CLASS M
DOW JONES(SM) ISLAMIC INDEX FUND
PROSPECTUS
JUNE 30, 2000
INVESTMENT ADVISOR
AAA
ALLIED ASSET ADVISORS, INC.
DOW JONES(SM) ISLAMIC INDEX FUND
PROSPECTUS
JUNE 30, 2000
The Dow Jones(SM) Islamic Index Fund is the first series offered by Allied Asset
Advisors Funds. This prospectus pertains to Class M shares and contains
pertinent information about investing in the Fund. Please read this prospectus
carefully before investing.
INVESTMENT ADVISOR
AAA
ALLIED ASSET ADVISORS, INC.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
RISK/RETURN SUMMARY............................................................2
PERFORMANCE SUMMARY............................................................4
FEES AND EXPENSES..............................................................4
MORE INFORMATION ABOUT THE DOW JONES ISLAMIC MARKET USA INDEX(SM)..............5
SHARI`AH SUPERVISORY BOARD.....................................................7
MANAGEMENT OF THE FUND.........................................................8
CALCULATING SHARE PRICE........................................................8
HOW TO PURCHASE SHARES.........................................................9
HOW TO SELL SHARES............................................................10
DISTRIBUTIONS AND TAXES.......................................................12
SHAREHOLDER REPORTS AND CONFIRMATIONS.........................................12
FINANCIAL HIGHLIGHTS..........................................................12
RISK/RETURN SUMMARY
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WHAT IS THE INVESTMENT OBJECTIVE OF THE DOW JONES(SM) ISLAMIC INDEX FUND?
The Dow Jones Islamic Index Fund ("Fund") seeks to match the total return of the
DOW JONES ISLAMIC MARKET USA INDEX(SM) (the "INDEX").
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE FUND?
To achieve its investment objective, the Fund invests in securities included in
the INDEX. The INDEX consists of U.S. common stocks that meet Islamic investment
principles. Islamic principles generally preclude investments in certain
industries (e.g., alcohol, pornography and casinos) and investments in interest
bearing debt obligations or businesses that derive a substantial amount of
impure interest income. Any uninvested cash will be held in non-interest bearing
deposits or invested in a manner following Islamic principles. Under normal
circumstances, the Fund plans to fully invest its assets in securities that are
included in the INDEX. Although the INDEX consists of stocks from many different
economic sectors, it is comprised primarily of companies with larger market
capitalizations. There is no guarantee that the Fund will achieve the same
return as the INDEX.
Due to the large number of stocks in the INDEX, the Fund may, in its initial
stages (i.e., the period during which the Fund's asset size is less than $100
million), purchase a sub-group of equities from those contained in the INDEX
that the investment advisor believes will best track the INDEX. The Fund will
determine the "sub-group" by selecting stocks that are representative of the
INDEX in terms of industry, size and/or other portfolio characteristics. The
Fund also will consider a security's weighting in the INDEX during its initial
stages emphasizing those securities that are more heavily weighted. As the
assets of the Fund grow, the investment advisor anticipates the holdings of the
Fund will increase to include more of the components of the INDEX.
In order to track the INDEX as closely as possible, the Fund will invest
substantially all of its assets in roughly the same proportions as the stocks
are represented in the INDEX. As the Fund receives cash from new investors, or
processes redemption requests from shareholders, the Fund will purchase or sell
securities in an effort to approximate the return of the INDEX. Also, the Fund's
investments are reviewed and adjusted at least quarterly to reflect any
adjustments in the INDEX in an effort to tract the INDEX as closely as possible.
The Fund normally sells portfolio securities in response to redemption requests
or to adjust the number of its shares to track the weighting or composition of
the INDEX. As a result, the Fund's portfolio turnover rate is expected to be
low. A low portfolio turnover rate usually results in low transaction costs and
provides tax efficiencies for shareholders.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
The main risks of investing in the Fund are listed below. Like any mutual fund,
you may lose money by investing in the Fund.
MARKET RISKS The return on and value of your investment in the Fund will
fluctuate in response to stock market movements. Stocks and other equity
securities are subject to market risks and fluctuations in value due to changes
in earnings, economic conditions and other factors beyond the control of the
Fund.
INDEX INVESTING RISKS Unlike non-index mutual funds, the Fund will not buy and
sell securities based upon economic, financial and market analysis and
investment judgment. Instead, the Fund will invest using an indexed-based
investment approach, which seeks to approximate the investment performance of
the INDEX. You should not expect to achieve the potential greater results of
some actively managed funds that aggressively seek growth or attempt to limit
losses in a market decline. The Fund's initial strategy of investing in a
representative sample of the INDEX may result in some deviation between the
Fund's performance and the INDEX. The Fund's return is likely to be lower than
that of the INDEX because the Fund incurs brokerage commissions, transaction
fees and other expenses that the INDEX does not. There is a risk that returns
from larger capitalization stocks will trail those of other asset classes or
overall stock market.
ISLAMIC SHARI`AH INVESTMENT RISKS It is possible that the Islamic Shari`ah
restrictions placed on investments may result in the Fund not performing as well
as mutual funds not subject to such restrictions.
TEMPORARY INVESTMENTS In response to severe or unusual adverse market,
economic, political or other conditions, the Fund may make temporary investments
that are not consistent with its investment objective and principal investment
strategies. Such investments may prevent the Fund from achieving its investment
objective. The Fund cannot invest in interest-paying instruments frequently used
by mutual funds for this purpose. Currently anticipated temporary investments
will be held in the form of cash. If the Fund's investments in cash or similar
investments increase, the Fund may not achieve its investment objective.
PERFORMANCE SUMMARY
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There is no performance information available for the Fund at this time because
the Fund has no operating history.
FEES AND EXPENSES
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This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS M
---------
Maximum sales charge (load) imposed on purchases(1) None
Maximum deferred sales charge (load) None
Maximum sales charge (load) imposed on reinvested dividends None
Exchange fee None Redemption fee(2) None
Maximum account fee(3) None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) CLASS M
---------
Management Fees 0.75%
Distribution (12b-1) Fees(4) 0.75%
Other Expenses(5) 0.87%
Shareholder Servicing Fee 0.25%
Other Operating Expenses 0.62%
Total Annual Fund Operating Expenses 2.37%
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Less Expense Reimbursement -0.72%
Net Annual Fund Operating Expenses(6) 1.65%
============
(1) Although no sales loads or transaction fees are charged, your account will
be assessed a fee of $25 for each returned check.
(2) The transfer agent charges a fee of $12 for outgoing wire transfers.
(3) IRA accounts are assessed a $12.50 annual fee.
(4) The Distribution (12b-1) fee will be limited to 0.50% of average daily net
assets.
(5) The percentage for "Other Expenses" totaling 0.87% is comprised of
two parts (1) an annual shareholder servicing fee of 0.25% of average daily net
assets, and (2) administration fees, transfer agency fees and all other ordinary
operating expenses of the fund estimated for the initial fiscal year at 0.62% of
average daily net assets.
(6) The Fund has an Investment Advisory and Management Agreement with the Allied
Asset Advisors, Inc., the investment advisor for the Fund, dated June 29, 2000.
The Agreement provides that the annual management fee shall be 0.75% of the
first $500 million in assets, 0.65% of the next $5 billion in assets and 0.50%
on the amount of assets over $5.5 billion. The investment advisor has also
entered into an Expense Waiver and Reimbursement Contract dated June 29, 2000
with the Fund under which the investment advisor has agreed to waive its fees
and absorb expenses to the extent that total annual fund operating expenses
exceed 1.65% for Class M shares. The investment advisor can recapture any
expenses or fees it has waived or reimbursed within a three year period. The
Contract is in effect for one year and expires June 29, 2001.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in a Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year, your dividends and distributions have been
reinvested, and that the Fund's operating expenses remain the same. Although
your actual cost may be higher or lower, based on these assumptions (including
one year of capped expenses in each period) your costs would be:
1 YEAR 3 YEARS
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$168 $658
MORE INFORMATION
ABOUT THE DOW JONES ISLAMIC MARKET USA INDEX(SM)
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WHAT IS THE DOW JONES ISLAMIC MARKET USA INDEX(SM)?
The INDEX is a diverse compilation of U.S. equity securities considered by the
Shari`ah Supervisory Board of Dow Jones to be in compliance with Islamic
principles. The INDEX is constructed from the 2,700 stocks in the Dow Jones
Global Indexes (DJGI) family. Dow Jones believes that these stocks are
accessible to investors and are well traded. The DJGI methodology removes issues
that are not suitable for global investing.
Certain businesses are incompatible with Shari`ah Laws. Thus, stocks of
companies whose primary business is in areas not suitable for Islamic investment
purposes are excluded from the INDEX. Excluded businesses include: alcohol, pork
related products, conventional financial services (banking, insurance, etc.),
entertainment (casinos/gambling, cinema, pornography, music, hotels, etc.),
tobacco and defense.
Financial filters are also applied to exclude, among other things, companies
that derive more than 5% of income from impure sources including interest and
companies that have total debt exceeding certain ratios. The filters are
described fully in the Statement of Additional Information.
As of March 15, 2000, the U.S. companies whose issues comprised the INDEX had an
average market capitalization of $15.4 billion dollars (U.S.) and a median
market capitalization of $3.0 billion (U.S.). SECURITIES ARE SELECTED FOR THE
INDEX SO AS TO REPRESENT THE MOST LIQUID SECURITIES MEETING THE SHARI`AH
INVESTMENT CRITERIA IN THE MARKET, AND TO REFLECT THE INDUSTRY MAKEUP OF THE
U.S. MARKET. ADDITIONAL FACTORS CONSIDERED WHEN APPLYING THE PROCESS DESCRIBED
ABOVE INCLUDE RELATIVE SIZE AND TURNOVER, ECONOMIC WEIGHTINGS, AND THE RELATIVE
HEALTH OF THE COMPANIES.
Dow Jones' Shari`ah Supervisory Board has approved the above criteria and any
changes to the Shari`ah Supervisory Board or the selection criteria are at the
sole discretion of Dow Jones. Changes by Dow Jones in the selection criteria or
the composition of the INDEX will be reflected in the composition of the Fund in
a reasonable period of time.
HOW HAS THE INDEX PERFORMED?
The following table shows the performance of the INDEX for the past four years
ended December 31, 1999 compared to other indexes. PLEASE NOTE THAT THE
PERFORMANCE SHOWN IS NOT THE PERFORMANCE OF THE FUND AND IS NOT INTENDED TO
PREDICT OR SUGGEST THE RETURN THAT MIGHT BE EXPERIENCED IF YOU INVEST IN THE
FUND. The Fund will seek to track the INDEX as closely as possible, but the
performance of the Fund will be less than the performance of the INDEX because
the Fund is subject to operational and transaction costs, while the INDEX is
not. Also, the Fund may not be fully invested in INDEX securities at all times
and stocks in the Fund may not be weighted the same as stocks in the INDEX at
all times. This will especially be true while the Fund's assets are under $100
million in its initial stages.
<TABLE>
<CAPTION>
Average Annual
Benchmark Return for the Calendar Years Total Return *
-------------------------- ------------ ------------ ------------ ----------------- ---------------------------
1999 1998 1997 1996
-------------------------- ------------ ------------ ------------ ----------------- ---------------------------
<S> <C> <C> <C> <C> <C>
DJIM US 21.68% 34.14% 30.16% 23.03% 27.25%
S&P 500 19.53% 26.67% 31.01% 20.26% 24.22%
Russell 2000 19.62% -3.45% 20.52% 14.76% 12.40%
-------------------------- ------------ ------------ ------------ ----------------- ---------------------------
* RETURN FROM 12/31/95 TO 12/31/99.
</TABLE>
The base date for the INDEX (the date that the INDEX started) is December 31,
1995 and the base value is set at 1000. The INDEX is reviewed quarterly, with
component changes implemented on the third Friday of March, June, September and
December. This frequency assures that the INDEX reflects the latest trends and
developments in the stock market and the companies' adherence to Islamic
principles.
The INDEX is capitalization-weighted. It is calculated in real time, posted and
disseminated every 5 seconds to major market-data vendors. Calculation of the
index is based on Laspeyres' formula. It does not include reinvested dividends.
"Dow Jones" and "Dow Jones Islamic Market Index(SM)" are service marks of Dow
Jones & Company, Inc. and have been licensed for use by Allied Asset Advisors,
Inc. in connection with the Fund. The Fund is not sponsored, endorsed, sold or
promoted by Dow Jones, and Dow Jones makes no representation regarding the
advisability of investing in the Fund. Dow Jones does not consider the needs of
the Fund or its shareholders in determining, composing or calculating the INDEX
or have any obligation to do so. See the Statement of Additional Information for
more information about Dow Jones.
SHARI`AH SUPERVISORY BOARD
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The INDEX is reviewed quarterly and annually by the Shari`ah Supervisory Board
(Shari`ah Board) and by Dow Jones for consideration of exclusion or inclusion of
components. In addition, the INDEX is reviewed on an on-going basis to
contemplate changes as a result of extraordinary events (e.g., de-listing,
bankruptcy, merger or takeover). The Shari`ah Board is not affiliated with the
Fund or the investment advisor and does not serve as a consultant to or
otherwise have any relationship with the Fund or the investment advisor. The
Shari`ah Board does not consider the objectives or needs of the Fund or its
shareholders in determining, composing or calculating the INDEX. The Shari`ah
Board is retained by Dow Jones & Company, Inc., to provide counsel on matters
relating to the Shari`ah compliance of the INDEX's eligible components. At the
Fund's inception, the Shari`ah Board consisted of the following individuals:
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SHARI`AH SUPERVISORY BOARD MEMBER BIOGRAPHY
- COUNTRY
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SHAYKH DR. ABDUL SATTAR ABU GHUDDAH Dr. Abu Ghuddah is a senior Shari`ah Advisor to Albaraka
- SYRIA Investment Co. of Saudi Arabia. He holds a PhD in Islamic Law.
Dr. Abu Ghuddah has published many books on Islamic Financial
transactions. He was an advisor for Islamic Law Encyclopaedia
(Kuwait Awqaf Ministry). Dr. Abu Ghuddah is a member and
chairman of several reputed Islamic Shari`ah Boards.
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SHAYKH JUSTICE MUHAMMAD TAQI USMANI Mr. Usmani has been a member of the Supreme Court of Pakistan
- PAKISTAN since 1982. He is also the vice president of Darul Uloom Karachi
and the vice chair and deputy chairman of the Islamic Fiqh
Academy (OIC), Jeddah. Mr. Usmani edits the monthly magazines
Albalagh and Albalagh International. He is a chairman or member
of the Shari`ah supervisory boards of a dozen Islamic banks and
financial institutions worldwide.
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SHAYKH NIZAM YAQUBY Mr. Yaquby is a member of the Islamic supervisory boards for
- BAHRAIN several Islamic institutions, including the Arab Islamic Bank and
the Abu Dhabi Islamic Bank. His work has appeared in the
following publications: Risalah Fi al-Tawbah, Qurrat
al-`Ainayn fi Fada il Birr al-Walidayn, Irshad al-`Uqala`ila
Hukun al-Qira`h min al-Mushaf fi al-Salah, Tahqiq al-Amal fi Ikhraj
Zakat al-Fitr bi al-Mal.
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SHAYKH DR. MOHAMED A. ELGARI Dr. Elgari is an associate professor of Islamic Economics and the
- SAUDI ARABIA director of the Center for Research in Islamic Economics at King
Abdulaziz University in Saudi Arabia. He is an expert at the
Islamic Jurisprudence Academy (OIC), Jeddah. Dr. Elgari is the
editor of the Review of Islamic Economics. He is also an advisor
to several Islamic financial institutions worldwide and the
author of many books on Islamic banking.
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SHAYKH YUSUF TALAL DELORENZO Mr. DeLorenzo is considered a leading Islamic scholar in the
- UNITED STATES United States. He has translated over twenty books from Arabic,
Persian, and Urdu for publication in English and has been
commissioned to prepare a new translation of the Qur`an. Mr.
DeLorenzo compiled the first English translation of legal rulings
issued by Shari`ah supervisory boards on the operations of
Islamic banks. He is also a Shari`ah consultant to several Islamic
financial institutions and was an advisor on Islamic
education to the government of Pakistan.
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MANAGEMENT OF THE FUND
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INVESTMENT ADVISOR
The Fund's investment advisor is Allied Asset Advisors, Inc. (AAA) located at
745 McClintock Drive, Suite 114, Burr Ridge, Illinois 60521. Subject to the
general supervision of the Fund's Board of Trustees, AAA is responsible for the
day-to-day investment decisions of the Fund in accordance with the Fund's
investment objective and policies. In exchange for these services, AAA receives
an annual management fee, which is calculated daily and paid monthly, according
to the average daily net assets of the Fund. AAA is a newly formed subsidiary of
the North American Islamic Trust (NAIT). Whereas, AAA, as a new entity, has no
track record in investment management or other assets under management besides
the Fund, NAIT has managed the investment of endowment assets for over 20 years.
Currently, these assets are valued in excess of $35,000,000. For more
information about NAIT, see the Statement of Additional Information.
The Investment Advisory Agreement between the Fund and AAA provides that the
annual management fee for the investment advisor will be 0.75% on the first $500
million in assets, 0.65% on the next $5 billion in assets and 0.50% on the
amount of assets over $5.5 billion. However, AAA has entered into an Expense
Waiver and Reimbursement Contract with the Fund whereby it has agreed to waive
its fees and absorb expenses to the extent that the Fund's total annual
operating expenses for Class M shares exceed 1.65% of net assets. AAA can
recapture any expenses or fees it has waived or reimbursed within a three year
period, however, the Fund is not obligated to pay any such deferred fees more
than three years after the end of the fiscal year in which the fee was deferred.
