Both the chart and the table assume reinvestment of dividends
and distributions.)
The returns for Class A and B Shares will be lower than the Class Y Shares'
returns shown in the bar chart because expenses of the classes differ.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage 3.61% 2.89% 3.42% 5.52% 4.94% 5.09% 4.88%
</TABLE>
Best quarter: Q__ 199_ 1.40%
Worst quarter: Q__ 199_ 0.61%
Past performance does not indicate how the Fund will perform
in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
<S> <C> <C> <C> <C>
CLASS A SHARES 1/1/92 4.62% 4.51% 4.07%
CLASS B SHARES
(with applicable CDSC) 1/1/92 3.84% 3.73%% 3.30%
CLASS Y SHARES 1/1/92 4.88% 4.77% 4.33%
</TABLE>
For current 7-day yield information, call 1-800-000-0000.
*The quoted performance of the Fund represents the performance of the Commingled
Account as described above. The Commingled Account was not registered with the
Securities and Exchange Commission under the Investment Company Act of 1940 and
therefore was not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled Account had been registered, the
Commingled Account's performance may have been adversely affected.
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Commingled Account adjusted for Class A, B,
and Y Shares' expenses were ____%, ____% and ____%, respectively.
10
<PAGE> 12
RISK/RETURN SUMMARY OF THE DIVERSIFIED ASSETS FUND
INVESTMENT OBJECTIVE Total return consistent with reduction
of long-term volatility.
PRINCIPAL INVESTMENT STRATEGIES The Fund pursues its objective through
asset allocation and security selection
by investing in a diversified portfolio
of bonds, stocks and money market
securities of U.S. and foreign issuers.
The Adviser will seek to allocate on
average about 65% of the Fund's total
assets to bonds, 25% to stocks and 10%
to money market securities. The Adviser
uses a portfolio management team
approach which manages each asset class
in accordance with the investment
criteria for the Growth Fund,
Intermediate Fixed Income Fund, and
Money Market Fund. The Fund seeks to
exceed the total return of a blended
benchmark consisting of 65% of the
Lehman Intermediate Government/Corporate
Index, 25% of the S & P 500(R) Index and
10% of the 90-day Treasury bill. The
Fund typically sells an investment when
the issuer begins to show deteriorating
relative fundamentals or when
alternative investments become more
attractive.
PRINCIPAL INVESTMENT RISKS The principal risks of investing in
the Fund are:
- Market Risk
- Selection Risk
- Credit Risk
- Interest Rate Risk
WHO MAY WANT TO INVEST? Consider investing in the Fund if you
are:
/ / INVESTING FOR LONG-TERM GOALS, SUCH
AS RETIREMENT
/ / SEEKING REGULAR MONTHLY INCOME
/ / PURSUING A BALANCED APPROACH TO
INVESTMENTS IN BOTH GROWTH- AND
INCOME- PRODUCING SECURITIES
This Fund will not be appropriate for
someone:
/ / PURSUING AN AGGRESSIVE HIGH GROWTH
INVESTMENT STRATEGY
/ / SEEKING A STABLE SHARE PRICE
/ / INVESTING EMERGENCY RESERVES
11
<PAGE> 13
RISK/RETURN SUMMARY AND FUND EXPENSES
PERFORMANCE INFORMATION
While the Fund only commenced operations as of the date of this prospectus, it
has adopted the performance of a master trust portfolio ("Commingled Account")
advised by the Adviser and managed the same as the Fund in all material
respects, for periods dating back to January 1, 1992, as adjusted to reflect the
full contractual rate of expenses associated with the Fund and its classes of
shares at its inception.
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing performance of the Commingled Account from year to year and
as compared to a broad-based securities index.* The USAllianz Diversified Index
in the table below is an unmanaged index calculated by aggregating 65% of the
Lehman Intermediate Government/Corporate Index, 25% of the S&P Index and 10% of
the 90-day Treasury bill.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASS Y SHARES**
(Both the chart and the table assume reinvestment of dividends and
distributions.)
The returns for Class A and B Shares will be lower than the Class Y Shares'
returns shown in the bar chart because expenses of the classes differ.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage 3.14% 4.43% -2.60% 19.54% 9.32% 14.81% 12.73%
</TABLE>
Best quarter: 4th Quarter 1998 7.91%
Worst quarter: 1st Quarter 1994 -2.67%
Past performance does not indicate how the Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
<S> <C> <C> <C> <C>
CLASS A SHARES
(with maximum sales charge) 1/1/92 12.45% 10.23% 8.27%
CLASS B SHARES
(with applicable CDSC) 1/1/92 11.61% 9.41% 7.46%
CLASS Y SHARES 1/1/92 12.73% 10.50% 8.53%
USALLIANZ DIVERSIFIED INDEX 1/1/92 13.36% 10.78% 9.91%
</TABLE>
*The quoted performance of the Fund represents the performance of the Commingled
Account as described above. The Commingled Account was not registered with the
Securities and Exchange Commission under the Investment Company Act of 1940 and
therefore was not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled Account had been registered, the
Commingled Account's performance may have been adversely affected.
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Commingled Account adjusted for Class A, B,
and Y shares' expenses were ____%, ____% and ____%, respectively versus ____%
for the USAllianz Diversified Index.
12
<PAGE> 14
FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUNDS.
Annual Fund operating expenses are paid out of Fund assets, and are reflected in
the share price. Each Fund's fees and expenses are based upon the Fund's
estimated operating expenses for the fiscal year ending.
FEE TABLE
<TABLE>
<CAPTION>
SHAREHOLDER FEES GLOBAL INTERMEDIATE MONEY
(FEES PAID GROWTH FUND OPPORTUNITIES FUND FIXED INCOME FUND MARKET FUND
DIRECTLY FROM
YOUR INVESTMENT) CLASS A CLASS B CLASS Y CLASS A CLASS B CLASS Y CLASS A CLASS B CLASS Y CLASS A CLASS B CLASS Y
- ------------------- ---------------------------- ------------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales
Charge (Load)
Imposed on
Purchases 5.75% 0% 0% 5.75% 0% 0% 4.75% 0% 0% 0% 0% 0%
Maximum Sales
Charge (Load)
Imposed on
Reinvested
Dividends None None None None None None None None None None None None
Maximum Deferred
Sales Load 0% 5.00% 0% 0% 5.00% 0% 0% 5.00% 0% 0% 5.00% 0%
ANNUAL FUND
OPERATING
EXPENSES
(as a percentage
of average net
assets)
Management fees .75% .75% .75% .95% .95% .95% .50% .50% .50% .35% .35% .35%
(12b-1) fees .25% .75% 0% .25% .75% 0% .25% .75% 0% .25% .75% 0%
Other expenses(1) .28% .53% .28% .65% .90% .65% .30% .55% .30% .28% .53% .28%
TOTAL ANNUAL FUND
OPERATING
EXPENSES(2) 1.28% 2.03% 1.03% 1.85% 2.60% 1.60% 1.05% 1.80% .80% .88% 1.63% .63%
SHAREHOLDER FEES DIVERSIFIED
(FEES PAID ASSETS FUND
DIRECTLY FROM
YOUR INVESTMENT) CLASS A CLASS B CLASS Y
- -------------------------------------------
<S> <C> <C> <C>
Maximum Sales
Charge (Load)
Imposed on
Purchases 5.75% 0% 0%
Maximum Sales
Charge (Load)
Imposed on
Reinvested
Dividends None None None
Maximum Deferred
Sales Load 0% 5.00% 0%
ANNUAL FUND
OPERATING
EXPENSES
(as a percentage
of average net
assets)
Management fees .55% .55% .55%
(12b-1) fees .25% .75% 0%
Other expenses(1) .40% .65% .40%
TOTAL ANNUAL FUND
OPERATING
EXPENSES(2) 1.20% 1.95% .95%
</TABLE>
- --------------
1 Certain Service Organizations may receive fees from a Fund in amounts
up to an annual rate of 0.25% of the daily net asset value of the Fund
shares owned by the shareholders with whom the Service Organization
has a servicing relationship.
2 Other Expenses and Total Annual Fund Operating Expenses are estimated for
the current fiscal year.
13
<PAGE> 15
FUND EXPENSES
- -------------
EXPENSE EXAMPLE
USE THE TABLE AT RIGHT TO COMPARE FEES AND EXPENSES WITH THOSE OF OTHER FUNDS.
IT ILLUSTRATES THE AMOUNT OF FEES AND EXPENSES YOU WOULD PAY, ASSUMING THE
FOLLOWING:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF EACH PERIOD
- NO CHANGES IN THE FUND'S NET EXPENSES.
BECAUSE THIS EXAMPLE IS HYPOTHETICAL AND FOR COMPARISON ONLY, YOUR ACTUAL COSTS
WILL BE DIFFERENT.
<TABLE>
<CAPTION>
INTERMED-
GLOBAL IATE FIXED MONEY DIVERSIFIED
GROWTH OPPORTUNITIES INCOME MARKET ASSETS
FUND FUND FUND FUND FUND
-------- ------------- ---------- -------- --------------
<S> <C> <C> <C> <C> <C>
CLASS A
1 YEAR $688 $738 $577 $90 $695
3 YEARS $928 $1,080 $793 $281 $949
CLASS B
1 YEAR $696 $748 $683 $666 $703
3 YEARS $906 $1,064 $866 $814 $927
CLASS Y
1 YEAR $95 $148 $82 $64 $102
3 YEARS $296 $459 $255 $202 $318
</TABLE>
14
<PAGE> 16
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
This section of the Prospectus provides descriptions of the Funds' objectives,
risks, strategies, and investments. Other strategies and investments not
described below may be found in the Funds' Statement of Additional Information
or SAI.
GROWTH FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment objective is long-term growth of capital, which objective
may not be changed without shareholder approval. In pursuit of its objective,
the Fund normally invests at least 80% of its total assets in equity securities,
which include common stocks, preferred stocks and convertible securities of U.S.
and foreign issuers traded on a U.S. securities market. Although the Fund
invests primarily in equity securities of larger capitalization companies, the
Fund is not limited to such investments and will consider investing in
securities of companies with varying market capitalizations if they otherwise
meet the Adviser's criteria for purchases.
In selecting investments, the Adviser seeks to produce a return that exceeds the
average for companies included in the S&P(R) 500 Index. The Adviser uses a
fundamental, "bottom up" approach to selecting securities for investment.
Factors considered may include analysis of an issuer's financial condition,
industry position, management, growth prospects, earnings estimates and other
general economic and market conditions. (See "Other Considerations - Temporary
Defensive Positions" on page 24.)
PRINCIPAL INVESTMENT RISKS
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. You may lose money by investing in the Fund. The
Fund faces the following general risks:
Market Risk
The values of stocks fluctuate in response to the activities of individual
companies and general stock market and economic conditions. Stock prices may
decline over short or even extended periods. Stocks are more volatile and
riskier than some other forms of investment, such as short-term , high-grade
fixed -income securities.
Selection Risk
Selection risk is the chance that poor security selection will cause the Fund to
underperform other funds with similar investment objectives.
Additional Risks
- - To the extent the Fund invests significantly in small or
mid-capitalization companies, it may have capitalization risk. These
companies may present additional risk because they have less
predictable earnings, more volatile share prices and less liquid
securities than large - capitalization companies. These securities may
fluctuate in value more than those of larger, more established
companies and, as a group, may suffer more severe price declines
during periods of generally declining stock prices.
15
<PAGE> 17
To the extent the Fund invests in foreign securities, it is subject to
certain risks including:
- lack of, or less stringent, uniform accounting, auditing and
financial reporting standards
- changes in currency rates
- nationalization, confiscation, difficulties enforcing contracts, or
foreign withholding/taxes
- political instability and diplomatic developments that could
adversely affect the Fund's investments
- less government oversight of foreign stock exchanges, brokers and
listed companies
- less liquidity due to lower trading volumes of foreign markets which
may increase price volatility
- foreign trading practices (including higher trading commissions,
higher custodial charges and delayed settlements)
- less publicly available information about foreign companies.
16
<PAGE> 18
GLOBAL OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment objective is long-term growth of capital, which objective
may not be changed without shareholder approval. In pursuit of its objective,
the Fund normally invests at least 80% of its total assets in equity securities,
which include common stocks, preferred stocks, convertible securities, warrants
and rights of U.S. and foreign issuers. Generally, the securities in which the
Fund invests will be doing business in one of the following seven industry
sectors:
- NATURAL RESOURCES -- Natural resources, energy and
construction service industries,
including companies that provide basic
resources for developing and
industrialized countries (such as energy
resources, utilities, building
materials, forest and paper products,
metals and miscellaneous materials).
- LIFE STYLE -- Innovative, solution-oriented companies
in the consumer goods industry (such as
producers and providers of appliances,
household durable products, household
products, recreation and other consumer
goods), food industry (such as
beverages, food and tobacco) and
companies engaged in the design,
production and/or distribution of goods
or services in the leisure, tourism and
merchandising industry.
- FINANCIALS -- Forward-thinking, solution driven
companies providing business-related
services (such as banking, insurance and
financial services, as well as real
estate, wholesaling and international
trade firms).
- HIGH TECHNOLOGY -- Companies that rely extensively on high
technology in their product range,
development and/or operations (such as
data processing and reproduction
companies, electrical, electronics and
electronic equipment companies.
- TELEMEDIA -- Companies engaged in the development,
production, sale and/or distribution of
media-related services (such as
broadcasting, publishing and internet
companies) and companies committed to
the development of new information
technologies, contributing to progress
being made in the development of new
communication infrastructures and
developing strategic communication
solutions for the global economy.
- LIFE SCIENCE -- Global companies that offer innovative
health and personal care services and
products (including pharmaceutical and
chemical companies).
- TRANSPORTATION -- Innovative and solution-driven companies
engaged in the business of
transportation on either a regional or
global basis.
Although the Fund invests primarily in larger capitalization companies, the Fund
is not limited to such investments and will consider investing in securities of
companies with varying market capitalizations if they otherwise meet the
Adviser's criteria for purchases. Similarly, while companies whose principal
trading
17
<PAGE> 19
markets are developed or industrialized countries are likely to be the Fund's
principal investments, the Fund is not limited to such investments and will
consider investing in securities of companies trading in emerging or developing
markets. The Fund may invest more than 25% of its total assets in a single
country.
In selecting investments, the Adviser seeks to produce a return that exceeds the
average for companies included in the MSCI World Equity Index. The Adviser uses
its own research, as well as input from its affiliates around the world and
other third parties to identify attractive companies meeting the sector criteria
described above. The Adviser then uses a fundamental "bottom up" approach to
selecting securities for investment. Factors considered may include analysis of
an issuer's financial condition, industry position, management, growth
prospects, earnings estimates and other general economic and market conditions.
The Adviser does not intend to invest in markets where property rights are not
defined and supported by adequate legal infrastructure. The Fund may trade
forward foreign currency contracts to hedge currency fluctuations of underlying
security positions when it is believed that a foreign currency may suffer a
decline against the U.S. dollar.
(See "Other Considerations" - "Temporary Defensive Positions" on page 24.)
PRINCIPAL INVESTMENT RISKS
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. You may lose money by investing in the Fund. The
Fund faces the following general risks:
Market Risk
The values of stocks fluctuate in response to the activities of individual
companies and general stock market and economic conditions. Stock prices may
decline over short or even extended periods. Stocks are more volatile and
riskier than some other forms of investment, such as short-term, high-grade
fixed-income securities.
Foreign Risk
Foreign investments may be riskier than U.S. investments. Such risks include,
but are not limited to:
- - lack of, or less stringent, uniform accounting, auditing and financial
reporting standards
- - changes in currency rates
- - nationalization, confiscation, difficulties enforcing contracts, or
foreign withholding/taxes
- - political instability and diplomatic developments that could adversely
affect the Fund's investments
- - less government oversight of foreign stock exchanges, brokers and listed
companies
- - less liquidity due to lower trading volumes of foreign markets which may
increase price volatility
- - foreign trading practices (including higher trading commissions, higher
custodial charges and delayed settlements)
- - less publicly available information about foreign companies
Concentration Risk
Concentration (25% or more of assets) in a single foreign country could expose
the Fund to increased risk due to changes in the economic or political
environment within that country.
Emerging Market Risk
To the extent the Fund's assets are invested in foreign emerging markets, it may
be subject to emerging market risk. Emerging market investments present greater
risk than those described previously for foreign issuers in general. Emerging
market countries have economic structures that are generally less diverse and
mature, and political systems that are less stable, than those of developed
countries.
18
<PAGE> 20
Selection Risk
Selection risk is the chance that poor security selection will cause the Fund to
underperform other funds with similar investment objectives.
Sector Style Risk
To the extent the Fund emphasizes investments in one sector over another, it may
be subject to risks associated with that particular sector. For instance, the
telemedia sector includes communications, entertainment, media and publishing
industries which are subject to (1) governmental regulation, (2) a greater
volatility than the overall market and (3) their products and services may be
subject to rapid obsolescence and change in taste. In addition, many countries
impose various types of ownership restrictions on investments both in mass media
companies, such as broadcasters and cable operators, as well as in common
carrier companies, such as the providers of local telephone service and cellular
radio.
Currency Risk
This is the risk that fluctuations in the exchange rates between the U.S. dollar
and foreign currencies may negatively affect the value of the Fund's
investments.
19
<PAGE> 21
INTERMEDIATE FIXED INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment objective is to maximize total return with secondary
emphasis on income, which objective may not be changed without shareholder
approval.
In pursuit of its objective, the Fund normally invests at least 80% of its total
assets in fixed income securities rated within the four highest rating
categories by a primary credit rating agency or, if unrated, which are
determined by the Adviser to be of comparable quality. Fixed income securities
include U.S. Government securities; corporate debt securities; U.S. dollar
denominated securities of foreign issuers (including corporate debt securities,
certificates of deposit and bankers' acceptances issued by foreign banks, and
obligations of foreign governments or their subdivisions, agencies and
instrumentalities, international agencies and supranational entities); zero
coupon and pay-in-kind securities; asset-backed securities and mortgage-backed
securities (including stripped mortgage-backed securities).
The Fund also may invest up to 20% of its total assets in high yield securities
(debt securities determined by a primary credit rating agency to have a lower
probability of being paid and have a credit rating lower than BBB by Standard &
Poor's or Baa by Moody's Investor Services, Inc. or, if unrated, which are
deemed of comparable quality by the Adviser).
In choosing fixed income securities, the portfolio management team employs a
"bottom up" approach, including rigorous credit analysis and relative value in
selecting securities. Strategies emphasize broad diversification and a targeted
maturity which generally approximates the Fund's benchmark, the Lehman
Intermediate Government/Corporate Bond Index. In assessing interest rate,
credit, maturity, yield curve and bond specific risks, the management team
analyzes (1) economic factors such as business cycles, inflation trends,
monetary and fiscal policies and (2) an issuer's relative value including its
cash flow, management experience, position in its market and capital structure
in comparison to other securities. (See "Other Considerations" - "Temporary
Defensive Positions" on page .)
Under normal conditions, the Fund intends to hold securities with maturities
primarily between 1 and 10 years with an average maturity of between 3 and 8
years, when weighted according to the Fund's holdings. The Adviser may sell a
security if its fundamental qualities deteriorate or to take advantage of more
attractive investment opportunities.
(See "Other Considerations" -- "Temporary Defensive Positions" on page 24.)
PRINCIPAL INVESTMENT RISKS
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. You may lose money by investing in the Fund. The
Fund faces the following general risks:
Interest Rate Risk
Interest rate risk is the chance that the value of the bonds the Fund holds will
decline due to rising interest rates. When interest rates rise, the price of
most bonds goes down. When interest rates go down, bond prices go up. The price
of a bond is also affected by its maturity. Bonds with longer maturities
generally have greater sensitivity to changes in interest rates.
Credit Risk
Credit risk is the chance that a bond issuer will fail to repay interest and
principal in a timely manner, reducing the Fund's return. Also, an issuer may
suffer adverse changes in financial condition that could lower the credit
20
<PAGE> 22
quality of a security, leading to greater volatility in the price of the
security and the Fund's shares. A change in the quality rating of a bond can
affect the bond's liquidity and make it more difficult for the Fund to sell.
Prepayment Risk
The Fund's investments in mortgage-related securities are subject to the risk
that the principal amount of the underlying mortgage may be repaid prior to the
bond's maturity date. Such repayments are common when interest rates decline.
When such a repayment occurs, no additional interest will be paid on the
investment. Prepayment exposes the Fund to lower return upon subsequent
reinvestment of the principal.
Income Risk
Income risk is the chance that falling interest rates will cause the Fund's
income to decline. Income risk is generally higher for short-term bonds.
Selection Risk
Selection risk is the chance that poor security selection will cause the Fund to
underperform other funds with similar investment objectives.
Additional Risks
- - Asset-backed securities involve the risk that such securities may not have
the benefit of a complete security interest in the related collateral.
- - The Fund has authority to invest up to 20% of its assets in high yield,
high risk debt securities. These lower quality securities have speculative
characteristics and are more volatile and are more subject to credit risk
than investment grade securities. High yield securities tend to be more
susceptible to high interest rates and to real or perceived adverse
economic and competitive industry conditions.
- - Investment in the securities of issuers in any foreign country involves
special risks and considerations not typically associated with investing
in U.S. issuers.
- - The sensitivity of the cash flows and yields of separately traded interest
and principal components of obligations to the rate of principal payments
(including prepayments).
21
<PAGE> 23
MONEY MARKET FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment objective is current income consistent with stability of
principal, which objective may not be changed without shareholder approval.
The Fund invests substantially all (but not less than 80%) of its total assets
in a diversified and liquid portfolio of high quality, money market investments,
including:
- - U.S. Government securities;
- - Certificates of deposits, time deposits, bankers' acceptances and other
short-term instruments issued by U.S. or foreign banks;
- - U.S. and foreign commercial paper and other short-term corporate debt
obligations, including those with floating rate or variable rates of
interest;
- - Obligations issued or guaranteed by one or more foreign governments or
their agencies, including supranational entities;
- - Loan participation interests;
- - Asset backed securities; and
- - Repurchase agreements collateralized by the types of securities above.
The Fund is required to invest at least 95% of its assets in the securities of
issuers with the highest credit rating, with the remainder invested in
securities with the second-highest credit rating. The Fund is subject to certain
federal requirements which include the following:
- - maintain an average dollar-weighted portfolio maturity of 90 days or less
- - buy individual securities that have remaining maturities of 13 months or
less
- - invest only in high-quality, dollar-denominated, short-term obligations.
(See "Other Considerations" - "Temporary Defensive Positions" on page 24.)
PRINCIPAL INVESTMENT RISKS
The Fund is not guaranteed to maintain a constant net asset value of $1.00 per
share, and it is possible to lose money by investing in the Fund.
Interest Rate Risk
The yield paid by the Fund will vary with short term interest rates.
Credit Risk
Although credit risk is very low because the Fund only invests in high quality
obligations, if an issuer fails to pay interest or repay principal, the value of
your investment could decline.
Selection Risk
Selection risk is the chance that poor security selection will cause the Fund to
underperform other funds with similar investment objectives.
22
<PAGE> 24
DIVERSIFIED ASSETS FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment objective is total return consistent with reduction of
long-term volatility, which objective may not be changed without shareholder
approval.
While the Fund normally invests approximately 65% of its total assets in fixed
income securities (which include investment grade corporate bonds and U.S.
Government Securities), 25% in equity securities and 10% in money market
securities, the mix may vary within ranges of 50-70% for fixed income
securities, 20-40% for stocks and 5-15% for money market securities. Each asset
class is managed along the same investment criteria for the Growth Fund, the
Intermediate Fixed Income Fund and the Money Market Fund (described elsewhere in
this prospectus) with the respective portfolio managers of these Funds
comprising the management team of the Fund. In making asset allocation
decisions, the management team evaluates forecasts for inflation, interest rates
and long term corporate earnings growth. The team then examines the potential
effect of these factors on each asset group over a one-to-three year time period
and compares its risk analysis to a weighted index of 65% of the Lehman
Intermediate Government/Corporate Bond Index, 25% of the S & P 500(R) Index, and
10% of the 90-day Treasury bill. The team then selects securities based on a
bottom up analysis. (See "Other Considerations" - "Temporary Defensive
Positions" on page 24.)
PRINCIPAL INVESTMENT RISKS
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. You may lose money by investing in the Fund. The
Fund faces the following general risks:
Market Risk
The values of stocks fluctuate in response to the activities of individual
companies and general stock market and economic conditions. Stock prices may
decline over short or even extended periods. Stocks are more volatile and
riskier than some other forms of investment, such as short-term, high-grade
fixed-income securities.
Interest Rate Risk
Interest rate risk is the chance that the value of the bonds the Fund holds will
decline due to rising interest rates. When interest rates rise, the price of
most bonds goes down. When interest rates go down, bond prices go up. The price
of a bond is also affected by its maturity. Bonds with longer maturities
generally have greater sensitivity to changes in interest rates.
Credit Risk
Credit risk is the chance that a bond issuer will fail to repay interest and
principal in a timely manner, reducing the Fund's return. Credit risk is
somewhat minimized by the Fund's policy of investing primarily in bonds rated
within the four highest long-term or two highest short-term rating categories or
comparable quality unrated securities and through adequate diversification among
issuers and industries.
Selection Risk
Selection risk is the chance that poor security selection will cause the Fund to
underperform other funds with similar investment objectives.
23
<PAGE> 25
OTHER CONSIDERATIONS
- --------------------
TEMPORARY DEFENSIVE POSITIONS
In order to meet liquidity needs or for temporary defensive purposes, each Fund
may hold investments including uninvested cash reserves, that are not part of
its main investment strategy. Each of the Growth Fund, Global Opportunities
Fund, Diversified Assets Fund and Intermediate Fixed Income Fund (the "Non-Money
Market Funds") may invest up to 100% of its assets in money market instruments,
including short-term debt securities issued by the U.S. Government and its
agencies and instrumentalities, domestic bank obligations, commercial paper or
in repurchase agreements secured by bank instruments (with regard to the Global
Opportunities Fund, such investment may include those of foreign governments and
companies). In addition, each Non-Money Market Fund may hold equity securities
which in the Adviser's opinion are more conservative than the types of
securities in which the Fund typically invests. To the extent the Funds are
engaged in temporary or defensive investments, a Fund will not be pursuing its
investment objective.
PORTFOLIO TURNOVER
While the Funds do not engage in short-term trading, in some cases in response
to market conditions, a Fund's portfolio turnover may exceed 100%. A higher rate
of portfolio turnover increases brokerage and other expenses, which must be
borne by the Fund and its shareholders and may adversely affect the Fund's
performance. High portfolio turnover also may result in the realization of
substantial net short-term capital gains, which are taxable as ordinary income
when distributed to shareholders.
YEAR 2000
Like other funds and business organizations around the world, the Funds could be
adversely affected if the computer systems used by the Adviser and other service
providers do not properly process and calculate date-related information for the
year 2000 and beyond. In addition, Year 2000 issues may adversely affect
companies in which the Funds invest where, for example, such companies incur
substantial costs to address Year 2000 issues or suffer losses caused by the
failure to adequately or timely do so.
The Funds have been assured that the Adviser and other service providers (i.e.,
Administrator, Transfer Agent, Fund Accounting Agent, Custodian and Distributor)
have developed and are implementing clearly defined and documented plans
intended to minimize risks to services critical to the Funds' operations
associated with Year 2000 issues. Internal efforts include a commitment to
dedicate adequate staff and funding to identify and remedy Year 2000 issues, and
specific actions such as inventorying software systems, determining inventory
items that may not function properly after December 31, 1999, reprogramming or
replacing such systems, and retesting for Year 2000 readiness. The Funds'
Adviser and service providers are likewise seeking assurances from their
respective vendors and suppliers that such entities are addressing any Year 2000
issues, and each provider intends to engage, where appropriate, in private and
industry or "streetwide" interface testing of systems for Year 2000 readiness.
In the event that any systems upon which the Funds are dependent are not Year
2000 ready by December 31, 1999, administrative errors and account maintenance
failures would likely occur. While the ultimate costs or consequences of
incomplete or untimely resolution of Year 2000 issues by the Adviser or the
Funds' service providers cannot be accurately assessed at this time, the Funds
currently have no reason to believe that the Year 2000 plans of the Adviser and
other service providers will not be completed by December 31, 1999, or that the
anticipated costs associated with full implementation of their plans will have a
material adverse impact on either their business operations or financial
condition or those of the Funds. The Funds and the Adviser will continue to
closely monitor developments relating to this issue, including development by
the Adviser and other service providers of contingency plans for providing
back-up computer services in the event of a systems failure or the
24
<PAGE> 26
inability of any provider to achieve Year 2000 readiness. Separately, the
Adviser will monitor potential investment risk related to Year 2000 issues.
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER
- ----------------------
Allianz of America, Inc., (the "Adviser"), is the adviser for the Funds. The
Adviser, a registered investment adviser, was established in 1976 and as of
December 31, 1998, managed more than $21 billion in fixed income, equity and
real estate investments. The Adviser is a subsidiary of Allianz AG Holding
("Allianz AG"), one of the world's largest insurance and financial services
companies. Allianz AG is headquartered in Munich, Germany and has operations in
68 countries. In North America, Allianz AG owns and operates Fireman's Fund
Insurance Company , Allianz Life Insurance Company of North America, Jefferson
Insurance Company, Allianz Insurance Company, Allianz Canada, and Allianz
Mexico. Through its portfolio management team, the Adviser makes the day-to-day
investment decisions and continuously reviews, supervises and administers the
Funds' investment programs.
For these advisory services, each Fund pays the Adviser a fee at the annual rate
shown below :
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE
NET ASSETS
<S> <C>
Growth Fund . 75%
Global Opportunities Fund . 95%
Intermediate Fixed Income Fund .50%
Money Market Fund .35%
Diversified Assets Fund .55%
</TABLE>
The Adviser may voluntarily waive a portion of its advisory fee and/or
reimburse expenses incurred by the Funds. Such waiver and/or reimbursements may
be discontinued at any time.
PORTFOLIO MANAGERS
The Adviser has several portfolio managers committed to the day-to-day
management of the Funds. Each Portfolio Manager uses a team approach to the
investment management of the Non-Money Market Funds and relies on analysis,
research and other information furnished by the team's experienced investment
professionals.
Gary Brown is responsible for the team of highly trained investment
professionals who manage the assets of the Intermediate Fixed Income Fund. He is
also responsible for the fixed income investments of the Diversified Assets Fund
and for the Money Market Fund. He is Senior Managing Director, Fixed Income of
the Adviser and has twenty-four years of investment experience. Mr. Brown is
currently responsible for directing the management of the Adviser's fixed income
investments. He has been with the Adviser since 1991, after serving as Managing
Director at CIGNA Investments from 1986 to 1991, with responsibility for CIGNA's
insurance company's public taxable and tax-exempt bond portfolios, as well as
four fixed income mutual funds and institutional client portfolios. His
investment experience has covered all fixed income securities, including
governments, corporates, mortgages, high yield, convertibles, and various
derivative products. Mr. Brown was a Vice President with CIGNA from 1982 to 1986
managing public and private fixed income investments for the insurance company
portfolios, responsible for asset and liability management and CIGNA's
convertible portfolio. Prior to joining CIGNA, he managed public bond and
private placement investments for INA Capital
25
<PAGE> 27
Advisors, Inc from 1979 to 1982, and was an investment analyst with The Penn
Mutual Life Insurance Company from 1975 to 1979. Mr.
