Filed with the Securities and Exchange Commission on June 6, 2000
1933 Act Registration File No. 333-30924
1940 Act File No. 811-9821
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. 2 |X|
Post-Effective Amendment No. |_|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 2 |X|
ALLIED ASSET ADVISORS FUNDS
---------------------------
(Exact Name of Registrant as Specified in Charter)
745 McClintock Drive, Suite 114
Burr Ridge, IL 60521
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (630) 789-9191
Copies of all communications to:
Elaine E. Richards, Esq. David Sturms, Esq.
Firstar Mutual Fund Services, LLC Vedder, Price, Kaufman & Kammholz
615 East Michigan Street, 2nd Floor 222 North LaSalle Street
Milwaukee, WI 53202 Chicago, IL 60601-1103
Approximate Date of Proposed Public Offering: As soon as practical after the e
ffective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
_____ immediately upon filing pursuant to paragraph (b)
_____ on ____________ pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on ____________ pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on ____________ pursuant to paragraph (a)(2) of Rule 485.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
Title of securities being registered: Dow Jones Islamic Index Fund,
Classes M and K.
PART A
Prospectus - Dow Jones Islamic Index Fund, Class K - Incorporated by reference
Prospectus - Dow Jones Islamic Index Fund, Class M - Incorporated by reference
THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
DOW JONES(SM) ISLAMIC INDEX FUND
A SERIES OF ALLIED ASSET ADVISORS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
__________, 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 __________, 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 JONESSM.........................................................4
THE TRUST......................................................................5
MANAGEMENT OF THE FUND.........................................................6
INVESTMENT ADVISOR.............................................................8
CODE OF ETHICS.................................................................8
ADMINISTRATIVE SERVICES........................................................8
DISTRIBUTOR....................................................................9
PRICING OF SHARES..............................................................9
PURCHASING SHARES..............................................................9
REDEMPTION OF SHARES..........................................................10
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................10
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES.............................11
PERFORMANCE INFORMATION.......................................................13
AUDITORS......................................................................14
COUNSEL.......................................................................14
FINANCIAL STATEMENTS..........................................................14
INVESTMENT RESTRICTIONS
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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%.
"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
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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, 1980 - present Bassam Osman, M.D., SC LTD,
745 Mcclintock Drive, Suite 114 Chairperson and Doctor
Burr Ridge, IL 60521 President
--------------------------------------- ---------- -------------------- ----------------------------------------------
*Muzamil Siddiqi 63 Trustee 3/84 - present North American Islamic Trust,
745 Mcclintock Drive, Suite 114 Inc., General Manager
Burr Ridge, IL 60521
--------------------------------------- ---------- -------------------- ----------------------------------------------
Abdalla Idris Ali 51 Disinterested 8/98-present - Director, the Center of
745 Mcclintock Drive, Suite 114 Trustee Islamic Studies, Kansas City, MO; 8/98 -
Burr Ridge, IL 60521 Principal, ISNA Islamic School, Toronto,
Ontario, Canada
--------------------------------------- ---------- -------------------- ----------------------------------------------
Jamal Said 43 Disinterested Religious Director, Mosque Foundation,
745 Mcclintock Drive, Suite 114 Trustee Bridgeview, IL
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 - Summer `98, Summer Associate,
745 Mcclintock Drive, Suite 114 Trustee Chicago Corporation Counsel; Summer '99,
Burr Ridge, IL 60521 Summer Associate, Kirkland & Ellis
--------------------------------------- ---------- -------------------- ----------------------------------------------
Omar Haydar 26 Secretary and 4/2000 - present Mutual Fund Coordinator,
745 Mcclintock Drive, Suite 114 Treasurer Allied Asset Advisors
Burr Ridge, IL 60521 6/99 - 4/2000 Information Technology
Consultant, Teksystems/Skidmore Owings &
Merrill LLP 5/98 - 7/98 - Law Clerk, Goodman
& Witanen 6/96 - 8/96 - Program Director,
English Language Service Summer ISNA
Program 8/95 - present - Law Student,
Chicago Kent College of Law
--------------------------------------- ---------- -------------------- ----------------------------------------------
Mujeeb Cheema 53 Vice President 1/98 - present Managing Director at Hawkins
745 Mcclintock Drive, Suite 114 International, Inc.; 2/80 - 12/97 President
Burr Ridge, IL 60521 of International at Hawkins Oil & Gas, Inc.
--------------------------------------- ---------- -------------------- ----------------------------------------------
</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 ________,
2000. 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 $0.00 None None $0.00
Jamal Said $0.00 None None $0.00
Mohammead Kaiseruddin $0.00 None None $0.00
Mazen Asbahi $0.00 None None $0.00
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 [DATE]. 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. 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 ____________, 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
--------------------------------------------------------------------------------
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
THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
DOW JONES(SM) ISLAMIC INDEX FUND
A SERIES OF ALLIED ASSET ADVISORS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
__________, 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 __________, 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 JONESSM.........................................................4
THE TRUST......................................................................5
MANAGEMENT OF THE FUND.........................................................6
INVESTMENT ADVISOR.............................................................8
CODE OF ETHICS.................................................................9
ADMINISTRATIVE SERVICES........................................................9
DISTRIBUTOR....................................................................9
DISTRIBUTION PLAN..............................................................9
SHAREHOLDER SERVICES AGREEMENT................................................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..........................................................15
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%.