The Expense Waiver and Reimbursement Contract expires on June 29, 2001.
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND FUND ACCOUNTANT
Firstar Bank, N.A. serves as custodian for the Fund's cash and securities.
Firstar Mutual Fund Services, LLC provides administrative, transfer agent,
dividend disbursing, and fund accounting services to the Fund.
DISTRIBUTOR
Rafferty Capital Markets, Inc., serves as principal underwriter for the Fund and
as such, is the exclusive agent for the distribution of shares of the Fund.
Broker-Dealer organizations that have a sales agreement with the distributor may
sell shares of the Fund. Class M shares have a 12b-1 plan, under which a
distribution fee limited to 0.50% is deducted from Fund assets each year. Over
time these fees will increase the cost of your investment and may cost more than
paying other types of sales charges.
CALCULATING SHARE PRICE
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Shares of the Fund are sold at their net asset value (NAV). The NAV for all
shares of the Fund is determined as of the close of regular trading on the New
York Stock Exchange (NYSE) (normally 4:00 p.m., Eastern time) on every business
day. The NAV for Class M shares of the Fund is calculated by dividing the sum of
the value of the securities held plus cash or other assets minus all liabilities
by the total number of Class M shares outstanding of the Fund.
The Fund's investments are valued according to market value. When a market quote
is not readily available, the security's value is based on "fair value" as
determined by the investment advisor under supervision of the Fund's Board of
Trustees.
If you place a good order (see "How to Purchase Shares") that is delivered to
the Fund before the close of the regular trading session of the NYSE on any
business day, your order will receive the share price determined for the Fund as
of that day. If your order is received after the close of the regular trading
session of the NYSE, it will receive the price determined on the next business
day.
HOW TO PURCHASE SHARES
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To open an account, you must invest at least the minimum amount.
MINIMUM INVESTMENTS TO OPEN TO ADD TO
YOUR ACCOUNT YOUR ACCOUNT
Regular accounts $500 $50
IRA accounts $250 $50
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GOOD ORDER PURCHASE REQUESTS
WHEN MAKING A PURCHASE REQUEST, MAKE SURE YOUR REQUEST IS IN GOOD ORDER. "GOOD
ORDER" MEANS YOUR PURCHASE REQUEST INCLUDES:
|X| THE NAME OF THE FUND
|X| THE DOLLAR AMOUNT OF SHARES TO BE PURCHASED
|X| ACCOUNT APPLICATION FORM OR INVESTMENT STUB
|X| CHECK PAYABLE TO THE "DOW JONES ISLAMIC INDEX FUND"
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<TABLE>
<CAPTION>
METHODS OF BUYING
<S> <C>
THROUGH A You can purchase shares of the Fund through any broker-dealer organization that has a sales
BROKER/DEALER agreement with the Fund's distributor. The broker-dealer organization is responsible for
ORGANIZATION sending your purchase order to the Fund. Please keep in mind that your broker-dealer may
charge additional fees for its services.
BY MAIL To open an account, complete an account application form and send it together with your
check to the address below. To make additional investments once you have opened your
account, send your check together with the detachable form that's included with your Fund
account statement or confirmation. You may also send a letter stating the amount of your
investment with your name, the name of the Fund and your account number together with a
check to the address below. Checks should be made payable to "Dow Jones Islamic Index
Fund." No third party checks will be accepted. If your check is returned for any reason,
a $25 fee will be assessed against your account.
REGULAR MAIL OVERNIGHT DELIVERY
Dow Jones Islamic Index Fund Dow Jones Islamic Index Fund
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 E. Michigan Street, Third Floor
Milwaukee, Wisconsin 53201-0701 Milwaukee, Wisconsin 53202
NOTE: The Fund does not consider the U.S. Postal Service or other independent delivery
services to be its agents. Therefore, when you deposit your account application form,
additional purchase request, or redemption request in the mail or use other delivery services,
or if your documents are simply in the transfer agent's post office box, that does not mean that
the transfer agent or the Fund actually RECEIVED those documents.
BY TELEPHONE To make additional investments by telephone, you must check the appropriate box on your account
application form authorizing telephone purchases. If you have given authorization for telephone
transactions and your account has been open for at least 15 days, call the Fund toll free at
1-888-FUNDS-85 and you will be allowed to move money from your bank account to your Fund
account upon request. Only bank accounts held at U.S. institutions that are Automated Clearing
House (ACH) members may be used for telephone transactions. For security reasons,
requests by telephone will be recorded.
BY WIRE To open an account or to make additional investments by wire, call 1-888-FUNDS-85 to notify the
Fund of the incoming wire using the wiring instructions below:
Firstar Bank, N.A.
Milwaukee, WI 53202
ABA #: 075000022
Credit: Firstar Mutual Fund Services, LLC
Account #: 112-952-137
Further Credit: Dow Jones Islamic Index Fund, Class M
(your name or the title on the account)
(your account #)
THROUGH AN Once your account has been opened, you may purchase shares of the Fund through an Automatic
AUTOMATIC Investment Plan ("AIP"). You can have money automatically transferred from your checking
INVESTMENT or savings account on a weekly, bi-weekly, monthly, bi-monthly or quarterly basis. To be
PLAN eligible for this plan, your bank must be a U.S. institution that is an ACH member. The
Fund may modify or terminate the AIP at any time. The first AIP purchase will take place no
earlier than 15 days after the transfer agent has received your request.
</TABLE>
HOW TO SELL SHARES
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<TABLE>
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METHODS OF SELLING
<S> <C>
THROUGH A If you purchased your shares through a broker-dealer or other financial organization, your
BROKER/DEALER redemption order may be placed through the same organization. The organization is responsible
ORGANIZATION for sending your redemption order to the Fund on a timely basis. Please keep in mind
that your broker-dealer may charge additional fees for its services.
BY MAIL Send your written redemption request to the address below. Your request should contain the
Fund's name, your account number and the dollar amount or the number of shares to be redeemed.
Be sure to have all shareholders sign the letter. Additional documents are required for certain
types of shareholders, such as corporations, partnerships, executors, trustees, administrators,
or guardians (i.e., corporate resolutions, or trust documents indicating proper authorization).
Please see the Statement of Additional Information for more information.
REGULAR MAIL OVERNIGHT DELIVERY
Dow Jones Islamic Index Fund Dow Jones Islamic Index Fund
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 E. Michigan Street, Third Floor
Milwaukee, Wisconsin 53201-0701 Milwaukee, Wisconsin 53202
The Fund's transfer agent may require a SIGNATURE GUARANTEE for certain redemption requests such
as redemption requests from IRA accounts, or redemption requests made payable to a person or an
address not on record with the Fund. A signature guarantee assures that your signature is
genuine and protects you from unauthorized account redemptions. You may obtain signature
guarantees from most trust companies, commercial banks or other eligible guarantor
INSTITUTIONS. A NOTARY PUBLIC CANNOT GUARANTEE SIGNATURES.
BY TELEPHONE If you are authorized to perform telephone transactions (either through your account application form
or by subsequent arrangement in writing with the Fund) you may redeem shares in any amount, but
not less than $100, by calling 1-888-FUNDS-85. A signature guarantee is required of
all shareholders to change or add telephone redemption privileges. For security reasons, requests
by telephone will be recorded.
BY WIRE To redeem shares by wire, call the Fund at 1-888-FUNDS-85 and specify the amount of money you
wish to be wired. Your bank may charge a fee to receive wired funds.
The transfer agent charges a $12 outgoing wire fee.
BY WRITING A CHECK On your account application form, you may select the option to receive a checkbook so that you can
redeem shares by writing checks against your Fund account. Checks may be made payable in the amount
of $250 or more. Any checks drawn on a joint account will only require one signature. There is a
$25 charge for stopping payment of a check upon your request, or if the transfer agent cannot
honor a check due to insufficient funds or other valid reason. There will be a charge of $5 for
issuing each checkbook.
THROUGH A If you own shares with a value of $10,000 or more, you may participate in the systematic
SYSTEMATIC withdrawal plan. The systematic withdrawal plan allows you to make automatic withdrawals from
WITHDRAWAL PLAN your Fund account at regular intervals. Money will be transferred from your Fund account to the
checking or savings account you choose on your account application form. If you expect to purchase
additional shares of the Fund, it may not be to your advantage to participate in the systematic
withdrawal plan because of the possible adverse tax consequences of making contemporaneous
purchases and redemptions.
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WHEN REDEMPTION PROCEEDS ARE SENT TO YOU
Your shares will be redeemed at the NAV next determined after the Fund receives
your redemption request in good order. Your redemption request cannot be
processed on days the NYSE is closed.
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WHEN MAKING A REDEMPTION REQUEST, MAKE SURE YOUR REQUEST IS IN GOOD ORDER. "GOOD
ORDER" MEANS YOUR LETTER OF INSTRUCTION INCLUDES:
|X| THE NAME OF THE FUND
|X| THE DOLLAR AMOUNT OR THE NUMBER OF SHARES TO BE REDEEMED
|X| SIGNATURES OF ALL REGISTERED SHAREHOLDERS EXACTLY AS THE SHARES ARE
REGISTERED
|X| THE ACCOUNT NUMBER
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All requests received in good order by the Fund before the close of the regular
trading session of the NYSE (normally 4:00 p.m. Eastern time) will usually be
wired to the bank you indicate or mailed on the following day to the address of
record. In all cases proceeds will be wired or a check mailed within seven
calendar days after the Fund receives your redemption request.
If you purchase shares using a check and soon after request a redemption, the
Fund will honor the redemption request, but will not mail or wire the proceeds
until your purchase check has cleared (usually within 12 days).
REDEMPTION IN-KIND
If the amount you are redeeming is over the lesser of $250,000 or 1% of the
Fund's net asset value, the Fund has the right to redeem your shares by giving
you the amount that exceeds $250,000 or 1% of the Fund's net asset value in
securities instead of cash.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
mail you a notice if your account falls below $500 ($250 for IRA accounts)
requesting that you bring the account back up to $500 or close it out. If you do
not respond to the request within 30 days, the Fund may close the account on
your behalf and send you the proceeds.
DISTRIBUTIONS AND TAXES
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The Fund will distribute substantially all of the net investment income and net
capital gains that it has realized on the sale of securities. These income and
gains distributions will generally be paid once each year, on or before December
31. Distributions will automatically be reinvested in additional shares of the
Fund, unless you elect to have the distributions paid to you in cash. If you
choose to have distribution checks mailed to you and either the U.S. Postal
service is unable to deliver the check to you or the check remains outstanding
for at least 6 months, the Fund reserves the right to reinvest the check at the
then current net asset value until you provide us with different instructions.
In general, Fund distributions are taxable to you as either ordinary income or
capital gains. This is true whether you reinvest your distributions in
additional Fund shares or receive them in cash. Any long-term capital gains the
Fund distributes are taxable to you as long-term capital gains no matter how
long you have owned your shares. If the Fund distributes realized gains soon
after you purchase shares, a portion of your investment may be treated as a
taxable distribution.
If you do not provide your social security or taxpayer identification number, or
if the IRS instructs the Fund to do so, the Fund, by law, must withhold 31% of
your taxable distributions.
When you sell your shares of the Fund, you may incur a capital gain or loss. The
individual tax rate on any gain from the sale of your shares depends on your
marginal tax rate and on how long you have held your shares.
Fund distributions and gains from the sale of your shares generally will be
subject to state and local income tax. Non-U.S. investors may be subject to U.S.
withholding tax. You should consult your tax advisor about the federal, state,
local or foreign tax consequences of your investment in the Fund.
SHAREHOLDER REPORTS AND CONFIRMATIONS
--------------------------------------------------------------------------------
As a shareholder, you will be provided annual and semi-annual reports showing
the Fund's portfolio investments and financial information. Account and tax
statements will be mailed to you on an annual basis. You will also receive
confirmations of your purchases and redemptions.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The Fund has commenced operations on June 30, 2000, therefore no financial
highlights are available for the Fund.
INVESTMENT ADVISOR
AAA
ALLIED ASSET ADVISORS, INC.
BURR RIDGE, ILLINOIS
DISTRIBUTOR
RAFFERTY CAPITAL MARKETS, INC.
WHITE PLAINS, NEW YORK
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
CHICAGO, ILLINOIS
LEGAL COUNSEL
VEDDER, PRICE, KAUFMAN, & KAMMHOLZ
CHICAGO, ILLINOIS
ADMINISTRATOR, TRANSFER AGENT,
AND FUND ACCOUNTANT
FIRSTAR MUTUAL FUND SERVICES, LLC
MILWAUKEE, WISCONSIN
CUSTODIAN
FIRSTAR BANK, N.A.
CINCINNATI, OHIO
WHERE TO FIND MORE INFORMATION:
You can find more information about the Fund in the following documents:
STATEMENT OF ADDITIONAL INFORMATION (SAI) DATED JUNE 30, 2000
The SAI for Class M of the Fund provides more details about the Fund's policies
and management. The Fund's SAI is incorporated by reference into this
Prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
After the Fund has been operating for the appropriate time, annual and
semi-annual reports will be made available. The Fund's annual and semi-annual
reports provide the most recent financial reports and portfolio listings. The
annual report contains a discussion of the market conditions and investment
climate that affected the Fund's performance during the last fiscal year.
You can obtain a free copy of these documents or request other information about
the Fund by calling the Fund at 1-888-FUNDS-85 or by writing to:
DOW JONES ISLAMIC INDEX FUND
C/O FIRSTAR MUTUAL FUND SERVICES, LLC
P.O. BOX 701
MILWAUKEE, WI 53201-0701
You may write to the Securities and Exchange Commission (SEC) Public Reference
Room at the regular mailing address or the e-mail address below and ask them to
mail you information about the Fund, including the SAI. They will charge you a
fee for this duplicating service. You can also visit the SEC Public Reference
Room and copy documents while you are there. For more information about the
operation of the Public Reference Room, call the SEC at the telephone number
below.
PUBLIC REFERENCE SECTION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0102
[email protected]
1-202-942-8090
Reports and other information about the Fund are available on the EDGAR Database
on the SEC's Internet site at HTTP://WWW.SEC.GOV.
1940 Act File No. 811-9821
CLASS K
DOW JONES(SM) ISLAMIC INDEX FUND
PROSPECTUS
JUNE 30, 2000
INVESTMENT ADVISOR
AAA
ALLIED ASSET ADVISORS, INC.
DOW JONES(SM) ISLAMIC INDEX FUND
PROSPECTUS
JUNE 30, 2000
The Dow Jones(SM) Islamic Index Fund is the first series offered by Allied Asset
Advisors Funds. This prospectus pertains to Class K shares and contains
pertinent information about investing in the Fund. Class K shares are not
subject to any sales charges or 12b-1 fees. Please read this prospectus
carefully before investing.
INVESTMENT ADVISOR
AAA
ALLIED ASSET ADVISORS, INC.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
RISK/RETURN SUMMARY............................................................2
PERFORMANCE SUMMARY............................................................4
FEES AND EXPENSES..............................................................4
MORE INFORMATION ABOUT THE DOW JONES ISLAMIC MARKET USA INDEX(SM)..............5
SHARI`AH SUPERVISORY BOARD.....................................................7
MANAGEMENT OF THE FUND.........................................................8
CALCULATING SHARE PRICE........................................................8
HOW TO PURCHASE SHARES.........................................................9
HOW TO SELL SHARES............................................................10
DISTRIBUTIONS AND TAXES.......................................................12
SHAREHOLDER REPORTS AND CONFIRMATIONS.........................................12
FINANCIAL HIGHLIGHTS..........................................................12
RISK/RETURN SUMMARY
--------------------------------------------------------------------------------
WHAT IS THE INVESTMENT OBJECTIVE OF THE DOW JONES(SM) ISLAMIC INDEX FUND?
The Dow Jones Islamic Index Fund ("Fund") seeks to match the total return of the
DOW JONES ISLAMIC MARKET USA INDEX(SM) (the "INDEX").
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE FUND?
To achieve its investment objective, the Fund invests in securities included in
the INDEX. The INDEX consists of U.S. common stocks that meet Islamic investment
principles. Islamic principles generally preclude investments in certain
industries (e.g., alcohol, pornography and casinos) and investments in interest
bearing debt obligations or businesses that derive a substantial amount of
impure interest income. Any uninvested cash will be held in non-interest bearing
deposits or invested in a manner following Islamic principles. Under normal
circumstances, the Fund plans to fully invest its assets in securities that are
included in the INDEX. Although the INDEX consists of stocks from many different
economic sectors, it is comprised primarily of companies with larger market
capitalizations. There is no guarantee that the Fund will achieve the same
return as the INDEX.
Due to the large number of stocks in the INDEX, the Fund may, in its initial
stages (i.e., the period during which the Fund's asset size is less than $100
million), purchase a sub-group of equities from those contained in the INDEX
that the investment advisor believes will best track the INDEX. The Fund will
determine the "sub-group" by selecting stocks that are representative of the
INDEX in terms of industry, size and/or other portfolio characteristics. The
Fund also will consider a security's weighting in the INDEX during its initial
stages emphasizing those securities that are more heavily weighted. As the
assets of the Fund grow, the investment advisor anticipates the holdings of the
Fund will increase to include more of the components of the INDEX.