Brown received a B.S. and an M.B.A. from Drexel University.
Ronald M. Clark, Senior Managing Director, is responsible for the day to day
management of the Growth Fund and the Global Opportunities Fund and is also
responsible for the equity investments of the Diversified Assets Fund. Mr. Clark
is also responsible for directing the management of all equity investments of
the Adviser and has twenty-nine years of investment experience. He began his
career in 1972 at Mutual of New York as an investment analyst, and shortly
thereafter joined its subsidiary now Allianz Life Insurance Company of North
America where he was Chief Investment Officer from 1973 to 1980.In addition to
equity investments, his responsibilities include membership on the Investment
Policy Committee of Allianz worldwide and the Finance Committee of the Adviser.
In addition, he provides senior level oversight of real estate investments and
holding company corporate finance activities. He is a graduate of the University
of Wisconsin, with an undergraduate degree in Industrial Engineering, and
masters in Finance and Real Estate.
David Marks, Chief Investment Officer, has overall supervisory responsibility
and is currently responsible for directing all of the Adviser's investment
operations. Mr. Marks has twenty-eight years of investment experience. Prior to
joining the Adviser in 1991, Mr. Marks was a Managing Director with CIGNA
Investments responsible for the investment advisory business that managed
institutional accounts. From 1985 to 1989, he was a Managing Director and Head
of Fixed Income Investments at CIGNA, responsible for $32 billion in public
bond, private placement, municipal, residential mortgage, leveraged, money
market and agricultural investments. From 1980 to 1985, Mr. Marks held various
senior management positions, including head of Private Placements and Venture
Capital and head of Corporate Finance. He joined Connecticut General in 1977 as
a Senior Analyst in Private Placements, after six years with Massachusetts
Mutual in the Private Placement and Venture Capital areas. He is a graduate of
the University of Connecticut, with a B.S. and an M.B.A, and the Tuck
(Dartmouth) Executive Program. Mr. Marks is a Chartered Financial Analyst (CFA).
The Statement of Additional Information or SAI has more detailed information
about the Adviser and other service providers.
THE ADMINISTRATOR AND DISTRIBUTOR
- ---------------------------------
BISYS Fund Services Limited Partnership ("BISYS"), whose address is 3435 Stelzer
Road, Columbus, Ohio 43219-3035, serves as the Fund's administrator.
Administrative services of BISYS include providing office space, equipment and
clerical personnel to the Funds and supervising custodial, auditing, valuation,
bookkeeping, legal and dividend disbursing services.
BISYS also serves as the distributor of the Funds' shares. BISYS may provide
financial assistance in connection with pre-approved seminars, conferences and
advertising to the extent permitted by applicable state or self-regulatory
agencies, such as the National Association of Securities Dealers.
26
<PAGE> 28
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF FUND SHARES
- ----------------------
HOW NAV IS CALCULATED
The NAV is calculated by adding the total value of a Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
TOTAL ASSETS - LIABILITIES
Number of Shares
Outstanding
NAV is calculated separately for each Class.
MONEY MARKET FUND
The Money Market Fund's net asset value (NAV), the offering price, is expected
to be constant at $1.00 per share although this value is not guaranteed. The NAV
is determined each day at the close of regular trading on the New York Stock
Exchange (the "NYSE"), normally at 4 p.m. Eastern time, on days the NYSE is
open. The Money Market Fund values its securities at its amortized cost. The
amortized cost method values a portfolio security initially at its cost on the
date of the purchase and thereafter assuming a constant amortization to maturity
of the difference between the principal amount due at maturity and initial cost.
OTHER FUNDS
Per share net asset value (NAV) for each Fund, other than the Money Market Fund,
is determined and its shares are priced at the close of regular trading on the
NYSE, normally at 4:00 p.m. Eastern time, on days the NYSE is open.
Your order for purchase, sale or exchange of shares is priced at the next NAV
calculated after your order is received in good order by the Fund less any
applicable sales charge (as noted in the section on "Distribution
Arrangements/Sales Charges.") on any day that both the NYSE and the Fund's
custodian are open for business. This is what is known as the offering price.
For example: If you place a purchase order to buy shares of the Fund, it must be
received by 4:00 p.m. Eastern time in order to receive the NAV calculated at
4:00 p.m. Eastern time. If your order is received after 4:00 p.m. Eastern time,
you will receive the NAV calculated on the next day at 4:00 p.m. Eastern time.
The Funds', except the Money Market Fund's securities, other than short term
debt securities, are generally valued at current market prices. If market
quotations are not available, prices will be based on fair value as determined
in good faith by or at the direction of the Funds' Trustees.
After the pricing of a foreign security has been established, if an event occurs
which would likely cause the value to change, the value of the foreign security
may be priced at fair value as determined in good faith by or at the direction
of the Funds` Trustees.
27
<PAGE> 29
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PURCHASING AND ADDING TO YOUR SHARES
- ------------------------------------
You may purchase Funds through the Funds' Distributor or through banks, brokers
and other investment representatives, which may charge additional fees and may
require higher minimum investments or impose other limitations on buying and
selling shares. If you purchase shares through an investment representative,
that party is responsible for transmitting orders by close of business and may
have an earlier cut-off time for purchase and sale requests. Consult your
investment representative or institution for specific information. You may
purchase Funds through the Funds' Distributor or through banks, brokers and
other investment representatives, which may charge additional fees and may
require higher minimum investments or impose other limitations on buying and
selling shares. If you purchase shares through an investment representative,
that party is responsible for transmitting orders by close of business and may
have an earlier cut-off time for purchase and sale requests. Consult your
investment representative or institution for specific information.
<TABLE>
<CAPTION>
ACCOUNT TYPE MINIMUM MINIMUM SUBSEQUENT
INITIAL INVESTMENT
<S> <C> <C>
CLASS A, B OR Y
Regular
(non-retirement) $ 500 $ 50
Retirement (IRA) $ 250 $ 250
Automatic Investment Plan $ 250 $ 50
</TABLE>
All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks are not accepted.
A Fund may waive its minimum purchase requirement and the Distributor may reject
a purchase order if it considers it in the best interest of the Fund and its
shareholders
- --------------------------------------------------------------------------------
Avoid 31% Tax Withholding
Each Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number in compliance with IRS
rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
- --------------------------------------------------------------------------------
28
<PAGE> 30
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------------
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
- ------------------------------------
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
BY REGULAR MAIL OR EXPRESS MAIL
If purchasing through your financial advisor or brokerage account, simply tell
your advisor or broker that you wish to purchase shares of the Funds and he or
she will take care of the necessary documentation. For all other purchases,
follow the instructions below.
All investments made by regular mail or express delivery, whether initial or
subsequent, should be sent:
BY REGULAR MAIL: BY EXPRESS MAIL:
USAllianz Funds USAllianz Funds
P.O. Box 00000 3435 Stelzer Road
Columbus, OH 43218-0000 Columbus, OH 43219
For Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "USAllianz Funds" and
include name of the appropriate Funds on the check.
3. Mail or deliver application and payment to the address above.
For Subsequent Investment:
1. Use the investment slip attached to your account statement. Or, if
unavailable, provide the following information:
- Fund name
- Share class
- Amount invested
- Account name and account number
2. Mail or deliver investment slip and payment to the address above.
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be a
U. S. Bank. YOUR BANK OR BROKER MAY
CHARGE FOR THIS SERVICE.
Establish electronic purchase option on your account application or call
1-800-000-0000. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-000-0000 to arrange a transfer from your bank account.
29
<PAGE> 31
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
- ------------------------------------
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial
institutions to send funds to each
other, almost instantaneously. With
an electronic purchase or sale, the
transaction is made through the
Automated Clearing House (ACH) and
may take up to eight days to clear.
There is generally no fee for ACH
transactions.
BY WIRE TRANSFER
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
For initial investment:
Fax the completed application, along with a request for a confirmation number to
1-800-000-0000. Follow the instructions below after receiving your confirmation
number.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
Name of Bank
Routing Number: ABA #000000
DDA#
Include:
Your name
Your confirmation number
After instructing your bank to wire the funds, call 1-800-000-0000 to advise us
of the amount being transferred and the name of your bank
- --------------------------------------------------------------------------------
You can also add to your account by using the convenient options described
below. The Fund reserves the right to change or eliminate these privileges at
any time with 60 days notice.
- --------------------------------------------------------------------------------
30
<PAGE> 32
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
- ------------------------------------
AUTOMATIC INVESTMENT PLAN
You can make automatic investments in the Funds from your bank account, through
payroll deduction or from your federal employment, Social Security or other
regular government checks. Automatic investments can be as little as $50 per
month, once you've invested the $250 minimum required to open the account.
To invest regularly from your bank account:
- Complete the Automatic Investment Plan portion on your Account
Application. Make sure you note:
- Your bank name, address and account number
- The amount you wish to invest automatically (minimum $50)
- Attach a voided personal check.
To invest regularly from your paycheck or government check:
Call 1-800-000-0000 for an enrollment form.
DIRECTED DIVIDEND OPTION
By selecting the appropriate box in the Account Application, you can elect to
receive your distributions in cash (check) or have distributions (capital gains
and dividends) reinvested in another Fund without a sales charge. You must
maintain the minimum balance in each Fund into which you plan to reinvest
dividends or the reinvestment will be suspended and your dividends paid to you.
The Fund may modify or terminate this reinvestment option without notice. You
can change or terminate your participation in the reinvestment option at any
time.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Dividends are higher for Class A shares than for Class B shares, because Class A
shares have lower distribution expenses. Capital gains are distributed at least
annually.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE OWNED
YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION DATE, SOME
OF YOUR INVESTMENT MAY BE RETURNED TO YOU IN THE FORM OF A DISTRIBUTION.
- --------------------------------------------------------------------------------
31
<PAGE> 33
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
SELLING YOUR SHARES
- -------------------
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Fund, its transfer agent, or your
investment representative. Normally you will receive your proceeds within a week
after your request is received. See section on "General Policies on Selling
Shares below."
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares or a
redemption of shares.
CONTINGENT DEFERRED SALES CHARGE
When you sell Class B shares, you will be charged a fee for any shares that have
not been held for a sufficient length of time. These fees will be deducted from
the money paid to you. See the section on "Distribution Arrangements/Sales
Charges" below for details.
INSTRUCTIONS FOR SELLING SHARES
If selling your shares through your financial adviser or broker, ask him or her
for redemption procedures. Your adviser and/or broker may have transaction
minimums and/or transaction times which will affect your redemption. For all
other sales transactions, follow the instructions below.
<TABLE>
<CAPTION>
<S> <C>
By telephone 1. Call 1-800-000-0000 with instructions as to how you wish
(unless you have declined to receive your funds (mail, wire, electronic transfer).
telephone sales privileges) (See "General Policies on Selling Shares--Verifying
Telephone Redemptions" below)
- -----------------------------------------------------------------------------------------------------
By mail 1. Call 1-800-000-0000 to request redemption forms or write a
(See "Selling Your Shares - letter of instruction indicating:
Redemptions in Writing - your Fund and account number
Required") - amount you wish to redeem
- address where your check should be sent
- account owner signature
2. Mail to:
USAllianz Funds
P.O. Box
Columbus, OH 43219
- -----------------------------------------------------------------------------------------------------
By overnight service See "By mail" instruction 1 above.
(See "General Policies on 2. Send to
Selling Shares--Redemptions in USAllianz Funds
Writing Required" below) c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, OH 43219
</TABLE>
32
<PAGE> 34
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
SELLING YOUR SHARES - CONTINUED
- -------------------
<TABLE>
<CAPTION>
<S> <C>
Wire transfer Call 1-800-000-0000 to request a wire transfer.
You must indicate this option
on your application. If you call by 4 p.m. Eastern time, your payment will normally
be wired to your bank on the next business day.
Note: Your financial
institution may also charge a
separate fee.
- --------------------------------------------------------------------------------
Electronic Redemptions Call 1-800-000-0000 to request an electronic redemption.
Your bank must participate in If you call by 4 p.m. Eastern time, the NAV of your shares
the Automated Clearing House will normally be determined on the same day and the proceeds
(ACH) and must be a U.S. bank. credited within 8 days.
</TABLE>
Your bank may charge for this service.
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. The minimum withdrawal is $50. To activate this
feature: o Make sure you've checked the appropriate box on the Account
Application. Or call 1-800-000-0000.
- - Include a voided personal check.
- - Your account must have a value of $10,000 or more to start withdrawals.
- - If the value of your account falls below $500, you may be asked to add
sufficient funds to bring the account back to $500, or the Fund may close
your account and mail the proceeds to you.
REDEMPTION BY CHECK WRITING - MONEY MARKET FUND
You may write an unlimited number of checks a month in amounts of $ 250 or more
on your account in Money Market Fund. To obtain checks, complete the signature
card section of the Account Application or contact the Fund to obtain a
signature card. Dividends and distributions will continue to be paid up to the
day the check is presented for payment. The check writing feature may be
modified or terminated upon 30-days' written notice. You must maintain the
minimum required account balance of ($500) and you may not close your Money
Market Fund account by writing a check.
33
<PAGE> 35
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
SELLING YOUR SHARES - CONTINUED
- -------------------
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Redemption requests requiring a signature guarantee, which include each of
the following.
- Redemptions over $50,000
- Your account registration or the name(s) in your account has changed
within the last 15 days
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the account
- The redemption proceeds are being transferred to another Fund
account with a different registration.
A signature guarantee can be obtained from a financial institution, such
as a bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock
Exchange Medallion Signature Program) or SEMP (Stock Exchanges Medallion
Program). Members are subject to dollar limitations which must be
considered when requesting their guarantee. The Transfer Agent may reject
any signature guarantee if it believes the transaction would otherwise be
improper.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to insure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders. If appropriate precautions have not been taken, the
Transfer Agent may be liable for losses due to unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, payment of your redemption
proceeds will be delayed until the Transfer Agent is satisfied that the check
has cleared (which may take up to 15 business days). You can avoid this delay by
purchasing shares with a certified check or federal funds wire.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders. If you experience difficulty making a telephone
redemption during periods of drastic economic or market change, you can send the
Funds your request by regular or express mail.
REDEMPTION IN KIND
Each Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(for example, more than 1% of the Fund's net assets). If the Fund deems it
advisable for the benefit of all shareholders, redemption in kind will consist
of securities equal in market value to your shares. When you convert these
securities to cash, you will pay brokerage charges.
34
<PAGE> 36
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
SELLING YOUR SHARES - CONTINUED
- -------------------
CLOSING OF SMALL ACCOUNTS
If your account falls below $500.00 (not as a result of market action), the Fund
may ask you to increase your balance. If it is still below $500.00 after 60
days, the Fund may close your account and send you the proceeds at the current
NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that remain
uncashed for six months will be canceled and the money reinvested in the
appropriate Fund at its current NAV.
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
- ---------------------------------------
This section describes the sales charges and fees you will pay as an investor in
different share classes offered by the Funds and ways to qualify for reduced
sales charges.
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
Sales Charge (Load) Front-end sales charge (not No front-end sales charge. A
applicable to money market contingent deferred sales
funds); reduced sales charge (CDSC) may be imposed
charges available. on shares redeemed within six
years after purchase; shares
automatically convert to
Class A Shares after 8 years.
Maximum investment is $250,000.
Distribution and Service Subject to annual Subject to annual distribution
(12b-1) Fee distribution and shareholder and shareholder servicing fees
servicing fees of up to of up to 1.00% of the Fund's
0.25% of the Fund's assets. assets.
Fund Expenses Lower annual expenses than Higher annual expenses than
Class B shares. Class A shares.
</TABLE>
There is also a Class Y open to:
- - Investors for whom the Adviser and its affiliates manage separate accounts
in a fiduciary, advisory, custodial (other than retirement accounts),
agency or similar capacity
- - Participants in 401(k) or 403(b) retirement plans
- - Directors, trustees, employees, and family members of the Adviser and its
affiliates.
Class Y shares are not subject to any sales charges or 12b-1 distribution fees;
however, this class, like Class A shares and Class B shares, has a sub transfer
agency arrangement.
35
<PAGE> 37
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED
- ---------------------------------------
CALCULATION OF SALES CHARGES
CLASS A SHARES
Class A shares are sold at their public offering price. This price includes the
initial sales charge. Therefore, part of the money you invest will be used to
pay the sales charge. The remainder is invested in Fund shares. The sales charge
decreases with larger purchases. There is no sales charge on reinvested
dividends and distributions.
The current sales charge rates are as follows:
FOR THE INTERMEDIATE FIXED INCOME FUND
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS A % OF AS A % OF
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT
<S> <C> <C>
Up to $49,999 4.75% 4.99%
$50,000 up to $75,000 4.50% 4.71%
$75,001 up to $100,000 3.50% 3.63%
$100,001 up to $250,000 3.25% 3.36%
$250,001 up to $500,000 2.50% 2.56%
$500,001 up to $1,000,000 2.00% 2.04%
$1,000,001 and above1 0.00% 0.00%
</TABLE>
FOR THE GROWTH FUND,
GLOBAL OPPORTUNITIES FUND AND DIVERSIFIED ASSETS FUND
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS A % OF AS A % OF
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT
<S> <C> <C>
Up to $49,999 5.75% 6.10%
$50,000 up to $75,000 4.75% 4.99%
$75,001 up to $100,000 4.50% 4.71%
$100,001 up to $250,000 3.00% 3.09%
$250,001 up to $500,000 2.50% 2.56%
$500,001 up to $1,000,000 2.00% 2.04%
$1,000,001 and above3 0.00% 0.00%
</TABLE>
- ------------------
1 There is no initial sales charge on purchases of $1 million or more. However,
a contingent deferred sales charge (CDSC) of up to 1.00% of the purchase price
will be charged to the shareholder if shares are redeemed in the first year
after purchase. This charge will be based on the lower of your cost for the
shares or their NAV at the time of redemption. There will be no CDSC on
reinvested distributions.
36
<PAGE> 38
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED
- ---------------------------------------
CLASS B AND CLASS Y SHARES
Class B and Y shares are offered at NAV, without any up-front sales charge.
Therefore, all the money you invest is used to purchase Fund shares. However, if
you sell your Class B shares of the Fund before the sixth anniversary of
purchase, you will have to pay a contingent deferred sales charge at the time of
redemption. The CDSC will be based upon the lower of the NAV at the time of
purchase or the NAV at the time of redemption according to the schedule below.
There is no CDSC on reinvested dividends or distributions. Unlike Class B
shares, you may sell your Class Y shares without incurring a CDSC.
ALL FUNDS - CLASS B SHARES
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 None
</TABLE>
If you sell some but not all of your Class B shares, certain shares not subject
to the CDSC (i.e., shares purchased with reinvested dividends) will be redeemed
first, followed by shares subject to the lowest CDSC (typically shares held for
the longest time).
CONVERSION FEATURE - CLASS B SHARES
- - Class B shares automatically convert to Class A shares of the same Fund
after eight years from the end of the month of purchase.
- - After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Class A shares, which will
increase your investment return compared to the Class B shares.
- - You will not pay any sales charge or fees when your shares convert, nor
will the transaction be subject to any tax.
- - If you purchased Class B shares of one Fund which you exchanged for Class
B shares of another Fund, your holding period will be calculated from the
time of your original purchase of Class B shares. The dollar value of
Class A shares you receive will equal the dollar value of the Class B
shares converted.
37
<PAGE> 39
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED
- ---------------------------------------
SALES CHARGE REDUCTIONS
Reduced sales charges for Class A shares are available to shareholders with
investments of [$50,000] or more. In addition, you may qualify for reduced sales
charges under the following circumstances.
- - Letter of Intent. You inform the Fund in writing that you intend to
purchase enough shares over a 13-month period to qualify for a reduced
sales charge. You must include a minimum of 5% of the total amount you
intend to purchase with your letter of intent.
- - Rights of Accumulation. When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.
- - Combination Privilege. Combine accounts of multiple Funds (excluding the
Money Market Fund) or accounts of immediate family household members
(spouse and children under 21) to achieve reduced sales charges.
SALES CHARGE WAIVERS
CLASS A SHARES
- --------------
The following qualify for waivers of sales charges:
- - Shares purchased by investment representatives through fee-based
investment products or accounts.
- - Proceeds from redemptions from another mutual fund complex within 90 days
after redemption, if you paid a front end sales charge for those shares.
- - Reinvestment of distributions from a deferred compensation plan, agency,
trust, or custody account that was maintained by the Adviser or its
affiliates or invested in any USAllianz Fund.
- - Shares purchased by any organization that provides services to the Funds;
retired Fund trustees; dealers who have an agreement with the Distributor;
and any trade organization to which the Adviser or the Administrator
belongs.
38
<PAGE> 40
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED
- ---------------------------------------
- --------------------------------------------------------------------------------
REINSTATEMENT PRIVILEGE
If you have sold Class A or Class B shares and decide to reinvest in the Fund
within a 90 day period, you will not be charged the applicable sales load on
amounts up to the value of the shares you sold. You must provide a written
reinstatement request and payment within 90 days of the date your instructions
to sell were processed.
- --------------------------------------------------------------------------------
CLASS B SHARES
- --------------
The CDSC will be waived under certain circumstances, including the following:
- - Distributions from retirement plans if the distributions are made
following the death or disability of shareholders or plan participants.
- - Redemptions from accounts other than retirement accounts following the
death or disability of the shareholder.
- - Returns of excess contributions to retirement plans.
- - Distributions of less than 12% of the annual account value under a
Systematic Withdrawal Plan.
- - Shares issued in a plan of reorganization sponsored by the Adviser, or
shares redeemed involuntarily in a similar situation.
DISTRIBUTION (12B-1) FEES - CLASS A AND B SHARES
- -------------------------------------------------
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and distribution
of the Fund's shares. 12b-1 fees are paid from Fund assets on an ongoing basis,
and will increase the cost of your investment.
- The 12b-1 fees vary by share class as follows:
- Class A shares pay a 12b-1 fee of up to .25% of the average
daily net assets of a Fund.
- Class B shares pay a 12b-1 fee of up to .75% of the average
daily net assets of the applicable Fund. This will cause
expenses for Class B shares to be higher and dividends to be
lower than for Class A shares.
- The higher 12b-1 fee on Class B shares, together with the CDSC, help
the Distributor sell Class B shares without an "up-front" sales
charge. In particular, these fees help to defray the Distributor's
costs of advancing brokerage commissions to investment
representatives.
Over time holders of Class B shares may pay more than the equivalent of the
maximum permitted front-end sales charge because 12b-1 distribution and service
fees are paid out of the Fund's assets on an on-going basis.
39
<PAGE> 41
SHAREHOLDER SERVICE FEES
- ------------------------
Various banks, trust companies, broker-dealers (other than the Distributor) and
other financial organizations ("Service Organization(s)") may provide certain
shareholder services for their customers who invest in the Funds' Class A and
Class B Shares, through accounts maintained at that Service Organization. The
Funds, under shareholder servicing agreements with the Service Organization,
will pay the Service Organization a fee at an annual rate of up to .25% of the
Fund's average daily net assets for these services, which include:
- receiving and processing shareholder orders
- maintaining retirement plan accounts
- answering questions and handling correspondence for customer
accounts
- acting as the sole shareholder of record for customer accounts
- issuing shareholder reports and transaction confirmations
40
<PAGE> 42
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
EXCHANGING YOUR SHARES
- ----------------------
You can exchange your shares in one Fund for shares of the same class of another
USAllianz Fund, usually without paying additional sales charges (see "Notes"
below). No transaction fees are charged for exchanges.
You must meet the minimum investment requirements and shares must be eligible
for sale in the state for the Fund into which you are exchanging. Exchanges from
one Fund to another are taxable.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to USAllianz Funds, P.O. Box
0000, Columbus OH 43219, or by calling 1-800-000-0000. Please provide the
following information:
- - Your name and telephone number o The exact name on your account and
account number
- - Taxpayer identification number (usually your Social Security number)
- - Dollar value or number of shares to be exchanged
- - The name of the Fund from which the exchange is to be made
- - The name of the Fund into which the exchange is being made.
See "Selling your Shares" for important information about telephone
transactions.
To prevent disruption in the management of the Funds, due to market timing
strategies, exchange activity may be limited to _____ exchanges within a _____
period.
AUTOMATIC EXCHANGES
You can use the Money Market Fund's Automatic Exchange feature to purchase
shares of the other Funds at regular intervals through regular, automatic
redemptions from the Money Market Fund. To participate in the Automatic
Exchange:
- - Complete the appropriate section of the Account Application.
- - Keep a minimum of $5,000 in the Money Market Fund and $1,000 in the
Fund whose shares you are buying.
To change the Automatic Exchange instructions or to discontinue the feature, you
must send a written request to USAllianz Funds, P.O. Box 0000, Columbus, Ohio
43218- XXXX.
NOTES ON EXCHANGES
When exchanging from a Fund that has no sales charge or a lower sales charge to
a Fund with a higher sales charge, you will pay the difference.
The registration and tax identification numbers of the two accounts must be
identical.
The Exchange Privilege (including automatic exchanges) may be changed or
eliminated at any time upon a 60-day notice to shareholders.
41
<PAGE> 43
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
- ----------------------------------
Any income a Fund receives is paid out, less expenses, in the form of dividends
to its shareholders. Shares begin accruing dividends on the day they are
purchased. Income dividends on the Growth Fund and Global Opportunities Fund are
usually paid semiannually. Income dividends on the Money Market Fund,
Diversified Assets Fund and Intermediate Fixed Income Fund are usually paid
monthly. Capital gains for all Funds are distributed at least annually.
An exchange of shares is considered a sale, and any related gains may be subject
to applicable taxes.
Dividends generally are taxable as ordinary income. Taxes on capital gains by
the Funds will vary with the length of time the Fund has held the security - not
how long you have invested in the Fund.
The Growth Fund, Global Opportunities Fund and Diversified Assets Fund may incur
foreign income taxes in connection with some of their investments. Certain of
these taxes may be credited to shareholders.
Dividends are taxable in the year in which they are declared, even if they are
paid and appear on your account statement the following year. Dividends and
distributions are treated in the same manner for federal income tax purposes
whether you receive them in cash or in additional shares.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements. There
is a penalty on certain pre-retirement distributions from retirement accounts.
Consult your tax adviser about the federal, state and local tax consequences in
your particular circumstances.
42
<PAGE> 44
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. As of the date of
this Prospectus, the Funds have not yet issued any reports.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including its operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.
- --------------------------------------------------------------------------------
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION AND
DISCUSS YOUR QUESTIONS ABOUT THE USALLIANZ FUNDS BY CONTACTING A BROKER OR BANK
THAT SELLS THE FUND. OR CONTACT THE FUND AT:
USALLIANZ FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-_____-_________
E-MAIL: [email protected]
INTERNET: HTTP://WWW.USALLIANZFUNDS.COM
- --------------------------------------------------------------------------------
You can review the Fund's reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
- - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
- - Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-00000.
- --------------------------------------------------------------------------------
43
<PAGE> 45
GROWTH FUND
GLOBAL OPPORTUNITIES FUND
INTERMEDIATE FIXED INCOME FUND
MONEY MARKET FUND
DIVERSIFIED ASSETS FUND
Each a Fund of
USALLIANZ FUNDS
Statement of Additional Information
Class A Shares, Class B Shares and Class Y Shares
September , 1999
Each above Fund has distinct investment objectives and policies.
Shares of the Funds are sold to the public by BISYS Fund Services Limited
Partnership ("BISYS" or the "Distributor") as an investment vehicle for
individuals, institutions, corporations and fiduciaries, including customers of
the Adviser or its affiliates.
USAllianz Funds is offering an indefinite number of shares of each
class of each Fund. Each Fund, including the Money Market Fund, also offers
Class Y shares, available only to accounts managed by the Adviser and to
institutional investors. Class Y shares have no front-end sales charge or
contingent deferred sales charge.
This Statement of Additional Information is not a Prospectus, but
should be read in conjunction with the Prospectus for USAllianz Funds dated
September __, 1999, which may be supplemented from time to time. This Statement
of Additional Information is incorporated by reference in its entirety into the
Prospectus. Copies of the Prospectus may be obtained without charge, upon
request, by writing USAllianz Funds at 3435 Stelzer Road, Columbus, Ohio 43219,
or by calling toll free (800) 0000000.
<PAGE> 46
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES......................................................B-3
The Funds .....................................................................B-3
Additional Information on Portfolio Instruments................................B-5
Investment Restrictions........................................................B-18
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..........................................B-20
Portfolio Turnover.............................................................B-20
NET ASSET VALUE.........................................................................B-22
Valuation of the Funds.........................................................B-22
MANAGEMENT OF THE TRUST.................................................................B-24
Trustees and Officers..........................................................B-24
The Adviser....................................................................B-25
Portfolio Transactions.........................................................B-26
Administrator..................................................................B-27
Distributor....................................................................B-28
Shareholder Service Fees.......................................................B-29
Custodians, Transfer Agent and Fund Accounting Services........................B-30
Independent Auditors...........................................................B-30
ADDITIONAL INFORMATION..................................................................B-30
Description of Shares..........................................................B-30
Vote of a Majority of the Outstanding Shares...................................B-31
Additional Tax Information.....................................................B-34
Additional Tax Information Concerning
Global Opportunities Fund......................................................B-34
Yields of the Funds............................................................B-35
Calculation of Total Return....................................................B-35
Performance Comparisons........................................................B-36
Miscellaneous..................................................................B-36
Financial Statements...........................................................B-37
APPENDIX................................................................................B-38
</TABLE>
2
<PAGE> 47
STATEMENT OF ADDITIONAL INFORMATION
USALLIANZ FUNDS
USAllianz Funds (the "Trust") is an open-end management company
organized in July 1999 as a Delaware business trust which offers five separate
and diversified investment portfolios (collectively, the "Funds" and each
individually, a "Fund"), each with a different investment objective. The Trust
offers four variable net asset value funds: the Growth Fund, the Intermediate
Fixed Income Fund, Global Opportunities Fund and the Diversified Assets Fund.
The Trust also offers a money market fund, the Money Market Fund.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of the Trust
described above. Capitalized terms not defined herein are defined in the
Prospectus. No investment in shares of a Fund should be made without first
reading the Trust's Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of each Fund are fundamental and may not be
changed without the vote of the Fund's shareholders.
THE FUNDS
USALLIANZ GROWTH FUND. The Fund pursues its objective of long-term growth of
capital by investing primarily in a diversified portfolio of publicly traded
common and preferred stocks and securities convertible into or exchangeable for
common stock (see "Convertible Securities"). The Fund expects to invest
primarily in securities of U.S.-based companies, but it may also invest in
securities of non-U.S. companies, generally through American Depository Receipts
("ADRs"). The Fund may without limit, hold uninvested cash reserves or invest in
debt instruments for temporary defensive purposes when the Adviser has
determined that abnormal market or economic conditions so warrant. These debt
obligations may include U.S. Government securities; certificates of deposit,
bankers' acceptances and other short-term debt obligations of banks with total
assets of at least $100,000,000; debt obligations of corporations (corporate
bonds, debentures, notes and other similar corporate debt instruments); variable
and floating rate demand and master demand notes; commercial paper; and
repurchase agreements with respect to securities in which the Fund is authorized
to invest. (See "Bank Obligations", "Government Obligations", "Commercial
Paper", "Corporate Debt Securities", "Repurchase Agreements" and "Variable and
Floating Rate Demand and Master Demand Notes"). Although the Fund's investments
in such debt securities and in convertible and preferred stock will generally be
rated A, A-1, or better by Standard & Poor's Corporation ("S&P") or A, Prime-1
or better by Moody's Investors Service, Inc. ("Moody's"), or deemed of
comparable quality by the Adviser, the Fund is authorized to invest up to 15% of
its assets in securities rated as low as BBB by S&P or Baa by Moody's, or deemed
of comparable quality by the Adviser. Securities rated BBB or Baa, or deemed
equivalent to such securities, may have speculative characteristics. If any
security held by the Fund is downgraded below BBB/Baa (or so deemed by the
Adviser), the securities will generally be sold unless it is determined that
such sale is not in the best interest of the Fund. The Fund will invest in no
securities rated below BBB or Baa. In addition, the Fund may enter into stock
index futures contracts, options on securities and options on futures contracts
to a limited extent (see "Future Contracts", and "Option Trading"). The Fund has
no intention to utilize options and futures in the near future and will
supplement its prospectus disclosure in the event it employs such investment
practices. The Fund may also invest in investment companies and real estate
investment trusts (REITS) and lend portfolio securities (see "Securities of
Other Investment Companies", "Lending of Portfolio Securities", and "Real Estate
Investment Trusts").
3
<PAGE> 48
USALLIANZ GLOBAL OPPORTUNITIES FUND. The Fund pursues its objective of long-term
growth of capital by investing, under normal circumstances, at least 80% of its
total assets in equity securities, including convertible securities of U.S. and
foreign issuers (see "Convertible Securities"). In addition, the Fund may enter
into stock index futures contracts, options on securities, options on futures
contracts and forward foreign currency exchange contracts to a limited extent
(see "Futures Contracts", "Options Trading", "Foreign Currency Options and
Futures Transactions", and "Forward Foreign Currency Exchange Contracts"). The
Fund has no intention to utilize options and futures in the near future and will
supplement its prospectus disclosure in the event it employs such investment
practice. The balance of the Fund's assets may be invested in investment grade
debt obligations issued by domestic and foreign companies, banks and governments
including institutions such as the World Bank (known as "Supranational Agency
Bonds"). For temporary defensive purposes when the Adviser has determined that
abnormal market or economic conditions so warrant, the Fund may invest without
limit in debt instruments of the same types, and subject to the same conditions,
as USAllianz Growth Fund under such circumstances. The Fund may also invest
without limitation in debt securities of foreign companies, banks and
governments during such abnormal market or economic conditions.
USALLIANZ INTERMEDIATE FIXED INCOME FUND. The Fund pursues its objective of
maximizing total return with secondary emphasis on income by investing in a
diversified portfolio consisting primarily of investment grade fixed rate debt
obligations, including U.S. government securities. Under normal market
conditions, at least 80% of the Fund's total assets will be invested in:
obligations of the U.S. government, its agencies and instrumentalities;
corporate bonds of U.S. issuers; mortgage-backed securities issued by U.S.
government agencies and other asset backed securities (see " Government
Obligations", "Mortgage Related Securities" and "Corporate Debt Securities").
The Fund also has authority to invest in other types of securities, including
preferred stocks, securities convertible into common stock, dollar-denominated
obligations of non-U.S. issuers, various types of asset-backed securities and
money market instrument (see "Convertible Securities" and "Foreign Investment").
The Fund may also invest in income-producing securities issued by real estate
investment trusts ("REITs") and Guaranteed Investment Contracts ("GICS") (see
"Real Estate Investment Trusts" and "Guaranteed Investment Contracts"). The Fund
may engage in transactions in covered options and interest-rate futures
contracts in order to lengthen or shorten the average maturity of its portfolio.
(see "Futures Contracts", and "Option Trading"). The Fund expects to maintain a
dollar-weighted average portfolio maturity of between 3 and 8 years.
Debt obligations acquired by the Fund will be rated at least investment grade,
i.e., BBB or better by S & P or Baa by Moody's or deemed of comparable quality
by the Adviser. At least 80% of the Fund's portfolio securities will be rated
Baa or better by Moody's or BBB or better by S&P or, if unrated, deemed of
comparable quality by the Adviser. If the rating of a security held by the Fund
is reduced, the Adviser is not required to sell the security but will do so if
and when the Adviser believes the sale is in the best interests of the Fund. Up
to 20% of the Fund's assets may be invested in securities rated below BBB by S&P
or Baa by Moody's (or, if unrated, deemed of comparable quality by the Adviser)
at the time of purchase by the Fund, in preferred stocks, zero coupon
obligations and in convertible securities. See the Appendix for a description of
such lower ratings and "Corporate Debt Securities" for a discussion of risks
posed by lower rated securities. The Fund may invest, for temporary defensive
purposes, in short term debt obligations of the foregoing as well as bank
obligations, commercial paper and repurchase agreements (see "Bank Obligations",
"Commercial Paper" and "Repurchase Agreements"). The Fund may also invest in
other investment companies; when-issued and delayed delivery securities, forward
foreign currency exchange contracts, and restricted securities. (See "Securities
of Other Investment Companies", and When-Issued and Delayed Delivery
Securities", "Forward Foreign Currency Exchange Contracts", and "Restricted
Securities"). The Fund has authority to lend its portfolio securities (see
"Lending of Portfolio Securities").
4
<PAGE> 49
USALLIANZ MONEY MARKET FUND. The Fund pursues its objective of current income
consistent with stability of principal by investing in a broad range of high
quality, short-term, money market instruments that have remaining maturities not
exceeding 397 days. The Fund is required to maintain a dollar-weighted average
portfolio maturity no greater than 90 days. The Fund's investments may include
any investments permitted under federal rules governing money market funds,
including: U.S. Government securities; bank obligations; commercial paper,
corporate debt securities, variable rate demand notes (see "Corporate Debt
Securities", "Repurchase Agreements", and "Variable and Floating Rate Demand ",
and "Master Demand Notes").
The Adviser selects only those U.S. dollar-denominated debt instruments that
meet the high quality and credit risk standards established by the Board of
Trustees and consistent with Federal requirements applicable to money market
funds. In accordance with such requirements, the Fund will purchase securities
that are rated within the top two rating categories by at least two nationally
recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has
rated the security, by that NRSRO, or if not rated, the securities are deemed of
comparable quality pursuant to standards adopted by the Board of Trustees.
Corporate debt securities (bonds, debentures, notes and other similar debt
instruments) in which the Fund may invest have 397 days or less to maturity and
are rated AA or better by S&P or Aa or better by Moody's. The Fund will invest
no more than 5% of its total assets in debt securities which are rated below the
top rating category or, if unrated, are of comparable investment quality as
determined by the Adviser.
The Fund may also invest up to 5% of its total assets in another investment
company, not to exceed 10% of the value of its total assets in the securities of
other investment companies (see "Securities of Other Investment Companies"). The
Fund may also invest in when issued and delayed delivery securities and lend its
portfolio securities (see "When Issued and Delayed Delivery Securities" and
"Lending of Portfolio Securities").
USALLIANZ DIVERSIFIED ASSETS FUND. The Fund pursues its objective of total
return consistent with reduction of long-term volatility by investing primarily
in a diversified portfolio of stocks, bonds, and money market securities of U.S.
and foreign issuers with each asset class being managed along the same
investment criteria for the Growth Fund, the Intermediate Fixed Income Fund and
the Money Market Fund as described in the prospectus.
Accordingly, see the above respective Fund investment sections for further
description of investments. For temporary defensive purposes during abnormal
market or economic conditions, the Fund may invest without limit in debt
instruments of the same type, and subject to the same conditions, as USAllianz
Growth Fund under such circumstances.
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
The following policies supplement the investment objectives and
policies of each Fund of the Trust as set forth above and in the Prospectus for
the Trust.
BANK OBLIGATIONS. (ALL FUNDS)
Each of the Funds may invest in bank obligations consisting of bankers'
acceptances, certificates of deposit and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically 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. Bankers' acceptances
invested in by the Funds will be those guaranteed by domestic and foreign banks
having, at the time of investment,
5
<PAGE> 50
capital, surplus and undivided profits in excess of $100,000,000 (as of the date
of their most recently published financial statements).
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of deposit
and time deposits will be those of domestic and foreign banks and savings and
loan associations if (a) at the time of investment, the depository or
institution has capital, surplus, and undivided profits in excess of
$100,000,000 (as of the date of its most recently published financial
statements), or (b) the principal amount of the instrument is insured in full by
the Federal Deposit Insurance Corporation.
Each of the Funds may also invest in Eurodollar certificates of deposit
("Euro CDs"), which are U.S. dollar-denominated certificates of deposit issued
by offices of foreign and domestic banks located outside the United States;
Yankee certificates of deposit ("Yankee CDs") which are certificates of deposit
issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held
in the United States; Eurodollar time deposits ("ETDs") which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or foreign bank;
and Canadian time deposits, which are basically the same as ETDs, except they
are issued by Canadian offices of major Canadian banks.
COMMERCIAL PAPER (ALL FUNDS)
Commercial paper consists of unsecured promissory notes issued by
corporations. Except as noted below with respect to variable amount master
demand notes, issues of commercial paper normally have maturities of less than 9
months and fixed rates of return.
The Global Opportunities Fund, Growth Fund, Diversified Assets Fund and
Intermediate Fixed Income Fund may invest in commercial paper rated in any
rating category or not rated by an NRSRO. In general, investment in lower-rated
instruments is more risky than investment in instruments in higher-rated
categories. For a description of the rating symbols of each NRSRO, see the
Appendix. Each Fund may also invest in Canadian commercial paper, which is
commercial paper issued by a Canadian corporation and Europaper, which is
commercial paper issued by a European-based corporation.
VARIABLE AND FLOATING RATE DEMAND AND MASTER DEMAND NOTES (ALL FUNDS).
The Funds may, from time to time, buy variable rate demand notes issued
by corporations, bank holding companies and financial institutions and similar
taxable and tax-exempt instruments issued by government agencies and
instrumentalities. These securities will typically have a maturity in the 5 to
20 year range but carry with them the right of the holder to put the securities
to a remarketing agent or other entity on short notice, typically seven days or
less. The obligation of the issuer of the put to repurchase the securities is
backed up by a letter of credit or other obligation issued by a financial
institution. The purchase price is ordinarily par plus accrued and unpaid
interest. Ordinarily, the remarketing agent will adjust the interest rate every
seven days (or at other intervals corresponding to the notice period for the
put), in order to maintain the interest rate at the prevailing rate for
securities with a seven-day maturity
Variable amount master demand notes in which each Fund may invest are
unsecured demand notes that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate according to the terms of
the instrument. Because master demand notes are direct lending arrangements
between a Fund and the issuer, they are not normally traded. Although there is
no secondary market in the notes, a Fund may demand payment of principal and
accrued interest at any time. While the notes are not rated by credit rating
agencies, issuers of variable amount master demand notes (which are normally
manufacturing, retail, financial and other business concerns) must satisfy the
same criteria set forth above for commercial paper. The Adviser will consider
the earning power, cash flow, and other
6
<PAGE> 51
liquidity ratios of such notes and will continuously monitor the financial
status and ability to make payment on demand. In determining dollar average
maturity, a variable amount master demand note will be deemed to have a maturity
equal to the longer of the period of time remaining until the next interest rate
adjustment or the period of time remaining until the principal amount can be
recovered from the issuer through demand.
GUARANTEED INVESTMENT CONTRACTS
(INTERMEDIATE FIXED INCOME FUND AND DIVERSIFIED ASSETS FUND)
The Intermediate Fixed Income Fund and Diversified Assets Fund may
invest in guaranteed investment contracts ("GICs"). In determining average
portfolio maturity, GICs will be deemed to have a maturity equal to the period
of time remaining until the next readjustment of the guaranteed interest rate.
DEPOSITARY RECEIPTS (ALL FUNDS EXCEPT MONEY MARKET FUND)
For many foreign securities, U.S. dollar-denominated ADRs, which are
traded in the United States on exchanges or over-the-counter, are issued by
domestic banks. ADRs represent the right to receive securities of foreign
issuers deposited in a domestic bank or a correspondent bank. ADRs do not
eliminate all of the risk inherent in investing in the securities of foreign
issuers. However, by investing in ADRs rather than directly in foreign issuers'
stock, a Fund can avoid currency risks during the settlement period for either
purchases or sales. In general, there is a large liquid market in the United
States for many ADRs. The Global Opportunities Fund may also invest in EDRs and
GDRs which are receipts evidencing an arrangement with European and other banks
similar to that for ADRs and are designed for use in European and other
securities markets. EDRs and GDRs are not necessarily denominated in the
currency of the underlying security.
Certain depositary receipts, typically those categorized as
unsponsored, require the holders to bear most of the costs of such facilities
while issuers of sponsored facilities normally pay more of the costs. The
depository of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
securities or to pass through the voting rights to facility holders with respect
to the deposited securities, whereas the depository of a sponsored facility
typically distributes shareholder communications and passes through the voting
rights.
SECURITIES OF OTHER INVESTMENT COMPANIES (ALL FUNDS).
Each Fund may invest in securities issued by other investment
companies. Each of the Funds currently intends to limit its investments so that,
as determined immediately after a securities purchase is made: (a) not more than
5% of the value of its total assets will be invested in the securities of any
one investment company; (b) not more than 10% of the value of its total assets
will be invested in the aggregate in securities of investment companies as a
group; (c) not more than 3% of the outstanding voting stock of any one
investment company will be owned by any of the Funds; and (d) not more than 10%
of the outstanding voting stock of any one investment company will be owned in
the aggregate by the Funds. As a shareholder of another investment company, a
Fund would bear, along with other shareholders, its pro rata portion of that
company's expenses, including advisory fees. These expenses would be in addition
to the advisory and other expenses that the Fund bears directly in connection
with its own operations. Investment companies in which a Fund may invest may
also impose a sales or distribution charge in connection with the purchase or
redemption of their shares and other types of commissions or charges. Such
charges will be payable by the Funds and, therefore, will be borne indirectly by
shareholders.
7
<PAGE> 52
GOVERNMENT OBLIGATIONS (ALL FUNDS)
Each of the Funds may invest in obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities, including bills, notes and
bonds issued by the U.S. Treasury, as well as "stripped" U.S. Treasury
obligations ("Stripped Treasury Obligations") such as Treasury receipts issued
by the U.S. Treasury representing either future interest or principal payments.
Stripped securities are issued at a discount to their "face value" and may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors.
Obligations of certain agencies and instrumentalities of the U.S.
government, such as the Government National Mortgage Association ("GNMA"), are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of Federal National Mortgage Association ("FNMA"), are supported by the
right of the issuer to borrow from the Treasury; others, such as those of the
Student Loan Marketing Association ("SLMA"), are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations; still
others, such as those of the Federal Farm Credit Banks or the Federal Home Loan
Mortgage Corporation ("FHLMC"), are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. government would
provide financial support to U.S. government-sponsored agencies or
instrumentalities, such as FNMA, SLMA, or the FHLMC, since it is not obligated
to do so by law. These agencies or instrumentalities are supported by the
issuer's right to borrow specific amounts from the U.S. Treasury, the
discretionary authority of the U.S. government to purchase certain obligations
from such agencies or instrumentalities, or the credit of the agency or
instrumentality.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES (ALL FUNDS)
Each Fund may purchase securities on a "when-issued" or
"delayed-delivery" basis. The Funds will engage in when-issued and
delayed-delivery transactions only for the purpose of acquiring portfolio
securities consistent with their investment objectives and policies, not for
investment leverage, although such transactions represent a form of leveraging.
When-issued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield and thereby involve risk that the
yield obtained in the transaction will be less than those available in the
market when the delivery takes place. A Fund will not pay for such securities or
start earning interest on them until they are received. When a Fund agrees to
purchase securities on a "when-issued" or "delayed-delivery" basis, a Fund's
Custodian will set aside cash or liquid securities equal to the amount of the
commitment in a separate account. Normally, the Custodian will set aside
portfolio securities to satisfy the purchase commitment, and in such case, a
Fund may be required subsequently to place additional assets in the separate
account in order to assure that the value of the account remains equal to the
amount of a Fund's commitment. It may be expected that a Fund's net assets will
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. In addition, because a
Fund will set aside cash or liquid securities to satisfy its purchase
commitments in the manner described above, a Fund's liquidity and the ability of
the Adviser to manage it might be affected in the event its commitments to
purchase "when-issued" or "delayed-delivery" securities ever exceeded 25% of the
value of its total assets. Under normal market conditions, however, a Fund's
commitments to purchase "when-issued" or "delayed-delivery" securities will not
exceed 25% of the value of its total assets.
Securities purchased on a when-issued basis are recorded as an asset
and are subject to changes in the value based upon changes in the general level
of interest rates. In when-issued and delayed-delivery transactions, a Fund
relies on the seller to complete the transaction; the seller's failure to do so
may cause such Fund to miss a price or yield considered to be advantageous. If a
Fund sells a "when-issued" or "delayed-delivery" security before a delivery, any
gain would be taxable.
8
<PAGE> 53
MORTGAGE-RELATED SECURITIES (ALL FUNDS EXCEPT GLOBAL OPPORTUNITIES FUND)
Each of the Funds, except the Global Opportunities Fund, may,
consistent with its investment objective and policies, invest in
mortgage-related securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities. The Intermediate Fixed Income Fund may, in
addition, invest in mortgage-related securities issued by non-governmental
entities, including collateralized mortgage obligations structured on pools of
mortgage pass-through certificates or mortgage loans, subject to the rating
limitations described in the Prospectus.
Mortgage-related securities, for purposes of the Fund's Prospectus and
this Statement of Additional Information, represent pools of mortgage loans
assembled for sale to investors by various governmental agencies such as GNMA
and government-related organizations such as FNMA and the FHLMC, as well as by
non-governmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party or
are otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. Accelerated prepayments have an adverse impact on
yields for pass-through securities purchased at a premium (i.e., a price in
excess of principal amount) and may involve additional risk of loss of principal
because the premium may not have been fully amortized at the time the obligation
is prepaid. The opposite is true for pass-through securities purchased at a
discount. The Funds may purchase mortgage-related securities at a premium or at
a discount. If a Fund purchases a mortgage-related security at a premium, that
portion may be lost if there is a decline in the market value of the security
whether resulting from changes in interest rates or prepayments in the
underlying mortgage collateral. As with other interest-bearing securities, the
prices of such securities are inversely affected by changes in interest rates.
However, though the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true, since in periods of
declining interest rates the mortgages underlying the securities are prone to
prepayment, thereby shortening the life of the security and shortening the
period of time over which income at the higher rate is received. When interest
rates are rising, though, the rate of prepayment tends to decrease, thereby
lengthening the period of time over which income at the lower rate is received.
For these and other reasons, a mortgage-related security's average maturity may
be shortened or lengthened as a result of interest rate fluctuations and,
therefore, it is not possible to predict accurately the security's return to the
Funds. In addition, regular payments received in respect of mortgage-related
securities include both interest and principal. No assurance can be given as to
the return the Funds will receive when these amounts are reinvested.
There are a number of important differences among the agencies and the
instrumentalities of the U.S. government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued by
GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") which are guaranteed as to the timely payment of principal and interest
by GNMA and such guaranty is backed by the full-faith and credit of the United
States. GNMA is a wholly-owned U.S. government corporation within the Department
of Housing and Urban Development. GNMA certificates are also supported by the
authority of the GNMA to borrow funds from the U.S. Treasury to make payments
under its guarantee. Mortgage-related securities issued by FNMA include FNMA
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")
which are solely the obligations of FNMA and are not backed by or entitled to
the full faith and credit of the United States. FNMA is a government-sponsored
organization owned entirely by private stockholders. Fannie Maes are guaranteed
as to timely payment of the principal and interest by FNMA. Mortgage-related
securities issued by FHLMC include FHLMC mortgage participation certificates
(also known as "Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of
the United States, organized pursuant to an Act of Congress, which is owned
entirely by the Federal Home Loan banks. Freddie Macs are not guaranteed by the
United States or by any Federal Home Loan banks and do not constitute a debt or
obligation of the United States or of any Federal Home Loan bank. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. FHLMC guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. When FHLMC does not
guarantee
9
<PAGE> 54
timely payment of principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.
Mortgage-related securities in which the above-named Funds may invest
may also include collateralized mortgage obligations ("CMOs"). CMOs are debt
obligations issued generally by finance subsidiaries or trusts that are secured
by mortgage-backed certificates, including, in many cases, certificates issued
by government-related guarantors, including GNMA, FNMA and FHLMC, together with
certain funds and other collateral. Although payment of the principal of and
interest on the mortgage-backed certificates pledged to secure the CMOs may be
guaranteed by GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the
issuer and are not insured or guaranteed by GNMA, FHLMC, FNMA or any other
governmental agency, or by any other person or entity. The issuers of the CMOs
typically have no significant assets other than those pledged as collateral for
the obligations.
CMOs are issued in multiple classes. Each class of CMOs, often referred
to as a "tranche," is issued at a specific adjustable or fixed interest rate and
must be fully retired no later than its final distribution date. Principal
prepayments on the mortgage loans or the mortgage assets underlying the CMOs may
cause some or all of the classes of CMOs to be retired substantially earlier
than their final distribution dates. Generally, interest is paid or accrues on
all classes of CMOs on a monthly basis.
The principal of and interest on the mortgage assets may be allocated
among the several classes of CMOs in various ways. In certain structures (known
as "sequential pay" CMOs), payments of principal, including any principal
prepayments, on the mortgage assets generally are applied to the classes of CMOs
in the order of their respective final distribution dates. Thus, no payment of
principal will be made on any class of sequential pay CMOs until all other
classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay"
CMOs. Parallel pay CMOs are those which are structured to apply principal
payments and prepayments of the mortgage assets to two or more classes
concurrently on a proportionate or disproportionate basis. These simultaneous
payments are taken into account in calculating the final distribution date of
each class.
CORPORATE DEBT SECURITIES (ALL FUNDS)
The Funds may invest in investment grade corporate debt securities
subject to the limitations set forth in the Prospectus. Depending upon the
prevailing market conditions, the Adviser may purchase debt securities at a
discount from face value, which produces a yield greater than the coupon rate.
Conversely, if debt securities are purchased at a premium over face value the
yield will be lower than the coupon rate. The Intermediate Fixed Income Fund
expects to invest in bonds, notes and debentures of a wide range of U.S.
corporate issuers. Such obligations, in the case of debentures will represent
unsecured promises to pay, and in the case of notes and bonds, may be secured by
mortgages on real property or security interests in personal property and will
in most cases differ in their interest rates, maturities and times of issuance.
The Intermediate Fixed Income Fund and Diversified Assets Fund may
invest without limitation in securities which are rated the fourth highest
rating group assigned by an NRSRO (e.g., securities rated BBB by S&P or Baa by
Moody's) or, if not rated, are of comparable quality as determined by the
Adviser ("Medium-Grade Securities"). After purchase by a Fund, a security may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. Neither event will require a sale of such security by the
Fund. A split rated security, i.e., rated in the fourth highest category by one
NRSRO and also rated below the fourth highest category by another NRSRO, will
not be considered a "medium grade security."
10
<PAGE> 55
As with other fixed-income securities, Medium-Grade Securities are
subject to credit risk and market risk. Market risk relates to changes in a
security's value as a result of changes in interest rates. Credit risk relates
to the ability of an issuer to make payments of principal and interest.
Medium-Grade Securities are considered by Moody's to have speculative
characteristics.
The Intermediate Fixed Income Fund may invest up to 20% of its total
assets in lower rated securities. Fixed income securities with ratings below Baa
(Moody's) or BBB (S&P) are considered below investment grade and are commonly
referred to as "junk" bonds ("Lower Rated Securities"). The Intermediate Fixed
Income Fund also may invest in unrated lower quality bonds.
These lower rated securities generally offer higher interest payments
because the company that issues the bond - the issuer - is at greater risk of
default (failure to repay the bond). This may be because the issuer is small or
new to the market, the issuer has financial difficulties, or the issuer has a
greater amount of debt.
Some risks of investing in lower rated securities include:
- Greater credit risk - Because of their more precarious financial
position, issuers of high yield bonds may be more vulnerable to
changes in the economy or to interest rate changes that might
affect their ability to repay debt.
- Reduced liquidity - There are fewer investors willing to buy high
yield bonds than there are for higher rated, investment grade
securities. Therefore, it may be more difficult to sell these
securities or to receive a fair market price for them.
- Lack of historical data - Because high yield bonds are a
relatively new type of security, there is little data to indicate
how such bonds will behave in a prolonged economic downturn.
However, there is a risk that such an economic downturn would
negatively affect the ability of issuers to repay their debts,
leading to increased defaults and overall losses to the Fund.
Particular types of Medium-Grade and Lower Rated Securities may present
special concerns. The prices of payment-in-kind or zero-coupon securities react
more strongly to changes in interest rates than the prices of other Medium-Grade
or Lower Rated Securities. Some Medium-Grade Securities in which a Fund may, and
some Lower Rated Securities which the Intermediate Fixed Income Fund may, invest
may be subject to redemption or call provisions that may limit increases in
market value that might otherwise result from lower interest rates while
increasing the risk that such Fund may be required to reinvest redemption or
call proceeds during a period of relatively low interest rates.
The credit ratings issued by Moody's and S&P are subject to various
limitations. For example, while such ratings evaluate credit risk, they
ordinarily do not evaluate the market risk of Medium-Grade or Lower Rated
Securities. In certain circumstances, the ratings may not reflect in a timely
fashion adverse developments affecting an issuer. For these reasons, the Adviser
conducts its own independent credit analysis of Medium-Grade and Lower Rated
Securities.
RESTRICTED SECURITIES (ALL FUNDS)
Securities in which each of the Funds may invest include securities
issued by corporations without registration under the Securities Act of 1933, as
amended (the "1933 Act"), in reliance on the exemption from such registration
afforded by Section 3(a)(3) thereof, and securities issued in reliance on the
so-called "private placement" exemption from registration which is afforded by
Section 4(2) of the 1933 Act ("Section 4(2) Securities"). Section 4(2)
Securities are restricted as to disposition under the federal securities laws,
and generally are sold to institutional investors, such as the Funds, who agree
that they are purchasing the securities for investment and not with a view to
public distribution. Any resale
11
<PAGE> 56
must also generally be made in an exempt transaction. Section 4(2) Securities
are normally resold to other institutional investors through or with the
assistance of the issuer or investment dealers who make a market in such Section
4(2) Securities, thus providing liquidity. The Trust's Board of Trustees has
delegated to the Adviser the day-to-day authority to determine whether a
particular issue of Section 4(2) Securities that are eligible for resale under
Rule 144A under the 1933 Act should be treated as liquid. Rule 144A provides a
safe-harbor exemption from the registration requirements of the 1933 Act for
resales to "qualified institutional buyers" as defined in the Rule. With the
exception of registered broker-dealers, a qualified institutional buyer must
generally own and invest on a discretionary basis at least $100 million in
securities.
The Adviser may deem Section 4(2) Securities liquid if it believes
that, based on the trading markets for such security, such security can be
disposed of within seven (7) days in the ordinary course of business at
approximately the amount at which a Fund has valued the security. In making such
determination, the Adviser generally considers any and all factors that it deems
relevant, which may include: (i) the credit quality of the issuer; (ii) the
frequency of trades and quotes for the security; (iii) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers; (iv) dealer undertakings to make a market in the security; and (v)
the nature of the security and the nature of market-place trades.
Subject to the limitations described above, the Funds may acquire
investments that are illiquid or of limited liquidity, such as private
placements or investments that are not registered under the 1933 Act. An
illiquid investment is any investment that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which it is
valued by a Fund. The price a Fund pays for illiquid securities or receives upon
resale may be lower than the price paid or received for similar securities with
a more liquid market. Accordingly, the valuation of these securities will
reflect any limitations on their liquidity. A Fund may not invest in additional
illiquid securities if, as a result, more than 15% (10% in the case of Money
Market Fund) of the market value of its net assets would be invested in illiquid
securities.
Treatment of Section 4(2) Securities as liquid could have the effect of
decreasing the level of a Fund's liquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.
REPURCHASE AGREEMENTS (ALL FUNDS)
Securities held by each of the Funds may be subject to repurchase
agreements. Under the terms of a repurchase agreement, a Fund would acquire
securities from member banks of the Federal Deposit Insurance Corporation and
registered broker-dealers which the Adviser deems creditworthy under the
guidelines approved by the Trust's Board of Trustees, subject to the seller's
agreement to repurchase such securities at a mutually agreed upon date and
price. The repurchase price would generally equal the price paid by a 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 securities. The seller under a
repurchase agreement will be required to maintain at all times the value of
collateral held pursuant to the agreement at not less than the repurchase price
(including accrued interest). If the seller were to default on its repurchase
obligations or become insolvent, the Fund holding such obligation would suffer a
loss to the extent that the proceeds from the sale of the underlying portfolio
securities were less than the repurchase price under the agreement, or to the
extent that the disposition of such securities by the Fund were delayed pending
court action. Additionally, there is no controlling legal precedent confirming
that a Fund would be entitled, as against the claim by such seller or its
receiver or trustee in bankruptcy, to retain the underlying securities, although
the Board of Trustees of the Trust believes that, under the regular procedures
normally in effect for the custody of a Fund's securities subject to repurchase
agreements, and under federal laws, a court of competent jurisdiction would rule
in favor of the Trust if presented with the question. Securities subject to
repurchase agreements will be held by the Trust's Custodian or another qualified
custodian or in the
12
<PAGE> 57
Federal Reserve/Treasury book-entry system. Repurchase agreements are considered
to be loans by a Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS (ALL FUNDS) AND DOLLAR ROLL AGREEMENTS
(INTERMEDIATE FIXED INCOME FUND AND DIVERSIFIED ASSETS FUND )
Each of the Funds may borrow money by entering into reverse repurchase
agreements and, with respect to the Intermediate Fixed Income Fund and
Diversified Assets Fund, dollar roll agreements in accordance with these Funds'
investment restrictions. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and broker-dealers
and agree to repurchase the securities, or substantially similar securities in
the case of a dollar roll agreement, at a mutually agreed-upon date and price. A
dollar roll agreement is identical to a reverse repurchase agreement except for
the fact that substantially similar securities may be repurchased. At the time a
Fund enters into a reverse repurchase agreement or a dollar roll agreement, it
will place in a segregated custodial account assets such as U.S. government
securities or other liquid high-grade debt securities consistent with the Fund's
investment restrictions having a value equal to the repurchase price (including
accrued interest), and will subsequently continually monitor the account to
insure that such equivalent value is maintained. Reverse repurchase agreements
and dollar roll agreements involve the risk that the market value of the
securities sold by a Fund may decline below the price at which a Fund is
obligated to repurchase the securities. Reverse repurchase agreements and dollar
roll agreements are considered to be borrowings by a Fund under the 1940 Act
and, therefore, a form of leverage. A Fund may experience a negative impact on
its net asset value if interest rates rise during the term of a reverse
repurchase agreement or dollar roll agreement. A Fund generally will invest the
proceeds of such borrowings only when such borrowings will enhance a Fund's
liquidity or when the Fund reasonably expects that the interest income to be
earned from the investment of the proceeds is greater than the interest expense
of the transaction.