In order to track the INDEX as closely as possible, the Fund will invest
substantially all of its assets in roughly the same proportions as the stocks
are represented in the INDEX. As the Fund receives cash from new investors, or
processes redemption requests from shareholders, the Fund will purchase or sell
securities in an effort to approximate the return of the INDEX. Also, the Fund's
investments are reviewed and adjusted at least quarterly to reflect any
adjustments in the INDEX in an effort to tract the INDEX as closely as possible.
The Fund normally sells portfolio securities in response to redemption requests
or to adjust the number of its shares to track the weighting or composition of
the INDEX. As a result, the Fund's portfolio turnover rate is expected to be
low. A low portfolio turnover rate usually results in low transaction costs and
provides tax efficiencies for shareholders.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
The main risks of investing in the Fund are listed below. Like any mutual fund,
you may lose money by investing in the Fund.
MARKET RISKS The return on and value of your investment in the Fund will
fluctuate in response to stock market movements. Stocks and other equity
securities are subject to market risks and fluctuations in value due to changes
in earnings, economic conditions and other factors beyond the control of the
Fund.
INDEX INVESTING RISKS Unlike non-index mutual funds, the Fund will not buy and
sell securities based upon economic, financial and market analysis and
investment judgment. Instead, the Fund will invest using an indexed-based
investment approach, which seeks to approximate the investment performance of
the INDEX. You should not expect to achieve the potential greater results of
some actively managed funds that aggressively seek growth or attempt to limit
losses in a market decline. The Fund's initial strategy of investing in a
representative sample of the INDEX may result in some deviation between the
Fund's performance and the Index. The Fund's return is likely to be lower than
that of the INDEX because the Fund incurs brokerage commissions, transaction
fees and other expenses that the INDEX does not. There is a risk that returns
from larger capitalization stocks will trail those of other asset classes or
overall stock market.
ISLAMIC SHARI`AH INVESTMENT RISKS It is possible that the Islamic Shari`ah
restrictions placed on investments may result in the Fund not performing as well
as mutual funds not subject to such restrictions.
TEMPORARY INVESTMENTS In response to severe or unusual adverse market,
economic, political or other conditions, the Fund may make temporary investments
that are not consistent with its investment objective and principal investment
strategies. Such investments may prevent the Fund from achieving its investment
objective. The Fund cannot invest in interest-paying instruments frequently used
by mutual funds for this purpose. Currently anticipated temporary investments
will be held in the form of cash. If the Fund's investments in cash or similar
investments increase, the Fund may not achieve its investment objective.
PERFORMANCE SUMMARY
--------------------------------------------------------------------------------
There is no performance information available for the Fund at this time because
the Fund has no operating history.
FEES AND EXPENSES
--------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS K
---------
Maximum sales charge (load) imposed on purchases(1) None
Maximum deferred sales charge (load) None
Maximum sales charge (load) imposed on reinvested dividends None
Exchange fee None Redemption fee(2) None
Maximum account fee(3) None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) CLASS K
---------
Management Fees 0.75%
Distribution (12b-1) Fees None
Other Expenses 0.62%
Total Annual Fund Operating Expenses 1.37%
-------
Less Expense Reimbursement -0.47%
Net Annual Fund Operating Expenses(4) 0.90%
=======
(1) Although no sales loads or transaction fees are charged, your account will
be assessed a fee of$25 for each returned check.
(2) The transfer agent charges a fee of $12 for outgoing wire transfers.
(3) IRA accounts are assessed a $12.50 annual fee.
(4) The Fund has an Investment Advisory and Management Agreement with the Allied
Asset Advisors, Inc., the investment advisor for the Fund, dated June 29, 2000.
The Agreement provides that the annual management fee shall be 0.75% of the
first $500 million in assets 0.65% of the next $5 billion in assets and 0.50% on
the amount of assets over $5.5 billion. The investment advisor has a also
entered into an Expense Waiver and Reimbursement Contract dated June 29, 2000
with the Fund under which the investment advisor has agreed to waive its fees
and absorb expenses to the extent that total annual fund operating expenses
exceed 0.90% for Class K shares. The investment advisor can recapture any
expenses or fees it has waived or reimbursed within a three year period. The
Contract is in effect for one year and expires June 29, 2001.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in a Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year, your dividends and distributions have been
reinvested, and that the Fund's operating expenses remain the same. Although
your actual cost may be higher or lower, based on these assumptions (including
one year of capped expenses in each period) your costs would be:
1 YEAR 3 YEARS
------ -------
$92 $375
MORE INFORMATION
ABOUT THE DOW JONES ISLAMIC MARKET USA INDEX(SM)
--------------------------------------------------------------------------------
WHAT IS THE DOW JONES ISLAMIC MARKET USA INDEX(SM)?
The INDEX is a diverse compilation of U.S. equity securities considered by the
Shari`ah Supervisory Board of Dow Jones to be in compliance with Islamic
principles. The INDEX is constructed from the 2,700 stocks in the Dow Jones
Global Indexes (DJGI) family. Dow Jones believes that these stocks are
accessible to investors and are well traded. The DJGI methodology removes issues
that are not suitable for global investing.
Certain businesses are incompatible with Shari`ah Laws. Thus, stocks of
companies whose primary business is in areas not suitable for Islamic investment
purposes are excluded from the INDEX. Excluded businesses include: alcohol, pork
related products, conventional financial services (banking, insurance, etc.),
entertainment (casinos/gambling, cinema, pornography, music, hotels, etc.),
tobacco and defense.
Financial filters are also applied to exclude, among other things, companies
that derive more than 5% of income from impure sources including interest and
companies that have total debt exceeding certain ratios. The filters are
described fully in the Statement of Additional Information.
As of March 15, 2000, the U.S. companies whose issues comprised the INDEX had an
average market capitalization of $15.4 billion dollars (U.S.) and a median
market capitalization of $3.0 billion (U.S.). SECURITIES ARE SELECTED FOR THE
INDEX SO AS TO REPRESENT THE MOST LIQUID SECURITIES MEETING THE SHARI`AH
INVESTMENT CRITERIA IN THE MARKET, AND TO REFLECT THE INDUSTRY MAKEUP OF THE
U.S. MARKET. ADDITIONAL FACTORS CONSIDERED WHEN APPLYING THE PROCESS DESCRIBED
ABOVE INCLUDE RELATIVE SIZE AND TURNOVER, ECONOMIC WEIGHTINGS, AND THE RELATIVE
HEALTH OF THE COMPANIES.
Dow Jones' Shari`ah Supervisory Board has approved the above criteria and any
changes to the Shari`ah Supervisory Board or the selection criteria are at the
sole discretion of Dow Jones. Changes by Dow Jones in the selection criteria or
the composition of the INDEX will be reflected in the composition of the Fund in
a reasonable period of time.
HOW HAS THE INDEX PERFORMED?
The following table shows the performance of the INDEX for the past four years
ended December 31, 1999 compared to other indexes. PLEASE NOTE THAT THE
PERFORMANCE SHOWN IS NOT THE PERFORMANCE OF THE FUND AND IS NOT INTENDED TO
PREDICT OR SUGGEST THE RETURN THAT MIGHT BE EXPERIENCED IF YOU INVEST IN THE
FUND. The Fund will seek to track the INDEX as closely as possible, but the
performance of the Fund will be less than the performance of the INDEX because
the Fund is subject to operational and transaction costs, while the INDEX is
not. Also, the Fund may not be fully invested in INDEX securities at all times
and stocks in the Fund may not be weighted the same as stocks in the INDEX at
all times. This will especially be true while the Fund's assets are under $100
million in its initial stages.
<TABLE>
<CAPTION>
Average Annual
Benchmark Return for the Calendar Years Total Return *
-------------------------- ------------ ------------ ------------ ----------------- ---------------------------
1999 1998 1997 1996
-------------------------- ------------ ------------ ------------ ----------------- ---------------------------
<S> <C> <C> <C> <C> <C>
DJIM US 21.68% 34.14% 30.16% 23.03% 27.25%
S&P 500 19.53% 26.67% 31.01% 20.26% 24.22%
Russell 2000 19.62% -3.45% 20.52% 14.76% 12.40%
-------------------------- ------------ ------------ ------------ ----------------- ---------------------------
* RETURN FROM 12/31/95 TO 12/31/99
</TABLE>
The base date for the INDEX (the date that the INDEX started) is December 31,
1995 and the base value is set at 1000. The INDEX is reviewed quarterly, with
component changes implemented on the third Friday of March, June, September and
December. This frequency assures that the INDEX reflects the latest trends and
developments in the stock market and the companies' adherence to Islamic
principles.
The INDEX is capitalization-weighted. It is calculated in real time, posted and
disseminated every 5 seconds to major market-data vendors. Calculation of the
index is based on Laspeyres' formula. It does not include reinvested dividends.
"Dow Jones" and "Dow Jones Islamic Market IndexSM" are service marks of Dow
Jones & Company, Inc. and have been licensed for use by Allied Asset Advisors,
Inc. in connection with the Fund. The Fund is not sponsored, endorsed, sold or
promoted by Dow Jones, and Dow Jones makes no representation regarding the
advisability of investing in the Fund. Dow Jones does not consider the needs of
the Fund or its shareholders in determining, composing or calculating the INDEX
or have any obligation to do so. See the Statement of Additional Information for
more information about Dow Jones.
SHARI`AH SUPERVISORY BOARD
--------------------------------------------------------------------------------
The INDEX is reviewed quarterly and annually by the Shari`ah Supervisory Board
(Shari`ah Board) and by Dow Jones for consideration of exclusion or inclusion of
components. In addition, the INDEX is reviewed on an on-going basis to
contemplate changes as a result of extraordinary events (e.g., de-listing,
bankruptcy, merger or takeover). The Shari`ah Board is not affiliated with the
Fund or the investment advisor and does not serve as a consultant to or
otherwise have any relationship with the Fund or the investment advisor. The
Shari`ah Board does not consider the objectives or needs of the Fund or its
shareholders in determining, composing or calculating the INDEX. The Shari`ah
Board is retained by Dow Jones & Company, Inc., to provide counsel on matters
relating to the Shari`ah compliance of the INDEX's eligible components. At the
Fund's inception, the Shari`ah Board consisted of the following individuals:
<TABLE>
<CAPTION>
-------------------------------------------------- -------------------------------------------------------------------
SHARI`AH SUPERVISORY BOARD MEMBER BIOGRAPHY
- COUNTRY
-------------------------------------------------- -------------------------------------------------------------------
<S> <C>
SHAYKH DR. ABDUL SATTAR ABU GHUDDAH Dr. Abu Ghuddah is a senior Shari`ah Advisor to Albaraka
- SYRIA Investment Co. of Saudi Arabia. He holds a PhD in Islamic Law.
Dr. Abu Ghuddah has published many books on Islamic Financial
transactions. He was an advisor for Islamic Law Encyclopaedia
(Kuwait Awqaf Ministry). Dr. Abu Ghuddah is a member and
chairman of several reputed Islamic Shari`ah Boards.
-------------------------------------------------- -------------------------------------------------------------------
SHAYKH JUSTICE MUHAMMAD TAQI USMANI Mr. Usmani has been a member of the Supreme Court of Pakistan
- PAKISTAN since 1982. He is also the vice president of Darul Uloom Karachi
and the vice chair and deputy chairman of the Islamic Fiqh
Academy (OIC), Jeddah. Mr. Usmani edits the monthly magazines
Albalagh and Albalagh International. He is a chairman or member
of the Shari`ah supervisory boards of a dozen Islamic banks and
financial institutions worldwide.
-------------------------------------------------- -------------------------------------------------------------------
SHAYKH NIZAM YAQUBY Mr. Yaquby is a member of the Islamic supervisory boards for
- BAHRAIN several Islamic institutions, including the Arab Islamic Bank and
the Abu Dhabi Islamic Bank. His work has appeared in the
following publications: Risalah Fi al-Tawbah, Qurrat
al-'Ainayn fi Fada il Birr al-Walidayn, Irshad
al-'Uqala'ila Hukun al-Qira'h min al-Mushaf fi al-Salah,
Tahqiq al-Amal fi Ikhraj Zakat al-Fitr bi al-Mal.
-------------------------------------------------- -------------------------------------------------------------------
SHAYKH DR. MOHAMED A. ELGARI Dr. Elgari is an associate professor of Islamic Economics and the
- SAUDI ARABIA director of the Center for Research in Islamic Economics at King
Abdulaziz University in Saudi Arabia. He is an expert at the
Islamic Jurisprudence Academy (OIC), Jeddah. Dr. Elgari is the
editor of the Review of Islamic Economics. He is also an advisor
to several Islamic financial institutions worldwide and the
author of many books on Islamic banking.
-------------------------------------------------- -------------------------------------------------------------------
SHAYKH YUSUF TALAL DELORENZO Mr. DeLorenzo is considered a leading Islamic scholar in the
- UNITED STATES United States. He has translated over twenty books from Arabic,
Persian, and Urdu for publication in English and has been
commissioned to prepare a new translation of the Qur`an. Mr. DeLorenzo
compiled the first English translation of legal rulings issued by Shari`ah
supervisory boards on the operations of Islamic banks. He is also a
Shari`ah consultant to several Islamic financial institutions and
was an advisor on Islamic education to the government of Pakistan.
-------------------------------------------------- -------------------------------------------------------------------
</TABLE>
MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
INVESTMENT ADVISOR
The Fund's investment advisor is Allied Asset Advisors, Inc. (AAA) located at
745 McClintock Drive, Suite 114, Burr Ridge, Illinois 60521. Subject to the
general supervision of the Fund's Board of Trustees, AAA is responsible for the
day-to-day investment decisions of the Fund in accordance with the Fund's
investment objective and policies. In exchange for these services, AAA receives
an annual management fee, which is calculated daily and paid monthly, according
to the average daily net assets of the Fund. AAA is a newly formed subsidiary of
the North American Islamic Trust (NAIT). Whereas, AAA, as a new entity, has no
track record in investment management or other assets under management besides
the Fund, NAIT has managed the investment of endowment assets for over 20 years.
Currently, these assets are valued in excess of $35,000,000. For more
information about NAIT, see the Statement of Additional Information.
The Investment Advisory Agreement between the Fund and AAA provides that the
annual management fee for the investment advisor will be 0.75% on the first $500
million in assets, 0.65% on the next $5 billion in assets and 0.50% on the
amount of assets over $5.5 billion. However, AAA has entered into an Expense
Waiver and Reimbursement Contract with the Fund whereby it has agreed to waive
its fees and absorb expenses to the extent that the Fund's total annual
operating expenses for Class K shares exceed 0.90% of net assets. AAA can
recapture any expenses or fees it has waived or reimbursed within a three year
period, however, the Fund is not obligated to pay any such deferred fees more
than three years after the end of the fiscal year in which the fee was deferred.
The Expense Waiver and Reimbursement Contract expires on June 29, 2001.
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND FUND ACCOUNTANT
Firstar Bank, N.A. serves as custodian for the Fund's cash and securities.
Firstar Mutual Fund Services, LLC provides administrative, transfer agent,
dividend disbursing, and fund accounting services to the Fund.
DISTRIBUTOR
Rafferty Capital Markets, Inc., serves as principal underwriter for the Fund
and as such, is the exclusive agent for the distribution of shares of the Fund.
Broker-Dealer organizations that have a sales agreement with the distributor may
sell shares of the Fund.
CALCULATING SHARE PRICE
--------------------------------------------------------------------------------
Shares of the Fund are sold at their net asset value (NAV). The NAV for all
shares of the Fund is determined as of the close of regular trading on the New
York Stock Exchange (NYSE) (normally 4:00 p.m., Eastern time) on every business
day. The NAV for Class K shares of the Fund is calculated by dividing the sum of
the value of the securities held plus cash or other assets minus all liabilities
by the total number of Class K shares outstanding of the Fund.
The Fund's investments are valued according to market value. When a market quote
is not readily available, the security's value is based on "fair value" as
determined by the investment advisor under supervision of the Fund's Board of
Trustees.
If you place a good order (see "How to Purchase Shares") that is delivered to
the Fund before the close of the regular trading session of the NYSE on any
business day, your order will receive the share price determined for the Fund as
of that day. If your order is received after the close of the regular trading
session of the NYSE, it will receive the price determined on the next business
day.
HOW TO PURCHASE SHARES
--------------------------------------------------------------------------------
To open an account, you must invest at least the minimum amount.
MINIMUM INVESTMENTS TO OPEN TO ADD TO
YOUR ACCOUNT YOUR ACCOUNT
Regular accounts $500 $50
IRA accounts $250 $50
--------------------------------------------------------------------------------
GOOD ORDER PURCHASE REQUESTS
WHEN MAKING A PURCHASE REQUEST, MAKE SURE YOUR REQUEST IS IN GOOD ORDER. "GOOD
ORDER" MEANS YOUR PURCHASE REQUEST INCLUDES:
|X| THE NAME OF THE FUND
|X| THE DOLLAR AMOUNT OF SHARES TO BE PURCHASED
|X| ACCOUNT APPLICATION FORM OR INVESTMENT STUB
|X| CHECK PAYABLE TO THE "DOW JONES ISLAMIC INDEX FUND"
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
METHODS OF BUYING
<S> <C>
THROUGH A You can purchase shares of the Fund through any broker-dealer organization that has a sales
BROKER/DEALER agreement with the Fund's distributor. The broker-dealer organization is responsible for
ORGANIZATION sending your purchase order to the Fund. Please keep in mind that your broker-dealer may
charge additional fees for its services.