OPTIONS TRADING (ALL FUNDS EXCEPT MONEY MARKET FUND)
A Fund may write (or sell) put and call options on the securities that
the Fund is authorized to buy or already holds in its portfolio. These option
contracts may be listed for trading on a national securities exchange or traded
over-the-counter. A Fund may also purchase put and call options. A Fund will not
write covered calls on more than 25% of its portfolio, and a Fund will not write
covered calls with strike prices lower than the underlying securities' cost
basis on more than 25% of its total portfolio. A Fund may not invest more than
5% of its total assets in option purchases.
A call option gives the purchaser of the option the right to buy, and
the writer has the obligation to sell, the underlying security or foreign
currency at the stated exercise price at any time prior to the expiration of the
option, regardless of the market price or exchange rate of the security or
foreign currency, as the case may be. The premium paid to the writer is
consideration for undertaking the obligations under the option contract. A put
option gives the purchaser the right to sell the underlying security or foreign
currency at the stated exercise price at any time prior to the expiration date
of the option, regardless of the market price or exchange rate of the security
or foreign currency, as the case may be. Put and call options purchased by the
Funds are valued at the last sale price, or in the absence of such a price, at
the mean between bid and asked price.
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included in the liability
section of the Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked-to-market to
reflect the current value of the option written. The current value of the traded
option is the last sale price or, in the absence of a sale, the average of the
closing bid and asked prices. If an option expires on the stipulated expiration
date or if the Fund enters into a closing purchase transaction, it will realize
a gain (or a loss if the cost of a closing purchase transaction exceeds the net
premium received when the option is sold) and the deferred credit related to
such option will be eliminated. If an option is exercised, the Fund
13
<PAGE> 58
may deliver the underlying security in the open market. In either event, the
proceeds of the sale will be increased by the net premium originally received
and the Fund will realize a gain or loss.
In order to close out a call option it has written, the Fund will enter
into a "closing purchase transaction" (the purchase of a call option on the same
security or currency with the same exercise price and expiration date as the
call option which such Fund previously has written). When the portfolio security
or currency subject to a call option is sold, the Fund will effect a closing
purchase transaction to close out an existing call option on that security or
currency. If such Fund is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security or currency until the option
expires or that Fund delivers the underlying security or currency upon exercise.
In addition, upon the exercise of a call option by the option holder, the Fund
will forego the potential benefit represented by market depreciation over the
exercise price.
A Fund may sell "covered" put and call options as a means of hedging
the price risk of securities in the Fund's portfolio. The sale of a call option
against an amount of cash equal to the put's potential liability constitutes a
"covered put."
Over-the-counter options ("OTC options") differ from exchange-traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than exchange-traded
options. Because OTC options are not traded on an exchange, pricing is normally
done by reference to information from a market marker. This information is
carefully monitored by the Adviser and verified in appropriate cases. OTC
options transactions will be made by a Fund only with recognized U.S. Government
securities dealers. OTC options are subject to the Funds' 15% limit on
investments in securities which are illiquid or not readily marketable (see
"Investment Restrictions"), provided that OTC option transactions by a Fund with
a primary U.S. Government securities dealer which has given the Fund an absolute
right to repurchase according to a "repurchase formula" will not be subject to
such 15% limit.
Each of the Growth Fund, Diversified Assets Fund, and Global
Opportunities Fund may also purchase or sell index options. Index options (or
options on securities indices) are similar in many respects to options on
securities except that an index option gives the holder the right to receive,
upon exercise, cash instead of securities, if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
Because index options are settled in cash, a call writer cannot
determine the amount of its settlement obligations in advance and, unlike call
writing on specific securities, cannot provide in advance for, or cover, its
potential settlement obligations by acquiring and holding the underlying
securities. A Fund may be required to segregate assets or provide an initial
margin to cover index options that would require it to pay cash upon exercise.
FUTURES CONTRACTS (ALL FUNDS EXCEPT MONEY MARKET FUND)
Each of the Funds except Money Market Fund may enter into futures
contracts. This investment technique is designed primarily to hedge against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might adversely affect the value of securities which a Fund holds or
intends to purchase. For example, when interest rates are expected to rise or
market values of portfolio securities are expected to fall, a Fund can seek
through the sale of futures contracts to offset a decline in the value of its
portfolio securities. When interest rates are expected to fall or market values
are expected to rise, a Fund, through the purchase of such contract, can attempt
to secure better rates or prices for the Fund than might later be available in
the market when it effects anticipated purchases.
14
<PAGE> 59
The acquisition of put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price to sell or to purchase the underlying futures contract, upon exercising
the option any time during the option period.
Futures transactions involve broker costs and require a Fund to
segregate liquid assets, such as cash, U.S. government securities or other
liquid high-grade debt obligations to cover its performance under such
contracts. A Fund may lose the expected benefit of futures contracts if interest
rates, securities or foreign exchange rates move in an unanticipated manner.
Such unanticipated changes may also result in poorer overall performance than if
the Fund had not entered into any futures transactions. In addition, the value
of a Fund's futures positions may not prove to be perfectly or even highly
correlated with its portfolio securities and foreign currencies, limiting the
Fund's ability to hedge effectively against interest rate, foreign exchange rate
and/or market risk and giving rise to additional risks. There is no assurance of
liquidity in the secondary market for purposes of closing out futures positions.
RISKS OF FUTURES AND OPTIONS INVESTMENTS (ALL FUNDS EXCEPT MONEY MARKET FUND).
A Fund will incur brokerage fees in connection with its futures and
options transactions, and it will be required to segregate funds for the benefit
of brokers as margin to guarantee performance of its futures and options
contracts. In addition, while such contracts will be entered into to reduce
certain risks, trading in these contracts entails certain other risks. Thus,
while a Fund may benefit from the use of futures contracts and related options,
unanticipated changes in interest rates may result in a poorer overall
performance for that Fund than if it had not entered into any such contracts.
Additionally, the skills required to invest successfully in futures and options
may differ from skills required for managing other assets in the Fund's
portfolio.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid being classified as a "commodity
pool operator," a Fund will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin deposits for futures
contracts held by such Fund plus premiums paid by it for open options on futures
would exceed 5% of such Fund's total assets. Such Fund will not engage in
transactions in financial futures contracts or options thereon for speculation,
but only to attempt to hedge against changes in market conditions affecting the
values of securities which such Fund holds or intends to purchase. When futures
contracts or options thereon are purchased to protect against a price increase
on securities intended to be purchased later, it is anticipated that at least
25% of such intended purchases will be completed. When other futures contracts
or options thereon are purchased, the underling value of such contracts will at
all times not exceed the sum of: (1) accrued profit on such contracts held by
the broker; (2) cash or high-quality money market instruments set aside in an
identifiable manner; and (3) cash proceeds from investments due in 30 days.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (ALL FUNDS EXCEPT MONEY MARKET FUND)
Each of the Funds, except Money Market Fund, may invest in forward
foreign currency exchange contracts. A 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 Funds may enter into forward currency contracts in order to hedge
against adverse movements in exchange rates between currencies. For example,
when a Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the United States
dollar cost or proceeds, as the case may be. By entering into a forward currency
contract in United States dollars for the purchase or sale of the amount of
foreign currency involved in an underlying
15
<PAGE> 60
security transaction, such Fund is able to protect itself against a possible
loss between trade and settlement dates resulting from an adverse change in the
relationship between the United States dollar and such foreign currency.
Additionally, for example, when a Fund believes that a foreign currency may
suffer a substantial decline against the U.S. dollar, it may enter into a
forward currency sale contract to sell an amount of that foreign currency
approximating the value of some or all of that Fund's portfolio securities or
other assets denominated in such foreign currency. Alternatively, when a Fund
believes a foreign currency will increase in value relative to the U.S. dollar,
it may enter into a forward currency purchase contract to buy that foreign
currency for a fixed U.S. dollar amount; however, this tends to limit potential
gains which might result from a positive change in such currency relationships.
No Fund intends to enter into such forward foreign currency exchange
contracts if such Fund would have more than 15% of the value of its total assets
committed to such contracts on a regular or continuous basis. A Fund also will
not enter into such forward contracts or maintain a net exposure on such
contracts where such Fund would be obligated to deliver an amount of foreign
currency in excess of the value of such Fund's securities or other assets
denominated in that currency. The Adviser believes that it is important to have
the flexibility to enter into such forward contracts when it determines that to
do so is in the best interests of a Fund. The Fund's Custodian segregates cash
or liquid high-grade securities in an amount not less than the value of the
Fund's total assets committed to forward foreign currency exchange contracts
entered into for the purchase of a foreign security. If the value of the
securities segregated declines, additional cash or securities are added so that
the segregated amount is not less than the amount of such Fund's commitments
with respect to such contracts. The Funds generally do not enter into a forward
contract for a term longer than one year.
If the Fund retains the portfolio security and engages in an offsetting
transaction, such Fund will incur a gain or a loss to the extent that there has
been a movement in forward currency contract prices. If the Fund engages in an
offsetting transaction it may subsequently enter into a new forward currency
contract to sell the foreign currency. If forward prices decline during the
period between which a Fund enters into a forward currency contract for the sale
of foreign currency and the date it enters into an offsetting contract for the
purchase of the foreign currency, such Fund would realize a gain to the extent
the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. The Funds will have to convert their
holdings of foreign currencies into United States dollars from time to time.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies.
FOREIGN CURRENCY OPTIONS AND FUTURES TRANSACTIONS (GLOBAL OPPORTUNITIES FUND)
The Global Opportunities Fund may invest in foreign currency options. A
foreign currency option provides the option buyer with the right to buy or sell
a stated amount of foreign currency at the exercise price at a specified date or
during the option period. A call option gives its owner the right, but not the
obligation, to buy the currency while a put option gives its owner the right,
but not the obligation, to sell the currency. The option seller (writer) is
obligated to fulfill the terms of an option sold if it is exercised. However,
either seller or buyer may close its position during the option period in the
secondary market for such options at any time prior to expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect the Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if a Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against the
decline of the value of the currency, it would not have to exercise its put.
Similarly, if the Fund has entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the
16
<PAGE> 61
currency had depreciated in value between the date of the purchase and the
settlement date, the Fund would not have to exercise its call, but could acquire
in the spot market the amount of foreign currency needed for settlement.
The Global Opportunities Fund may invest in foreign currency futures
transactions. As part of its financial futures transactions, the Fund may use
foreign currency futures contracts and options on such futures contracts.
Through the purchase or sale of such contracts, the Fund may be able to achieve
many of the same objectives it may achieve through forward foreign currency
exchange contracts more effectively and possibly at a lower cost. Unlike forward
foreign currency exchange contracts, foreign currency futures contracts and
options on foreign currency futures contracts are standardized as to amount and
delivery, and may be traded on boards of trade and commodities exchanges or
directly with a dealer which makes a market in such contracts and options. It is
anticipated that such contracts may provide greater liquidity and lower cost
than forward foreign currency exchange contracts.
LENDING OF PORTFOLIO SECURITIES (ALL FUNDS)
In order to generate additional income, each of the Funds may, from
time to time, lend its portfolio securities to broker-dealers, banks or
institutional borrowers of securities. A Fund must receive 102% collateral in
the form of cash or U.S. government securities. This collateral must be valued
daily by the Adviser and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund. During
the time portfolio securities are on loan, the borrower pays the Fund any
dividends or interest paid on such securities. Loans are subject to termination
by the Fund or the borrower at any time. While the Fund does not have the right
to vote securities on loan, it intends to terminate the loan and regain the
right to vote if that is considered important with respect to the investment. In
the event the borrower defaults in its obligation to a Fund, the Fund bears the
risk of delay in the recovery of its portfolio securities and the risk of loss
of rights in the collateral. The Fund will only enter into loan arrangements
with broker-dealers, banks or other institutions which the Adviser has
determined are creditworthy under guidelines established by the Trust's Board of
Trustees.
CONVERTIBLE SECURITIES (ALL FUNDS EXCEPT MONEY MARKET FUND).
Convertible securities give the holder the right to exchange the
security for a specific number of shares of common stock. Convertible securities
include convertible preferred stocks, convertible bonds, notes and debentures,
and other securities. Convertible securities typically involve less credit risk
than common stock of the same issuer because convertible securities are "senior"
to common stock -- i.e., they have a prior claim against the issuer's assets.
Convertible securities generally pay lower dividends or interest than
non-convertible securities of similar quality. They may also reflect changes in
the value of the underlying common stock.
REAL ESTATE INVESTMENT TRUSTS
Each Fund may invest in equity or debt real estate investment trusts
("REITs"). Equity REITs are trusts that sell shares to investors and use the
proceeds to invest in real estate or interests in real estate. Debt REITs invest
in obligations secured by mortgages on real property or interest in real
property. A REIT may focus on particular types of projects, such as apartment
complexes or shopping centers, or on particular geographic regions, or both. An
investment in a REIT may be subject to certain risks similar to those associated
with direct ownership of real estate, including: declines in the value of real
estate; risks related to general and local economic conditions, overbuilding and
competition; increases in property taxes and operating expenses; and variations
in rental income. Also, REITs may not be diversified. A REIT may fail to qualify
for pass-through tax treatment of its income under the Internal Revenue Code and
may also fail to maintain its exemption from registration under the Investment
Company Act of 1940. Also, REITs (particularly equity REITs) may be dependent
upon management skill and face risks of failing to obtain adequate financing on
favorable terms.
17
<PAGE> 62
INVESTMENT RESTRICTIONS
Each Fund's investment objective may not be changed without a vote of
the holders of a majority of the Fund's outstanding shares. In addition, the
following investment restrictions may be changed with respect to a particular
Fund only by the vote of a majority of the outstanding shares of that Fund (as
defined under "ADDITIONAL INFORMATION - Vote of a Majority of the Outstanding
Shares" in this Statement of Additional Information). All other investment
limitations described in the Prospectus or this Statement of Additional
Information may be changed by the Trust's Board of Trustees.
No Fund may:
1. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as it might be deemed to be an underwriter
upon the disposition of portfolio securities acquired within the limitation on
purchases of illiquid securities and except to the extent that the purchase of
obligations directly from the issuer thereof in accordance with its investment
objective, policies and limitations may be deemed to be underwriting;
2. Invest in commodities, except that as consistent with its investment
objective and policies the Fund may: (a) purchase and sell options, forward
contracts, futures contracts, including without limitation those relating to
indices; (b) purchase and sell options on futures contracts or indices; and (c)
purchase publicly traded securities of companies engaging in whole or in part in
such activities.
3. Purchase or sell real estate, except that it may purchase securities
of issuers which deal in real estate and may purchase securities which are
secured by interests in real estate;
4. Purchase any securities which would cause 25% or more of the value
of its total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, provided that:
(a) there is no limitation with respect to obligations issued
or guaranteed by the U.S. government, any state, territory or
possession of the United States, the District of Columbia or any of
their authorities, agencies, instrumentalities or political
subdivisions, and repurchase agreements secured by such
instruments;
(b) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily
related to financing the activities of the parents;
(c) utilities will be divided according to their services, for
example, gas, gas transmission, electric and gas, electric, and
telephone will each be considered a separate industry; and
(d) personal credit and business credit businesses will be
considered separate industries.
5. Purchase securities of any one issuer, other than securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in such issuer or the Fund would hold more than 10% of
any class of securities of the issuer or more than 10% of the outstanding voting
securities of the issuer, except that up to 25% of the value of the Fund's total
assets may be invested without regard to such limitations.
18
<PAGE> 63
6. Make loans, except that a Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an amount
not exceeding one-third of its total assets.
7. Issue senior securities except to the extent permitted under the
1940 Act or any rule, order or interpretation thereunder.
8. Borrow money (not including reverse repurchase agreements or dollar
roll agreements), except that each Fund may borrow from banks for temporary or
emergency purposes and then only in amounts up to 30% of its total assets at the
time of borrowing (and provided that such bank borrowings and reverse repurchase
agreements and dollar roll agreements do not exceed in the aggregate one-third
of the Fund's total assets (10% in the case of the Money Market Fund) less
liabilities other than the obligations represented by the bank borrowings,
reverse repurchase agreements and dollar roll agreements), or mortgage, pledge
or hypothecate any assets except in connection with a bank borrowing in amounts
not to exceed 30% of the Fund's net assets at the time of borrowing.
For purposes of the above investment limitations, the Funds treat all
supranational organizations as a single industry and each foreign government
(and all of its agencies) as a separate industry. In addition, a security is
considered to be issued by the government entity (or entities) whose assets and
revenues back the security.
With respect to investment limitation No. 2 above, "commodities"
includes commodity contracts. With respect to investment limitation No. 8 above,
and as a non-fundamental policy which may be changed without the vote of
shareholders, no Fund will purchase securities while its outstanding borrowings
(including reverse repurchase agreements) are in excess of 5% of its total
assets. Securities held in escrow or in separate accounts in connection with a
Fund's investment practices described in the Funds' Prospectus or Statement of
Additional Information are not deemed to be pledged for purposes of this
limitation.
In addition, the Funds are subject to the following non-fundamental
limitations, which may be changed without the vote of shareholders.
No Fund may:
1. Write or sell put options, call options, straddles, spreads, or any
combination thereof, except, as consistent with the Fund's investment objective
and policies for transactions in options on securities or indices of securities,
future contracts and options on futures contracts and in similar investments.
2. Purchase securities on margin, make short sales of securities or
maintain a short position, except that, as consistent with a Fund's investment
objective and policies, (a) this investment limitation shall not apply to the
Fund's transactions in futures contracts and related options, options on
securities or indices of securities and similar instruments, and (b) it may
obtain short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities.
3. Purchase securities of companies for the purpose of exercising
control.
4. Invest more than 15% (10% with respect to Money Market Fund) of its
net assets in illiquid securities.
Except for the Funds' policy on illiquid securities, and borrowing, if
a percentage limitation is satisfied at the time of investment, a later increase
or decrease in such percentage resulting from a change in the value of a Fund's
portfolio securities will not constitute a violation of such limitation for
purposes of the 1940 Act.
19
<PAGE> 64
PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of a Fund's purchases or sales of portfolio securities for
the year by the monthly average value of the securities. The SEC requires that
the calculation exclude all securities whose maturities at the time of
acquisition are one year or less. The portfolio turnover rates for the Funds of
the Trust may vary greatly from year to year as well as within a particular
year, and may also be affected by cash requirements for redemption of shares.
High portfolio turnover rates will generally result in higher transaction costs
to a Fund, including brokerage commissions, and may result in additional tax
consequences to a Fund's shareholders.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each of the classes of shares of the Trust's Funds is sold on a continuous
basis by the Trust's distributor, BISYS, and the Distributor has agreed to use
appropriate efforts to solicit all purchase orders. The Trust's Funds offer
one or more of the following classes of shares: Class A Shares, Class B Shares
and Class Y Shares.
As stated in the Prospectus, the public offering price of Class A Shares of
the Money Market Fund is their net asset value per share which is sought to be
maintained at $1.00. The public offering price of Class A Shares of each of
the other Funds is their net asset value per share next computed after the
sale plus a sales charge which varies based upon the quantity purchased. The
public offering price of such Class A Shares of the Trust is calculated by
dividing net asset value by the difference (expressed as a decimal) between
100% and the sales charge percentage of offering price applicable to the
purchase.
The offering price is rounded to two decimal places each time a computation is
made. The amount of sales charge reallowed to dealers is set forth below as
applicable to purchases of Class A Shares of a Fund.
AMOUNT OF SALES
CHARGE REALLOWED TO DEALERS
AS A PERCENTAGE
OF PUBLIC
OFFERING PRICE*
---------
CLASS A SHARES --Growth Fund, Global Opportunities Fund, Intermediate Fixed
Income Fund, Diversified Assets Fund
AMOUNT OF INVESTMENT
Less than $50,000.................................... 4.50%
$50,000 but less than $100,000....................... 4.00%
$100,000 but less than $250,000...................... 3.50%
$250,000 but less than $500,000...................... 2.50%
$500,000 but less than $1,000,000.................... 1.50%
$1,000,000 and over.................................. (See below)
CLASS A SHARES Intermediate Fixed Income Fund
AMOUNT OF INVESTMENT
Less than $50,000.................................... 2.75%
$50,000 but less than $100,000....................... 2.50%
$100,000 but less than $250,000...................... 2.50%
$250,000 but less than $500,000...................... 1.75%
20
<PAGE> 65
$500,000 but less than $1,000,000.................... 1.00%
$1,000,000 and over.................................. (See below)
- ----------
* The staff of the Securities and Exchange Commission has indicated that
dealers who receive more than 90% of the sales charge may be considered
underwriters.
Although no sales charge is applied to purchases of $1,000,000 or more,
the Distributor may pay the following dealer concessions for such purchases: for
Growth Fund, Global Opportunities Fund, Diversified Asset Fund up to 1.00% on
purchases of $1,000,000 or more.
QUANTITY DISCOUNTS IN THE SALES CHARGES
Right Of Accumulation
The Funds permit sales charges on Class A shares to be reduced through
rights of accumulation. For Class A shares, the schedule of reduced sales
charges will be applicable once the accumulated value of the account has reached
$50,000. For this purpose, the dollar amount of the qualifying concurrent or
subsequent purchase is added to the net asset value of any other Class A shares
of those Funds in the Trust owned at the time by the investor. The sales charge
imposed on the Class A shares being purchased will then be at the rate
applicable to the aggregate of Class A shares purchased. For example, if the
investor held Class A shares of these Funds valued at $100,000 and purchased an
additional $20,000 of shares of these Funds (totaling an investment of
$120,000), the sales charge for the $20,000 purchase would be at the next lower
sales charge on the schedule (i.e., the sales charge for purchases over $100,000
but less than $250,000). There can be no assurance that investors will receive
the cumulative discounts to which they may be entitled unless, at the time of
placing their purchase order, the investors, their dealers, or Service
Organizations make a written request for the discount. The cumulative discount
program may be amended or terminated at any time. This particular privilege does
not entitle the investor to any adjustment in the sales charge paid previously
on purchases of shares of the Funds. If the investor knows that he will be
making additional purchases of shares in the future, he may wish to consider
executing a Letter of Intent.
Letter Of Intent
The schedule of reduced sales charges is also available to Class A
investors who enter into a written Letter of Intent providing for the purchase,
within a 13-month period, of Class A shares of a particular Fund. Shares of such
Fund previously purchased during a 90-day period prior to the date of receipt by
the Fund of the Letter of Intent which are still owned by the shareholder may
also be included in determining the applicable reduction, provided the
shareholder, dealer, or Service Organization notifies the Fund of such prior
purchases.
A Letter of Intent permits an investor in Class A shares to establish a
total investment goal to be achieved by any number of investments over a
13-month period. Each investment made during the period will receive the reduced
sales commission applicable to the amount represented by the goal as if it were
a single investment. A number of shares totaling 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Fund in the name of the
shareholder. The initial purchase under a Letter of Intent must be equal to at
least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, or a
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the 13-month period, the investor is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. The Fund is authorized by
the shareholder to liquidate a sufficient number of escrowed shares to obtain
such difference. If the goal is exceeded and purchases
21
<PAGE> 66
pass the next sales charge level, the sales charge on the entire amount of the
purchase that results in passing that level and on subsequent purchases will be
subject to further reduced sales charges in the same manner as set forth under
"Right of Accumulation," but there will be no retroactive reduction of sales
charges on previous purchases. At any time while a Letter of Intent is in
effect, a shareholder may, by written notice to the Fund, increase the amount of
the stated goal. In that event, shares purchased during the previous 90-day
period and still owned by the shareholder will be included in determining the
applicable sales charge reduction. The 5% escrow and minimum purchase
requirements will be applicable to the new stated goal. Investors electing to
purchase Fund shares pursuant to a Letter of Intent should carefully read the
application for Letter of Intent which is available from the Fund.
The Trust may suspend the right of redemption or postpone the date of payment
for shares during a period when: (a) trading on the NYSE is restricted by
applicable rules and regulations of the SEC; (b) the NYSE is closed for other
than customary weekend and holiday closings; (c) the SEC has by order permitted
such suspensions; or (d) an emergency exists as a result of which: (i) disposal
by the Trust of securities owned by it is not reasonably practicable, or (ii) it
is not reasonably practicable for the Trust to determine the fair market value
of its net assets
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each Fund is
determined and the shares of each Fund are priced as of the Valuation Times
defined in the Prospectus on each Business Day of the Trust. A "Business Day" is
a day on which the New York Stock Exchange (the "NYSE") is open for trading.
Currently, the NYSE will not be open in observance of the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
VALUATION OF THE MONEY MARKET FUND
The Money Market Fund has elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price a Fund would receive if it sold the instrument. The value of
securities in the Money Market Fund can be expected to vary inversely with
changes in prevailing interest rates.
Pursuant to Rule 2a-7, the Money Market Fund will maintain a
dollar-weighted average maturity appropriate to the Fund's objective of
maintaining a stable net asset value per share, provided that the Fund will not
purchase any security with a remaining maturity of more than 397 days (thirteen
months) (securities subject to repurchase agreements may bear longer maturities)
nor will it maintain a dollar-weighted average maturity which exceeds 90 days.
The Trust's Board of Trustees has also undertaken to establish procedures
reasonably designed, taking into account current market conditions and the
investment objective of the Fund, to stabilize the net asset value per share of
the Fund for purposes of sales and redemptions at $1.00. These procedures
include review by the Trustees, at such intervals as they deem appropriate, to
determine the extent, if any, to which the net asset value per share of the Fund
calculated by using available market quotations deviates from $1.00 per share.
In the event such deviation exceeds 0.5%, Rule 2a-7 requires that the Board of
Trustees promptly consider what action, if any, should be initiated. If the
Trustees believe that the extent of any deviation from the Fund's $1.00
amortized cost price per share may result in material dilution or other unfair
results to new or existing investors, they will take such steps as they consider
appropriate to eliminate or reduce, to the extent reasonably practicable, any
such dilution or unfair results. These steps may include selling portfolio
instruments prior to maturity, shortening the dollar-weighted average maturity,
withholding or reducing dividends, reducing the number of the Fund's outstanding
shares without monetary
22
<PAGE> 67
consideration, or utilizing a net asset value per share determined by using
available market quotations. As permitted by Rule 2a-7 and the procedures
adopted by the Board, certain of the Board's responsibilities under the Rule may
be delegated to the Adviser.
VALUATION OF THE NON MONEY MARKET FUNDS
Portfolio securities, the principal market for which is a securities
exchange, will be valued at the closing sales price on that exchange on the day
of computation or, if there have been no sales during such day, at the latest
bid quotation. Portfolio securities, the principal market for which is not a
securities exchange, will be valued at their latest bid quotation in such
principal market. In either case, if no such bid price is available then such
securities will be valued in good faith at their respective fair market values
using methods by or under the supervision of the Board of Trustees of the Trust.
Portfolio securities with a remaining maturity of 60 days or less will be valued
either at amortized cost or original cost plus accrued interest, which
approximates current value.
Portfolio securities which are primarily traded on foreign exchanges
may be valued with the assistance of a pricing service and are generally valued
at the preceding closing values of such securities on their respective
exchanges, except that when an occurrence subsequent to the time a foreign
security is valued is likely to have changed such value, then the fair value of
those securities may be determined by consideration of other factors by or under
the direction of the Board of Trustees. Over-the-counter securities are valued
on the basis of the bid price at the close of business on each business day.
Notwithstanding the above, bonds and other fixed-income securities are valued by
using market quotations and may be valued on the basis of prices provided by a
pricing service approved by the Board of Trustees. All assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the mean between the bid and asked prices of such currencies against U.S.
dollars as last quoted by any major bank.
All other assets and securities, including securities for which market
quotations are not readily available, will be valued at their fair value as
determined in good faith under the general supervision of the Board of Trustees
of the Trust.
23
<PAGE> 68
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
Overall responsibility for management of the Trust rests with its Board
of Trustees, who are elected by the shareholders of the Trust's Funds. The
Trustees elect the officers of the Trust to supervise actively its day-to-day
operations.
The Trust will be managed by the Trustees in accordance with the laws
of the state of Delaware governing business trusts. There are currently three
Trustees, all of whom are "interested persons" of the Trust within the meaning
of that term under the 1940 Act. The Trustees of the Trust receive quarterly
fees and fees and expenses for each meeting of the Board of Trustees attended.
However, no officer or employee of BISYS, BISYS Fund Services Ohio, Inc. ("BISYS
OHIO"), or Allianz of America, Inc. (the "Adviser") receives any compensation
from the Trust for acting as a Trustee of the Trust. The officers of the Trust
receive no compensation directly from the Trust for performing the duties of
their offices. BISYS receives fees from the Trust for acting as Administrator.
BISYS Ohio, an affiliate of BISYS, receives fees from the Trust for acting as
Transfer Agent and for providing certain fund accounting services.
The Trustees and Officers of the Trust, their addresses and their
principal occupations during the past 5 years are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE TRUST PRINCIPAL OCCUPATION
DURING PAST 5 YEARS
AND OTHER AFFILIATIONS
<S> <C> <C>
Chairman of the Board and
Trustee
President and Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
</TABLE>
24
<PAGE> 69
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE TRUST PRINCIPAL OCCUPATION
DURING PAST 5 YEARS
AND OTHER AFFILIATIONS
<S> <C> <C>
Trustee
Secretary
Treasurer
Assistant Treasurer
</TABLE>
*Mr. and Mr. are each an "interested person" of the Trust, as
defined in the 1940 Act.
Mr. _____ is an "interested person" because (1)______________.
Each Trustee who is not an affiliated person of BISYS or the Adviser,
receives an annual fee of $_____0 plus $_____ for each Board meeting attended
and reimbursement of expenses incurred in attending meetings for services as a
Trustee to the Fund Complex. Mr. _____ is an employee of the Adviser. He
receives no compensation from the Trust for acting as Trustee.
THE ADVISER
Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Fund's investment objectives and restrictions, investment
advisory services are provided to the Funds of the Trust by the Adviser.
The Adviser is a registered investment adviser since 1981. The Adviser,
55 Greens Farms Road, Westport, Connecticut 06881 is a Delaware corporation
incorporated on June 15, 1976 and as of December 31, 1998 had $21,310,812,000 of
assets under management. The Adviser has no previous experience in providing
investment management services to an investment company. Allianz AG Holding is
the principal owner of the Adviser. Allianz AG Holding, headquartered in Munich
Germany, is one of the world's largest insurance and financial services
companies with operations in 68 countries.
Under the Investment Advisory Agreement, the Adviser has agreed to
provide, investment advisory services for each of the Trust's Funds as described
in the Prospectus. For the services provided and the expenses assumed pursuant
to the Investment Advisory Agreement, each of the Trust's Funds pays the Adviser
a fee, computed daily and paid monthly, at an annual rate calculated as a
percentage of the average daily net assets of that Fund. The annual rates for
the Funds are as follows: .75% for the Growth Fund; .55% for the Diversified
Assets Fund; .50% for the Intermediate Fixed Income Fund; .95% for the Global
Opportunities Fund and, .35% for the Money Market Fund. The Adviser may
periodically voluntarily reduce all or a portion of its advisory fee with
respect to any Fund to increase the net income of one or more of the Funds
available for distribution as dividends.