BY MAIL To open an account, complete an account application form and send it together with your
check to the address below. To make additional investments once you have opened your
account, send your check together with the detachable form that's included with your Fund
account statement or confirmation. You may also send a letter stating the amount of your
investment with your name, the name of the Fund and your account number together with a
check to the address below. Checks should be made payable to "Dow Jones Islamic Index
Fund." No third party checks will be accepted. If your check is returned for any reason,
a $25 fee will be assessed against your account.
REGULAR MAIL OVERNIGHT DELIVERY
Dow Jones Islamic Index Fund Dow Jones Islamic Index Fund
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 E. Michigan Street, Third Floor
Milwaukee, Wisconsin 53201-0701 Milwaukee, Wisconsin 53202
NOTE: The Fund does not consider the U.S. Postal Service or other independent delivery
services to be its agents. Therefore, when you deposit your account application form,
additional purchase request, or redemption request in the mail or use other delivery services,
or if your documents are simply in the transfer agent's post office box, that does not mean that
the transfer agent or the Fund actually RECEIVED those documents.
BY TELEPHONE To make additional investments by telephone, you must check the appropriate box on your account
application form authorizing telephone purchases. If you have given authorization for telephone
transactions and your account has been open for at least 15 days, call the Fund toll free at
1-888-FUNDS-85 and you will be allowed to move money from your bank account to your Fund
account upon request. Only bank accounts held at U.S. institutions that are Automated Clearing
House (ACH) members may be used for telephone transactions. For security reasons,
requests by telephone will be recorded.
BY WIRE To open an account or to make additional investments by wire, call 1-888-FUNDS-85 to notify the
Fund of the incoming wire using the wiring instructions below:
Firstar Bank, N.A.
Milwaukee, WI 53202
ABA #: 075000022
Credit: Firstar Mutual Fund Services, LLC
Account #: 112-952-137
Further Credit: Dow Jones Islamic Index Fund, Class K
(your name or the title on the account)
(your account #)
THROUGH AN Once your account has been opened, you may purchase shares of the Fund through an Automatic
AUTOMATIC Investment Plan ("AIP"). You can have money automatically transferred from your checking
INVESTMENT or savings account on a weekly, bi-weekly, monthly, bi-monthly or quarterly basis. To be
PLAN eligible for this plan, your bank must be a U.S. institution that is an ACH member. The
Fund may modify or terminate the AIP at any time. The first AIP purchase will take place no
earlier than 15 days after the transfer agent has received your request.
</TABLE>
HOW TO SELL SHARES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
METHODS OF SELLING
<S> <C>
THROUGH A If you purchased your shares through a broker-dealer or other financial organization, your
BROKER/DEALER redemption order may be placed through the same organization. The organization is responsible
ORGANIZATION for sending your redemption order to the Fund on a timely basis. Please keep in mind
that your broker-dealer may charge additional fees for its services.
BY MAIL Send your written redemption request to the address below. Your request should contain the
Fund's name, your account number and the dollar amount or the number of shares to be redeemed.
Be sure to have all shareholders sign the letter. Additional documents are required for certain
types of shareholders, such as corporations, partnerships, executors, trustees, administrators,
or guardians (i.e., corporate resolutions, or trust documents indicating proper authorization).
Please see the Statement of Additional Information for more information.
REGULAR MAIL OVERNIGHT DELIVERY
Dow Jones Islamic Index Fund Dow Jones Islamic Index Fund
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 E. Michigan Street, Third Floor
Milwaukee, Wisconsin 53201-0701 Milwaukee, Wisconsin 53202
The Fund's transfer agent may require a SIGNATURE GUARANTEE for certain redemption requests such
as redemption requests from IRA accounts, or redemption requests made payable to a person or an
address not on record with the Fund. A signature guarantee assures that your signature is
genuine and protects you from unauthorized account redemptions. You may obtain signature
guarantees from most trust companies, commercial banks or other eligible guarantor
INSTITUTIONS. A NOTARY PUBLIC CANNOT GUARANTEE SIGNATURES.
BY TELEPHONE If you are authorized to perform telephone transactions (either through your account application
form or by subsequent arrangement in writing with the Fund) you may redeem shares in any amount,
but not less than $100, by calling 1-800 FUNDS-85. A signature guarantee is required of
all shareholders to change or add telephone redemption privileges. For security reasons, requests
by telephone will be recorded.
BY WIRE To redeem shares by wire, call the Fund at 1-888-FUNDS-85 and specify the amount of money you wish to
be wired. Your bank may charge a fee to receive wired funds. The transfer agent charges a $12
outgoing wire fee.
BY WRITING A CHECK On your account application form, you may select the option to receive a checkbook so that you can
redeem shares by writing checks against your Fund account. Checks may be made payable in the amount
of $250 or more. Any checks drawn on a joint account will only require one signature. There is a
$25 charge for stopping payment of a check upon your request, or if the transfer agent cannot
honor a check due to insufficient funds or other valid reason. There will be a charge of $5 for
issuing each checkbook.
THROUGH A If you own shares with a value of $10,000 or more, you may participate in the systematic
SYSTEMATIC withdrawal plan. The systematic withdrawal plan allows you to make automatic withdrawals from
WITHDRAWAL PLAN your Fund account at regular intervals. Money will be transferred from your Fund account to the
checking or savings account you choose on your account application form. If you expect to purchase
additional shares of the Fund, it may not be to your advantage to participate in the systematic
withdrawal plan because of the possible adverse tax consequences of making contemporaneous
purchases and redemptions.
</TABLE>
WHEN REDEMPTION PROCEEDS ARE SENT TO YOU
Your shares will be redeemed at the NAV next determined after the Fund receives
your redemption request in good order. Your redemption request cannot be
processed on days the NYSE is closed.
--------------------------------------------------------------------------------
WHEN MAKING A REDEMPTION REQUEST, MAKE SURE YOUR REQUEST IS IN GOOD ORDER. "GOOD
ORDER" MEANS YOUR LETTER OF INSTRUCTION INCLUDES:
|X| THE NAME OF THE FUND
|X| THE DOLLAR AMOUNT OR THE NUMBER OF SHARES TO BE REDEEMED
|X| SIGNATURES OF ALL REGISTERED SHAREHOLDERS EXACTLY AS THE SHARES ARE
REGISTERED
|X| THE ACCOUNT NUMBER
--------------------------------------------------------------------------------
All requests received in good order by the Fund before the close of the regular
trading session of the NYSE (normally 4:00 p.m. Eastern time) will usually be
wired to the bank you indicate or mailed on the following day to the address of
record. In all cases proceeds will be wired or a check mailed within seven
calendar days after the Fund receives your redemption request.
If you purchase shares using a check and soon after request a redemption, the
Fund will honor the redemption request, but will not mail or wire the proceeds
until your purchase check has cleared (usually within 12 days).
REDEMPTION IN-KIND
If the amount you are redeeming is over the lesser of $250,000 or 1% of the
Fund's net asset value, the Fund has the right to redeem your shares by giving
you the amount that exceeds $250,000 or 1% of the Fund's net asset value in
securities instead of cash.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
mail you a notice if your account falls below $500 ($250 for IRA accounts)
requesting that you bring the account back up to $500 or close it out. If you do
not respond to the request within 30 days, the Fund may close the account on
your behalf and send you the proceeds.
DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
The Fund will distribute substantially all of the net investment income and net
capital gains that it has realized on the sale of securities. These income and
gains distributions will generally be paid once each year, on or before December
31. Distributions will automatically be reinvested in additional shares of the
Fund, unless you elect to have the distributions paid to you in cash. If you
choose to have distribution checks mailed to you and either the U.S. Postal
service is unable to deliver the check to you or the check remains outstanding
for at least 6 months, the Fund reserves the right to reinvest the check at the
then current net asset value until you provide us with different instructions.
In general, Fund distributions are taxable to you as either ordinary income or
capital gains. This is true whether you reinvest your distributions in
additional Fund shares or receive them in cash. Any long-term capital gains the
Fund distributes are taxable to you as long-term capital gains no matter how
long you have owned your shares. If the Fund distributes realized gains soon
after you purchase shares, a portion of your investment may be treated as a
taxable distribution.
If you do not provide your correct social security or taxpayer identification
number, or if the IRS instructs the Fund to do so, the Fund, by law, must
withhold 31% of your taxable distributions.
When you sell your shares of the Fund, you may incur a capital gain or loss. The
individual tax rate on any gain from the sale of your shares depends on your
marginal tax rate and on how long you have held your shares.
Fund distributions and gains from the sale of your shares generally will be
subject to state and local income tax. Non-U.S. investors may be subject to U.S.
withholding tax. You should consult your tax advisor about the federal, state,
local or foreign tax consequences of your investment in the Fund.
SHAREHOLDER REPORTS AND CONFIRMATIONS
--------------------------------------------------------------------------------
As a shareholder, you will be provided annual and semi-annual reports showing
the Fund's portfolio investments and financial information. Account and tax
statements will be mailed to you on an annual basis. You will also receive
confirmations of your purchases and redemptions.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The Fund has commenced operations on June 30, 2000, therefore no financial
highlights are available for the Fund.
INVESTMENT ADVISOR
AAA
ALLIED ASSET ADVISORS, INC.
BURR RIDGE, ILLINOIS
DISTRIBUTOR
RAFFERTY CAPITAL MARKETS, INC.
WHITE PLAINS, NEW YORK
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
CHICAGO, ILLINOIS
LEGAL COUNSEL
VEDDER, PRICE, KAUFMAN, & KAMMHOLZ
CHICAGO, ILLINOIS
ADMINISTRATOR, TRANSFER AGENT,
AND FUND ACCOUNTANT
FIRSTAR MUTUAL FUND SERVICES, LLC
MILWAUKEE, WISCONSIN
CUSTODIAN
FIRSTAR BANK, N.A.
CINCINNATI, OHIO
WHERE TO FIND MORE INFORMATION:
You can find more information about the Fund in the following documents:
STATEMENT OF ADDITIONAL INFORMATION (SAI) DATED JUNE 30, 2000
The SAI for Class K of the Fund provides more details about the Fund's policies
and management. The Fund's SAI is incorporated by reference into this
Prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
After the Fund has been operating for the appropriate time, annual and
semi-annual reports will be made available. The Fund's annual and semi-annual
reports provide the most recent financial reports and portfolio listings. The
annual report contains a discussion of the market conditions and investment
climate that affected the Fund's performance during the last fiscal year.
You can obtain a free copy of these documents or request other information about
the Fund by calling the Fund at 1-888-FUNDS-85 or by writing to:
DOW JONES ISLAMIC INDEX FUND
C/O FIRSTAR MUTUAL FUND SERVICES, LLC
P.O. BOX 701
MILWAUKEE, WI 53201-0701
You may write to the Securities and Exchange Commission (SEC) Public Reference
Room at the regular mailing address or the e-mail address below and ask them to
mail you information about the Fund, including the SAI. They will charge you a
fee for this duplicating service. You can also visit the SEC Public Reference
Room and copy documents while you are there. For more information about the
operation of the Public Reference Room, call the SEC at the telephone number
below.
PUBLIC REFERENCE SECTION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0102
[email protected]
1-202-942-8090
Reports and other information about the Fund are available on the EDGAR Database
on the SEC's Internet site at HTTP://WWW.SEC.GOV.
1940 Act File No. 811-9821
CLASS M
DOW JONES(SM) ISLAMIC INDEX FUND
A SERIES OF ALLIED ASSET ADVISORS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30, 2000
INVESTMENT ADVISOR
AAA
ALLIED ASSET ADVISORS, INC.
745 MCCLINTOCK DRIVE, SUITE 114
BURR RIDGE, IL 60521
(630) 789-9191
This Statement of Additional Information relates to the Dow Jones(SM) Islamic
Index Fund, which is the first mutual fund within the Allied Asset Advisors
Funds family. The SAI is not a prospectus but should be read in conjunction with
the Fund's current Prospectus dated June 30, 2000. To obtain the Prospectus,
please visit the Fund's web-site, call 1-888-FUNDS-85 or write to the Fund as
shown below:
REGULAR MAIL OVERNIGHT OR EXPRESS MAIL
------------ -------------------------
Dow Jones Islamic Index Fund Dow Jones Islamic Index Fund
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street, 3rd Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS........................................................3
INVESTMENT OBJECTIVE AND STRATEGIES............................................4
MORE ABOUT DOW JONES(SM).......................................................4
THE TRUST......................................................................6
MANAGEMENT OF THE FUND.........................................................7
INVESTMENT ADVISOR.............................................................9
CODE OF ETHICS.................................................................9
ADMINISTRATIVE SERVICES........................................................9
DISTRIBUTOR...................................................................10
DISTRIBUTION PLAN.............................................................10
SHAREHOLDER SERVICES AGREEMENT................................................11
PRICING OF SHARES.............................................................11
PURCHASING SHARES.............................................................11
REDEMPTION OF SHARES..........................................................12
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................12
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES.............................13
PERFORMANCE INFORMATION.......................................................15
AUDITORS......................................................................16
COUNSEL.......................................................................16
FINANCIAL STATEMENTS..........................................................17
INVESTMENT RESTRICTIONS
--------------------------------------------------------------------------------
FUNDAMENTAL RESTRICTIONS
The Fund has adopted the following fundamental investment policies and
restrictions that cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Fund. Under the 1940 Act, a "majority of
the outstanding voting securities" of a fund means the vote of:
(1) more than 50% of the outstanding voting securities of the fund; or
(2) 67% or more of the voting securities of the fund present at a meeting, if
the holders of more than 50% of the outstanding voting securities are
present or represented by proxy, whichever is less.
The Fund may not:
1. Make loans except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from
time to time.
2. Borrow money, except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from
time to time.
3. Concentrate its investments in a particular industry, as that term is used
in the 1940 Act, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
4. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate and or mortgages or investments secured
by real estate, or interests therein, except that the Fund reserves freedom
of action to hold and to sell real estate acquired as a result of the
Fund's ownership of securities.
5. Engage in the business of underwriting securities, except to the extent
that the Fund may be deemed to be an underwriter in connection with the
disposition of portfolio securities.
6. Issue senior securities, except as permitted under the 1940 Act, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
7. Purchase physical commodities or contracts relating to physical
commodities.
NON-FUNDAMENTAL RESTRICTIONS
As a matter of non-fundamental policy, the Fund currently does not intend to :
1. Borrow money in an amount greater than 5% of its total assets, except for
temporary or emergency purposes;
2. Purchase securities on margin or make short sales;
3. Enter into futures contracts or purchase options thereon ; and
4. Invest more than 15% of its net assets in illiquid securities.
INVESTMENT OBJECTIVE AND STRATEGIES
--------------------------------------------------------------------------------
The Fund seeks to match the total return of the Dow Jones Islamic Market USA
Index(SM) (the "INDEX"), a diversified compilation of equity securities
considered by Dow Jones' Shari`ah Supervisory Board to be in compliance with
Islamic Shari`ah principles. Because the Fund is a diversified Fund, there is a
possibility that the Fund may be unable to track the composition of the INDEX if
the INDEX becomes non-diversified.
The following discussion supplements the information regarding the investment
objective of the Fund and the policies to be employed to achieve this objective
as set forth above and in the Fund's Prospectus.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which a fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause a
fund to miss a price or yield considered advantageous. Settlement dates may be a
month or more after entering into these transactions and the market values of
the securities purchased may vary from the purchase prices. The Fund may dispose
of a commitment prior to settlement if the investment advisor deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments. These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other than
normal transaction costs, are incurred. However, liquid assets of the Fund
sufficient to make payment for the securities to be purchased are segregated on
the Fund's records at the trade date. These assets are marked to market daily
and are maintained until the transaction is settled.
RESTRICTED SECURITIES. Securities that have legal or contractual restrictions on
their resale may be acquired by the Fund. The price paid for these securities,
or received 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 reflects any limitation on their liquidity.
OTHER INVESTMENT COMPANIES. Subject to applicable statutory and regulatory
limitations, the assets of the Fund may be invested in shares of other
investment companies.
PERCENTAGE RESTRICTIONS. If a percentage restriction on investment or
utilization of assets set forth in this Statement of Additional Information or
referred to in the Prospectus is adhered to at the time an investment is made or
assets are so utilized, a later change in percentage resulting from changes in
the value of the portfolio securities is not considered a violation of the
policy.
MORE ABOUT DOW Jones(SM)
--------------------------------------------------------------------------------
The filters applied in constituting the Dow Jones Islamic Market USA Index(SM)
are:
1. Total debt divided by total assets is equal to or greater than 33%. (Note:
total debt = short term debt + current portion of long-term debt +
long-term debt).
2. Accounts receivables divided by total assets is equal to or greater than
45%. (Note: accounts receivables = current receivables + long-term
receivables).
3. (Non-operating interest income plus impure income) all divided by revenue
is equal to or greater than 5%.
Companies that pass Shari`ah screens are included in the INDEX'S investable
universe from which INDEX components are selected. The steps taken to select the
components of the INDEX are as follows:
1. Rank companies both by market cap and by the daily average dollar turnover
for the preceding quarter.
2. Calculate combination score for each stock by combining market value rank
and turnover rank with equal weight on both factors.
3. Sort stocks into their respective industry groups by country.
4. Based on the combined score in descending order, select those companies of
each industry group in each country whose cumulative market capitalization
is closest to 95% of the total market capitalization of the industry group.
5. Select all U.S. companies from the above global companies (currently 241
companies).
"Dow Jones," "Dow Jones Islamic Market USA Index(SM)" and "DJIM" are service
marks of Dow Jones & Company, Inc. Dow Jones has no relationship to the Fund or
its investment advisor, other than the licensing of the Dow Jones Islamic Market
Index(SM) and its service marks for use in connection with the Fund.
Dow Jones does not sponsor, endorse, sell or promote the Fund; recommend that
any person invest in the Fund or any other securities; have any responsibility
or liability for or make any decisions about the timing, amount or pricing of
the Fund; have any responsibility or liability for the administration,
management or marketing of the Fund; consider the needs of the Fund or the
owners of the Fund in determining, composing or calculating the INDEX or have
any obligation to do so.
Dow Jones will not have any liability in connection with the Fund. Specifically,
Dow Jones does not make any warranty, express or implied, and Dow Jones
disclaims any warranty about (1) the results to be obtained by the Fund, the
owners of the Fund or any other person in connection with the use of the Dow
Jones Islamic Market Index and the data included in the INDEX; (2) the accuracy
or completeness of the INDEX and its data; and (3) the merchantability and the
fitness for a particular purpose or use of the INDEX and its data.
Although Dow Jones uses reasonable efforts to comply with its guidelines
regarding the selection of components in the INDEX, Dow Jones disclaims any
warranty of compliance with Shari`ah Law or other Islamic principles. Dow Jones
will have no liability for any errors, omissions or interruptions in the INDEX
or its data. Under no circumstances will Dow Jones be liable for any lost
profits or indirect, punitive, special or consequential damages or losses, even
if Dow Jones knows that they might occur. The licensing agreement between the
Fund's investment advisor and Dow Jones is solely for their benefit and not for
the benefit of the owners of the Fund or any other third parties.
THE TRUST
--------------------------------------------------------------------------------
Allied Asset Advisors Funds (the "Trust"), an open-end management
investment company, was organized as a Delaware business trust on January 14,
2000. The Trust currently offers one series of shares to investors, Dow
Jones(SM) Islamic Index Fund (the "Fund") which consists of two classes: Classes
K and M. The Fund is a diversified series and has its own investment objective
and policies. The Trust may start another series and offer shares of a new fund
under the Trust at any time. The Fund's registered office in Delaware is The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801 and
its principal office is at 745 McClintock Drive, Suite 114, Burr Ridge, Illinois
60521.
Shares, when issued, will be fully paid and nonassessable. Shares of
the Fund have equal dividend, voting, liquidation and redemption rights, and are
voted in the aggregate and not by class except in matters where a separate vote
is required or permitted by the Investment Company Act of 1940 (the "1940 Act")
or when the matter affects only the interest of a particular class. The
beneficial interest of the Trust is divided into an unlimited number of shares,
with no par value. When matters are submitted to shareholders for a vote, each
shareholder is entitled to one vote for each full share owned and fractional
votes for fractional shares owned. The Trust does not normally hold annual
meetings of shareholders. The Trustees shall promptly call and give notice of a
meeting of shareholders for the purpose of voting upon removal of any Trustee
when requested to do so in writing by shareholders holding 10% or more of the
Trust's outstanding shares. The Trust will comply with the provisions of Section
16(c) of the 1940 Act in order to facilitate communications among shareholders.
Shares will be maintained in open accounts on the books of the Transfer Agent,
and certificates for shares will generally not be issued, except for special
requests.
Each share of the Fund represents an equal proportionate interest in
the assets and liabilities belonging to that Fund with every other share of that
Fund and is entitled to such dividends and distributions out of the income
belonging to the Fund as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
any Fund into a greater or lesser number of shares of that Fund so long as the
proportionate beneficial interests in the assets belonging to that Fund and the
rights of shares of any other Fund are in no way affected. In case of any
liquidation of a Fund, the holders of shares of the Fund being liquidated will
be entitled to receive as a class a distribution out of the assets, net of the
liabilities, belonging to that Fund. Expenses attributable to any Fund are borne
by that Fund. Likewise, expenses attributable to any class are borne
specifically by that class. Class M shares of the Fund are subject to
Distribution (Rule 12b-1) and Shareholder Servicing expenses, which are further
discussed in the Class M Prospectus and later in this SAI. Class K shares of the
Fund are not subject to such Distribution and Shareholder Servicing expenses.
Class K shares are discussed in the Class K Prospectus and Statement of
Additional Information.
Any general expenses of the Trust not readily identifiable as belonging
to a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees allocate such expenses on the basis of relative net
assets or number of shareholders. No shareholder is liable to further calls or
to assessment by the Trust without his or her express consent.
The assets of the Fund received for the issue or sale of its shares,
and all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, shall constitute the underlying assets of the Fund. In the
event of the dissolution or liquidation of the Fund, the holders of shares of
the Fund are entitled to share pro rata in the net assets of the Fund available
for distribution to shareholders.
If they deem it advisable and in the best interests of shareholders,
the Trustees may create additional series of shares, each of which represents
interests in a separate portfolio of investments and is subject to separate
liabilities, and may create multiple classes of shares of such series, which may
differ from each other as to expenses and dividends. If additional series or
classes of shares are created, shares of each series or class are entitled to
vote as a series or class only to the extent required or permitted by the 1940
Act as permitted by the Trustees. Upon the Trust's liquidation, all shareholders
of a series would share pro-rata in the net assets of such series available for
distribution to shareholders of the series, but, as shareholders of such series,
would not be entitled to share in the distribution of assets belonging to any
other series.
MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
The Trust's Board of Trustees governs the Trust. The Board of Trustees consists
of six individuals, three of whom are not "interested persons" of the Trust as
that term is defined in Section 2(a)(19) of the 1940 Act. The Trustees meet
throughout the year to oversee the Trust's activities, review contractual
arrangements with companies that provide services to the Fund, and decide upon
matters of general policy with respect to the Fund. The names and business
addresses of the Trustees and officers of the Trust, together with information
as to their principal occupations during the past five years, are listed below:
<TABLE>
<CAPTION>
--------------------------------------- ---------- -------------------- ----------------------------------------------
NAME AND ADDRESS AGE POSITION/OFFICE PRINCIPAL OCCUPATIONS DURING THE PAST FIVE
WITH THE TRUST YEARS
--------------------------------------- ---------- -------------------- ----------------------------------------------
<S> <C> <C> <C>
*Bassam Osman 50 Trustee, Medical Doctor, Bassam Osman, M.D., SC LTD
Chairperson and (1980 - present)
745 Mcclintock Drive, Suite 114 President
Burr Ridge, IL 60521
--------------------------------------- ---------- -------------------- ----------------------------------------------
*Muzamil Siddiqi 63 Trustee General Manager, North American Islamic
745 Mcclintock Drive, Suite 114 Trust, Inc. (1984 - present)
Burr Ridge, IL 60521
--------------------------------------- ---------- -------------------- ----------------------------------------------
Abdalla Idris Ali 51 Disinterested Director, Center of Islamic Studies, Kansas
745 Mcclintock Drive, Suite 114 Trustee City, Missouri (1998-present); Principal,
Burr Ridge, IL 60521 ISNA Islamic School, Toronto, Ontario,
Canada (1998 - Present)
--------------------------------------- ---------- -------------------- ----------------------------------------------
Jamal Said 43 Disinterested Religious Director, Mosque Foundation,
745 Mcclintock Drive, Suite 114 Trustee Bridgeview, Illinois
Burr Ridge, IL 60521
--------------------------------------- ---------- -------------------- ----------------------------------------------
Mohammed Kaiseruddin 56 Disinterested Nuclear Engineer, Sargent & Lundy (1973 -
745 Mcclintock Drive, Suite 114 Trustee present)
Burr Ridge, IL 60521
--------------------------------------- ---------- -------------------- ----------------------------------------------
Mazen Asbahi 26 Disinterested Student and Summer Associate, Kirkland &
745 Mcclintock Drive, Suite 114 Trustee Ellis (Summer 1999); Student and Summer
Burr Ridge, IL 60521 Associate, Chicago Corporation Counsel
(Summer 1998)
--------------------------------------- ---------- -------------------- ----------------------------------------------
Omar Haydar 26 Secretary and Mutual Fund Coordinator, Allied Asset
745 Mcclintock Drive, Suite 114 Treasurer Advisors (April 2000 - present); Information
Burr Ridge, IL 60521 Technology Consultant, Teksystems/Skidmore
Owings & Merrill LLP (June 1999 - April
2000); Law Clerk, Goodman & Witanen (May
1998 - June 1998); - Program Director, English
Language Service Summer ISNA Program (June
1996 - August 1996); Law Student, Chicago
Kent College of Law (1995 - 2000)
--------------------------------------- ---------- -------------------- ----------------------------------------------
Mujeeb Cheema 53 Vice President Managing Director, Hawkins International,
745 Mcclintock Drive, Suite 114 Inc. (1998 - present); President
Burr Ridge, IL 60521 (International), Hawkins Oil & Gas, Inc.
(1980 - 1997)
--------------------------------------- ---------- -------------------- ----------------------------------------------
</TABLE>
* This trustee is deemed to be an "interested person" of the Trust as that term
is defined in Section 2(a)(19) of the 1940 Act.
TRUSTEE COMPENSATION. The trustees serve without compensation, but will be
reimbursed for expenses incurred in connection with attendance at Board
meetings. The table below details the amount of compensation estimated to be
received by the Trustees from the Trust for the fiscal year ending May 31, 2001.
Presently, none of the executive officers receive compensation from the Trust.
<TABLE>
<CAPTION>
---------------------------- ----------------- ----------------------- ---------------------- ------------------------
NAME AND POSITION AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS BENEFITS UPON FROM TRUST AND FUND
FROM TRUST PART OF TRUST EXPENSES RETIREMENT COMPLEX PAID TO
TRUSTEES
---------------------------- ----------------- ----------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
*Bassam Osman None None None None
*Muzamil Siddiqi None None None None
Abdalla Idris Ali None None None None
Jamal Said None None None None
Mohammed Kaiseruddin None None None None
Mazen Asbahi None None None None
Omar Haydar None None None None
Mujeeb Cheema None None None None
---------------------------- ----------------- ----------------------- ---------------------- ------------------------
</TABLE>
CONTROL PERSONS, PRINCIPAL HOLDERS OF SECURITIES AND MANAGEMENT OWNERSHIP. As of
May 16, 2000, which was prior to the public offering of the Fund's shares, North
American Islamic Trust was the holder of 100% of the Fund's shares, and there
were otherwise no control persons or principal holders of securities of the
Fund. Control persons are persons deemed to control the Fund because they own
beneficially over 25% of the outstanding equity securities. Principal holders
are persons that own beneficially 5% or more of the Fund's outstanding equity
securities.
INVESTMENT ADVISOR
--------------------------------------------------------------------------------
Allied Asset Advisors, Inc. (defined as "AAA" or "Investment Advisor") is a
Delaware corporation that serves as an investment manager to the Fund pursuant
to an Investment Advisory Agreement dated as of June 29, 2000. AAA is a wholly
owned subsidiary of The North American Islamic Trust ("NAIT"). NAIT is a
non-profit entity that qualifies as a tax-exempt organization under Section
501(c)(3) of the Internal Revenue Code. The purpose of NAIT is to serve Islams
and Muslims.
This Investment Management Agreement is effective for an initial term of two
years and will continue on a year-to-year basis thereafter, provided that
specific approval is voted at least annually by the Board of Trustees of the
Trust or by the vote of the holders of a majority of the outstanding voting
securities of the Fund. In either event, it must also be approved by a majority
of the Trustees of the Trust who are neither parties to the Agreement nor
interested persons of any such party as defined in the 1940 Act at a meeting
called for the purpose of voting on such approval. The Agreement may be
terminated upon 60 days notice, without the payment of any penalty, by vote of a
majority of the outstanding voting securities of the Fund.
For the services provided by AAA under the Agreement, the Trust, on behalf of
the Fund, has agreed to pay to AAA an annual fee of 0.75% on the first $500
million in assets, 0.65% on the next $5 billion in assets and 0.50% on the
amount of assets over $5.5 billion. All fees are computed on the average daily
closing net asset value of the Fund and are payable monthly. The fee is higher
than the fee paid by most other index mutual funds.
CODE OF ETHICS
--------------------------------------------------------------------------------
The Trust, the Investment Advisor and the Distributor have adopted a written
Code of Ethics that governs the personal securities transactions of their board
members, officers and employees who may have access to current trading
information of the Trust. The Code permits such persons to invest in securities
for their personal accounts including securities that may be purchased or held
by the Trust. The Code restricts and limits, absent prior approval, certain
types of transactions and includes reporting and other obligations to monitor
personal transactions.
ADMINISTRATIVE SERVICES
--------------------------------------------------------------------------------
ADMINISTRATOR, FUND ACCOUNTANT, TRANSFER AGENT
Firstar Mutual Fund Services, LLC, a subsidiary of Firstar Bank, N.A., provides
administrative personnel and services (including blue-sky services) to the Fund.
Administrative services include, but are not limited to, providing office space,
equipment, telephone facilities, various personnel, including clerical and
supervisory, and computers, as is necessary or beneficial to provide compliance
services to the Fund. Firstar Mutual Fund Services, LLC also will serve as fund
accountant and transfer agent under separate agreements.
CUSTODIAN
Firstar Bank, N.A. is custodian for the securities and cash of the Fund. Under
the Custodian Agreement, Firstar Bank, N.A. holds the Fund's portfolio
securities in safekeeping and keeps all necessary records and documents relating
to its duties.
DISTRIBUTOR
--------------------------------------------------------------------------------
Rafferty Capital Markets, Inc. (the "Distributor") serves as the principal
underwriter and national distributor for the shares of the Fund pursuant to a
Distribution Agreement with the Trust dated as of June 29, 2000 (the
"Distribution Agreement"). The Distributor is registered as a broker-dealer
under the Securities Exchange Act of 1934 and each state's securities laws and
is a member of the NASD. The offering of the Fund's shares is continuous. The
Distribution Agreement provides that the Distributor, as agent in connection
with the distribution of Fund shares, will use its best efforts to distribute
the Fund's shares.
DISTRIBUTION PLAN
--------------------------------------------------------------------------------
The Board of Trustees has adopted a Distribution Plan for Class M shares of the
Fund, in accordance with Rule 12b-1 (the "Plan") under the 1940 Act. The Fund is
authorized under the Plan to use the assets of the Fund to compensate the
Distributor or others for certain activities relating to the distribution of
shares of the Fund to investors and the provision of shareholder services. The
maximum amount payable under the Plan is 0.75% of the Fund's average net assets
on an annual basis.
The NASD's maximum sales charge rule relating to mutual fund shares establishes
limits on all types of sales charges, whether front-end, deferred or
asset-based. This rule may operate to limit the aggregate distribution fees to
which shareholders may be subject to under the terms of the Plan.
The Plan authorizes the use of Fund assets to pay the Distributor, banks,
broker/dealers and other institutions that provide distribution assistance
and/or shareholder services such as:
o printing and distributing prospectuses to persons other than Fund
shareholders,
o printing and distributing advertising and sales literature and reports to
shareholders used in connection with selling shares of the Fund, and
o furnishing personnel and communications equipment to service shareholder
accounts and prospective shareholder inquiries.
The Plan requires the Fund to prepare and furnish to the Trustees for their
review, at least quarterly, written reports complying with the requirements of
the Rule and setting out the amounts expended under the Plan and the purposes
for which those expenditures were made. The Plan provides that so long as it is
in effect the selection and nomination of Trustees who are not interested
persons of the Trust will be committed to the discretion of the Trustees then in
office who are not interested persons of the Trust.
The Plan will continue in effect only so long as its continuance is specifically
approved at least annually by a majority vote of both all the Trustees and those
Trustees who are not interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to the Plan, cast in person at a meeting called for the purpose of
voting on the Plan. The Plan for the Fund may be terminated at any time by a
majority vote of the Trustees who are not interested persons of the Trust and
who have no direct or indirect financial interest in the operations of the Plan
or in any agreement related to the Plan or by vote of a majority of the
outstanding voting securities of the Fund.
The Plan may not be amended so as to materially increase the amount of the
distribution fees for the Fund unless the amendment is approved by a vote of at
least a majority of the outstanding voting securities of the Fund. In addition,
no material amendment may be made unless approved by the Trustees in the manner
described above for Trustee approval of the Plan.
SHAREHOLDER SERVICES AGREEMENT
--------------------------------------------------------------------------------
The Board of Trustees has approved a Shareholder Servicing Agreement between the
Fund (on behalf of Class M shares) and the Distributor. Under the Shareholder
Servicing Agreement, the Distributor will provide information and administrative
services for the benefit of Class M shares. The Distributor will appoint various
broker-dealer firms and other service or administrative firms to provide related
services and facilities for Class M shareholders. The Shareholder Services
Agreement provides that the Trust will pay the Distributor a fee at a rate
sufficient to reimburse the Distributor for service fee payments made by the
Distributor to broker-dealer firms and other financial services firms retained
by the Distributor. The Distributor will pay the firms a service fee at an
annual rate of up to 0.25% of net assets of Class M shares.
PRICING OF SHARES
--------------------------------------------------------------------------------
Shares of the Fund are sold on a continual basis at the net asset value per
share next computed following acceptance of an order by the Fund. The Fund's net
asset value per share for the purpose of pricing purchase and redemption orders
is determined at the close of normal trading (normally 4:00 p.m. Eastern Time)
on each day the New York Stock Exchange is open for trading. The NYSE is closed
on the following holidays: New Year's Day, Martin Luther King, Jr.'s Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Securities listed on a U.S. securities exchange or NASDAQ for which market
quotations are readily available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed securities is taken from
the exchange where the security is primarily traded. Options, futures, unlisted
U.S. securities and listed U.S. securities not traded on the valuation date for
which market quotations are readily available are valued at the most recent
quoted bid price.