Pursuant to the Investment Advisory Agreement, the Adviser will pay all
expenses, including as applicable, the compensation of any subadvisers directly
appointed by it, incurred by it in connection with its activities under the
Investment Advisory Agreement other than the cost of securities (including
brokerage commissions) if any, purchased for the Trust.
25
<PAGE> 70
Unless sooner terminated, the Investment Advisory Agreement continues
in effect as to a particular Fund for an initial period of two years and
thereafter for successive one-year periods if such continuance is approved at
least annually (i) by the Trust's Board of Trustees or by vote of a majority of
the outstanding voting securities of such Fund and (ii) by vote of a majority of
the Trustees who are not parties to the Investment Advisory Agreement, or
interested persons (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for such purpose. The Investment Advisory Agreement
is terminable as to a particular Fund at any time on 60 days' prior written
notice without penalty by the Trustees, by vote of a majority of outstanding
shares of that Fund, or by the Adviser. The Agreement also terminates
automatically in the event of any assignment, as defined in the 1940 Act.
The Investment Advisory Agreement provides that the Adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Trust in connection with the performance of its duties, except a loss
suffered by a Fund resulting from a breach of fiduciary duty with respect to its
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its duties, or from reckless disregard of its duties and
obligations thereunder.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Adviser determines,
subject to the general supervision of the Trustees of the Trust and in
accordance with each Fund's objective and restrictions, which securities are to
be purchased and sold by a Fund and selects brokers to execute such Fund's
portfolio transactions.
Purchases and sales of portfolio securities which are debt securities
usually are principal transactions in which portfolio securities are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. Purchases from underwriters of portfolio securities generally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers may include the spread between
the bid and asked prices. Transactions on stock exchanges involve the payment of
negotiated brokerage commissions. Transactions in the over-the-counter market
are generally principal transactions with dealers. With respect to the
over-the-counter market, the Trust, where possible will deal directly with the
dealers who make a market in the securities involved except under those
circumstances where better price and execution are available elsewhere.
Allocation of transactions, including their frequency, to various
brokers and dealers is determined by the Adviser in its best judgment and in the
manner deemed fair and reasonable to shareholders. The primary consideration is
prompt execution of orders in an effective manner at the most favorable price.
Subject to this consideration, brokers and dealers who provide supplemental
investment research to the Adviser may receive orders for transactions on behalf
of the Trust. Information so received is in addition to and not in lieu of
services required to be performed by the Adviser and does not reduce the fees
payable to such adviser by the Trust . Such information may be useful to the
Adviser in serving both the Trust and other clients and, conversely supplemental
information obtained by the placement of business of other clients may be useful
to the Adviser in carrying out its obligations to the Trust.
While the Adviser generally seeks competitive commissions, the Trust
may not necessarily pay the lowest commission available on each brokerage
transaction for the reasons discussed above.
The Trust will not acquire portfolio securities issued by, make savings
deposits in, or enter into repurchase or reverse repurchase agreements with the
Adviser, the Distributor, or their affiliates, and will not give preference to
the Adviser's correspondents with respect to such transactions, securities,
savings deposits, repurchase agreements and reverse repurchase agreements.
26
<PAGE> 71
Investment decisions for each Fund of the Trust are made independently
from those made for the other Funds or any other portfolio investment company or
account managed by the Adviser. Any such other portfolio, investment company or
account may also invest in the same securities as the Trust. When a purchase or
sale of the same security is made at substantially the same time on behalf of a
Fund and another Fund, portfolio, investment company or account, the transaction
will be averaged as to price and available investments will be allocated as to
amount in a manner which the Adviser believes to be equitable to the Fund(s) and
such other portfolio, investment company, or account. In some instances, this
investment procedure may adversely affect the price paid or received by a Fund
or the size of the position obtained by the Fund. To the extent permitted by
law, the Adviser may aggregate the securities to be sold or purchased for a Fund
with those to be sold or purchased for other Funds or for other portfolios,
investment companies, or accounts in order to obtain best execution. In making
investment recommendations for the Trust, the Adviser will not inquire or take
into consideration whether an issuer of securities proposed for purchase or sale
by the Trust is a customer of the Adviser, its parent or affiliates, and, in
dealing with its customers, the Adviser, its parent and affiliates will not
inquire or take into consideration whether securities of such customers are held
by the Trust.
ADMINISTRATOR
BISYS serves as the administrator (the "Administrator") to the Trust
pursuant to an Administration Agreement dated as of ________, 1999 (the
"Administration Agreement").
Under the Administration Agreement, the Administrator has agreed to
maintain office facilities for the Trust; furnish statistical and research data,
clerical and certain bookkeeping services and stationery and office supplies;
prepare the periodical reports to the SEC on Form N-SAR or any replacement forms
therefor; compile data for, prepare for execution by the Funds and file certain
federal and state tax returns and required tax filings; prepare compliance
filings pursuant to state securities laws with the advice of the Trust's
counsel; keep and maintain the financial accounts and records of the Funds,
including calculation of daily expense accruals; and generally assist in all
aspects of the Trust's operations other than those performed by the Adviser
under the Investment Advisory Agreement, by the Custodian under the Custody
Agreement and by BISYS under the Fund Accounting and Transfer Agency Agreement.
Under the Administration Agreement, the Administrator may delegate all or any
part of its responsibilities thereunder.
The Administrator receives a fee from each Fund for its services as
Administrator and expenses assumed pursuant to the Administration Agreement,
calculated daily and paid monthly, at the annual rate of ____% of the combined
average daily net assets of the Funds up to [$1] billion. In the event that the
combined average daily net assets of the Funds exceed [$1] billion, the parties
intend to review the level of compensation payable to the Administrator for its
administrative services. In addition, the Administrator also receives a separate
annual fee from each Fund for certain fund accounting services. From time to
time, the Administrator may waive all or a portion of the administration fee
payable to it by the Funds, either voluntarily or pursuant to applicable
statutory expense limitations.
Unless sooner terminated as provided therein, the Administration
Agreement between the Trust and BISYS will continue in effect until [ ], 1999.
The Administration Agreement thereafter shall be renewed for successive
_____-year terms ending on [ ] of each _____-year period if such continuance is
approved at least annually (i) by the Trust's Board of Trustees or by vote of a
majority of the outstanding voting securities of the affected Fund and (ii) by
vote of a majority of the Trustees who are not interested persons (as defined in
the 1940 Act) of any party to the Administration Agreement cast in person at a
meeting called for such purpose. The Administration Agreement is terminable with
respect to a particular Fund at any time on [90] days' written notice without
penalty by vote of the Trustees, by vote of a majority of the outstanding shares
of that Fund or by BISYS.
27
<PAGE> 72
The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or any loss suffered by
the Trust in connection with the matters to which the Administration Agreement
relates, except a loss from willful misfeasance, bad faith or gross negligence
in the performance of its duties, or from the reckless disregard by the
Administrator of its obligations and duties thereunder.
DISTRIBUTOR
BISYS serves as distributor to the Trust pursuant to a Distribution
Agreement dated as of , 1999 (the "Distribution Agreement"). The Distribution
Agreement provides that the Distributor will use its best efforts to maintain a
broad distribution of the Funds' shares among bona fide investors and may enter
into selling group agreements with responsible dealers and dealer managers as
well as sell the Funds' shares to individual investors. The Distributor is not
obligated to sell any specific amount of shares.
Unless otherwise terminated, the Distribution Agreement between the
Trust and BISYS is effective for one year from the date of the Prospectus and
_______ will continue in effect for successive one-year periods if approved at
least annually (i) by the Trust's Board of Trustees or by the vote of a majority
of the outstanding shares of the Trust, and (ii) by the vote of a majority of
the Trustees of the Trust who are not parties to the Distribution Agreement or
interested persons (as defined in the 1940 Act) of any party to the Distribution
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement is terminable at any time on 60 days'
written notice without penalty by the Trustees, by a vote of a majority of the
shareholders of the Trust, or by BISYS on 90 days' written notice. The
Distribution Agreement will automatically terminate in the event of any
assignment as defined in the 1940 Act.
DISTRIBUTION PLAN. A Distribution Plan (the "Plan") has been adopted by
each of the Funds pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The Plan for each Fund provides for different rates of fee payment with respect
to Class A shares and Class B shares, as described in the Prospectus. No Plan
has been adopted for Class Y shares of any Fund. Pursuant to the Plans, the
Funds may pay directly or reimburse the Distributor monthly in amounts described
in the Prospectus for costs and expenses of marketing the shares, or classes of
shares, of the Funds.
The Plan provides for payments by each Fund to the Distributor at an
annual rate not to exceed 0.75% of the Fund's average net assets attributable to
its Class B shares and 0.25% ;of the Funds' average net assets attributable to
Class A shares. The Distributor also receives the proceeds of any CDSC imposed
on redemptions of Class B shares.
Although Class B shares are sold without an initial sales charge, the
Distributor pays a sales commission equal to 4.00% of the amounts invested in
each of the Funds to securities dealers and other financial institutions who
sell Class B shares. The Distributor may, at times, pay sales commissions higher
than the above on sales of Class B shares. These commissions are not paid on
exchanges from other Funds and sales to investors for whom the CDSC is waived.
Under each Plan, each Fund pays the Distributor and other securities
dealers and other financial institutions and organizations for certain or
distribution activities. Selling dealers may be paid amounts subject to overall
limits applicable to each class. Amounts received by the Distributor may,
additionally, subject to the Plan maximums, be used to cover certain other costs
and expenses related to the distribution of Fund shares and provision of service
to Fund shareholders, including: (a) advertising by radio, television,
newspapers, magazines, brochures, sales literature, direct mail or any other
form of advertising; (b) expenses of sales employees or agents of the
Distributor, including salary, commissions, travel and related expenses; (c)
costs of printing prospectuses and other materials to be given or sent to
prospective investors; and (d) such other similar services as the Trustees
determine to be reasonably
28
<PAGE> 73
calculated to result in the sale of shares of the Funds. Each Fund will pay all
costs and expenses in connection with the preparation, printing and distribution
of the Prospectus to current shareholders and the operation of its Plan(s),
including related legal and accounting fees. A Fund will not be liable for
distribution expenditures made by the Distributor in any given year in excess of
the maximum amount payable under a Plan for that Fund in that year.
The Plan provides that it may not be amended to increase materially the
costs which the Funds or a class of shares may bear pursuant to the Plan without
shareholder approval and that other material amendments of the Plan must be
approved by the Board of Trustees, and by the Trustees who are neither
"interested persons" (as defined in the 1940 Act) of the Trust nor have any
direct or indirect financial interest in the operation of the particular Plan or
any related agreement, by vote cast in person at a meeting called for the
purpose of considering such amendments. The selection and nomination of the
Trustees of the Trust have been committed to the discretion of the Trustees who
are not "interested persons" of the Trust. The Plan with respect to each of the
Funds were approved by the Board of Trustees and by the Trustees who are neither
"interested persons" nor have any direct or indirect financial interest in the
operation of any Plan ("Plan Trustee"), by vote cast in person at a ________,
1999 meeting called for the purpose of voting on the Plan, and by the sole
shareholder of each class of shares of each of the Funds on ________, 1999. The
continuance of the Plan is subject to similar annual approval by the Trustees
and the Plan Trustees. Each Plan is terminable with respect to a class of shares
of a Fund at any time by a vote of a majority of the Plan Trustees or by vote of
the holders of a majority of the shares of the class. The Board of Trustees has
concluded that there is a reasonable likelihood that the Plan will benefit the
Funds and their shareholders.
SHAREHOLDER SERVICE FEES
The Trust may also contract with banks, trust companies, broker-dealers
(other than BISYS) or other financial organizations ("Service Organizations") to
provide certain administrative services for the Funds. Services provided by
Service Organizations may include among other things: providing necessary
personnel and facilities to establish and maintain certain shareholder accounts
and records; assisting in processing purchase and redemption transactions;
arranging for the wiring of funds; transmitting and receiving funds in
connection with client orders to purchase or redeem shares; verifying and
guaranteeing client signatures in connection with redemption orders, transfers
among and changes in client-designating accounts; providing periodic statements
showing a client's account balance and, to the extent practicable, integrating
such information with other client transactions; furnishing periodic and annual
statements and confirmations of all purchases and redemptions of shares in a
client's account; transmitting proxy statements, annual reports, and updating
prospectuses and other communications from the Funds to clients; and providing
such other services as the Funds or a client reasonably may request, to the
extent permitted by applicable statute, rule or regulation. Neither BISYS nor
the Adviser will be a Service Organization or receive fees for servicing.
Some Service Organizations may impose additional or different
conditions on their clients, such as requiring their clients to invest more than
the minimum initial or subsequent investments specified by the Funds or charging
a direct fee for servicing. If imposed, these fees would be in addition to any
amounts that might be paid to the Service Organization by the Funds. Each
Service Organization has agreed to transmit to its clients a schedule of any
such fees. Shareholders using Service Organizations are urged to consult them
regarding any such fees or conditions.
29
<PAGE> 74
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING SERVICES
[ ], [ address ], serves as Custodian to the Trust pursuant to the
Custodian Services Agreement dated as of ________, 1999 (the "Custody
Agreement"). The Custodian's responsibilities include safeguarding and
controlling the Funds' cash and securities, handling the receipt and delivery of
securities, and collecting interest and dividends on the Funds' investments.
BISYS Fund Services Ohio, Inc., ("BISYS Ohio") serves as the transfer
agent (the "Transfer Agent") for all Funds of the Trust pursuant to a Transfer
Agency Agreement dated ________, 1999, (the Transfer Agency Agreement") .
In addition, BISYS Ohio provides certain fund accounting services to
the Trust pursuant to the Fund Accounting Agreement dated ________, 1999.
Pursuant to Agreement, the Trust's fee schedule is as follows. BISYS Ohio
receives an annual base fee for its fund accounting services equal to $_____ per
Fund, payable in equal monthly installments.
BISYS Ohio maintains the accounting books and records for the Funds,
including journals containing an itemized daily record of all purchases and
sales of portfolio securities, all receipts and disbursements of cash and all
other debts and credits, general and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts, including interest
accrued and interest received and other required separate ledger accounts;
maintains a monthly trial balance of all ledger accounts; performs certain
accounting services for the Funds, including calculation of the net asset value
per share, calculation of the dividend and capital gain distributions, if any,
and of yield, reconciliation of cash movements with Funds, custodians,
affirmation to the Funds' custodians of all portfolio trades and cash
settlements, verification and reconciliation with the Funds' custodians of all
daily trade activities; provides certain reports; obtains dealer quotations,
prices from a pricing service or matrix prices on all portfolio securities in
order to mark the portfolio to the market; and prepares an interim balance
sheet, statement of income and expense, and statement of changes in net assets
for the Funds.
INDEPENDENT AUDITORS
[ ] are the independent auditors for the Trust.
LEGAL COUNSEL
Dickstein Shapiro Morin and Oshinsky, LLP, 2101 L Street NW,
Washington, D.C. 20037 serves as counsel to the Adviser and the Trust.
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
The Trust is a Delaware business trust organized on July __, 1999. The
Declaration of Trust authorizes the issuance of an unlimited number of shares of
beneficial interest of series and classes of shares. Pursuant to such authority,
the Board of Trustees has established five series: the Growth Fund, Global
Opportunities Fund, Intermediate Fixed Income Fund, Diversified Assets Fund and
Money Market Fund and has authorized the issuance of an unlimited number of
Class A, Class B and Class Y shares of each such Fund. Each share of each Fund
represents an equal proportionate interest with each other share of that series
and/or class. Upon liquidation, shares are entitled to a pro rata share of the
Trust based on the relative net assets of each series and/or class. Shareholders
have no preemptive or conversion rights. Shares are redeemable and transferable.
30
<PAGE> 75
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual shareholder meetings. At meetings called for the initial election
of Trustees or to consider other matters, each share is entitled to one vote for
[each dollar of net asset value applicable to such share]. Shares generally vote
together as one class on all matters. Classes of shares of each Fund have equal
voting rights. No amendment may be made to the Declaration of Trust that
adversely affects any class of shares without the approval of a majority of the
votes applicable to shares of that class. Shares have non-cumulative voting
rights, which means that the holders of more than 50% of the votes applicable to
shares voting for the election of Trustees can elect all of the Trustees to be
elected at a meeting.
After the initial meeting as described above, no further shareholder
meetings for the purpose of electing Trustees will be held, unless required by
law, unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. The
Declaration of Trust provides that a Trustee will not be liable for errors of
judgment or mistakes of fact or law, but nothing in the Declaration of Trust
protects a Trustee against any liability to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of his duties involved in the conduct of his office.
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES
As used in the Funds' Prospectus and the Statement of Additional
Information, "vote of a majority of the outstanding shares" of the Trust or the
Fund means the affirmative vote, at an annual or special meeting of shareholders
duly called, of the lesser of: (a) 67% or more of the votes of shareholders of
the Trust or the Fund, present at such meeting at which the holders of more than
50% of the votes attributable to the shareholders of record of the Trust or the
Fund are represented in person or by proxy, or (b) the holders of more than
fifty percent (50%) of the outstanding votes of shareholders of the Trust or the
Fund.
ADDITIONAL TAX INFORMATION
Each Fund intends to qualify as a "regulated investment company" (a
"RIC" under the Internal Revenue Code of 1986, as amended (the "Code")). Such
qualification generally will relieve the Funds of liability for federal income
taxes to the extent their earnings are distributed in accordance with the Code.
However, taxes may be imposed on the Funds, particularly the Global
Opportunities Fund, by foreign countries with respect to income received on
foreign securities. Depending on the extent of each Fund's activities in states
and localities in which its offices are maintained, in which its agents or
independent contractors are located, or in which it is otherwise deemed to be
conducting business, each Fund may be subject to the tax laws of such states or
localities. In addition, if for any taxable year the Fund does not qualify for
the special tax treatment afforded regulated investment companies, all of its
taxable income will be subject to a federal tax at regular corporate rates
(without any deduction for distributions to its shareholders). In such event,
dividend distributions would be taxable to shareholders to the extent of
earnings and profits, and would be eligible for the dividends-received deduction
for corporations.
A non-deductible 4% excise tax is also imposed on regulated investment
companies that do not make distributions to shareholders on a timely basis in
accordance with calendar-year distribution requirements (regardless of whether
they otherwise have a non-calendar taxable year). These rules require annual
distributions equal to 98% of their ordinary income for the calendar year plus
98% of their capital gain net income for the one-year period ending on October
31 of such calendar year. The balance of such income must be distributed during
the next calendar year. For the foregoing purposes, a Fund is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year. If distributions during a calendar year were less
than the required amount, a particular Fund would be subject to a non-deductible
excise tax equal to 4% of the deficiency.
31
<PAGE> 76
Each of the Funds will be required in certain cases to withhold and
remit to the United States Treasury 31% of taxable distributions paid to a
shareholder who has provided either an incorrect tax identification number or no
number at all, or who is subject to withholding by the Internal Revenue Service
for failure to report properly payments of interest or dividends.
Dividends of investment company taxable income (including net
short-term capital gains) are taxable to shareholders as ordinary income.
Distribution of investment company taxable income may be eligible for the
corporate dividends-received deduction to the extent attributable to a Fund's
dividend income from U.S. corporations, and if other applicable requirements are
met. Distributions of net capital gains (the excess of net long-term capital
gains over net short-term capital losses) designated by a Fund as capital gain
dividends are not eligible for the dividends-received deduction and will
generally be taxable to shareholders as long-term capital gains, regardless of
the length of time the Fund's shares have been held by a shareholder. Capital
gains from assets held for one year or less will be taxed as ordinary income.
Generally, dividends are taxable to shareholders, whether received in cash or
reinvested in shares of a Fund. Any distributions that are not from a Fund's
investment company taxable income or net capital gain may be characterized as a
return of capital to shareholders or, in some cases, as capital gain.
Shareholders will be notified annually as to the federal tax status of dividends
and distributions they receive and any tax withheld thereon. Dividends,
including capital gain dividends, declared in October, November, or December
with a record date of such month and paid during the following January will be
treated as having been paid by a Fund and received by shareholders on December
31 of the calendar year in which declared, rather than the calendar year in
which the dividends are actually received.
Upon the taxable disposition (including a sale or redemption) of shares
of a Fund, a shareholder may realize a gain or loss depending upon his basis in
his shares. Such gain or loss generally will be treated as capital gain or loss
if the shares are capital assets in the shareholder's hands. Such gain or loss
will be long-term or short-term, generally depending upon the shareholder's
holding period for the shares. However, a loss realized by a shareholder on the
disposition of Fund shares with respect to which capital gain dividends have
been paid will, to the extent of such capital gain dividends, be treated as
long-term capital loss if such shares have been held by the shareholder for six
months or less. Further, a loss realized on a disposition will be disallowed to
the extent the shares disposed of are replaced (whether by reinvestment of
distributions or otherwise) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss.
Shareholders receiving distributions in the form of additional shares will have
a cost basis for Federal income tax purposes in each share received equal to the
net asset value of a share of the Funds on the reinvestment date.
A portion of the difference between the issue price and the face amount
of zero coupon securities ("Original Issue Discount") will be treated as income
to any Fund holding securities with Original Issue Discount each year although
no current payments will be received by such Fund with respect to such income.
This original issue discount will comprise a part of the investment company
taxable income of such Fund which must be distributed to shareholders in order
to maintain its qualification as a RIC and to avoid federal income tax at the
level of the relevant Fund. Taxable shareholders of such a Fund will be subject
to income tax on such original issue discount, whether or not they elect to
receive their distributions in cash. In the event that a Fund acquires a debt
instrument at a market discount, it is possible that a portion of any gain
recognized on the disposition of such instrument may be treated as ordinary
income.
A Fund's investment in options, futures contracts and forward
contracts, options on futures contracts and stock indices and certain other
securities, including transactions involving actual or deemed short sales or
foreign exchange gains or losses are subject to many complex and special tax
rules. For example, over-the-counter options on debt securities and certain
equity options, including options on stock and on narrow-based stock indexes,
will be subject to tax under Section 1234 of the Code, generally
32
<PAGE> 77
producing, a long-term or short-term capital gain or loss upon lapse of the
option or sale of the underlying stock or security.
By contrast, a Fund's treatment of certain other options, futures and
forward contracts entered into by the Fund is generally governed by Section 1256
of the Code. These "Section 1256" positions generally include regulated futures
contracts, foreign currency contracts, non-equity options and dealer equity
options. Each such Section 1256 position held by a Fund will be marked-to-market
(i.e., treated as if it were sold for fair market value) on the last business
day of that Fund's fiscal year, and all gain or loss associated with fiscal year
transactions and marked-to-market positions at fiscal year end (except certain
currency gain or loss covered by Section 988 of the Code) will generally be
treated as 60% long term capital gain or loss and 40% short-term capital gain or
loss. The effect of Section 1256 mark-to-market rules may be to accelerate
income or to convert what otherwise would have been long-term capital gains into
short-term capital gains or short-term capital losses into long-term capital
losses within such Fund. The acceleration of income on Section 1256 positions
may require the Fund to accrue taxable income without the corresponding receipt
of cash. In order to generate cash to satisfy the distribution requirements of
the Code, a Fund may be required to dispose of portfolio securities that it
otherwise would have continued to hold or to use cash flows from other sources,
such as the sale of the Fund's shares. In these ways, any or all of these rules
may affect the amount, character and timing of income earned and in turn
distributed to shareholders by the Funds.
When a Fund holds options or contracts which substantially diminish its
risk of loss with respect to other positions (as might occur in some hedging
transactions), this combination of positions could be treated as a straddle for
tax purposes, resulting in possible deferral of losses, adjustments in the
holding periods of securities owned by a Fund and conversion of short-term
capital losses into long-term capital losses. Certain tax elections exist for
mixed straddles, i.e., straddles comprised of at least one Section 1256 position
and at least one non-Section 1256, position which may reduce or eliminate-the
operation of these straddle rules.
Each Fund will monitor its transactions in such options and contracts
and may make certain other tax elections in order to mitigate the effect of the
above rules and to prevent disqualification of a Fund as a RIC under Subchapter
M of the Code.
In order for a Fund to qualify as a RIC for any taxable year, at least
90% of the Fund's annual gross income must be derived from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities, including gains from foreign currencies, and
other income derived with respect to the business of investing in stock,
securities or currencies. Future Treasury regulations may provide that foreign
exchange gains may not qualify for purposes of the 90% limitation if such gains
are not directly related to a Fund's principal business of investing in stock or
securities, or options or futures with respect to such stock or securities.
Currency speculation or the use of currency forward contracts or other currency
instruments for non-hedging purposes may generate gains deemed to be not
directly related to the Fund's principal business of investing in stock or
securities and related options or futures. Each Fund will limit its activities
involving foreign exchange gains to the extent necessary to comply with the
above requirements.
The federal income tax treatment of interest rate and currency swaps is
unclear in certain respects and may in some circumstances result in the
realization of income not qualifying under the 90% limitation described above.
Each Fund will limit its interest rate and currency swaps to the extent
necessary to comply with this requirement.
Information set forth in the Prospectus and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of shares of the Funds. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund or its shareholders
and this description is not intended as a
33
<PAGE> 78
substitute for federal tax planning. Accordingly, potential purchasers of shares
of a Fund are urged to consult their tax advisers with specific reference to
their own tax situation, including any application of foreign, state or local
tax laws. In addition, the tax discussion in the Prospectus and this Statement
of Additional Information is based on tax laws and regulations which are in
effect on the date of the Prospectus and this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action.
ADDITIONAL TAX INFORMATION CONCERNING THE GLOBAL OPPORTUNITIES FUND
The Global Opportunities Fund may invest in non-U.S. corporations,
which would be treated as "passive foreign investment companies" ("PFICs") under
the Code which will result in adverse tax consequences upon the disposition of,
or the receipt of "excess distributions" with respect to, such equity
investments. To the extent that the Global Opportunities Fund invests in PFICs,
it may adopt certain tax strategies to reduce or eliminate the adverse effects
of certain federal tax provisions governing PFIC investments. Many non-U.S.
banks and insurance companies may not be treated as PFICs if they satisfy
certain technical requirements under the Code. To the extent that the Global
Opportunities Fund invests in foreign securities which is determined to be PFIC
securities and are required to pay a tax on such investments, a credit for this
tax would not be allowed to be passed through to the Global Opportunities Fund
shareholders. Therefore, the payment of this tax would reduce the Global
Opportunities Fund's economic return from its PFIC investments. Gains from
dispositions of PFIC shares and excess distributions received with respect to
such shares are treated as ordinary income rather than capital gains.
PERFORMANCE INFORMATION
From time to time performance information for the Funds showing their
average annual total return, aggregate total return and/or yield may be
presented in advertisements, sales literature and shareholder reports. Such
performance figures are based on historical earnings and are not intended to
indicate future performance. Average annual total return of a Fund will be
calculated for the period since the establishment of the Fund and will reflect
the imposition of the maximum sales charge, if any. Average annual total return
is measured by comparing the value of an investment in a Fund at the beginning
of the relevant period to the redemption value of the investment at the end of
the period (assuming immediate reinvestment of any dividends or capital gains
distributions) and annualizing the result. Aggregate total return is calculated
similarly to average annual total return except that the return figure is
aggregated over the relevant period instead of annualized. Yield of a Fund will
be computed by dividing a Fund's net investment income per share earned during a
recent one-month period by that Fund's per share maximum offering price (reduced
by any undeclared earned income expected to be paid shortly as a dividend) on
the last day of the period and annualizing the result. Each Fund may also
present its average annual total return, aggregate total return and yield, as
the case may be, excluding the effect of a sales charge, if any.
In addition, from time to time the Funds may present their respective
distribution rates in shareholder reports and in supplemental sales literature
which is accompanied or preceded by a Prospectus and in shareholder reports.
Distribution rates will be computed by dividing the distribution per share over
a twelve-month period by the maximum offering price per share. The calculation
of income in the distribution rate includes both income and capital gains
dividends and does not reflect unrealized gains or losses, although a Fund may
also present a distribution rate excluding the effect of capital gains. The
distribution rate differs from the yield, because it includes capital gains
which are often non-recurring in nature, whereas yield does not include such
items. Distribution rates may also be presented excluding the effect of a sales
charge, if any.
34
<PAGE> 79
Total return and yield are functions of the type and quality of
instruments held in the portfolio, levels of operation expenses and changes in
market conditions. Consequently, total return and yield will fluctuate and are
not necessarily representative of future results. In addition, if the Adviser or
BISYS voluntarily reduce all or a part of their respective fees, as further
discussed in this Prospectus, the total return of such Fund will be higher than
it would otherwise be in the absence of such voluntary fee reductions.
YIELDS OF THE MONEY MARKET FUND
The standardized seven-day yield for the Money Market Fund is computed:
(1) by determining the net change, exclusive of capital changes, in the value of
a hypothetical pre-existing account in that Fund having a balance of one share
at the beginning of the seven-day base period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts; (2) dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return; and (3) annualizing the results (i.e., multiplying the base
period return by (365/7)). The net change in the account value of the Money
Market Fund includes the value of additional shares purchased with dividends
from the original share, dividends declared on both the original share and any
additional shares, and all fees, other than non-recurring account charges
charged to all shareholder accounts in proportion to the length of the base
period and assuming that Fund's average account size. The capital changes to be
excluded from the calculation of the net change in account value are net
realized gains and losses from the sale of securities and unrealized
appreciation and depreciation.
The effective yield for the Money Market Fund is computed by
compounding the base period return, as calculated above by adding one to the
base period return, raising the sum to a power equal to 365 divided by seven and
subtracting one from the result. Each of the thirty-day yields and effective
yields is calculated as described above except that the base period is 30 days
rather than 7 days.
At any time in the future, yields may be higher or lower than past
yields and there can be no assurance that any historical results will continue.
YIELDS OF THE NON-MONEY MARKET FUNDS
Yields of each of the Non-Money Market Funds will be computed by
analyzing net investment income per share for a recent thirty-day period and
dividing that amount by a Fund share's maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed income securities (except for
obligations backed mortgages or other assets) and may include recognition of a
pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The yield of each of the Non-Money Market Funds will vary from time
to time depending upon market conditions, the composition of a Fund's portfolio
and operating expenses of the Trust allocated to each Fund. These factors and
possible differences in the methods used in calculating yield should be
considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objectives and policies of each of
the Funds.
CALCULATION OF TOTAL RETURN
Average annual total return is a measure of the change in value of the
investment in a Fund over the period covered, which assumes any dividends or
capital gains distributions are reinvested in the Fund immediately rather than
paid to the investor in cash. Average annual total return will be calculated by:
(1) adding to the total number of shares purchased by a hypothetical $1,000
investment in the Fund and all additional shares which would have been purchased
if all dividends and distributions paid or distributed during the period had
immediately been reinvested, (2) calculating the value of the hypothetical
initial
35
<PAGE> 80
investment of $1,000 as of the end of the period by multiplying the total number
of shares owned at the end of the period by the net asset value per share on the
last trading day of the period, (3) assuming redemption at the end of the
period, and (4) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year.