PURCHASING SHARES
--------------------------------------------------------------------------------
Shares of the Fund are sold in a continuous offering and may be purchased on any
business day through authorized investment dealers or directly from the Fund.
STOCK CERTIFICATES AND CONFIRMATIONS. The Fund does not generally issue stock
certificates representing shares purchased. Confirmations of the opening of an
account and of all subsequent transactions in the account are forwarded by the
Fund to the shareholder's address of record. If a shareholder needs stock
certificates, the Fund can issue them under special requests.
SPECIAL INCENTIVE PROGRAMS. At various times the Fund may implement programs
under which a dealer's sales force may be eligible to win nominal awards for
certain sales efforts or recognition program conforming to criteria established
by the Fund, or participate in sales programs sponsored by the Fund. In
addition, AAA or Distributor, in their discretion may from time to time,
pursuant to objective criteria, sponsor programs designed to reward selected
dealers for certain services or activities that are primarily intended to result
in the sale of shares of the Fund. These programs will not change the price you
pay for your shares or the amount that the Fund will receive from the sale.
REDEMPTION OF SHARES
--------------------------------------------------------------------------------
SIGNATURE GUARANTEES. If a shareholder requests that redemption proceeds be sent
to an address other than that on record with the Fund or proceeds be made
payable to someone other than to the shareholder(s) of record, the written
request must have signatures guaranteed by:
o a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Company ("FDIC");
o a member of the New York, Boston, American, Midwest, or Pacific Stock
Exchange;
o a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund, which is administered by the FDIC; or
o any other "eligible guarantor institution" as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantor program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
ADDITIONAL DOCUMENTATION. Additional documents are required for certain types of
shareholders, such as corporations, partnerships, executors, trustees,
administrators, or guardians. The Fund's Transfer Agent requires documents from
entities to identify individuals possessing authority to redeem shares from the
Fund. The documentation may include corporate resolutions, partnership
agreements, trust instruments or plans that give such authority to the
individual.
BROKERAGE ALLOCATION AND OTHER PRACTICES
--------------------------------------------------------------------------------
AAA places the Fund's portfolio securities transactions, taking into account the
costs, promptness of executions and other qualitative considerations. There is
no pre-existing commitment to place orders with any broker, dealer or member of
an exchange. AAA evaluates a wide range of criteria in placing the Fund's
portfolio securities transactions, including the broker's commission rate,
execution capability, positioning and distribution capabilities, information in
regard to the availability of securities, trading patterns, statistical or
factual information, opinions pertaining to trading strategy, back office
efficiency, ability to handle difficult trades, financial stability, and prior
performance in servicing AAA and its clients. In transactions on securities
executed in the over-the-counter market, purchases and sales are transacted
directly with dealers on a principal basis.
AAA, when effecting purchases and sales of portfolio securities for the account
of the Fund, will seek execution of trades either (1) at the most favorable and
competitive rate of commission charged by any broker, dealer or member of an
exchange, or (2) at a higher rate of commission charges, if reasonable, in
relation to brokerage and research services provided to the Fund or AAA by such
member, broker, or dealer. Such services may include, but are not limited to,
any one or more of the following: information as to the availability of
securities for purchase or sale, statistical or factual information, or opinions
pertaining to investments. AAA may use research and services provided by brokers
and dealers in servicing all its clients, including the Fund, and AAA will not
necessarily use all such services in connection with the Fund. In accordance
with the provisions of Section 28(e) of the 1934 Act, AAA may from time-to-time
receive services and products which serve both research and non-research
functions. In such event, AAA makes a good faith determination of the
anticipated research and non-research use of the product or service and
allocates brokerage only with respect to the research component. Brokerage may
also be allocated to dealers in consideration of the Fund's share distribution
but only when execution and price are comparable to that offered by other
brokers.
If AAA provides investment advisory services to individuals and other
institutional clients, there may be occasions on which other investment advisory
clients advised by AAA may also invest in the same securities as the Fund. When
these clients buy or sell the same securities at substantially the same time,
the AAA may average the transactions as to price and allocate the amount of
available investments in a manner, which it believes to be equitable to each
client, including the Fund. On the other hand, to the extent permitted by law,
AAA may aggregate the securities to be sold or purchased for the Fund with those
to be sold or purchased for other clients managed by it in order to obtain lower
brokerage commissions, if any.
Because of the Fund's indexing investment strategy, it generally only sells
securities to generate cash to satisfy redemption requests, or to rebalance its
portfolio to track the target index. As a result, the Fund's portfolio turnover
rate is expected to be low. The portfolio turnover rate is calculated by
dividing the lesser of the Fund's annual sales or purchases of portfolio
securities (exclusive of purchases or sales of securities whose maturities at
the time of acquisition were one year or less) by the monthly average value of
the securities in the portfolio during the year.
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
DISTRIBUTIONS
A shareholder will automatically receive all income dividends and capital gain
distributions in additional full and fractional shares of the Fund at their net
asset value as of the date of payment unless the shareholder elects to receive
such dividends or distributions in cash. The reinvestment date normally precedes
the payment date by about seven days although the exact timing is subject to
change. Shareholders will receive a confirmation of each new transaction in
their account. The Trust will confirm all account activity, including the
payment of dividend and capital gain distributions and transactions made as a
result of a Systematic Withdrawal Plan or an Automatic Investment Plan.
Shareholders may rely on these statements in lieu of stock certificates.
TAXES
DISTRIBUTIONS OF NET INVESTMENT INCOME. The Fund receives income generally in
the form of dividends on its investments. This income, less expenses incurred in
the operation of the Fund, constitutes the Fund's net investment income from
which dividends may be paid to you. Any distributions by the Fund from such
income will be taxable to you as ordinary income, whether you take them in cash
or in additional shares.
DISTRIBUTIONS OF CAPITAL GAINS. The Fund may derive capital gains and losses in
connection with sales or other dispositions of its portfolio securities.
Distributions from net short-term capital gains will be taxable to you as
ordinary income. Distributions from net long-term capital gains will be taxable
to you as long-term capital gain, regardless of how long you have held your
shares in the Fund. Any net capital gains realized by the Fund generally will be
distributed once each year, and may be distributed more frequently, if
necessary, in order to reduce or eliminate excise or income taxes on the Fund.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS. The Fund will inform you of
the amount of your ordinary income dividends and capital gains distributions at
the time they are paid, and will advise you of their tax status for federal
income tax purposes shortly after the close of each calendar year. If you have
not held Fund shares for a full year, the Fund may designate and distribute to
you, as ordinary income or capital gain, a percentage of income that is not
equal to the actual amount of such income earned during the period of your
investment in the Fund.
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY. The Fund intends to
elect to be treated as a regulated investment company under Subchapter M of the
Internal Revenue Code and intends to so qualify during the current fiscal year.
As a regulated investment company, the Fund generally pays no federal income tax
on the income and gains it distributes to you. The Board reserves the right not
to maintain the qualification of the Fund as a regulated investment company if
it determines such course of action to be beneficial to shareholders. In such
case, the Fund will be subject to federal, and possibly state corporate taxes on
its taxable income and gains, and distributions to you will be taxed as ordinary
dividend income to the extent of the Fund's earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS. To avoid federal excise taxes, the
Internal Revenue Code requires the Fund to distribute to you by December 31 of
each year, at a minimum, the following amounts: 98% of its taxable ordinary
income earned during the calendar year; 98% of its capital gain net income
earned during the twelve month period ending October 31; and 100% of any
undistributed amounts from the prior year. The Fund intends to declare and pay
these amounts in December (or in January that are treated by you as received in
December) to avoid these excise taxes, but can give no assurances that its
distributions will be sufficient to eliminate all taxes.
REDEMPTION OF FUND SHARES. By law, redemptions and exchanges of Fund shares are
taxable transactions for federal and state income tax purposes. If you redeem
your Fund shares, the IRS will require that you report a gain or loss on your
redemption or exchange. If you hold your shares as a capital asset, the gain or
loss that you realize will be capital gain or loss and will be long-term or
short-term, generally depending on how long you hold your shares. Any loss
incurred on the redemption or exchange of shares held for six months or less
will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by the Fund on those shares.
By law, all or a portion of any loss that you realize upon the redemption of
your Fund shares will be disallowed to the extent that you buy other shares in
the Fund (through reinvestment of dividends or otherwise) within 30 days before
or after your share redemption. Any loss disallowed under these rules will be
added to your tax basis in the new shares you buy.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS. If you are a corporate
shareholder, you should note that it is expected that a portion of the dividends
paid by the Fund will qualify for the dividends-received deduction. In some
circumstances, you will be allowed to deduct these qualified dividends, thereby
reducing the tax that you would otherwise be required to pay on these dividends.
The dividends-received deduction will be available only with respect to
dividends designated by the Fund as eligible for such treatment. All dividends
(including the deducted portion) must be included in your alternative minimum
taxable income calculation.
INVESTMENT IN COMPLEX SECURITIES. The Fund may invest in complex securities.
These investments may be subject to numerous special and complex tax rules.
These rules could affect whether gains and losses recognized by the Fund are
treated as ordinary income or capital gain, accelerate the recognition of income
to the Fund and/or defer the Fund's ability to recognize losses. In turn, these
rules may affect the amount, timing or character of the income distributed to
you by the Fund.
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
TOTAL RETURN. Average annual total return quotations used in the Fund's
advertising and promotional materials are calculated according to the following
formula:
P(1 +T)n = ERV
where P equals a hypothetical initial payment of $1,000; T equals average annual
total return; n equals the number of years; and ERV equals the ending redeemable
value at the end of the period of a hypothetical $1,000 payment made at the
beginning of the period.
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication. Average annual total
return, or "T" in the above formula, is computed by finding the average annual
compounded rates of return over the period that would equate the initial amount
invested to the ending redeemable value. Average annual total return assumes the
reinvestment of all dividends and distributions.
CUMULATIVE TOTAL RETURN. Cumulative total return represents the simple change in
value of an investment over a stated period and may be quoted as a percentage or
as a dollar amount. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in order
to illustrate the relationship between these factors and their contributions to
total return.
OTHER INFORMATION. The Fund's performance data quoted in advertising and other
promotional materials represents past performance and is not intended to predict
or indicate future results. The return and principal value of an investment in a
Fund will fluctuate, and an investor's redemption proceeds may be more or less
than the original investment amount.
If permitted by applicable law, the Fund may be compared to data prepared by
Lipper Analytical Services, Inc., CDA Investment Technologies, Inc.,
Morningstar, Inc., the Donoghue Organization, Inc. or other independent services
which monitor the performance of investment companies, and may be quoted in
advertising in terms of its ranking in each applicable universe. In addition,
the Fund may use performance data reported in financial and industry
publications, including Barron's, Business Week, Forbes, Fortune, Investor's
Daily, IBC/Donoghue's Money Fund Report, Money Magazine, The Wall Street
Journal, USA Today and others.
In addition to the INDEX, the Fund may from time to time use the following
unmanaged indices for performance comparison purposes:
o S&P 500 - The S&P 500 is an index of 500 stocks designed to track the
overall equity market's industry weightings. Most, but not all, large
capitalization stocks are in the index. There are also some small
capitalization names in the index. The list is maintained by Standard &
Poor's Corporation. It is market capitalization weighted. There are
always 500 issuers in the S&P 500. Changes are made by Standard &
Poor's as needed.
o Russell 2000 - The Russell 2000 is composed of the 2,000 smallest stocks in
the Russell 3000, a market value weighted index of the 3,000 largest U. S.
publicly traded companies.
o The NASDAQ Composite Index - The NASDAQ Composite Index is a
broad-based market capitalization-weighted index of all NASDAQ stocks.
AUDITORS
--------------------------------------------------------------------------------
Deloitte & Touche LLP, Two Prudential Plaza, 180 North Stetson Avenue, Chicago,
Illinois, 60601-6779, serves as the Fund's independent auditors, whose services
include auditing the Fund's financial statements and the performance of related
tax services.
COUNSEL
--------------------------------------------------------------------------------
Vedder, Price, Kaufman, & Kammholz, 222 North LaSalle Street, Chicago, Illinois
60601-1003, is counsel for the Fund.
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
DOW JONES ISLAMIC INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 16, 2000
ASSETS
Cash $100,000
Receivable from investment advisor 38,360
Prepaid initial registration expenses 33,175
------
TOTAL ASSETS 171,535
LIABILITIES AND NET ASSETS
Payable to investment advisor 71,535
------
TOTAL LIABILITIES 71,535
------
NET ASSETS $100,000
=======
NET ASSETS CONSIST OF:
Class K capital shares outstanding, no par value,
indefinite shares authorized 10,000
======
Net asset value, redemption price and offering price per share
(net assets/shares outstanding) $10.00
=====
.........
The accompanying Notes to the Financial Statements are an integral part of this
statement.
DOW JONES ISLAMIC INDEX FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 14, 2000 (DATE OF INCEPTION) TO MAY 16, 2000
INVESTMENT INCOME
Dividends $ -
EXPENSES
Organization expenses 38,360
-------
Total expenses before reimbursements 38,360
Less: reimbursement of expenses by investment advisor (38,360)
-------
NET INVESTMENT INCOME $ -
=======
.........
The accompanying Notes to the Financial Statements are an integral part of this
statement.
DOW JONES ISLAMIC INDEX FUND
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM JANUARY 14, 2000 (DATE OF INCEPTION) TO MAY 16, 2000
NOTE 1 - ORGANIZATION AND REGISTRATION
Allied Asset Advisors Funds (the "Trust"), an open-end management investment
company, was organized as a Delaware business trust on January 10, 2000. The
Trust currently offers one series of shares to investors, Dow Jones(SM) Islamic
Index Fund (the "Fund") which consists of two classes: Classes K and M. The Fund
is a diversified series and has its own investment objective and policies. The
Trust may start another series and offer shares of a new fund under the Trust at
any time. Allied Asset Advisors, Inc. ("AAA" or the "Advisor") is a Delaware
corporation that serves as an investment manager to the Fund. AAA is a wholly
owned subsidiary of The North American Islamic Trust. The Fund has had no
operations other than those relating to organizational matters, including the
sale of 10,000 shares of beneficial interest of the Fund to capitalize the Trust
("Original Shares"), for cash in the amount of $100,000.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with accounting principles generally accepted in the
United States of America ("GAAP").
A. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported changes in net assets during
the reporting period. Actual results could differ from those estimates.
B. ORGANIZATION AND PREPAID INITIAL REGISTRATION EXPENSES
Expenses incurred by the Trust in connection with the organization and
the initial public offering of shares are expensed as incurred. These expenses
were advanced by the Advisor, and the Advisor has agreed to voluntarily
reimburse the Fund for these expenses. Prepaid initial registration expenses are
deferred and amortized over the period of benefit (not to exceed twelve months).
C. FEDERAL INCOME TAXES
The Fund intends to qualify annually for treatment as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended, and, if so qualified, will not be liable for federal income taxes to
the extent earnings are distributed to shareholders on a timely basis.
NOTE 3 - CAPITAL STOCK
The Trust is authorized to issue an unlimited number of shares with no par
value. A total of 10,000 shares were initially sold to capitalize the Trust.
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of the
Dow Jones Islamic Index Fund:
We have audited the accompanying statement of assets and liabilities of the Dow
Jones Islamic Index Fund (the "Fund"), a series of Allied Asset Advisors Funds
(the "Trust") as of May 16, 2000, and the related statement of operations for
the period from January 14, 2000 (date of inception) to May 16, 2000. These
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Dow Jones Islamic Index Fund at May 16,
2000, and the results of its operations for the period from January 14, 2000
(date of inception) to May 16, 2000, in conformity with accounting principles
generally accepted in the United States of America.
Chicago, Illinois
May 18, 1999
CLASS K
DOW JONES(SM) ISLAMIC INDEX FUND
A SERIES OF ALLIED ASSET ADVISORS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30, 2000
INVESTMENT ADVISOR
AAA
ALLIED ASSET ADVISORS, INC.
745 MCCLINTOCK DRIVE, SUITE 114
BURR RIDGE, IL 60521
(630) 789-9191
This Statement of Additional Information relates to the Dow Jones(SM) Islamic
Index Fund, which is the first mutual fund within the Allied Asset Advisors
Funds family. The SAI is not a prospectus but should be read in conjunction with
the Fund's current Prospectus dated June 30, 2000. To obtain the Prospectus,
please visit the Fund's web-site, call 1-888-FUNDS-85 or write to the Fund as
shown below:
REGULAR MAIL OVERNIGHT OR EXPRESS MAIL
------------ -------------------------
Dow Jones Islamic Index Fund Dow Jones Islamic Index Fund
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street, 3rd Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS........................................................3
INVESTMENT OBJECTIVE AND STRATEGIES............................................4
MORE ABOUT DOW JONES(SM).......................................................4
THE TRUST......................................................................6
MANAGEMENT OF THE FUND.........................................................7
INVESTMENT ADVISOR.............................................................9
CODE OF ETHICS................................................................10
ADMINISTRATIVE SERVICES.......................................................10
DISTRIBUTOR...................................................................10
PRICING OF SHARES.............................................................10
PURCHASING SHARES.............................................................11
REDEMPTION OF SHARES..........................................................11
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................12
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES.............................13
PERFORMANCE INFORMATION.......................................................14
AUDITORS......................................................................15
COUNSEL.......................................................................15
FINANCIAL STATEMENTS..........................................................16
INVESTMENT RESTRICTIONS
--------------------------------------------------------------------------------
FUNDAMENTAL RESTRICTIONS
The Fund has adopted the following fundamental investment policies and
restrictions that cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Fund. Under the 1940 Act, a "majority of
the outstanding voting securities" of a fund means the vote of:
(1) more than 50% of the outstanding voting securities of the fund; or
(2) 67% or more of the voting securities of the fund present at a meeting, if
the holders of more than 50% of the outstanding voting securities are
present or represented by proxy, whichever is less.
The Fund may not:
1. Make loans except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from
time to time.
2. Borrow money, except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from
time to time.
3. Concentrate its investments in a particular industry, as that term is used
in the 1940 Act, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
4. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate and or mortgages or investments secured
by real estate, or interests therein, except that the Fund reserves freedom
of action to hold and to sell real estate acquired as a result of the
Fund's ownership of securities.
5. Engage in the business of underwriting securities, except to the extent
that the Fund may be deemed to be an underwriter in connection with the
disposition of portfolio securities.
6. Issue senior securities, except as permitted under the 1940 Act, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
7. Purchase physical commodities or contracts relating to physical
commodities.
NON-FUNDAMENTAL RESTRICTIONS
As a matter of non-fundamental policy, the Fund currently does not intend to :
1. Borrow money in an amount greater than 5% of its total assets, except for
temporary or emergency purposes;
2. Purchase securities on margin or make short sales;
3. Enter into futures contracts or purchase options thereon; and
4. Invest more than 15% of its net assets in illiquid securities.
INVESTMENT OBJECTIVE AND STRATEGIES
--------------------------------------------------------------------------------
The Fund seeks to match the total return of the Dow Jones Islamic Market USA
Index(SM) (the "INDEX"), a diversified compilation of equity securities
considered by Dow Jones' Shari'ah Supervisory Board to be in compliance with
Islamic Shari'ah principles. Because the Fund is a diversified Fund, there is a
possibility that the Fund may be unable to track the composition of the INDEX if
the INDEX becomes non-diversified.
The following discussion supplements the information regarding the investment
objective of the Fund and the policies to be employed to achieve this objective
as set forth above and in the Fund's Prospectus.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which a fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause a
fund to miss a price or yield considered advantageous. Settlement dates may be a
month or more after entering into these transactions and the market values of
the securities purchased may vary from the purchase prices. The Fund may dispose
of a commitment prior to settlement if the investment advisor deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments. These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other than
normal transaction costs, are incurred. However, liquid assets of the Fund
sufficient to make payment for the securities to be purchased are segregated on
the Fund's records at the trade date. These assets are marked to market daily
and are maintained until the transaction is settled.
RESTRICTED SECURITIES. Securities that have legal or contractual restrictions on
their resale may be acquired by the Fund. The price paid for these securities,
or received 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 reflects any limitation on their liquidity.
OTHER INVESTMENT COMPANIES. Subject to applicable statutory and regulatory
limitations, the assets of the Fund may be invested in shares of other
investment companies.
PERCENTAGE RESTRICTIONS. If a percentage restriction on investment or
utilization of assets set forth in this Statement of Additional Information or
referred to in the Prospectus is adhered to at the time an investment is made or
assets are so utilized, a later change in percentage resulting from changes in
the value of the portfolio securities is not considered a violation of the
policy.
MORE ABOUT DOW JONES(SM)
--------------------------------------------------------------------------------
The filters applied in constituting the Dow Jones Islamic Market USA Index(SM)
are:
1. Total debt divided by total assets is equal to or greater than 33%. (Note:
total debt = short term debt + current portion of long-term debt +
long-term debt).
2. Accounts receivables divided by total assets is equal to or greater than
45%. (Note: accounts receivables = current receivables + long-term
receivables).
3. (Non-operating interest income plus impure income) all divided by revenue
is equal to or greater than 5%.
Companies that pass Shari`ah screens are included in the INDEX'S investable
universe from which INDEX components are selected. The steps taken to select the
components of the INDEX are as follows:
1. Rank companies both by market cap and by the daily average dollar turnover
for the preceding quarter.
2. Calculate combination score for each stock by combining market value rank
and turnover rank with equal weight on both factors.
3. Sort stocks into their respective industry groups by country.
4. Based on the combined score in descending order, select those companies of
each industry group in each country whose cumulative market capitalization
is closest to 95% of the total market capitalization of the industry group.
5. Select all U.S. companies from the above global companies (currently 241
companies).
"Dow Jones," "Dow Jones Islamic Market USA Index(SM)" and "DJIM" are service
marks of Dow Jones & Company, Inc. Dow Jones has no relationship to the Fund or
its investment advisor, other than the licensing of the Dow Jones Islamic Market
Index(SM) and its service marks for use in connection with the Fund.
Dow Jones does not sponsor, endorse, sell or promote the Fund; recommend that
any person invest in the Fund or any other securities; have any responsibility
or liability for or make any decisions about the timing, amount or pricing of
the Fund; have any responsibility or liability for the administration,
management or marketing of the Fund; consider the needs of the Fund or the
owners of the Fund in determining, composing or calculating the INDEX or have
any obligation to do so.
Dow Jones will not have any liability in connection with the Fund. Specifically,
Dow Jones does not make any warranty, express or implied, and Dow Jones
disclaims any warranty about: (1) the results to be obtained by the Fund, the
owners of the Fund or any other person in connection with the use of the Dow
Jones Islamic Market Index and the data included in the INDEX; (2) the accuracy
or completeness of the INDEX and its data; and (3) the merchantability and the
fitness for a particular purpose or use of the INDEX and its data.
Although Dow Jones uses reasonable efforts to comply with its guidelines
regarding the selection of components in the INDEX, Dow Jones disclaims any
warranty of compliance with Shari'ah Law or other Islamic principles. Dow Jones
will have no liability for any errors, omissions or interruptions in the INDEX
or its data. Under no circumstances will Dow Jones be liable for any lost
profits or indirect, punitive, special or consequential damages or losses, even
if Dow Jones knows that they might occur. The licensing agreement between the
Fund's investment advisor and Dow Jones is solely for their benefit and not for
the benefit of the owners of the Fund or any other third parties.
THE TRUST
--------------------------------------------------------------------------------
Allied Asset Advisors Funds (the "Trust"), an open-end management
investment company, was organized as a Delaware business trust on January 14,
2000. The Trust currently offers one series of shares to investors, Dow
Jones(SM) Islamic Index Fund (the "Fund") which consists of two classes: Classes
K and M. The Fund is a diversified series and has its own investment objective
and policies. The Trust may start another series and offer shares of a new fund
under the Trust at any time. The Fund's registered office in Delaware is The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801 and
its principal office is at 745 McClintock Drive, Suite 114, Burr Ridge, Illinois
60521.
Shares, when issued, will be fully paid and nonassessable. Shares of
the Fund have equal dividend, voting, liquidation and redemption rights, and are
voted in the aggregate and not by class except in matters where a separate vote
is required by the Investment Company Act of 1940 (the "1940 Act") or when the
matter affects only the interest of a particular class. The beneficial interest
of the Trust is divided into an unlimited number of shares, with no par value.
When matters are submitted to shareholders for a vote, each shareholder is
entitled to one vote for each full share owned and fractional votes for
fractional shares owned. The Trust does not normally hold annual meetings of
shareholders. The Trustees shall promptly call and give notice of a meeting of
shareholders for the purpose of voting upon removal of any Trustee when
requested to do so in writing by shareholders holding 10% or more of the Trust's
outstanding shares. The Trust will comply with the provisions of Section 16(c)
of the 1940 Act in order to facilitate communications among shareholders. Shares
will be maintained in open accounts on the books of the Transfer Agent, and
certificates for shares will generally not be issued, except for special
requests.
Each share of the Fund represents an equal proportionate interest in
the assets and liabilities belonging to that Fund with every other share of that
Fund and is entitled to such dividends and distributions out of the income
belonging to the Fund as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
any Fund into a greater or lesser number of shares of that Fund so long as the
proportionate beneficial interests in the assets belonging to that Fund and the
rights of shares of any other Fund are in no way affected. In case of any
liquidation of a Fund, the holders of shares of the Fund being liquidated will
be entitled to receive as a class a distribution out of the assets, net of the
liabilities, belonging to that Fund. Expenses attributable to any Fund are borne
by that Fund. Likewise, expenses attributable to any class are borne
specifically by that class. Class K shares of the Fund are not subject to a
Distribution and Shareholder Servicing Plan. Class M shares of the Fund are
subject to Distribution (Rule 12b-1) and Shareholder Servicing expenses and are
discussed in the Class M Prospectus and Statement of Additional Information.
Any general expenses of the Trust not readily identifiable as belonging
to a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees allocate such expenses on the basis of relative net
assets or number of shareholders. No shareholder is liable to further calls or
to assessment by the Trust without his or her express consent.
The assets of the Fund received for the issue or sale of its shares, and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, shall constitute the underlying assets of the Fund. In the event of
the dissolution or liquidation of the Fund, the holders of shares of the Fund
are entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
If they deem it advisable and in the best interests of shareholders, the
Trustees may create additional series of shares, each of which represents
interests in a separate portfolio of investments and is subject to separate
liabilities, and may create multiple classes of shares of such series, which may
differ from each other as to expenses and dividends. If additional series or
classes of shares are created, shares of each series or class are entitled to
vote as a series or class only to the extent required by the 1940 Act as
permitted by the Trustees. Upon the Trust's liquidation, all shareholders of a
series would share pro-rata in the net assets of such series available for
distribution to shareholders of the series, but, as shareholders of such series,
would not be entitled to share in the distribution of assets belonging to any
other series.
MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
The Trust's Board of Trustees governs the Trust. The Board of Trustees consists
of six individuals, three of whom are not "interested persons" of the Trust as
that term is defined in Section 2(a)(19) of the 1940 Act. The Trustees meet
throughout the year to oversee the Trust's activities, review contractual
arrangements with companies that provide services to the Fund, and decide upon
matters of general policy with respect to the Fund. The names and business
addresses of the Trustees and officers of the Trust, together with information
as to their principal occupations during the past five years, are listed below:
<TABLE>
<CAPTION>
--------------------------------------- ---------- -------------------- ----------------------------------------------
NAME AND ADDRESS AGE POSITION/OFFICE PRINCIPAL OCCUPATIONS DURING THE PAST FIVE
WITH THE TRUST YEARS
--------------------------------------- ---------- -------------------- ----------------------------------------------
<S> <C> <C> <C>
*Bassam Osman 50 Trustee, Medical Doctor, Bassam Osman, M.D., SC LTD
Chairperson and (1980 - present)
745 Mcclintock Drive, Suite 114 President
Burr Ridge, IL 60521
--------------------------------------- ---------- -------------------- ----------------------------------------------
*Muzamil Siddiqi 63 Trustee General Manager, North American Islamic
745 Mcclintock Drive, Suite 114 Trust, Inc. (1984 - present)
Burr Ridge, IL 60521
--------------------------------------- ---------- -------------------- ----------------------------------------------
Abdalla Idris Ali 51 Disinterested Director, Center of Islamic Studies, Kansas
745 Mcclintock Drive, Suite 114 Trustee City, Missouri (1998-present); Principal,
Burr Ridge, IL 60521 ISNA Islamic School, Toronto, Ontario,
Canada (1998 - Present)
--------------------------------------- ---------- -------------------- ----------------------------------------------
Jamal Said 43 Disinterested Religious Director, Mosque Foundation,
745 Mcclintock Drive, Suite 114 Trustee Bridgeview, Illinois
Burr Ridge, IL 60521
--------------------------------------- ---------- -------------------- ----------------------------------------------
Mohammed Kaiseruddin 56 Disinterested Nuclear Engineer, Sargent & Lundy (1973 -
745 Mcclintock Drive, Suite 114 Trustee present)
Burr Ridge, IL 60521
--------------------------------------- ---------- -------------------- ----------------------------------------------
Mazen Asbahi 26 Disinterested Student and Summer Associate, Kirkland &
745 Mcclintock Drive, Suite 114 Trustee Ellis (Summer 1999); Student and Summer
Burr Ridge, IL 60521 Associate, Chicago Corporation Counsel
(Summer 1998)
--------------------------------------- ---------- -------------------- ----------------------------------------------
Omar Haydar 26 Secretary and Mutual Fund Coordinator, Allied Asset
745 Mcclintock Drive, Suite 114 Treasurer Advisors (April 2000 - present); Information
Burr Ridge, IL 60521 Technology Consultant, Teksystems/Skidmore
Owings & Merrill LLP (June 1999 - April
2000); Law Clerk, Goodman & Witanen
(May 1998 - June 1998); - Program Director,
English Language Service Summer ISNA Program
(June 1996 - August 1996); Law Student,
Chicago Kent College of Law (1995 - 2000)
--------------------------------------- ---------- -------------------- ----------------------------------------------
Mujeeb Cheema 53 Vice President Managing Director, Hawkins International,
745 Mcclintock Drive, Suite 114 Inc. (1998 - present); President
Burr Ridge, IL 60521 (International), Hawkins Oil & Gas, Inc.
(1980 - 1997)
--------------------------------------- ---------- -------------------- ----------------------------------------------
</TABLE>
* This trustee is deemed to be an "interested person" of the Trust as that term
is defined in Section 2(a)(19) of the 1940 Act.
TRUSTEE COMPENSATION. The trustees serve without compensation, but will be
reimbursed for expenses incurred in connection with attendance at Board
meetings. The table below details the amount of compensation estimated to be
received by the Trustees from the Trust for the fiscal year ending May 31, 2001.
Presently, none of the executive officers receive compensation from the Trust.
<TABLE>
<CAPTION>
---------------------------- ----------------- ----------------------- ---------------------- ------------------------
NAME AND POSITION AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS BENEFITS UPON FROM TRUST AND FUND
FROM TRUST PART OF TRUST EXPENSES RETIREMENT COMPLEX PAID TO
TRUSTEES
---------------------------- ----------------- ----------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
* Bassam Osman None None None None
*Muzamil Siddiqi None None None None
Abdalla Idris Ali None None None None
Jamal Said None None None None
Mohammead Kaiseruddin None None None None
Mazen Asbahi None None None None
Omar Haydar None None None None
Mujeeb Cheema None None None None
---------------------------- ----------------- ----------------------- ---------------------- ------------------------
</TABLE>
CONTROL PERSONS, PRINCIPAL HOLDERS OF SECURITIES AND MANAGEMENT OWNERSHIP. As of
May 16, 2000, which was prior to the public offering of the Fund's shares, North
American Islamic Trust was the holder of 100% of the Fund's shares, and there
were otherwise no control persons or principal holders of securities of the
Fund. Control persons are persons deemed to control the Fund because they own
beneficially over 25% of the outstanding equity securities. Principal holders
are persons that own beneficially 5% or more of the Fund's outstanding equity
securities.
INVESTMENT ADVISOR
--------------------------------------------------------------------------------
Allied Asset Advisors, Inc. (defined as "AAA" or "Investment Advisor") is a
Delaware corporation that serves as an investment manager to the Fund pursuant
to an Investment Management Agreement dated as of June 29, 2000. AAA is a wholly
owned subsidiary of The North American Islamic Trust ("NAIT"). NAIT is a
non-profit entity that qualifies as a tax-exempt organization under Section
501(c)(3) of the Internal Revenue Code. The purpose of NAIT is to serve Islams
and Muslims.
This Investment Management Agreement is effective for an initial term of two
years and will continue on a year-to-year basis thereafter, provided that
specific approval is voted at least annually by the Board of Trustees of the
Trust or by the vote of the holders of a majority of the outstanding voting
securities of the Fund. In either event, it must also be approved by a majority
of the Trustees of the Trust who are neither parties to the Agreement nor
interested persons of any such party as defined in the 1940 Act at a meeting
called for the purpose of voting on such approval. The Agreement may be
terminated upon 60 days notice, without the payment of any penalty, by vote of a
majority of the outstanding voting securities of the Fund.
For the services provided by AAA under the Agreement, the Trust, on behalf of
the Fund, has agreed to pay to AAA an annual fee of 0.75% on the first $500
million in assets, 0.65% on the next $5 billion in assets and 0.50% on the
amount of assets over $5.5 billion. All fees are computed on the average daily
closing net asset value of the Fund and are payable monthly. The fee is higher
than the fee paid by most other index mutual funds.
CODE OF ETHICS
--------------------------------------------------------------------------------
The Trust, the Investment Advisor and the Distributor have adopted a written
Code of Ethics that governs the personal securities transactions of their board
members, officers and employees who may have access to current trading
information of the Trust. The Code permits such persons to invest in securities
for their personal accounts including securities that may be purchased or held
by the Trust. The Code restricts and limits, absent prior approval, certain
types of transactions and includes reporting and other obligations to monitor
personal transactions.
ADMINISTRATIVE SERVICES
--------------------------------------------------------------------------------
ADMINISTRATOR, FUND ACCOUNTANT, TRANSFER AGENT
Firstar Mutual Fund Services, LLC, a subsidiary of Firstar Bank, N.A., provides
administrative personnel and services (including blue-sky services) to the Fund.
Administrative services include, but are not limited to, providing office space,
equipment, telephone facilities, various personnel, including clerical and
supervisory, and computers, as is necessary or beneficial to provide compliance
services to the Fund. Firstar Mutual Fund Services, LLC also will serve as fund
accountant and transfer agent under separate agreements.