PERFORMANCE COMPARISONS
Investors may judge the performance of the Funds by comparing their
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices such as the Morgan Stanley Capital International EAFE Index
and those prepared by Dow-Jones & Co., Inc., Standard & Poor's Corporation,
Shearson-Lehman Brothers, Inc. and the Russell 2000 Growth Index and to data
prepared by Lipper Analytical Services, Inc. a widely recognized independent
service which monitors the performance of mutual funds, Morningstar, Inc. and
the Consumer Price Index. Comparisons may also be made to indices or data
published in Money Magazine, Forbes, Barron's, The Wall Street Journal, The Bond
Buyer's Weekly, 20-Bond Index, The Bond Buyer's Index, The Bond Buyer, The New
York Times, Business Week, Pensions and Investments, and USA Today. In addition
to performance information, general information about these Funds that appears
in a publication such as those mentioned above, may be included in
advertisements and in reports to shareholders,
From time to time, the Funds may include the following types of
information in advertisements, supplemental sales literature and reports to
shareholders: (1) discussions of general economic or financial principles (such
as the effects of compounding and the benefits of dollar-cost averaging); (2)
discussions of general economic trends; (3) presentations of statistical data to
supplement such discussions; (4) descriptions of past or anticipated portfolio
holdings for one or more of the Funds within the Trust; (5) descriptions of
investment strategies for one or more of the Funds; (6) descriptions or
comparisons of various savings and investment policies (including, but not
limited to, insured bank products, annuities, qualified retirement plans and
individual stocks and bonds), which may or may not include the Funds; (7)
comparisons of investment products (including the Funds) with relevant market or
industry indices or other appropriate benchmarks; and (8) discussions of fund
rankings or ratings by recognized rating organizations. The Funds may also
include calculations, such as hypothetical compounding examples which describe
hypothetical investment results in such communications. Such performance
examples will be based on an expressed set of assumptions and are not indicative
of the performance of any of the Funds.
Morningstar, Inc., Chicago, Illinois, rates mutual funds on a one- to
five-star rating scale with five stars representing the highest rating. Such
ratings are based on a fund's historical -risk/reward ratio as determined by
Morningstar relative to other funds in that fund's class. Funds are divided into
classes based upon the respective investment objectives. The one- to five-star
ratings represent the following ratings by Morningstar, respectively: Lowest,
Below Average, Neutral, Above Average and Highest.
Current yields or performance will fluctuate from time to time and are
not necessarily representative of future results. Accordingly a Fund's yield or
performance may not provide for comparison with bank deposits or other
investments which provide fixed returns for a stated period of time. Yield and
performance are functions of a Fund's quality, composition and maturity as well
as expenses allocated to the Fund. Fees imposed on customer accounts by the
Adviser or its affiliated or correspondent banks or cash management services
will reduce a Fund's effective yield to its customers.
MISCELLANEOUS
Individual Trustees are elected by the shareholders and, subject to
removal by a vote of two-thirds of the Board of Trustees, serve until their
successors are elected and qualified. Meetings of
36
<PAGE> 81
shareholders are not required to be held at any specific intervals. Individual
Trustees may be removed by vote of the shareholders voting not less than
two-thirds of the shares then outstanding.
The Trust is registered with the SEC as a management investment
company. Such registration does not involve supervision of the management
policies of the Trust.
The Prospectus and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the SEC. Copies of such information may be obtained from the SEC by payment of
the prescribed fee.
The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer or other person is authorized to
give any information or make any representation other than those contained in
the Prospectus and this Statement of Additional Information.
As of ________, 1999, the Trustees and officers of the Trust, as a
group, owned, none of the shares of any Fund of the Trust. As of ________, 1999,
the Adviser, owned beneficially the following percentages of the Funds,
respectively: Intermediate Fixed Income Fund, ____%, Growth Fund, ____%,
Diversified Assets Fund, ____% and Global Opportunities Fund, ____%. the Adviser
may be presumed to control both the Trust and each of the Funds because it
possesses or shares investment or voting power with respect to more than ____%
of the total shares outstanding of certain of the Funds. As a result, the
Adviser may have the ability to elect the Trustees of the Trust, approve the
Investment Advisory and Distribution Agreements for each of the Funds and to
control any other matters submitted to the shareholders of the Funds for their
approval or ratification.
FINANCIAL STATEMENTS
The Trust's balance sheet as of [ ], 1999 has been audited by [ ] and
is included herein along with the report thereon of [ ], independent auditors of
the Trust.
37
<PAGE> 82
APPENDIX
COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment is strong. Within this
category, certain obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
rated "A-1". However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and are
dependent on favorable business, financial, and economic conditions for the
obligor to meet its financial obligation.
"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The "D" rating will also be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually debt obligations not having an original maturity in excess
of one year, unless explicitly noted. The following summarizes the rating
categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) 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 structure 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 supporting institutions) 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, may be more subject to
variation.
38
<PAGE> 83
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the rating categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:
"F1" - Securities possess the highest credit quality. This designation
indicates the strongest capacity for timely payment of financial commitments and
may have an added "+" to denote any exceptionally strong credit feature.
"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of securities rated
"F1."
39
<PAGE> 84
"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
"B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.
"C" - Securities possess high default risk. This designation indicates
that the capacity for meeting financial commitments is solely reliant upon a
sustained, favorable business and economic environment.
"D" - Securities are in actual or imminent payment default.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.
"TBW-2" - This designation represents Thomson BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson BankWatch's lowest rating
category and indicates that the obligation is regarded as non-investment grade
and therefore speculative.
CORPORATE LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
40
<PAGE> 85
"BB," "B," "CCC," "CC" and "C" - Debt is regarded as having significant
speculative characteristics. "BB" indicates the least degree of speculation and
"C" the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
"BB" - Debt is less vulnerable to non-payment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
"B" - Debt is more vulnerable to non-payment than obligations rated
"BB," but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial or economic conditions
will likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
"CCC" - Debt is currently vulnerable to non-payment, and is dependent
upon favorable business, financial and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable to
non-payment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
"D" - An obligation rated "D" is in payment default. This rating is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon the
filing of a bankruptcy petition or the taking of similar action if payments on
an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an "r"
symbol should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." 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 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.
41
<PAGE> 86
"A" - Bonds 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 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.
"Ba," "B," "Caa," "Ca" and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols, Aa1, A1, Baa1, Ba1 and B1.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD" and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable uncertainty as to
timely payment of principal, interest or preferred dividends. Debt rated "DD" is
a defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
42
<PAGE> 87
The following summarizes the ratings used by Fitch IBCA for corporate
and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of investment risk
and are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is very unlikely to be adversely
affected by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of investment risk and
indicate very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.
"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of investment risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to adverse changes in circumstances or in
economic conditions than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
investment risk. The capacity for timely payment of financial commitments is
adequate, but adverse changes in circumstances and in economic conditions are
more likely to impair this category.
"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
"CCC," "CC" and "C" - Bonds have high default risk. Capacity for
meeting financial commitments is reliant upon sustained, favorable business or
economic developments. "CC" ratings indicate that default of some kind appears
probable, and "C" ratings signal imminent default.
"DDD," "DD" and "D" - Bonds are in default. Securities are not meeting
obligations and are extremely speculative. "DDD" designates the highest
potential for recovery on these securities, and "D" represents the lowest
potential for recovery.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "B" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
43
<PAGE> 88
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC" and "CC" - These designations are assigned by Thomson
BankWatch to non-investment grade long-term debt. Such issues are regarded as
having speculative characteristics regarding the likelihood of timely payment of
principal and interest. "BB" indicates the lowest degree of speculation and "CC"
the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may include
a plus or minus sign designation which indicates where within the respective
category the issue is placed.
44
<PAGE> 89
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
Exhibit
Number Description of Exhibit
------ ----------------------
<TABLE>
<CAPTION>
<S> <C>
(a) Agreement and Declaration of Trust dated 7/13/99
(b) By-laws
(c) Not Applicable
(d) Form of Investment Advisory Agreement dated _________, 1999*
(e) Form of Distribution Agreement dated _________ , 1999 *
(f) Not Applicable
(g) Form of Custody Agreement dated ________, 1999 *
(h)(1) Form of Transfer Agency Agreement dated ______, 1999*
(h)(2) Form of Administration Agreement dated _______, 1999*
(h)(3) Form of Fund Accounting Agreement dated ______, 1999*
(i) Opinion and Consent of Counsel to the Registrant*
(j) Consent of [ ] (Independent Auditors)*
(k) N/A
(l) Initial Capital Agreement*
(m) Form of Rule 12b-1 Plan*
(n) N/A
(o) Form of Rule 18f-3 Plan *
(p) Powers of Attorney
* to be filed by pre-effective amendment
</TABLE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
The Fund's Agreement and Declaration of Trust provides that the Fund
will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Fund, except if it is determined in the manner specified
in the Agreement and Declaration of Trust that they have not acted in good faith
in the reasonable belief that their actions were in or not opposed to the best
interests of the Fund or that such indemnification would relieve any officer or
Trustee of any liability to the Fund or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his or her
duties or, in a criminal proceeding, such Trustee or officers had reasonable
cause to believe their conduct was unlawful. The Fund, at its expense, will
provide liability insurance for the benefit of its Trustees and officers.
Insofar as indemnification for liability arising under the Securities
Act of 1933 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 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 director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE> 90
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Allianz of America, Inc., the Registrant's investment adviser (the "Adviser"),
is a registered investment adviser. The Adviser manages private accounts
representing assets of approximately $21 billion. The Adviser, (and its
predecessor organization) has been engaged in advising private client accounts
since 1976. The Adviser was organized on June 15, 1976.
Set forth below is a description of other business, profession,
vocation or employment of a substantial nature in which each
member/principal/officer of the Adviser is or has been engaged, at any time
during the past two fiscal years, for his own account or in the capacity of
director, officer, employee, partner or trustee:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NAME POSITION WITH ADVISER OTHER BUSINESS ADDRESS
Henning Schulte- Director and President Chairman, Managing Koeniginstrasse 28
Noelle and Chief Executive Board, Allianz AG Munich, Germany 80802
Officer
Lowell C. Anderson Director Chairman, President 1750 Hennepin Avenue
and Chief Executive Minneapolis, MN 55403
Officer, Allianz Life
Insurance Co. of
North America
Diethart Breipohl Director Member of Board of Koeniginstrasse 28
Management, Allianz Munich, Germany 80802
AG
Herbert F. Hansmeyer Director Member of Board of Koeniginstrasse 28
Management, Allianz Munich, Germany 80802
AG
David P. Marks Director, Chief N/A 55 Greens Farms Road
Investment Officer and Westport, CT 06881
Secretary
Hans-Juergen Schinzler Director Chairman of The Board Koeniginstrasse 107
of Management, Munich Munich, Germany 80791
Reinsurance Company
Ronald M. Clark Chief Operating Officer N/A 55 Greens Farms Road
and Treasurer Westport, CT 06881
Ed Ghigliotty Chief Administrative Senior Vice President 55 Greens Farms Road
Officer (since 4/99) of Operations & Chief Westport, CT 06881
Financial Officer,
Jefferson Insurance
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
<S> <C> <C> <C>
company of New York
(prior to 4/99)
Gary Brown Vice President and N/A 55 Greens Farms Road
Manager Director Westport, CT 06881
Wendell R. Kurtz Vice President and N/A 55 Greens Farms Road
Managing Director Westport, CT 06881
Raymond W. Gebhardt Assistant Secretary Assistant Tax Director, 777 San Marin Drive
Fireman's Fund Novato, CA 94998
Insurance Co.
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITER
(a), (b) BISYS Fund Services L.P. serves as the Registrant's principal
underwriter and serves as the principal underwriter for the following investment
company:
(a) BISYS acts as Distributor/Underwriter for other
registered investment companies:
BISYS FUND SERVICES LIMITED PARTNERSHIP
---------------------------------------
Alpine Equity Trust
American Performance Funds
AmSouth Mutual Funds
The BB&T Mutual Funds Group
The Coventry Group
ESC Strategic Funds, Inc.
The Eureka Funds
Governor Funds
Fifth Third Funds
Hirtle Callaghan Trust
HSBC Funds Trust and HSBC Mutual Funds Trust
INTRUST Funds Trust
The Infinity Mutual Funds, Inc.
The Kent Funds
Magna Funds
Meyers Investment Trust
Mercantile Mutual Funds
MMA Praxis Mutual Funds
M.S.D.&T. Funds
Pacific Capital Funds
The Parkstone Advantage Funds
Republic Advisor Funds Trust
Republic Funds Trust
Sefton Funds Trust
Summit Investment Trust
<PAGE> 92
Variable Insurance Funds
The Victory Portfolios
The Victory Variable Insurance Funds
Vintage Mutual Funds, Inc.
(b) Officers and Directors.
<TABLE>
<CAPTION>
Name and Principal Positions and Position
Business Address Offices with Registrant with Underwriter
- ---------------- ----------------------- ----------------
<S> <C> <C>
BISYS Fund Services, Inc. None Sole General Partner
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation None Sole Limited Partner
150 Clove Road
Little Falls, New Jersey
</TABLE>
(c) No person affiliated with the principal underwriter holds any
position or offices with the Trust.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Registrant's accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules thereunder are in the
physical possession of the following:
BISYS Fund Services
3435 Stelzer Road, Columbus, Ohio 43219
----------------------------------------
31a-1(a)
31a-1(b)(2)A, B, C and D
31a-1(b) 4, 5, 6, 8, 9, 10, 11, 12
31a-2(a) 1 and 2
31a-2(c)
Allianz of America, Inc.
55 Greens Farms Road , Westport, Connecticut 06881
---------------------------------------------------
31a-1(b) 10
31a-1(f)
31a-2(e)
31a-1(d)
31a-2(c)
31a-2(e)
Not Applicable
--------------
<PAGE> 93
31a-1(b) 3 and 7
31a-1(c)
31a-1(e)
31a-2(b)
31a-2(d)
ITEM 29. MANAGEMENT SERVICES
N/A
ITEM 30. UNDERTAKINGS
(a) Registrant undertakes to call a meeting of
shareholders for the purpose of voting upon the
removal of a trustee if requested to do so by the
holders of at least 10% of the Registrant's
outstanding shares.
(b) Registrant undertakes to provide the support to
shareholders specified in Section 16(c) of the 1940
Act as though that section applied to the Registrant.
(c) Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholder
upon request and without charge.
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Columbus, in the State of
Ohio on the 20th day of July, 1999.
USALLIANZ FUNDS
By: /s/ David P. Marks *
--------------------------
David P. Marks
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement of USAllianz Funds has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ David P. Marks* Trustee, President, Principal July 20, 1999
- -------------------------- Executive Officer
David P. Marks
/s/ Gary Brown* Trustee July 20, 1999
- --------------------------
Gary Brown
/s/ Ronald M. Clark* Trustee July 20, 1999
- --------------------------
Ronald M. Clark
/s/ Gary Tenkman Treasurer, Principal Financial and
- -------------------------- Accounting Officer
Gary Tenkman
*By: /s/ Charles Booth
---------------------------- July 20, 1999
Charles Booth
-------------
Attorney-in-Fact
</TABLE>
<PAGE> 95
USALLIANZ FUNDS
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
DESCRIPTION OF EXHIBIT EXHIBIT
- ---------------------- -------
REFERENCE
- ---------
<S> <C>
Agreement and Declaration of Trust dated _______, 1999......................(a)
By-laws ....................................................................(B)
Investment Advisory Agreement dated ______, 1999............................(d)*
Distribution Agreement dated ______, 1999 ..................................(e)*
Custody Agreement dated _______, 1999 ...................................(g)(1)*
Transfer Agency Agreement dated _____, 1999..............................(h)(1)*
Administration Agreement dated ______, 1999 .............................(h)(2)*
Fund Accounting Agreement dated ______, 1999 ............................(h)(3)*
Opinion and Consent of Counsel to the Registrant............................(i)*
Consent of [ ] (Independent Auditors)..................................(j)*
Initial Capital Agreement ..................................................(l)*
Rule 12b-1 Plan of Distribution.............................................(m)*
Rule 18F-3 Plan ............................................................(o)*
Powers of Attorney..........................................................(p)
</TABLE>
*
*To be filed by amendment.
<PAGE> 1
Exhibit (a)
AGREEMENT AND DECLARATION OF TRUST
of
USALLIANZ FUNDS
a Delaware Business Trust
Principal Place of Business:
55 Greens Farms Road
Westport, Connecticut 06881
Agent for Service of
Process in Delaware:
Corporation Service Company
1013 Centre Road
Wilmington, Delaware 19805
<PAGE> 2
TABLE OF CONTENTS
AGREEMENT AND DECLARATION OF TRUST
<TABLE>
<CAPTION>
<S> <C>
ARTICLE Name and Definitions........................................................................1
1. Name....................................................................................................1
2. Definitions.............................................................................................1
(a) Adviser(s)..........................................................................................1
(b) By-laws.............................................................................................1
(c) Certificate of Trust................................................................................1
(d) Class...............................................................................................1
(e) Commission..........................................................................................1
(f) Declaration of Trust................................................................................1
(g) Delaware Act........................................................................................2
(h Interested Person...................................................................................2
(i) 1940 Act............................................................................................2
(j) Person..............................................................................................2
(k) Principal Underwriter...............................................................................2
(l) Series..............................................................................................2
(m) Shareholder.........................................................................................2
(n) Shares..............................................................................................2
(o) Trust...............................................................................................2
(p) Trust Property......................................................................................2
(q) Trustees............................................................................................2
ARTICLE II. Purpose of Trust............................................................................2
ARTICLE III Shares......................................................................................2
1. Division of Beneficial Interest.........................................................................2
2. Ownership of Shares.....................................................................................2
3. Transfer of Shares......................................................................................2
4. Investments in the Trust................................................................................2
5. Status of Shares and Limitation of Personal Liability...................................................2
6. Establishment, Designation, Abolition or
Termination etc. of Series or Class....................................................................2
(a) Assets Held with Respect to a Particular Series.....................................................2
(b) Liabilities Held with Respect to a Particular Series................................................2
(c) Dividends, Distributions. Redemptions, and Repurchases.............................................2
(d) Equality............................................................................................2
(e) Fractions...........................................................................................2
(f) Exchange Privilege..................................................................................2
(g) Combination of Series...............................................................................2
ARTICLE IV Trustees......................................................................................2
1. Number, Election and Tenure.............................................................................2
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
2. Effect of Death, Resignation, etc. of a Trustee.........................................................2
3. Powers..................................................................................................2
4. Payment of Expenses by the Trust........................................................................2
5. Payment of Expenses by Shareholders.....................................................................2
6. Ownership of Assets of the Trust........................................................................2
7. Service Contracts.......................................................................................2
8. Trustees and Officers as Shareholders...................................................................2
9. Compensation............................................................................................2
ARTICLE V Shareholders' Voting Powers and Meetings....................................................2
1. Voting Powers. Meetings. Notice. and Record Dates.......................................................2
2. Quorum and Required Vote................................................................................2
3. Record Dates............................................................................................2
4. Additional Provisions...................................................................................2
ARTICLE VI Net Asset Value, Distributions and Redemptions..............................................2
1. Determination of Net Asset Value, Net Income and Distributions..........................................2
2. Redemptions and Repurchases.............................................................................2
ARTICLE VII Limitation and Liability; Indemnification...................................................2
1. Trustees, Shareholders, etc. Not Personally Liable; Notice.............................................2
2. Trustees' Good Faith Action; Expert Advice; No Bond or Surety...........................................2
3. Indemnification of Shareholders.........................................................................2
4. Indemnification of Trustees, Officers, etc..............................................................2
5. Compromise Payment......................................................................................2
6. Indemnification Not Exclusive, etc......................................................................2
7. Liability of Third Persons Dealing with Trustees........................................................2
8. Insurance...............................................................................................2
ARTICLE VIIII Miscellaneous...............................................................................2
1. Termination of the Trust or Any Series or Class.........................................................2
2. Reorganization..........................................................................................2
3. Amendments..............................................................................................2
4. Filing of Copies; References; Headings..................................................................2
5. Applicable Law..........................................................................................2
6. Provisions in Conflict with Law or Regulations..........................................................2
7. Business Trust Only.....................................................................................2
</TABLE>
ii
<PAGE> 4
AGREEMENT AND DECLARATION OF TRUST
USALLIANZ FUNDS
THIS AGREEMENT AND DECLARATION OF TRUST is made and entered into
as of the date set forth below by the Trustees named hereunder for the purpose
of forming a Delaware business trust in accordance with the provisions
hereinafter set forth.
NOW, THEREFORE, the Trustees hereby direct that the Certificate of
Trust be filed with the Office of the Secretary of State of the State of
Delaware and do hereby declare that the Trustees will hold IN TRUST all cash,
securities, and other assets which the Trust now possesses or may hereafter
acquire from time to time in any manner and manage and dispose of the same upon
the following terms and conditions for the benefit of the holders of Shares of
this Trust.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust shall be know as USAllianz Funds and
the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) "Adviser(s)" means a party or parties furnishing services to
the Trust pursuant to any investment advisory or investment management contract
described in Article IV, Section 6(a) hereof;
(b) "By-laws" shall mean the By-Laws of the Trust as amended from
time to time, which By-Laws are expressly herein incorporated by reference as
part of the "governing instrument" within the meaning of the Delaware Act;
(c) "Certificate of Trust" means the certificate of trust, as
amended or restated from time to time, filed by the Trustees in the Office of
the Secretary of State of the State of Delaware in accordance with the Delaware
Act;
(d) "Class" means a class of Shares of a Series of the Trust
established in accordance with the provisions of Article III hereof;
(e) "Commission" shall have the meaning given such term in the
1940 Act;
(f) "Declaration of Trust" means this Agreement and Declaration of
Trust, as amended or restated from time to time;
1
<PAGE> 5
(g) "Delaware Act" means the Delaware Business Trust Act, 12 Del.
C. Section Section 3801 et seq., as amended from time to time;
(h) "Interested Person" shall have the meaning given it in Section
2(a)(19) of the 1940 Act;
(i) "1940 Act" means the Investment Company Act of 1940 and the
rules and regulations thereunder, all as amended from time to time;
(j) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, estates, and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof, whether domestic or foreign;
(k) "Principal Underwriter" shall have the meaning given such term
in the 1940 Act;
(l) "Series" means such Series of Shares established and
designated under or in accordance with the provisions of Article III hereof; and
where the context requires or where appropriate, shall be deemed to include
"Class: or "Classes";
(m) "Shareholder" means a record owner of outstanding Shares;
(n) "Shares" means the shares of beneficial interest into which
the beneficial interest in the Trust shall be divided from time to time and
includes fractions of Shares as well as whole Shares;
(o) "Trust" means the Delaware Business Trust established under
the Delaware Act by this Declaration of Trust and the filing of the Certificate
of Trust in the Office of the Secretary of State of the State of Delaware;
(p) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is from time to time owned or held by or for the
account of the Trust; and
(q) "Trustees" means the Person or Persons who have signed this
Declaration of Trust and all other persons who may from time to time be duly
elected or appointed to serve as Trustees in accordance with the provisions
hereof, in each case so long as such Person shall continue in office in
accordance with the terms of this Declaration of Trust, and reference herein to
a Trustee or the Trustees shall refer to such Person or Persons in his or her or
their capacity as Trustees hereunder.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the
business of an investment company registered under the 1940 Act through one or
more series and to carry on
2
<PAGE> 6
such other business as the Trustees may from time to time determine. The
Trustees shall not be limited by any law limiting the investments which may be
made by fiduciaries.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial
interest in the Trust shall be divided into one or more Series. The Trustees may
divide each Series into Classes. Subject to the further provisions of this
Article III and any applicable requirements of the 1940 Act, the Trustees shall
have full power and authority, in their sole discretion, and without obtaining
any authorization or vote of the Shareholders of any Series or Class thereof,
(i) to divide the beneficial interest in each Series or Class thereof into
Shares, with or without par value as the Trustees shall determine, (ii) to issue
Shares without limitation as to number (including fractional Shares) to such
Persons and for such amount and type of consideration, including cash or
securities, subject to any restriction set forth in the By-Laws, at such time or
times and on such terms as the Trustees may deem appropriate, (iii) to establish
and designate and to change in any manner any Series or Class thereof and to fix
such preferences, voting powers, rights, duties and privileges and business
purpose of each Series or Class thereof as the Trustees may from time to time
determine, which preferences, voting powers, rights, duties and privileges may
be senior or subordinate to (or in the case of business purpose, different from)
any existing Series or Class thereof and may be limited to specified property or
obligations of the Trust or profits and losses associated with specified
property or obligations of the Trust, (iv) to divide or combine the Shares of
such Series or Class thereof into a greater or lesser number without thereby
materially changing the proportionate beneficial interest of the shares of such
Series or Class thereof in the assets held with respect to that Series, (v) to
classify or reclassify any issued Shares of any Series or Class thereof into
shares of one or more Series or Classes thereof; (vi) to change the name of any
Series or Class thereof; (vii) to abolish or terminate any one or more Series or
Classes thereof; (viii) to refuse to issue Shares to any person or class of
Persons; and (ix) to take such other action with respect to the Shares as the
Trustees may deem desirable.
Subject to the distinctions permitted among Classes of the same
Series as established by the Trustees, consistent with the requirements of the
1940 Act, each Share of a Series of the Trust shall represent an equal
beneficial interest in the net assets of such Series, and each holder of Shares
of a Series shall be entitled to receive such Shareholder's pro rata share of
distributions of income and capital gains, if any, made with respect to such
Series and upon redemption of the Shares of any Series, such Shareholder shall
be paid solely out of the funds and property of such Series of the Trust.
All references to Shares in this Declaration of Trust shall be
deemed to be Shares of any or all Series or Classes thereof, as the context may
require. All provisions herein relating to the Trust shall apply equally to each
Series of the Trust and each Class thereof, except as the context otherwise
requires.
All Shares issued hereunder, including, without limitation, Shares
issued in connection with a dividend or other distribution in Shares or a split
or reverse split or Shares, shall be fully paid and nonassessable. Except as
otherwise provided by the Trustees, Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
3
<PAGE> 7
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or those of a transfer or similar agent for
the Trust, which books shall be maintained separately for the Shares of each
Series or Class of the Trust. No certificates certifying the ownership of Shares
shall be issued except as the Trustees may otherwise determine from time to
time. The Trustees may make such rules as they consider appropriate for the
issuance of Share certificates, the transfer of Shares of each Series or Class
of the Trust and similar matters., The record books of the Trust as kept by the
Trust or any transfer or similar agent, as the case may be, shall be conclusive
as to the identity of the Shareholders of each Series or Class of the Trust and
as to the number of Shares of each Series or Class of the Trust held from time
to time by each Shareholder.
Section 3. Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the books of the Trust only by the
record holder thereof or by his or her duly authorized agent upon delivery to
the Trustees or the Trust's transfer agent of a duly executed instrument of
transfer, together with a Share certificate if one is outstanding, and such
evidence of the genuineness of each such execution and authorization and of such
other matters as may be required by the Trustees. Upon such delivery, and
subject to any further requirements specified by the Trustees or contained in
the By-Laws, the transfer shall be recorded on the books of the Trust. Until a
transfer is so recorded, the holder of record of Shares shall be deemed to be
the holder of such Shares for all purposes hereunder and neither the Trustees
nor the Trust, nor any transfer agent or registrar or any officer, employee, or
agent of the Trust, shall be affected by any notice of a proposed transfer.
Section 4. Investments in the Trust. Investments may be accepted
by the Trust from Persons, at such times, on such terms, and for such
consideration as the Trustees from time to time may authorize.
Section 5. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof. The
death, incapacity, dissolution, termination, or bankruptcy of a Shareholder
during the existence of the Trust shall not operate to terminate the Trust, nor
entitle the representative of any such Shareholder to an accounting or to take
any action in court or elsewhere against the Trust or the Trustees, but shall
entitle such representative only to the rights of such Shareholder under this
Trust. Ownership of Shares shall not entitle the Shareholder to any title in or
to the whole or any part of the Trust Property or any right to call for a
participation or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders as partners. No Shareholder
shall be personally liable for the debts, liabilities, obligations and expenses
incurred by, contracted for, or otherwise existing with respect to, the Trust or
any Series. Neither the Trust nor the Trustees, nor any officer, employee, or
agent of the Trust shall have any power to bind personally any Shareholder, nor,
except as specifically provided herein, to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.
Section 6. Establishment, Designation, Abolition or Termination
etc. of Series or Class. The establishment and designation of any Series or
Class of Shares of the Trust shall be effective upon the adoption by a majority
of the Trustees then in office of a resolution that sets forth such
establishment and designation and the relative rights and preferences of such
Series or
4
<PAGE> 8
Class of the Trust, whether directly in such resolution or by reference to
another document including, without limitation, any registration statement of
the Trust, or as otherwise provided in such resolution. The abolition or
termination of any Series or Class of Shares of the Trust shall be effective
upon the adoption by a majority of the Trustees then in office of a resolution
that abolishes or terminates such Series or Class.
Shares of each Series or Class of the Trust established pursuant
to this Article III, unless otherwise provided in the resolution establishing
such Series or Class, shall have the following relative rights and preferences:
(a) Assets Held with Respect to a Particular Series. All
consideration received by the trust for the issue or sale of Shares of a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof from
whatever source derived (including, without limitation, any proceeds derived
from the sale, exchange or liquidation of such assets and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be)
shall irrevocably be held separate with respect to that Series for all purposes,
and shall be so recorded upon the books of account of the Trust. Such
consideration, assets, income, earnings, profits and proceeds thereof, from
whatever source derived, (including, without limitation, any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds, in whatever form the same may
be) shall irrevocably be held separate with respect to that Series for all
purposes, and shall be so recorded upon the books of account of the Trust. Such
consideration, assets, income, earnings, profits and proceeds thereof, from
whatever source derived, (including, without limitation) any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds), in whatever form the same may
be, are herein referred to as "assets held with respect to" that Series. In the
event that there are any assets, income, earnings, profits and proceeds thereof,
funds or payments which are not readily identifiable as assets held with respect
to any particular Series (collectively "General Assets"), the Trustees shall
allocate such General Assets to, between or among any one or more of the Series
in such manner and on such basis as the Trustees, in their sole discretion, deem
fair and equitable, and any General Assets so allocated to a particular Series
shall be held with respect to that Series. Each such allocation by the Trustees
shall be conclusive and binding upon the Shareholders of all Series for all
purposes. Separate and distinct records shall be maintained for each Series and
the assets held with respect to each Series shall be made and accounted for
separately from the assets held with respect to all other series and the General
Assets of the Trust not allocated to such Series.
(b) Liabilities Held with Respect to a Particular Series. The
assets of the Trust held with respect to each particular Series shall be charged
against the liabilities of the Trust held with respect to that Series and all
expenses, costs, charges, and reserves attributable to that Series, except that
liabilities and expenses allocated solely to a particular Class shall be borne
by that Class. Any general liabilities of the Trust which are not readily
identifiable as being held with respect to any particular Series or Class shall
be allocated and charged by the Trustees to and among any one or more of the
Series or Classes in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. All liabilities, expenses, costs, charges,
and reserves so charged to a Series or Class are herein referred to as
"liabilities held with respect to" that Series or Class. Each allocation of
liabilities, expenses, costs, charges, and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Series or Classes for all
purposes. Without limiting the foregoing, but subject to the right of the
Trustees to allocate
5
<PAGE> 9
general liabilities, expenses, costs, charges or reserves as herein provided,
the debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular Series shall be enforceable
against the assets held with respect to such Series only and not against the
assets of the Trust generally or against the assets held with respect to any
other Series. Notice of this contractual limitation on liabilities among Series
may, in the Trustees' discretion, be set forth in the Certificate of Trust and
upon the giving of such notice in the Certificate of Trust, the statutory
provisions of Section 3804 of the Delaware Act relating to limitations on
liabilities among Series (and the statutory effect under Section 3804 of setting
forth such notice in the certificate of trust) shall become applicable to the
Trust and each Series. Any person extending credit to, contracting with or
having any claim against any Series may look only to the assets of that Series
to satisfy or enforce any debt, with respect to that Series. No Shareholder or
former Shareholder of any Series shall have a claim on or any right to any
assets allocated or belonging to any other Series.
(c) Dividends, Distributions. Redemptions, and Repurchases.
Notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, Article VI, no dividend or distribution, including, without
limitation, any distribution paid upon termination of the Trust or of any Series
or Class with respect to, nor any redemption or repurchase of, the Shares of any
Series or Class, shall be effected by the Trust other than from the assets held
with respect to such Series, nor shall any Shareholder or any particular Series
or Class otherwise have any right or claim against the assets held with respect
to any other Series except to the extent that such Shareholder has such a right
or claim hereunder as a Shareholder of such other Series. The Trustees, shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as capital, and
each such determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) Equality. All the Shares of each particular Series shall
represent an equal proportionate interest in the assets held with respect to
that Series (subject to the liabilities held with respect to that Series or
Class thereof and such rights and preferences as may have been established and
designated with respect to any Class within such Series), and each Share of any
particular Series shall be equal to each other Share of that Series. With
respect to any Class of a Series, each such Class shall represent interests in
the assets held with respect to that Series and shall have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that expenses allocated to a Class may be borne solely by such Class as
determined by the Trustees and a Class may have exclusive voting rights with
respect to matters affecting only that Class.
(e) Fractions. Any fractional Share of a Series or Class thereof
shall carry proportionately all the rights and obligations of a whole Share of
that Series or Class, including rights with respect to voting, receipt of
dividends and distributions, redemption of Shares and termination of the Trust.
(f) Exchange Privilege. The Trustees shall have the authority to
provide that the holders of Shares of any Series or Class shall have the right
to exchange said Shares for Shares of one or more other Series of Shares or
Class of Shares of the Trust or of other investment companies registered under
the 1940 Act in accordance with such requirements and procedures as may be
established by the Trustees.
6
<PAGE> 10
(g) Combination of Series. The Trustees shall have the authority,
without the approval of the Shareholders of any Series or Class unless otherwise
required by applicable law, to combine the assets and liabilities held with
respect to any two or more Series or Classes into assets and liabilities held
with respect to a single Series or Class.
ARTICLE IV
Trustees
Section 1. Number, Election and Tenure. The number of Trustees
shall initially be three, who shall be Gary Brown, Ronald M. Clark and David P.
Marks. Thereafter, the number of Trustees shall at all times be at least one or
no more than such number as determined, from time to time, by the Trustees
pursuant to Section 3 of this Article IV. Each Trustee shall serve during the
lifetime of the Trust until he or she dies, resigns, has reached any mandatory
retirement age as set by the Trustees, is declared bankrupt or incompetent by a
court of appropriate jurisdiction, or is removed, or, if sooner, until the next
meeting of Shareholders called for the purpose of electing Trustees and until
the election and qualification of his or her successor. In the event that less
than a majority of Trustees holding office have been elected by the
Shareholders, the Trustees then in office shall take such action as may be
necessary under applicable law for the election of Trustees. Any Trustee may
resign at any time by written instrument signed by him or her and delivered to
any officer of the Trust or to a meeting of the Trustees. Such resignation shall
be effective upon receipt unless specified to be effective at some other time.
Except to the extent expressly provided in a written agreement with the Trust,
no Trustee resigning and no Trustee removed shall have right to any compensation
for any period following his or her resignation or removal, or any right to
damages on account of such removal. The Shareholders may elect Trustees at any
meeting of Shareholders called by the Trustees for that purpose. Any Trustee may
be removed at any meeting of Shareholders by a vote of two-thirds of the
outstanding Shares of the Trust.
Section 2. Effect of Death, Resignation, etc. of a Trustee. The
death, declination to serve, resignation, retirement, removal or incapacity of
one or more Trustees, or all of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of this Declaration of
Trust. Whenever there shall be fewer than the designated number of Trustees,
until additional Trustees are elected or appointed as provided herein to bring
the total number of Trustees equal to the designated number, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration of Trust. As conclusive evidence of such vacancy, a written
instrument certifying the existence of such vacancy may be executed by an
officer of the Trust or by a majority of the Trustees. In the event of the
death, declination, resignation, retirement, removal, or incapacity of all the
then Trustees within a short period of time and without the opportunity for at
least one Trustee being able to appoint additional Trustees to replace those no
longer serving, the Trust's Adviser(s) are empowered to appoint new Trustees
subject to the provisions of the 1940 Act.
Section 3. Powers. Subject to the provisions of this Declaration
of Trust, the business of the Trust shall be managed by the Trustees, and the
Trustees shall have all powers necessary or convenient to carry out that
responsibility including the power to engage in transactions of all kinds on
behalf of the Trust as described in this Declaration of Trust. Without
7
<PAGE> 11
limiting the foregoing, the Trustees may: adopt By-Laws not inconsistent with
this Declaration of Trust providing for the management of the affairs of the
Trust and may amend and repeal such By-Laws to the extent that such By-Laws do
not reserve that right to the Shareholders; enlarge or reduce the number of
Trustees; remove any Trustee with or without cause at any time by written
instrument signed by at least two-thirds of the number of Trustees prior to such
removal, specifying the date when such removal shall become effective, and fill
vacancies caused by enlargement of their number or by the death, resignation,
retirement or removal of a Trustee; elect and remove, with or without cause,
such officers and appoint and terminate such agents as they consider
appropriate, appoint from their own number and establish and terminate one or
more committees, consisting of two or more Trustees, that may exercise the
powers and authority of the Board of Trustees to the extent that the Trustees so
determine; employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities or
with a Federal Reserve Bank; employ an administrator for the Trust and may
authorize such administrator to employ subadministrators; employ an investment
adviser or investment advisers to the Trust and may authorize such Advisers to
employ subadvisers; retain a transfer agent or a shareholder servicing agent, or
both; provide for the issuance and distribution of Shares by the Trust directly
or through one or more Principal Underwriters or otherwise; redeem, repurchase
and transfer Shares pursuant to applicable law; set record dates for the
determination of Shareholders with respect to various matters; declare and pay
dividends and distributions to Shareholders of each Series from the assets of
such Series; and in general delegate such authority as they consider desirable
to any officer of the Trust, to any committee of the Trustees and to any agent
or employee of the Trust or to any such custodian, transfer or shareholder
servicing agent, or Principal Underwriter. Any determination as to what is in
the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified herein or in the By-Laws or required by law, any action by
the Trustees shall be deemed effective if approved or taken by a majority of the
Trustees present at a meeting of Trustees at which a quorum of Trustees is
present, within or without the State of Delaware.
Without limiting the foregoing, the Trustees shall have the power
and authority to cause the Trust (or to act on behalf of the Trust):
(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold,
pledge, sell, assign, transfer, exchange, distribute, write options on, lend or
otherwise deal in or dispose of contracts for the future acquisition or delivery
of fixed income or other securities, and securities of every nature and kind,
including, without limitation, all types of bonds, debentures, stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers' acceptances, and other securities of any kind,
issued, created, guaranteed, or sponsored by any and all Persons, including
without limitation, states, territories, and possessions of the United States
and the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political subdivision of
the United States Government or any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation or
organization organized under the laws of the United States or of any state,
territory, or possession thereof, or by any corporation or
8
<PAGE> 12
organization organized under the laws of the United States or of any state,
territory, or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts for any such
securities, to change the investments of the assets of the Trust; and to
exercise any and all rights, powers, and privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons to exercise any of
said rights, powers, and privileges in respect of any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease,
or write options (including, options on futures contracts) with respect to or
otherwise deal in any property rights relating to any or all of the assets of
the Trust or any Series;
(c) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such Person or Persons as the Trustees
shall deem proper, granting to such Person or Persons such power and discretion
with relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its own
name or in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;
(f) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer of any
security which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer; and to pay
calls or subscriptions with respect to any security held in the Trust;
(g) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of the
expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(h) To compromise, arbitrate or otherwise adjust claims in favor
of or against the Trust or any matter in controversy, including, but not limited
to, claims for taxes;
(i) To enter into joint ventures, general or limited partnerships
and any other combinations or associations;
(j) To borrow funds or other property in the name of the Trust
exclusively for Trust purposes and in connection therewith to issue notes or
other evidences of indebtedness; and to mortgage and pledge the Trust Property
or any part thereof to secure any or all of such indebtedness;
(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment
9
<PAGE> 13
thereof; and to mortgage and pledge the Trust Property or any part thereof to
secure any of or all of such obligations;
(l) To purchase and pay for entirely out of Trust Property such
insurance as the Trustees may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies insuring the
assets of the Trust or payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters, or
independent contractors of the Trust, individually against all claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such Person as Trustee, officer, employee, agent,
investment adviser, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such Person against
liability;
(m) To adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans and trusts, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits, for any or
all of the Trustees, officers, employees and agents of the Trust;
(n) To operate as and carry out the business of an investment
company, and exercise all the powers necessary or appropriate to the conduct of
such operations;
(o) To enter into contracts of any kind and description;
(p) To employ as custodian of any assets of the Trust one or more
banks, trust companies or companies that are members of a national securities
exchange or such other entities as the Commission may permit as custodians of
the Trust, subject to any conditions set forth in this Declaration of Trust or
in the By-Laws;
(q) To employ auditors, counsel or other agents of the Trust,
subject to any conditions set forth in this Declaration of Trust or in the
By-Laws;
(r) To interpret the investment policies, practices, or
limitations of any Series or Class;
(s) To establish separate and distinct Series with separately
defined investment objectives and policies and distinct investment purposes, and
with separate Shares representing beneficial interests in such Series, and to
establish separate Classes, all in accordance with the provisions of Article
III;
(t) To the full extent permitted by the Delaware Act, to allocate
assets, liabilities and expenses of the Trust to a particular Series and Class
or to apportion the same between or among two or more Series or Classes,
provided that any liabilities or expenses incurred by a particular Series or
Class shall be payable solely out of the assets belonging to that Series or
Class as provided for in Article III;
(u) To invest all of the assets of the Trust, or any Series or any
Class thereof in a single investment company;
10
<PAGE> 14
(v) Subject to the 1940 Act, to engage in any other lawful act or
activity in which a business trust organized under the Delaware Act may engage.
The Trust shall not be limited to investing in obligations
maturing before the possible termination of the Trust or one or more of its
Series. The Trust shall not in any way be bound or limited by any present or
future law or custom in regard to investment by fiduciaries. The Trust shall not
be required to obtain any court order to deal with any assets of the Trust or
take any other action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees are
authorized to pay or cause to be paid out of the principal or income of the
Trust, or partly out of the principal and partly out of income, as they deem
fair, all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees, Advisers, Principal
Underwriter, auditors, counsel, custodian, transfer agent, shareholder servicing
agent, and such other agents or independent contractors and such other expenses
and charges as the Trustees may deem necessary or proper to incur, which
expenses, fees, charges, taxes and liabilities shall be allocated in accordance
with Article III, Section 6 hereof.
Section 5. Payment of Expenses by Shareholders. The Trustees shall
have the power, as frequently as they may determine, to cause each Shareholder,
or each Shareholder of any particular Series, to pay directly, in advance or
arrears, expenses of the Trust as described in Section 4 of this Article IV
("Expenses"), in an amount fixed from time to time by the Trustees, by setting
off such Expenses due from such Shareholder from declared but unpaid dividends
owed such Shareholder and/or by reducing the number of Shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such Expenses due from such Shareholder,
provided that the direct payment of such Expenses by Shareholders is permitted
under applicable law.
Section 6. Ownership of Assets of the Trust. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trust,
except that the Trustees shall have power to cause legal title to any Trust
Property to be held by or in the name of one or more of the Trustees, or in the
name of the Trust, or in the name of any other Person as nominee, on such terms
as the Trustees may determine. The right, title and interest of the Trustees in
the Trust Property shall vest automatically in each Person who may hereafter
become a Trustee. Upon the resignation, removal or death of a Trustee, he or she
shall automatically cease to have any right, title or interest in any of the
Trust Property, and the right, title and interest of such Trustee in the Trust
property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
Section 7. Service Contracts.
(a) Subject to such requirements and restrictions as may be set
forth under federal and/or state law and in the By-Laws, including, without
limitation, the requirements of Section 15 of the 1940 Act, the Trustees may, at
any time and from time to time, contract for exclusive or nonexclusive advisory,
management and/or administrative services for the Trust or for any Series (or
Class thereof) with any Person and any such contract may contain such other
11
<PAGE> 15
terms as the Trustees may determine, including, without limitation, authority
for the Adviser(s) or administrator to delegate certain or all of its duties
under such contracts to other qualified investment advisers and administrators
and to determine from time to time without prior consultation with the Trustees
what investments shall be purchased, held, sold or exchanged and what portion,
if any, of the assets of the Trust shall be held uninvested and to make changes
in the Trust's investments, or such other activities as may specifically be
delegated to such party.
(b) The Trustees may also, at any time and from time to time,
contract without any Person, appointing such Person exclusive or nonexclusive
distributor or Principal Underwriter for the Shares of one or more of the Series
(or Classes) or other securities to be issued by the Trust.
(c) The Trustees are also empowered, at any time and from time to
time, to contact with any Person, appointing such Person or Persons the
custodian, transfer agent and/or shareholder servicing agent for the Trust or
one or more of its Series.
(d) The Trustees are further empowered, at any time and from time
to time, to contract with any Person to provide such other services to the Trust
or one or more of the Series, as the Trustees determine to be in the best
interests of the Trust and the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the
Trust is a shareholder, director, officer, partner,
trustee, employee, Adviser, Principal Underwriter,
distributor, or affiliate or agent of or for any
Person, or for any parent or affiliate of any Person
with which an advisory, management, or administration
contract, or Principal Underwriter's or distributor's
contract, or transfer agent, shareholder servicing
agent or other type of service contract may have been
or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust; or that
(ii) any Person with which an advisory, management, or
administration contract or Principal Underwriter's or
distributor's contract, or transfer agent or
shareholder servicing agent contract may have been or
may hereafter be made also has an advisory,
management, or administration contract, or Principal
Underwriter's or distributor's or other service
contract with one or more other Persons, or has other
business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same, or create any liability or accountability to the Trust or its
shareholders.
12
<PAGE> 16
Section 8. Trustees and Officers as Shareholders. Any Trustee,
officer or agent of the Trust may acquire, own and dispose of Shares to the same
extent as if he or she were not a Trustee, officer or agent; and the Trustees
may issue and sell and cause to be issued and sold Shares to, and redeem such
Shares from, any such Person or any firm or company in which such Person is
interested, subject only to the general limitations contained herein or in the
By-Laws relating to the sale and redemption of such Shares.
Section 9. Compensation. The Trustees in such capacity shall be
entitled to reasonable compensation from the Trust and they may fix the amount
of such compensation. Nothing herein shall in any way prevent the employment of
any Trustee for advisory, management, legal, accounting, investment banking or
other services and payment for such services by the Trust.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Meetings. Notice. and Record Dates. The
Shareholders shall have power to vote only: (i) for the election or removal of
Trustees as provided in Article IV, Section 1 hereof, and (ii) with respect to
such additional matters relating to the Trust as may be required by applicable
law, this Declaration of Trust, the By-Laws or any registration statement of the
Trust with the Commission (or any successor agency) or as the Trustees may
consider necessary or desirable. Shareholders shall be entitled to one vote for
each dollar, and a fractional vote for each fraction of a dollar, of net asset
value per Share for each Share held, as to any matter on which the Share is
entitled to vote. Notwithstanding any other provision of this Declaration of
Trust, on any matters submitted to a vote of the Shareholders, all shares of the
Trust then entitled to vote shall be voted in aggregate, except: (i) when
required by the 1940 Act, Shares shall be voted by individual Series; (ii) when
the matter involves any action that the Trustees have determined will affect
only the interests of one or more Series, then only Shareholders of such Series
shall be entitled to vote thereon; and (iii) when the matter involves any action
that the Trustees have determined will affect only the interests of one or more
Classes, then only the Shareholders of such Class or Classes shall be entitled
to vote thereon. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy may be given in
writing. The By-Laws may provide that proxies may also, or may instead, be given
by an electronic or telecommunications device or in any other manner. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and may
take any action required by law, this Declaration of Trust or By-Laws to be
taken by the Shareholders. Meetings of the Shareholders shall be called and
notice thereof and record dates therefor shall be given and set as provided in
the By-Laws.
Section 2. Quorum and Required Vote. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust,
twenty-five percent (25%) of the Shares issued and outstanding shall constitute
a quorum at a Shareholders' meeting but any lesser number shall be sufficient
for adjourned sessions. When any one or more Series (or Classes) is to vote as a
single Series (or Class) separate from any other Shares, twenty-five percent
(25%) of the Shares of each such Series (or Class) issued and outstanding shall
constitute a quorum at a Shareholders' meeting of that Series (or Class). Except
when a larger vote is
13
<PAGE> 17
required by any provision of this Declaration of Trust or the By-Laws or by
applicable law, when a quorum is present at any meeting, a majority of the
Shares voted shall decide any questions and a plurality of the Shares voted
shall elect a Trustee, provided that where any provision of law or of this
Declaration of Trust requires that the holders of any Series shall vote as a
Series (or that holders of a Class shall vote as a Class), then a majority of
the Shares of that Series (or Class) voted on the matter (or a plurality with
respect to the election of a Trustee) shall decide that matter insofar as that
Series (or Class) is concerned.
Section 3. Record Dates. For the purpose of determining the
Shareholders of any Series (or Class) who are entitled to receive payment of any
dividend or of any other distribution, the Trustees may from time to time fix a
date, which shall be before the date for the payment of such dividend or such
other payment, as the record date for determining the Shareholders of such
Series (or Class) having the right to receive such dividend or distribution.
Without fixing a record date, the Trustees may for distribution purposes close
the register or transfer books for one or more Series (or Classes) at any time
prior to the payment of a distribution. Nothing in this Section shall be
construed as precluding the Trustees from setting different record dates for
different Series (or Classes).
Section 4. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Net Asset Value, Distributions and Redemptions
Section 1. Determination of Net Asset Value, Net Income and
Distributions. Subject to applicable law and Article III, Section 6 hereof, the
Trustees, in their absolute discretion, may prescribe and shall set forth in the
By-Laws or in a duly adopted vote of the Trustees such bases and time for
determining the per Share or net asset value of the Shares of any Series or
Class or net income attributable to the Shares of any Series or Class, or the
declaration and payment of dividends and distributions on the Shares of any
Series or Class, as they may deem necessary or desirable.
Section 2. Redemptions and Repurchases.
(a) The Trust shall purchase such Shares as are offered by any
Shareholder for redemption, upon the presentation of a proper instrument of
transfer together with a request directed to the Trust, or a Person designated
by the Trust, that the Trust purchase such Shares or in accordance with such
other procedures for redemption as the Trustees may from time to time authorize;
and the Trust will pay therefor the net asset value thereof as determined by the
Trustees (or on their behalf), in accordance with any applicable provisions of
the By-Laws, any registration statement of Trust and applicable law. Unless
extraordinary circumstances exist, payment for said Shares shall be made by the
Trust to the Shareholder in accordance with the 1940 Act and any rules and
regulations thereunder or as otherwise required by the Commission. The
obligation set forth in this Section 2(a) is subject to the provision that,
during any emergency which makes it impracticable for the Trust to dispose of
the investments of the applicable Series or to determine fairly the value of the
net assets held with respect to such Series, such obligation
14
<PAGE> 18
may be suspended or postponed by the Trustees. In the case of a suspension of
the right of redemption as provided herein, a Shareholder may either withdraw
the request for redemption or receive payment based on the net asset value per
share next determined after the termination of such suspension.
(b) The redemption price may in any case or cases be paid wholly or
partly in kind if the Trustees determine that such payment is advisable in the
interest of the remaining Shareholders of the Series or Class thereof for which
the Shares are being redeemed. Subject to the foregoing, the fair value,
selection and quantity of securities or other property so paid or delivered as
all or part of the redemption price may be determined by or under authority of
the Trustees. In no case shall the Trust be liable for any delay of any Adviser
or other Person in transferring securities selected for delivery as all or part
of any payment-in-kind.
(c) If the Trustees shall, at any time and in good faith, determine
that direct or indirect ownership of Shares of any Series or Class thereof has
or may become concentrated in any Person to an extent that would disqualify any
Series as a regulated investment company under the Internal Revenue Code of
1986, as amended (or any successor statute thereof), then the Trustees shall
have the power (but not the obligation) by such means as they deem equitable (i)
to call for the redemption by any such Person of a number, or principal amount,
of Shares sufficient to maintain or bring the direct or indirect ownership of
Shares into conformity with the requirements for such qualification, (ii) to
refuse to transfer or issue Shares of any Series or Class thereof to such Person
whose acquisition of the Shares in question would result in such
disqualification, or (iii) to take such other action as they deem necessary and
appropriate to avoid such disqualification. Any such redemption shall be
effected at the redemption price and in the manner provided in this Article VI.
(d) The holders of Shares shall upon demand disclose to the
Trustees in writing such information with respect to direct and indirect
ownership of Shares as the Trustees deem necessary to comply with the provisions
of the Internal Revenue Code of 1986, as amended (or any successor statute
thereto), or to comply with the requirements of any other taxing authority.
ARTICLE VII
Limitation of Liability; Indemnification
Section 1. Trustees, Shareholders, etc. Not Personally Liable;
Notice. The Trustees, officers, employees and agents of the Trust, in incurring
any debts, liabilities or obligations, or in limiting or omitting any other
actions for or in connection with the Trust, are or shall be deemed to be acting
as Trustees, officers, employees or agents of the Trust and not in their own
capacities. No Shareholder shall be subject to any personal liability whatsoever
in tort, contract or otherwise to any other Person or Persons in connection with
the assets or the affairs of the Trust or of any Series, and subject to Section
4 of this Article VII, no Trustee, officer, employee or agent of the Trust shall
be subject to any personal liability whatsoever in tort, contract, or otherwise,
to any other Person or Persons in connection with the assets or affairs of the
Trust or of any Series, save only that arising from his or her own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office or the discharge of his or her
functions. The Trust (or if the matter relates only to a particular Series,
15
<PAGE> 19
that Series) shall be solely liable for any and all debts, claims, demands,
judgments, decrees, liabilities or obligations of any and every kind, against or
with respect to the Trust or such Series in tort, contract or otherwise in
connection with the assets or the affairs of the Trust or such Series, and all
Persons dealing with the Trust or any Series shall be deemed to have agreed that
resort shall be had solely to the Trust Property of the Trust (or if the matter
relates only to a particular Series, that of such Series), for the payment or
performance thereof.
The Trustees may provide that every note, bond, contract,
instrument, certificate or undertaking made or issued by the Trustees or by any
officer or officers shall give notice that a Certificate of Trust in respect of
the Trust is on file with the Secretary of State of the State of Delaware and
may recite to the effect that the same was executed or made by or on behalf of
the Trust or by them as Trustee or Trustees or as officer or officers, and not
individually, and that the obligations of any instrument made or issued by the
Trustees or by any officer or officers of the Trust are not binding upon any of
them or the Shareholders individually but are binding only upon the assets and
property of the Trust, or the particular Series in question, as the case may be.
The omission of any statement to such effect from such instrument shall not
operate to bind any Trustee or Trustees or officer or officers or Shareholder or
Shareholders individually, or to subject the assets of any Series to the
obligations of any other Series.
Section 2. Trustees' Good Faith Action; Expert Advice; No Bond or
Surety. The exercise by the Trustees of their powers and discretion hereunder
shall be binding upon everyone interested. Subject to Section 4 of this Article
VII, a Trustee shall be liable for his or her own willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall not be liable
for errors of judgment or mistakes of fact or law. Subject to the foregoing, (i)
the Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant, Adviser, administrator,
distributor or Principal Underwriter, custodian or transfer agent, dividend
disbursing agent, shareholder servicing agent or accounting agent of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee; (ii) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of the contract involved)
any officer, partner or responsible employee of a contracting party employed by
the Trust. The Trustees as such shall not be required to give any bond or surety
or any other security for the performance of their duties.
Section 3. Indemnification of Shareholders. If any Shareholder (or
former Shareholder) of the Trust shall be charged or held to be personally
liable for any obligation or liability of the Trust solely by reason of being or
having been a Shareholder and not because of such Shareholder's acts or
omissions or for some other reason, the Trust (upon proper and timely request by
the Shareholder) may assume the defense against such charge and satisfy any
judgment thereon or may reimburse the Shareholder for expenses, and the
Shareholder or former Shareholder (or the heirs, executors, administrators or
other legal representatives thereof, or in the case of a corporation or other
entity, its corporate or other general successor) shall be entitled (but solely
out of the assets of the Series of which such Shareholder or former Shareholder
is or
16
<PAGE> 20
was the holder of Shares) to be held harmless from and indemnified against all
loss and expense arising from such liability.
Section 4. Indemnification of Trustees, Officers, etc. Subject to
the limitations, if applicable, hereinafter set forth in this Section 4, the
Trust shall indemnify (from the assets of one or more Series to which the
conduct in question relates) each of its Trustees, officers, employees and
agents (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, together with such
Person's heirs, executors, administrators or personal representative, referred
to as a "Covered Person")) against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or with which such Covered
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,
except with respect to any matter as to which it has been determined that such
Covered Person (i) did not act in good faith in the reasonable belief that such
Covered Person's action was in or not opposed to the best interests of the
Trust; or (ii) had acted with willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such Covered
Person's office; and (iii) for a criminal proceeding, had reasonable cause to
believe that his or her conduct was unlawful (the conduct described in (i), (ii)
and (iii) being referred to hereafter as "Disabling Conduct"). A determination
that the Covered Person is entitled to indemnification may be made by (i) a
final decision on the merits by a court or other body before whom the proceeding
was brought that the Covered Person to be indemnified was not liable by reason
of Disabling Conduct, (ii) dismissal of a court action or an administrative
proceeding against a Covered Person for insufficiency of evidence of Disabling
Conduct, or (iii) a reasonable determination, based upon a review of the facts,
that the indemnitee was not liable by reason of Disabling Conduct by (a) a vote
of a majority of a quorum of the Trustees who are neither Interested Persons of
the Trust nor parties to the proceeding (the "Disinterested Trustees"), or (b)
an independent legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by any such Covered Person (but
excluding amounts paid in satisfaction of judgments, in compromise or as fines
or penalties), may be paid from time to time by one or more Series to which the
conduct in question related in advance of the final disposition of any such
action, suit or proceeding; provided that the Covered Person shall have
undertaken to repay the amounts so paid to such Series if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article VII and (i) the Covered Person shall have provided security for such
undertaking, (ii) the Trust shall be insured against losses arising by reason of
any lawful advances, or (iii) a majority of a quorum of the Disinterested
Trustees, or an independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as opposed to a full
trial type inquiry), that there is reason to believe that the Covered Person
ultimately will be found entitled to indemnification.
Section 5. Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 4 of this
Article VII, pursuant to a consent decree or otherwise, no such indemnification
either for said payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of a quorum of the
Disinterested Trustees or (ii) by an independent legal counsel in a written
opinion.
17
<PAGE> 21
Approval by the Trustees pursuant to clause (i) or by independent legal counsel
pursuant to clause (ii) shall not prevent the recovery from any Covered Person
of any amount paid to such Covered Person in accordance with either of such
clauses as indemnification if such Covered Person is subsequently adjudicated by
a court of competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in or not opposed to the
best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the Covered Person's
office.
Section 6. Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article VII shall not be exclusive of or affect
any other rights to which any such Covered Person or shareholder may be
entitled. As used in this Article VII, a "disinterested" Person is one against
whom none of the actions, suits or other proceedings in question, and no other
action, suit or other proceeding on the same or similar grounds is then or has
been pending or threatened. Nothing contained in this Article VII 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.
Section 7. Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry concerning
the validity of any transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred to the Trust or
upon its order.
Section 8. Insurance. The Trustees shall be entitled and empowered
to the fullest extent permitted by law to purchase with Trust assets insurance
for liability and for all expenses reasonably incurred or paid or expected to be
paid by a Trustee, officer, employee, or agent of the Trust in connection with
any claim, action, suit, or proceeding in which he or she may become involved by
virtue of his or her capacity or former capacity as a Trustee of the Trust.
ARTICLE VIII
Miscellaneous
Section 1. Termination of the Trust or Any Series or Class.
(a) Unless terminated as provided herein, the Trust shall continue
without limitation of time. The Trustees in their sole discretion may terminate
the Trust.
(b) Upon the requisite action by the Trustees to terminate the
Trust or any one or more Series of Shares or any Class thereof, after paying or
otherwise providing for all charges, taxes, expenses, and liabilities, whether
due or accrued or anticipated, of the Trust or of the particular Series or any
Class thereof as may be determined by the Trustees, the Trust shall in
accordance with such procedures as the Trustees may consider appropriate reduce
the remaining assets of the Trust or of the affected Series or Class to
distributable form in cash or Shares (if any Series remain) or other securities,
or any combination thereof, and distribute the proceeds to the Shareholders of
the Series or Classes involved, ratably according to the number of Shares of
such
18
<PAGE> 22
Series or Class held by the Shareholders of such Series or Class on the date of
distribution. Thereupon, the Trust or any affected Series or Class shall
terminate and the Trustees and the Trust shall be discharged from any and all
further liabilities and duties relating thereto or arising therefrom, and the
right, title, and interest of all parties with respect to the Trust or such
Series or Class shall be canceled and discharged.
(c) Upon termination of the Trust, following completion of winding
up of its business, the Trustees shall cause a certificate of cancellation of
the Trust's Certificate of Trust to be filed in accordance with the Delaware
Act, which certificate of cancellation may be signed by any one Trustee.
Section 2. Reorganization
(a) Notwithstanding anything else herein, the Trustees may, without
Shareholder approval unless such approval is required by applicable law, (i)
cause the Trust to merge or consolidate with or into or transfer its assets and
any liabilities to one or more trusts (or series thereof to the extent permitted
by law), partnerships, associations, corporations or other business entities
(including trusts, partnerships, associations, corporations or other business
entities created by the Trustees to accomplish such merger or consolidation or
transfer of assets and any liabilities) so long as the surviving or resulting
entity is an investment company as defined in the 1940 Act, or is a series
thereof, that will succeed to or assume the Trust's registration under the 1940
Act and that is formed, organized, or existing under the laws of the United
States or of a state, commonwealth, possession or colony of the United States,
unless otherwise permitted under the 1940 Act, (ii) cause any one or more Series
(or Classes) of the Trust to merge or consolidate with or into or transfer its
assets and any liabilities to any one or more other Series (or Classes) of the
Trust, one or more trusts (or series or classes thereof to the extent permitted
by law), partnerships, association, corporations, (iii) cause the Shares to be
exchanged under or pursuant to any state or federal statute to the extent
permitted by law or (iv) cause the Trust to reorganize as a corporation, limited
liability company or limited liability partnership under the laws of Delaware or
any other state or jurisdiction.