CUSTODIAN
Firstar Bank, N.A. is custodian for the securities and cash of the Fund. Under
the Custodian Agreement, Firstar Bank, N.A. holds the Fund's portfolio
securities in safekeeping and keeps all necessary records and documents relating
to its duties.
DISTRIBUTOR
--------------------------------------------------------------------------------
Rafferty Capital Markets, Inc. (the "Distributor") serves as the principal
underwriter and national distributor for the shares of the Fund pursuant to a
Distribution Agreement with the Trust dated as of June 29, 2000 (the
"Distribution Agreement"). The Distributor is registered as a broker-dealer
under the Securities Exchange Act of 1934 and each state's securities laws and
is a member of the NASD. The offering of the Fund's shares is continuous. The
Distribution Agreement provides that the Distributor, as agent in connection
with the distribution of Fund shares, will use its best efforts to distribute
the Fund's shares.
PRICING OF SHARES
--------------------------------------------------------------------------------
Shares of the Fund are sold on a continual basis at the net asset value per
share next computed following acceptance of an order by the Fund. The Fund's net
asset value per share for the purpose of pricing purchase and redemption orders
is determined at the close of normal trading (normally 4:00 p.m. Eastern Time)
on each day the New York Stock Exchange is open for trading. The NYSE is closed
on the following holidays: New Year's Day, Martin Luther King, Jr.'s Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Securities listed on a U.S. securities exchange or NASDAQ for which market
quotations are readily available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed securities is taken from
the exchange where the security is primarily traded. Options, futures, unlisted
U.S. securities and listed U.S. securities not traded on the valuation date for
which market quotations are readily available are valued at the most recent
quoted bid price.
PURCHASING SHARES
--------------------------------------------------------------------------------
Shares of the Fund are sold in a continuous offering and may be purchased on any
business day through authorized investment dealers or directly from the Fund.
STOCK CERTIFICATES AND CONFIRMATIONS. The Fund does not generally issue stock
certificates representing shares purchased. Confirmations of the opening of an
account and of all subsequent transactions in the account are forwarded by the
Fund to the shareholder's address of record. If a shareholder needs stock
certificates, the Fund can issue them under special requests.
SPECIAL INCENTIVE PROGRAMS. At various times the Fund may implement programs
under which a dealer's sales force may be eligible to win nominal awards for
certain sales efforts or recognition program conforming to criteria established
by the Fund, or participate in sales programs sponsored by the Fund. In
addition, AAA or Distributor, in their discretion may from time to time,
pursuant to objective criteria, sponsor programs designed to reward selected
dealers for certain services or activities that are primarily intended to result
in the sale of shares of the Fund. These programs will not change the price you
pay for your shares or the amount that the Fund will receive from the sale.
REDEMPTION OF SHARES
--------------------------------------------------------------------------------
SIGNATURE GUARANTEES. If a shareholder requests that redemption proceeds be sent
to an address other than that on record with the Fund or proceeds be made
payable to someone other than to the shareholder(s) of record, the written
request must have signatures guaranteed by:
o a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Company ("FDIC");
o a member of the New York, Boston, American, Midwest, or Pacific Stock
Exchange;
o a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund, which is administered by the FDIC; or
o any other "eligible guarantor institution" as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantor program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
ADDITIONAL DOCUMENTATION. Additional documents are required for certain types of
shareholders, such as corporations, partnerships, executors, trustees,
administrators, or guardians. The Fund's Transfer Agent requires documents from
entities to identify individuals possessing authority to redeem shares from the
Fund. The documentation may include corporate resolutions, partnership
agreements, trust instruments or plans that give such authority to the
individual.
BROKERAGE ALLOCATION AND OTHER PRACTICES
--------------------------------------------------------------------------------
AAA places the Fund's portfolio securities transactions, taking into account the
costs, promptness of executions and other qualitative considerations. There is
no pre-existing commitment to place orders with any broker, dealer or member of
an exchange. AAA evaluates a wide range of criteria in placing the Fund's
portfolio securities transactions, including the broker's commission rate,
execution capability, positioning and distribution capabilities, information in
regard to the availability of securities, trading patterns, statistical or
factual information, opinions pertaining to trading strategy, back office
efficiency, ability to handle difficult trades, financial stability, and prior
performance in servicing AAA and its clients. In transactions on securities
executed in the over-the-counter market, purchases and sales are transacted
directly with dealers on a principal basis.
AAA, when effecting purchases and sales of portfolio securities for the account
of the Fund, will seek execution of trades either (1) at the most favorable and
competitive rate of commission charged by any broker, dealer or member of an
exchange, or (2) at a higher rate of commission charges, if reasonable, in
relation to brokerage and research services provided to the Fund or AAA by such
member, broker, or dealer. Such services may include, but are not limited to,
any one or more of the following: information as to the availability of
securities for purchase or sale, statistical or factual information, or opinions
pertaining to investments. AAA may use research and services provided by brokers
and dealers in servicing all its clients, including the Fund, and AAA will not
necessarily use all such services in connection with the Fund. In accordance
with the provisions of Section 28(e) of the 1934 Act, AAA may from time-to-time
receive services and products which serve both research and non-research
functions. In such event, AAA makes a good faith determination of the
anticipated research and non-research use of the product or service and
allocates brokerage only with respect to the research component. Brokerage may
also be allocated to dealers in consideration of the Fund's share distribution
but only when execution and price are comparable to that offered by other
brokers.
If AAA provides investment advisory services to individuals and other
institutional clients, there may be occasions on which other investment advisory
clients advised by AAA may also invest in the same securities as the Fund. When
these clients buy or sell the same securities at substantially the same time,
the AAA may average the transactions as to price and allocate the amount of
available investments in a manner, which it believes to be equitable to each
client, including the Fund. On the other hand, to the extent permitted by law,
AAA may aggregate the securities to be sold or purchased for the Fund with those
to be sold or purchased for other clients managed by it in order to obtain lower
brokerage commissions, if any.
Because of the Fund's indexing investment strategy, it generally only sells
securities to generate cash to satisfy redemption requests, or to rebalance its
portfolio to track the target index. As a result, the Fund's portfolio turnover
rate is expected to be low. The portfolio turnover rate is calculated by
dividing the lesser of the Fund's annual sales or purchases of portfolio
securities (exclusive of purchases or sales of securities whose maturities at
the time of acquisition were one year or less) by the monthly average value of
the securities in the portfolio during the year.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable combination
of net price and execution available, the Advisor may consider sales of shares
of the Fund as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
DISTRIBUTIONS
A shareholder will automatically receive all income dividends and capital gain
distributions in additional full and fractional shares of the Fund at their net
asset value as of the date of payment unless the shareholder elects to receive
such dividends or distributions in cash. The reinvestment date normally precedes
the payment date by about seven days although the exact timing is subject to
change. Shareholders will receive a confirmation of each new transaction in
their account. The Trust will confirm all account activity, including the
payment of dividend and capital gain distributions and transactions made as a
result of a Systematic Withdrawal Plan or an Automatic Investment Plan.
Shareholders may rely on these statements in lieu of stock certificates.
TAXES
DISTRIBUTIONS OF NET INVESTMENT INCOME. The Fund receives income generally in
the form of dividends on its investments. This income, less expenses incurred in
the operation of the Fund, constitutes the Fund's net investment income from
which dividends may be paid to you. Any distributions by the Fund from such
income will be taxable to you as ordinary income, whether you take them in cash
or in additional shares.
DISTRIBUTIONS OF CAPITAL GAINS. The Fund may derive capital gains and losses in
connection with sales or other dispositions of its portfolio securities.
Distributions from net short-term capital gains will be taxable to you as
ordinary income. Distributions from net long-term capital gains will be taxable
to you as long-term capital gain, regardless of how long you have held your
shares in the Fund. Any net capital gains realized by the Fund generally will be
distributed once each year, and may be distributed more frequently, if
necessary, in order to reduce or eliminate excise or income taxes on the Fund.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS. The Fund will inform you of
the amount of your ordinary income dividends and capital gains distributions at
the time they are paid, and will advise you of their tax status for federal
income tax purposes shortly after the close of each calendar year. If you have
not held Fund shares for a full year, the Fund may designate and distribute to
you, as ordinary income or capital gain, a percentage of income that is not
equal to the actual amount of such income earned during the period of your
investment in the Fund.
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY. The Fund intends to
elect to be treated as a regulated investment company under Subchapter M of the
Internal Revenue Code and intends to so qualify during the current fiscal year.
As a regulated investment company, the Fund generally pays no federal income tax
on the income and gains it distributes to you. The Board reserves the right not
to maintain the qualification of the Fund as a regulated investment company if
it determines such course of action to be beneficial to shareholders. In such
case, the Fund will be subject to federal, and possibly state corporate taxes on
its taxable income and gains, and distributions to you will be taxed as ordinary
dividend income to the extent of the Fund's earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS. To avoid federal excise taxes, the
Internal Revenue Code requires the Fund to distribute to you by December 31 of
each year, at a minimum, the following amounts: 98% of its taxable ordinary
income earned during the calendar year; 98% of its capital gain net income
earned during the twelve month period ending October 31; and 100% of any
undistributed amounts from the prior year. The Fund intends to declare and pay
these amounts in December (or in January that are treated by you as received in
December) to avoid these excise taxes, but can give no assurances that its
distributions will be sufficient to eliminate all taxes.
REDEMPTION OF FUND SHARES. By law, redemptions and exchanges of Fund shares are
taxable transactions for federal and state income tax purposes. If you redeem
your Fund shares, the IRS will require that you report a gain or loss on your
redemption or exchange. If you hold your shares as a capital asset, the gain or
loss that you realize will be capital gain or loss and will be long-term or
short-term, generally depending on how long you hold your shares. Any loss
incurred on the redemption or exchange of shares held for six months or less
will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by the Fund on those shares.
By law, all or a portion of any loss that you realize upon the redemption of
your Fund shares will be disallowed to the extent that you buy other shares in
the Fund (through reinvestment of dividends or otherwise) within 30 days before
or after your share redemption. Any loss disallowed under these rules will be
added to your tax basis in the new shares you buy.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS. If you are a corporate
shareholder, you should note that it is expected that a portion of the dividends
paid by the Fund will qualify for the dividends-received deduction. In some
circumstances, you will be allowed to deduct these qualified dividends, thereby
reducing the tax that you would otherwise be required to pay on these dividends.
The dividends-received deduction will be available only with respect to
dividends designated by the Fund as eligible for such treatment. All dividends
(including the deducted portion) must be included in your alternative minimum
taxable income calculation.
INVESTMENT IN COMPLEX SECURITIES. The Fund may invest in complex securities.
These investments may be subject to numerous special and complex tax rules.
These rules could affect whether gains and losses recognized by the Fund are
treated as ordinary income or capital gain, accelerate the recognition of income
to the Fund and/or defer the Fund's ability to recognize losses. In turn, these
rules may affect the amount, timing or character of the income distributed to
you by the Fund.
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
TOTAL RETURN. Average annual total return quotations used in the Fund's
advertising and promotional materials are calculated according to the following
formula:
P(1 +T)n = ERV
where P equals a hypothetical initial payment of $1,000; T equals average annual
total return; n equals the number of years; and ERV equals the ending redeemable
value at the end of the period of a hypothetical $1,000 payment made at the
beginning of the period.
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication. Average annual total
return, or "T" in the above formula, is computed by finding the average annual
compounded rates of return over the period that would equate the initial amount
invested to the ending redeemable value. Average annual total return assumes the
reinvestment of all dividends and distributions.
CUMULATIVE TOTAL RETURN. Cumulative total return represents the simple change in
value of an investment over a stated period and may be quoted as a percentage or
as a dollar amount. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in order
to illustrate the relationship between these factors and their contributions to
total return.
OTHER INFORMATION. The Fund's performance data quoted in advertising and other
promotional materials represents past performance and is not intended to predict
or indicate future results. The return and principal value of an investment in a
Fund will fluctuate, and an investor's redemption proceeds may be more or less
than the original investment amount.
If permitted by applicable law, the Fund may be compared to data prepared by
Lipper Analytical Services, Inc., CDA Investment Technologies, Inc.,
Morningstar, Inc., the Donoghue Organization, Inc. or other independent services
which monitor the performance of investment companies, and may be quoted in
advertising in terms of its ranking in each applicable universe. In addition,
the Fund may use performance data reported in financial and industry
publications, including Barron's, Business Week, Forbes, Fortune, Investor's
Daily, IBC/Donoghue's Money Fund Report, Money Magazine, The Wall Street
Journal, USA Today and others.
In addition to the INDEX, the Fund may from time to time use the following
unmanaged indices for performance comparison purposes:
o S&P 500 - The S&P 500 is an index of 500 stocks designed to track the
overall equity market's industry weightings. Most, but not all, large
capitalization stocks are in the index. There are also some small
capitalization names in the index. The list is maintained by Standard &
Poor's Corporation. It is market capitalization weighted. There are
always 500 issuers in the S&P 500. Changes are made by Standard &
Poor's as needed.
o Russell 2000 - The Russell 2000 is composed of the 2,000 smallest stocks in
the Russell 3000, a market value weighted index of the 3,000 largest U. S.
publicly traded companies.
o The NASDAQ Composite Index - The NASDAQ Composite Index is a
broad-based market capitalization-weighted index of all NASDAQ stocks.
AUDITORS
--------------------------------------------------------------------------------
Deloitte & Touche LLP, Two Prudential Plaza, 180 North Stetson Avenue, Chicago,
Illinois, 60601-6779, serves as the Fund's independent auditors, whose services
include auditing the Fund's financial statements and the performance of related
tax services.
COUNSEL
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Vedder, Price, Kaufman, & Kammholz, 222 North LaSalle Street, Chicago, Illinois
60601-1003, is counsel for the Fund.
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
DOW JONES ISLAMIC INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 16, 2000
ASSETS
Cash $100,000
Receivable from investment advisor 38,360
Prepaid initial registration expenses 33,175
------
TOTAL ASSETS 171,535
LIABILITIES AND NET ASSETS
Payable to investment advisor 71,535
------
TOTAL LIABILITIES 71,535
------
NET ASSETS $100,000
=======
NET ASSETS CONSIST OF:
Class K capital shares outstanding, no par value,
indefinite shares authorized 10,000
======
Net asset value, redemption price and offering price per share
(net assets/shares outstanding) $10.00
=====
.........
The accompanying Notes to the Financial Statements are an integral part of this
statement.
DOW JONES ISLAMIC INDEX FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 14, 2000 (DATE OF INCEPTION) TO MAY 16, 2000
INVESTMENT INCOME
Dividends $ -
EXPENSES
Organization expenses 38,360
-------
Total expenses before reimbursements 38,360
Less: reimbursement of expenses by investment advisor (38,360)
-------
NET INVESTMENT INCOME $ -
=======
..............
The accompanying Notes to the Financial Statements are an integral part of this
statement.
DOW JONES ISLAMIC INDEX FUND
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM JANUARY 14, 2000 (DATE OF INCEPTION) TO MAY 16, 2000
NOTE 1 - ORGANIZATION AND REGISTRATION
Allied Asset Advisors Funds (the "Trust"), an open-end management investment
company, was organized as a Delaware business trust on January 10, 2000. The
Trust currently offers one series of shares to investors, Dow Jones(SM) Islamic
Index Fund (the "Fund") which consists of two classes: Classes K and M. The Fund
is a diversified series and has its own investment objective and policies. The
Trust may start another series and offer shares of a new fund under the Trust at
any time. Allied Asset Advisors, Inc. ("AAA" or the "Advisor") is a Delaware
corporation that serves as an investment manager to the Fund. AAA is a wholly
owned subsidiary of The North American Islamic Trust. The Fund has had no
operations other than those relating to organizational matters, including the
sale of 10,000 shares of beneficial interest of the Fund to capitalize the Trust
("Original Shares"), for cash in the amount of $100,000.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with accounting principles generally accepted in the
United States of America ("GAAP").
A. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported changes in net assets during
the reporting period. Actual results could differ from those estimates.
B. ORGANIZATION AND PREPAID INITIAL REGISTRATION EXPENSES
Expenses incurred by the Trust in connection with the organization and
the initial public offering of shares are expensed as incurred. These expenses
were advanced by the Advisor, and the Advisor has agreed to voluntarily
reimburse the Fund for these expenses. Prepaid initial registration expenses are
deferred and amortized over the period of benefit (not to exceed twelve months).
C. FEDERAL INCOME TAXES
The Fund intends to qualify annually for treatment as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended, and, if so qualified, will not be liable for federal income taxes to
the extent earnings are distributed to shareholders on a timely basis.
NOTE 3 - CAPITAL STOCK
The Trust is authorized to issue an unlimited number of shares with no par
value. A total of 10,000 shares were initially sold to capitalize the Trust.
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of the
Dow Jones Islamic Index Fund:
We have audited the accompanying statement of assets and liabilities of the Dow
Jones Islamic Index Fund (the "Fund"), a series of Allied Asset Advisors Funds
(the "Trust") as of May 16, 2000, and the related statement of operations for
the period from January 14, 2000 (date of inception) to May 16, 2000. These
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Dow Jones Islamic Index Fund at May 16,
2000, and the results of its operations for the period from January 14, 2000
(date of inception) to May 16, 2000, in conformity with accounting principles
generally accepted in the United States of America.
Chicago, Illinois
May 18, 1999