(b) Pursuant to and in accordance with the provisions of Section
3815(f) of the Delaware Act, and notwithstanding anything to the contrary
contained in this Declaration of Trust, an agreement of merger or consolidation
or exchange or transfer of assets and liabilities approved by the Trustees in
accordance with this Section 2 may (i) effect any amendment to the governing
instrument of the Trust or (ii) effect the adoption of a new governing
instrument of the Trust if the Trust is the surviving or resulting trust in the
merger or consolidation.
(c) The Trustees may create one or more business trusts to which
all or any part of the assets, liabilities, profits, or losses of the Trust or
any Series or Class thereof may be transferred and may provide for the
conversion of Shares in the Trust or any Series or Class thereof into beneficial
interests in any such newly created trust or trusts or any series of classes
thereof.
Section 3. Amendments. Except as specifically provided in this
Section 3, the Trustees may, without Shareholder vote, restate, amend, or
otherwise supplement this Declaration of Trust. Shareholders shall have the
right to vote on (i) any amendment that would affect their right to vote granted
in Article V, Section 1 hereof, (ii) any amendment to this Section 3 of Article
VIII; (iii) any amendment that may require their vote under applicable law or
19
<PAGE> 23
by the Trust's registration statement, as filed with the Commission, and (iv)
any amendment submitted to them for their vote by the Trustees. Any amendment
required or permitted to be submitted to the Shareholders that, as the Trustees
determine, shall affect the Shareholders of one or more Series shall be
authorized by a vote of the Shareholders of each Series affected and no vote of
Shareholders of a Series not affected shall be required. Notwithstanding
anything else herein, no amendment hereof shall limit the rights to insurance
provided by Article VII hereof with respect to any acts or omissions of Persons
covered thereby prior to such amendment not shall any such amendment limit the
rights to indemnification referenced in Article VII hereof as provided in the
By-Laws with respect to any actions or omissions of Persons covered thereby
prior to such amendment. The Trustees may, without Shareholder vote, restate,
amend, or otherwise supplement the Certificate of Trust as they deem necessary
or desirable.
Section 4. Filing of Copies; References; Headings. The original or
a copy of this instrument and of each restatement and/or amendment hereto shall
be kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such restatements and/or amendments have been
made and as to any matters in connection with the Trust hereunder; and, with the
same effect as if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any such restatements
and/or amendments. In this instrument and in any such restatements and/or
amendments, references to this instrument, and all expressions such as "herein,"
"hereof," and "hereunder," shall be deemed to refer to this instrument as
amended or affected by any such restatements and/or amendments. Headings are
placed herein for convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or effect of this
instrument. Whenever the singular number is used herein, the same shall include
the plural; and the neuter, masculine and feminine genders shall include each
other, as applicable. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 5. Applicable Law.
(a) The Trust is created under, and this Declaration of Trust is to
be governed by, and construed and enforced in accordance with, the laws of the
State of Delaware. The Trust shall be of the type commonly called a business
trust, and without limiting the provisions hereof, the Trust specifically
reserves the right to exercise any of the powers or privileges afforded to
business trusts or actions that may be engaged in by business trusts under the
Delaware Act, and the absence of a specific reference herein to any such power,
privilege, or action shall not imply that the Trust may not exercise such power
or privilege or take such actions.
(b) Notwithstanding the first sentence of Section 5(a) of this
Article VIII, there shall not be applicable to the Trust, the Trustees, or this
Declaration of Trust either the provisions of Section 3540 of Title 12 of the
Delaware Code or any provisions of the laws (statutory or common) of the State
of Delaware (other than the Delaware Act) pertaining to trusts that relate to or
regulate: (i) the filing with any court or governmental body or agency of
Trustee accounts or schedules of trustee fees and charges; (ii) affirmative
requirements to post bonds for trustees, officers, agents, or employees of a
trust; (iii) the necessity for obtaining a court or other governmental approval
concerning the acquisition, holding, or disposition of real or personal
property; (iv) fees or other sums applicable to trustees, officers, agents or
employees of a trust; (v) the allocation of receipts and expenditures to
titling, storage, or other manner of holding of trust assets; or (vii) the
establishment of fiduciary or other standards or responsibilities or
20
<PAGE> 24
limitations on the acts of powers of liabilities or authorities and powers of
trustees that are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this
Declaration of Trust; or (viii) activities similar to those referenced in the
foregoing items (i) through (vii).
Section 6. Provisions in Conflict with Law or Regulations
(a) The provisions of this Declaration of Trust are severable, and
if the Trustees shall determine, with the advice of counsel, that any such
provision is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code of 1986, as amended (or any successor
statute thereto), and the regulations thereunder, the Delaware Act or with other
applicable laws and regulations, the conflicting provision shall be deemed never
to have constituted a part of this Declaration of Trust; provided, however, that
such decision shall not affect any of the remaining provisions of this
Declaration of Trust or render invalid or improper any action taken or omitted
prior to such determination.
(b) If any provision of this Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall, not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration of Trust in any jurisdiction.
Section 7. Business Trust Only. It is the intention of the Trustees
to create a business trust pursuant to the Delaware Act. It is not the intention
of the Trustees to create a general partnership, limited partnership, joint
stock association, corporation, bailment, or any form of legal relationship
other than a business trust pursuant to the Delaware Act. Nothing in this
Declaration of Trust shall be construed to make the Shareholders, either by
themselves or with the Trustees, partners, or members of a joint stock
association.
IN WITNESS WHEREOF, the Trustees named below do hereby make and
enter into this Agreement and Declaration of Trust as of the 13th day of July,
1999.
_______________________
Gary Brown
_______________________
Ronald M. Clark
_______________________
David P. Marks
THE PRINCIPAL PLACE OF BUSINESS
OF THE TRUST IS:
55 Greens Farms Road
Westport, Connecticut 06881
21
<PAGE> 1
Exhibit (b)
BY-LAWS
of
USALLIANZ FUNDS
a Delaware Business Trust
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INTRODUCTION....................................................................................1
A. Agreement and Declaration of Trust.......................................................1
B. Definitions..............................................................................1
ARTICLE I. OFFICES..........................................................................1
Section 1. Principal Office.................................................................1
Section 2. Delaware Office..................................................................1
Section 3. Other Offices....................................................................1
ARTICLE II. MEETINGS OF SHAREHOLDERS........................................................1
Section 1. Place of Meetings................................................................1
Section 2. Call of Meetings.................................................................1
Section 3. Notice of Meeting of Shareholders................................................2
Section 4. Manner of Giving Notice: Affidavit of Notice....................................2
Section 5. Adjourned Meeting; Notice........................................................2
Section 6. Voting...........................................................................2
Section 7. Waiver of Notice; Consent of Absent Shareholders.................................2
Section 8. Shareholder Action by Written Consent Without a Meeting..........................3
Section 9. Record Date for Shareholder Notice; Voting and Giving Consents...................3
Section 10. Proxies..........................................................................4
Section 11. Inspectors of Election...........................................................4
ARTICLE III TRUSTEES........................................................................5
Section 1. Powers...........................................................................5
Section 2. Number of Trustees...............................................................5
Section 3. Vacancies........................................................................5
Section 4. Chair............................................................................5
Section 5. Place of Meetings and Meetings by Telephone......................................5
Section 6. Regular Meetings.................................................................5
Section 7. Special Meetings.................................................................6
Section 8. Quorum...........................................................................6
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C>
Section 9. Waiver of Notice.................................................................6
Section 10. Adjournment......................................................................6
Section 11. Notice of Adjournment............................................................6
Section 12. Action Without a Meeting........................................................6
Section 13. Fees and Compensation of Trustees...............................................7
Section 14. Delegation of Power to Other Trustees...........................................7
ARTICLE IV COMMITTEES.......................................................................7
Section 1. Committees of Trustees...........................................................7
Section 2. Meetings and Action of Committees................................................7
ARTICLE V OFFICERS..........................................................................8
Section 1. Officers.........................................................................8
Section 2. Election of Officers.............................................................8
Section 2. Subordinate Officers.............................................................8
Section 4. Removal and Resignation of Officers..............................................8
Section 5. Vacancies in Offices.............................................................8
Section 6. President........................................................................8
Section 7. Vice Presidents..................................................................9
Section 8. Secretary........................................................................9
Section 9. Treasurer........................................................................9
ARTICLE VI INSPECTION OF RECORDS AND REPORTS................................................9
Section 1. Inspection by Shareholders.......................................................9
Section 2. Inspection by Trustees..........................................................10
ARTICLE VII GENERAL MATTERS................................................................10
Section 1. Checks, Drafts, Evidences of Indebtedness.......................................10
Section 2. Contracts and Instruments: How Executed........................................10
Section 3. Fiscal Year.....................................................................10
Section 4. Seal............................................................................10
ARTICLE VIII AMENDMENTS....................................................................10
Section 1. Amendment.......................................................................10
</TABLE>
2
<PAGE> 3
BY-LAWS
of
USALLIANZ FUNDS
a Delaware Business Trust
INTRODUCTION
A. Agreement and Declaration of Trust. These By-Laws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of USAllianz Funds, a Delaware business trust (the
"Trust"). In the event of any inconsistency between the terms hereof and the
terms of the Declaration of Trust, the terms of the Declaration of Trust shall
control.
B. Definitions. Capitalized terms used herein and not herein defined
are used as defined in the Declaration of Trust.
ARTICLE I. OFFICES
Section 1. Principal Office. The Trustees shall fix and, from time
to time, may change the location of the principal executive office of the Trust
at any place within or outside the State of Delaware.
Section 2. Delaware Office. The Trustees shall establish a
registered office in the State of Delaware and shall appoint as the Trust's
registered agent for service of process in the State of Delaware an individual
who is a resident of the State of Delaware or a Delaware corporation or a
corporation authorized to transact business in the State of Delaware; in each
case the business office of such registered agent for service of process shall
be identical with the registered Delaware office of the Trust.
Section 3. Other Offices. The Trustees may at any time establish
branch or subordinate offices at any place or places within or outside the State
of Delaware where the Trust intends to do business.
ARTICLE II. MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. Meetings of Shareholders shall be
held at any place designed by the Trustees. In the absence of any such
designation, Shareholders' meetings shall be held at the principal executive
office of the Trust.
Section 2. Call of Meetings. There shall be no annual Shareholders'
meetings. Special meetings of the Shareholders may be called at any time by the
Trustees, the President or any other officer designated for the purpose by the
Trustees, for the purpose of seeking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or provided in the
Declaration of Trust or upon any other matter as to which such vote or authority
<PAGE> 4
is deemed by the Trustees or the President to be necessary or desirable. To the
extent required by the Investment Company Act of 1940, as amended ("1940 Act"),
meetings of the Shareholders for the purpose of voting on the removal of any
Trustee shall be called promptly by the Trustees.
Section 3. Notice of Meeting of Shareholders. All notices of
meetings of Shareholders shall be sent or otherwise given to Shareholders in
accordance with Section 4 of this Article II not less than ten (10) nor more
than ninety (90) days before the date of the meeting. The notice shall specify
(i) the place, date and hour of the meeting, and (ii) the general nature of the
business to be transacted.
Section 4. Manner of Giving Notice; Affidavit of Notice. Notice of
any meeting of Shareholders shall be (i) given either by hand delivery,
first-class mail, telegraphic or other written communication, charges prepaid,
and (ii) addressed to the Shareholder at the address of that Shareholder
appearing on the books of the Trust or its transfer agent or given by the
Shareholder to the Trust for the purpose of notice. If no such address appears
on the Trust's books or is not given to the Trust, notice shall be deemed to
have been given if sent to that Shareholder by first class mail or telegraphic
or other written communication to the Trust's principal executive office, or if
published at least once in a newspaper of general circulation in the county
where that office is located. Notice shall be deemed to have given at the time
when delivered personally or deposited in the mail or sent by telegram or other
means of written communication or, where notice is given by publication, on the
date of publication.
An affidavit of the mailing or other means of giving any notice of any
meeting of Shareholders shall be filed and maintained in the minute book of the
Trust.
Section 5. Adjourned Meeting; Notice. Any meeting of Shareholders,
whether or not a quorum is present, may be adjourned from time to time by: (a)
the vote of the majority of the Shares represented at that meeting, either in
person or by proxy; or (b) in his or her discretion by the chair of the meeting.
When any meeting of Shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed. Notice of any
such adjourned meeting shall be given to each Shareholder of record entitled to
vote at the adjourned meeting in accordance with the provisions of Sections 3
and 4 of this Article II. At any adjourned meeting, any business may be
transacted which might have been transacted at the original meeting.
Section 6. Voting. The Shareholders entitled to vote at any meeting
of Shareholders shall be determined in accordance with the provisions of the
Declaration of Trust of the Trust, as in effect at such time. The Shareholders'
vote may be by voice vote or by ballot, provided, however, that any election for
Trustees must be by ballot if demanded by any Shareholder before the voting has
begun.
Section 7. Waiver of Notice; Consent of Absent Shareholders. The
transaction of business and any actions taken at a meeting of Shareholders,
however called and noticed and wherever held, shall be as valid as though taken
at a meeting duly held after regular call and notice provided a quorum is
present either in person or by proxy at the meeting of Shareholders and if
either before or after the meeting, each Shareholder entitled to vote who was
not present in
2
<PAGE> 5
person or by proxy at the meeting of the Shareholders signs a written waiver of
notice or a consent to a holding of the meeting or an approval of the minutes.
The waiver of notice or consent need not specify either the business to be
transacted or the purpose of any meeting of Shareholders.
Attendance by a Shareholder at a meeting of Shareholders shall
constitute a waiver of notice of that meeting, except if the Shareholder objects
at the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened and except that attendance at a
meeting of Shareholders is not a waiver of any right to object to the
consideration of matters not included in the notice of the meeting of
Shareholders if that objection is expressly made at the beginning of the
meeting.
Section 8. Shareholder Action by Written Consent Without a Meeting.
Except as provided in the Declaration of Trust, any action that may be taken at
any meeting of Shareholders may be taken without a meeting and without prior
notice if a consent in writing setting forth the action to be taken is signed by
the holders of outstanding Shares having not less than the minimum number of
votes that would be necessary to authorize or take that action at a meeting, at
which all Shares entitled to vote on that action were present and voted,
provided, however, that the Shareholders receive any necessary Information
Statement or other necessary documentation in conformity with the requirements
of the Securities Exchange Act of 1934 or the rules or regulations thereunder.
All such consents shall be filed with the Secretary of the Trust and shall be
maintained in the Trust's records. Any Shareholder giving a written consent or
the Shareholder's proxy holders or a transferee of the Shares or a personal
representative of the Shareholder or their respective proxy holders may revoke
the Shareholder's written consent by a writing received by the Secretary of the
Trust before written consents of the number of Shares required to authorize the
proposed action have been filed with the Secretary.
If the consents of all Shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
Shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the Shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II.
Section 9. Record Date for Shareholder Notice; Voting and Giving
Consents.
(a) For purposes of determining the Shareholders entitled to vote or
act at any meeting or adjournment thereof, the Trustees may fix in advance a
record date which shall not be more than ninety (90) days nor less than ten (10)
days before the date of any such meeting. Without fixing a record date for a
meeting, the Trustees may for voting and notice purposes close the register or
transfer books for one or more Series (or Classes) for all or any part of the
period between the earliest date on which a record date for such meeting could
be set in accordance herewith and the date of such meeting.
If the Trustees do not so fix a record date or close the register or
transfer books of the affected Series or Classes, the record date for
determining Shareholders entitled to notice of or to vote at a meeting of
Shareholders shall be the close of business on the business day next preceding
the date on which notice is given or if notice is waived, at the close of
business on the business day next preceding the day on which the meeting is
held.
3
<PAGE> 6
(b) The record date for determining Shareholders entitled to give
consent to action in writing without a meeting, (a) when no prior action of the
Trustees has been taken, shall be the day on which the first written consent is
given, or (b) when prior action of the Trustees has been taken, shall be (i)
such date as determined for that purpose by the Trustees, which record date
shall not precede the date upon which the resolution fixing it is adopted by the
Trustees and shall not be more than twenty (20) days after the date of such
resolution, or (ii) if no record date is fixed by the Trustees, the record date
shall be the close of business on the day on which the Trustees adopt the
resolution relating to that action. Nothing in this Section shall be constituted
as precluding the Trustees from setting different record dates for different
Series or Classes. Only Shareholders of record on the record date as herein
determined shall have any right to vote or to act at any meeting or give consent
to any action relating to such record date, notwithstanding any transfer of
Shares on the books of the Trust after such record date.
Section 10. Proxies. Subject to the provisions of the Declaration
of Trust, every Person entitled to vote for Trustees or on any other matter
shall have the right to do so either in person or by proxy, provided that either
(i) an instrument authorizing such a proxy to act is executed by the Shareholder
in writing and dated not more than eleven (11) months before the meeting, unless
the instrument specifically provides for a longer period or (ii) the Trustees
adopt an electronic, telephonic, computerized or other alternative to the
execution of a written instrument authorizing the proxy to act, and such
authorization is received not more than eleven (11) months before the meeting. A
proxy shall be deemed executed by a Shareholder if the Shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the Shareholder or the Shareholder's
attorney-in-fact. A valid proxy which does not state that it is irrevocable
shall continue in full force and effect unless (i) revoked by the Person
executing it before the vote pursuant to that proxy is taken, (a) by a writing
delivered to the Trust stating that the proxy is revoked, or (b) by a subsequent
proxy executed by such Person, or (c) attendance at the meeting and voting in
person by the Person executing that proxy, or (d) revocation by such Person
using any electronic, telephonic, computerized or other alternative means
authorized by the Trustees for authorizing the proxy to act; or (ii) written
notice of the death or incapacity of the maker of that proxy is received by the
Trust before the vote pursuant to that proxy is counted. A proxy with respect to
Shares held in the name of two or more Persons shall be valid if executed by any
one of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of the two or more Persons.
A proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger.
Section 11. Inspectors of Election. Before any meeting of
Shareholders, the Trustees may appoint any persons other than nominees for
office to act as inspectors of election at the meeting or its adjournments. If
no inspectors of election are so appointed, the Chairman of the meeting may
appoint inspectors of election at the meeting. The number of inspectors shall be
two (2). If any person appointed as inspector fails to appear or fails or
refuses to act, the Chairman of the meeting may appoint a person to fill the
vacancy.
These inspectors shall:
(a) Determine the number of Shares outstanding and the voting
power of each, the Shares represented at the meeting, the
existence of a quorum and the authenticity, validity and
effect of proxies;
4
<PAGE> 7
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all Shareholders.
ARTICLE III. TRUSTEES
Section 1. Powers. Subject to the applicable provisions of the 1940
Act, the Declaration of Trust and these By-Laws relating to action required to
be approved by the Shareholders, the business and affairs of the Trust shall be
managed and all powers shall be exercised by or under the direction of the
Trustees.
Section 2. Number of Trustees. The exact number of Trustees within
the limits specified in the Declaration of Trust shall be fixed from time to
time by a resolution of the Trustees.
Section 3. Vacancies. Vacancies in the authorized number of
Trustees may be filled as provided in the Declaration of Trust.
Section 4. Chair. The Trustees shall have the power to appoint
from among the members of the Board of Trustees a Chair. Such appointment shall
be by majority vote of the Trustees. Such Chair shall serve until his or her
successor is appointed or until his or her earlier death, resignation or
removal. The Chair shall preside at meetings of the Trustees and shall, subject
to the control of the Trustees, perform such other powers and duties as may be
from time to time assigned to him or her by the Trustees or prescribed by the
Declaration of Trust or these By-Laws, consistent with his or her position. The
Chair need not be a Shareholder.
Section 5. Place of Meetings and Meetings by Telephone. All
meetings of the Trustees may be held at any place that has been selected from
time to time by the Trustees. In the absence of such an election, regular
meetings shall be held at the principal executive office of the Trust. Subject
to any applicable requirements of the 1940 Act, any meeting, regular or special,
may be held by conference telephone or similar communication equipment, so long
as all Trustees participating in the meeting can hear one another and all such
Trustees shall be deemed to be present in person at the meeting.
Section 6. Regular Meetings. Regular meetings of the Trustees shall
be held without call at such time as shall from time to time be fixed by the
Trustees. Such regular meetings may be held without notice.
5
<PAGE> 8
Section 7. Special Meetings. Special meetings of the Trustees for
any purpose or purposes may be called at any time by the Chair, the President or
the Secretary or any two (2) Trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each Trustee or sent by first-class mail, by
telegram or telecopy (or similar electronic means) or, by nationally recognized
overnight courier, charges prepaid, addressed to each Trustee at that Trustee's
address as it is shown on the records of the Trust. If the notice is mailed, it
shall be deposited in the United States mail at least seven (7) calendar days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or by telegram, telecopy (or similar electronic
means), or overnight courier, it shall be given at least forty eight (48) hours
before the time of the holding of the meeting. Any oral notice given personally
or by telephone must be communicated only to the Trustee. The notice need not
specify the purpose of the meeting or the place of the meeting, if the meeting
is to be held at the principal executive office of the Trust. Notice of a
meeting need not be given to any Trustee if a written waiver of notice, executed
by such Trustee before or after the meeting, is filed with the records of the
meeting, or to any Trustee who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to such Trustee.
Section 8. Quorum. Twenty-five percent (25%) of the Trustees shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the Trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Trustees, subject to the
provisions of the Declaration of Trust. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
Trustees if any action taken is approved by at least a majority of the required
quorum for that meeting.
Section 9. Waiver of Notice. Notice of any meeting need not be
given to any Trustee who either before or after the meeting signs a written
waiver of notice, a consent to holding the meeting, or an approval of the
minutes. The waiver of notice or consent need not specify the purpose of the
meeting. All such waivers, consents, and approvals shall be filed with the
records of the Trust or made a part of the minutes of the meeting. Notice of a
meeting shall also be deemed given to any Trustee who attends the meeting
without protesting, prior to or at its commencement, the lack of notice to that
Trustee.
Section 10. Adjournment. A majority of the Trustees present,
whether or not constituting a quorum, may adjourn any meeting to another time
and place.
Section 11. Notice of Adjournment. Notice of the time and place of
holding an adjourned meeting need not be given.
Section 12. Action Without a Meeting. Unless the 1940 Act requires
that a particular action be taken only at a meeting at which the Trustees are
present in person, any action to be taken by the Trustees at a meeting may be
taken without such meeting by the written consent of a majority of the Trustees
then in office. Any such written consent may be executed and given by telecopy
or similar electronic means. Such written consents shall be filed with the
minutes of the proceedings of the Trustees. If any action is so taken by the
Trustees by the written consent of less than all of the Trustees, prompt notice
of the taking of such action shall be
6
<PAGE> 9
furnished to each Trustee who did not execute such written consent, provided
that the effectiveness of such action shall not be impaired by any delay or
failure to furnish such notice.
Section 13. Fees and Compensation of Trustees. Trustees and members
of committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Trustees. This Section 13 of Article III shall not be construed to preclude any
Trustee from serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those services.
Section 14. Delegation of Power to Other Trustees. Any Trustee may,
by power of attorney, delegate his or her power for a period not exceeding one
(1) month at any one time to any other Trustee. Except where applicable law may
require a Trustee to be present in person, a Trustee represented by another
Trustee, pursuant to such power of attorney, shall be deemed to be present for
purpose of establishing a quorum and satisfying the required majority vote.
ARTICLE IV. COMMITTEES
Section 1. Committees of Trustees. The Trustees may be resolution
designate one or more committees, each consisting of two (2) or more Trustees,
to serve at the pleasure of the Trustees. The Trustees may designate one or more
Trustees as alternate members of any committee who may replace any absent member
at any meeting of the committee. Any committee, to the extent provided for by
resolution of the Trustees, shall have the authority of the Trustees, except
with respect to:
(a) the approval of any action which under applicable law requires approval by a
majority of the Trustees or certain Trustees;
(b) the filling of vacancies of Trustees;
(c) the fixing of compensation of the Trustees for services generally or as a
member of any committee;
(d) the amendment or termination of the Declaration of Trust or any Series or
Class or the amendment of the By-Laws or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Trustees which by its
express terms is not so amendable or repealable;
(f) a distribution to the Shareholders of the Trust, except at a rate or in a
periodic amount or within a designated range determined by the Trustees; or
(g) the appointment of any other committees of the Trustees or the members of
such new committees.
Section 2. Meetings and Action of Committees. Meetings and action
of committees shall be governed by, held and taken in accordance with the
provisions of Article III of these ByLaws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Trustees generally, except that the time of regular meetings of
7
<PAGE> 10
committees may be determined either by resolution of the Trustees or by
resolution of the committee. Special meetings of committees may also be called
by resolution of the Trustees. Alternate members shall be given notice of
meetings of committees and shall have the right to attend all meetings of
committees. The Trustees may adopt rules for the governance of any committee not
inconsistent with the provisions of these By-Laws.
ARTICLE V. OFFICERS
Section 1. Officers. The officers of the Trust shall be a
President, a Secretary, and a Treasurer. The Trust may also have, at the
discretion of the Trustees, one or more Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this Article V. Any
number of offices may be held by the same person. Any officer may be, but need
not be, a Trustee or Shareholder.
Section 2. Election of Officers. The officers of the Trust, except
such officers as may be appointed in accordance with the provisions of Section 3
or Section 5 of this Article V, shall be chosen by the Trustees, and each shall
serve at the pleasure of the Trustees, subject to the rights, if any, of an
officer under any contract or employment.
Section 3. Subordinate Officers. The Trustees may appoint and may
empower the President to appoint such other officers as the business of the
Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
Trustees may from time to time determine.
Section 4. Removal and Resignation of Officers. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the Trustees at any regular or
special meeting of the Trustees or by such officer upon whom such power of
removal may be conferred by the Trustees.
Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a party.
Section 5. Vacancies in Offices. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.
The President may make temporary appointments to a vacant office pending action
by the Trustees.
Section 6. President. The President shall be the chief operating
and chief executive officer of the Trust and shall, subject to the control of
the Trustees, have general supervision, direction and control of the business
and the officers of the Trust. He or she or his or her designee, shall preside
at all meetings of the Shareholders. He or she shall have the general powers and
duties of a president of a corporation and shall have such other powers and
duties as may be prescribed by the Trustees, the Declaration of Trust or these
By-Laws.
8
<PAGE> 11
Section 7. Vice Presidents. In the absence or disability of the
President, any Vice President, unless there is an Executive Vice President,
shall perform all the duties of the President and when so acting shall have all
powers of and be subject to all the restrictions upon the President. The
Executive Vice President or Vice Presidents, whichever the case may be, shall
have such other powers and shall perform such other duties as from time to time
may be prescribed for them respectively by the Trustees or the President or by
these By-Laws.
Section 8. Secretary. The Secretary shall keep or cause to be kept
at the principal executive office of the Trust, or such other place as the
Trustees may direct, a book of minutes of all meetings and actions of Trustees,
committees of Trustees and Shareholders with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at Trustees' meetings or committee meetings, the
number of shares present or represented at meetings of Shareholders and the
proceedings of the meetings.
The Secretary shall keep or cause to be kept at the principal executive
office of the Trust or at the office of the Trust's transfer agent or registrar,
a share register or a duplicate share register showing the names of all
Shareholders and their addresses, the number and classes of Shares held by each,
the number and date of certificates issued for the same and the number and date
of cancellation of every certificate surrendered for cancellation.
The Secretary shall give or cause to be given notice of all meetings of
the Shareholders and of the Trustees (or committees thereof) required to be
given by these By-Laws or by applicable law and shall have such other powers and
perform such other duties as may be prescribed by the Trustees or by these
By-Laws.
Section 9. Treasurer. The Treasurer shall be the chief financial
officer and chief accounting officer of the Trust and shall keep and maintain or
cause to be kept and maintained adequate and correct books and records of
account of the properties and business transactions of the Trust and each Series
or Class thereof, including accounts of the assets, liabilities, receipts,
disbursements, gains, losses, capital and retained earnings of all Series or
Classes thereof. The books of account shall at all reasonable times be open to
inspection by any Trustee.
The Treasurer shall deposit all monies and other valuables in the name
and to the credit of the Trust with such depositaries as may be designated by
the Board of Trustees. He or she shall disburse the funds of the Trust as may be
ordered by the Trustees, shall render to the President and Trustees, whenever
they request it, an account of all of his or her transactions as chief financial
officer and of the financial condition of the Trust and shall have other powers
and perform such other duties as may be prescribed by the Trustees or these
By-Laws.
ARTICLE VI. INSPECTION OF RECORDS AND REPORTS
Section 1. Inspection by Shareholders. The Trustees shall from time
to time determine whether and to what extent, and at what times and places, and
under what conditions and regulations the accounts and books of the Trust or any
of them shall be open to the inspection of the Shareholders; and no Shareholder
shall have any right to inspect any account or book or document of the Trust
except as conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.
9
<PAGE> 12
Section 2. Inspection by Trustees. Every Trustee shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a Trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.
ARTICLE VII. GENERAL MATTERS
Section 1. Checks, Drafts, Evidences of Indebtedness. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed in such manner and by such person or persons as shall be designated
from time to time in accordance with the resolution of the Board of Trustees.
Section 2. Contracts and Instruments; How Executed. The Trustees,
except as otherwise provided in these By-Laws, may authorize any officer or
officers, agent or agents, to enter into any contract or execute any instrument
in the name of and on behalf of the Trust and this authority may be general or
confined to specific instances; and unless so authorized or ratified by the
Trustees or within the agency power of an officer, no officer, agent, or
employee shall have any power or authority to bind the Trust by any contract or
engagement or to pledge its credit or to render it liable for any purpose or for
any amount.
Section 3. Fiscal Year. The fiscal year of each series of the Trust
shall be fixed and refixed or changed from time to time by the Trustees.
Section 4. Seal. The seal of the Trust shall consist of a
flat-faced dye with the name of the Trust cut or engraved thereon. However,
unless otherwise required by the Trustees, the seal shall not be necessary to be
placed on, and its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf of the Trust.
ARTICLE VIII. AMENDMENTS
Section 1. Amendment. Except as otherwise provided by applicable
law or by the Declaration of Trust, these By-Laws may be restated, amended,
supplemented or repealed by a majority vote of the Trustees.
10
<PAGE> 1
Exhibit (p)
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Gregory T. Maddox, Stephanie Blaha, Charles Booth and Jennifer Brancato
and each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission by USAllianz Funds pursuant to the
Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, by means of the Securities and Exchange Commission's
electronic disclosure system known as EDGAR or otherwise; and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as each of them might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Gary Brown
Gary Brown Trustee July 13, 1999
/s/ Ronald M. Clark
Ronald M. Clark Trustee July 13, 1999
/s/ David P. Marks Trustee July 13, 1999
David P. Marks