"Dow Jones," "Dow Jones Islamic Market USA IndexSM" 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, 1980 - present Bassam Osman, M.D., SC LTD,
745 Mcclintock Drive, Suite 114 Chairperson and Doctor
Burr Ridge, IL 60521 President
--------------------------------------- ---------- -------------------- ----------------------------------------------
*Muzamil Siddiqi 63 Trustee 3/84 - present North American Islamic Trust,
745 Mcclintock Drive, Suite 114 Inc., General Manager
Burr Ridge, IL 60521
--------------------------------------- ---------- -------------------- ----------------------------------------------
Abdalla Idris Ali 51 Disinterested 8/98-present - Director, the Center of
745 Mcclintock Drive, Suite 114 Trustee Islamic Studies, Kansas City, MO; 8/98 -
Burr Ridge, IL 60521 Principal, ISNA Islamic School, Toronto,
Ontario, Canada
--------------------------------------- ---------- -------------------- ----------------------------------------------
Jamal Said 43 Disinterested Religious Director, Mosque Foundation,
745 Mcclintock Drive, Suite 114 Trustee Bridgeview, IL
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 - Summer `98, Summer Associate,
745 Mcclintock Drive, Suite 114 Trustee Chicago Corporation Counsel; Summer '99,
Burr Ridge, IL 60521 Summer Associate, Kirkland & Ellis
--------------------------------------- ---------- -------------------- ----------------------------------------------
Omar Haydar 26 Secretary and 4/2000 - present Mutual Fund Coordinator,
745 Mcclintock Drive, Suite 114 Treasurer Allied Asset Advisors
Burr Ridge, IL 60521 6/99 - 4/2000 Information Technology
Consultant, Teksystems/Skidmore Owings &
Merrill LLP 5/98 - 7/98 - Law Clerk, Goodman
& Witanen 6/96 - 8/96 - Program Director,
English Language Service Summer ISNA
Program 8/95 - present - Law Student,
Chicago Kent College of Law
--------------------------------------- ---------- -------------------- ----------------------------------------------
Mujeeb Cheema 53 Vice President 1/98 - present Managing Director at Hawkins
745 Mcclintock Drive, Suite 114 International, Inc.; 2/80 - 12/97 President
Burr Ridge, IL 60521 of International at Hawkins Oil & Gas, Inc.
--------------------------------------- ---------- -------------------- ----------------------------------------------
</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 ________,
2000. 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 [DATE]. 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 ____________, 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:
|X| printing and distributing prospectuses to persons other than Fund
shareholders,
|X| printing and distributing advertising and sales literature and reports to
shareholders used in connection with selling shares of the Fund, and
|X| 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.
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
--------------------------------------------------------------------------------
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
ALLIED ASSET ADVISORS FUNDS
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) DECLARATION OF TRUST
(i) Certificate of Trust1
(ii) Declaration of Trust1
(iii) Written Instrument Fixing the Number of Trustees2
(iv) Written Instrument Establishing and Designating Classes of Interest2
(b) BYLAWS1
(i) Amendment to Bylaws2
(c) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS-- Incorporated by reference
to the Declaration of Trust and Bylaws
(d) ADVISORY AGREEMENT2
(i) Expense Waiver and Reimbursement Agreement2
(e) DISTRIBUTION AGREEMENT2
(f) BONUS OR PROFIT SHARING CONTRACTS - Not applicable
(g) CUSTODY AGREEMENT2
(h) OTHER MATERIAL CONTRACTS
(i) Administration Agreement2
(ii) Transfer Agent Servicing Agreement2
(iii) Fund Accounting Services Agreement2
(iv) Shareholder Services Agreement2
(v) Fulfillment Agreement2
(i) OPINION AND CONSENT OF COUNSEL2
(j) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS--Filed herewith
(k) OMITTED FINANCIAL STATEMENTS - Not applicable
(l) AGREEMENT RELATING TO INITIAL CAPITAL2
(m) RULE 12B-1 PLAN2
(n) RULE 18F-3 PLAN2
(o) RESERVED.
(p) CODE OF ETHICS2
1 Incorporated by reference to Registrant's Initial Filing of the Registration
Statement filed February 23, 2000.
2 Incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to the
Registration Statement filed on May 23, 2000.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
No person is directly or indirectly controlled by or under common
control with the Registrant.
ITEM 25. INDEMNIFICATION.
Reference is made to Article V of the Registrant's Agreement and
Declaration of Trust.
Pursuant to Rule 484 under the Securities Act of 1933, as amended, the
Registrant furnishes the following undertaking: "Insofar as indemnification for
liability arising under the Securities Act of 1933 (the "Act") may be permitted
to trustees, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue."
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISOR
Allied Asset Advisors, Inc. ("AAA"), investment adviser to all of the series of
the Registrant, is a registered investment adviser under the Investment Advisers
Act of 1940. Besides serving as investment adviser to the Fund, AAA is not
currently (and has not during the past two years) engaged in any other business,
profession, vocation or employment of a substantial nature. Information
regarding the business, vocation or employment of a substantial nature of the
AAA and its officers is incorporated by reference to the information contained
in Part B of this Registration Statement.
To Registrant's knowledge, none of the directors or senior executive officers of
AAA except those set forth below, is, or has been at any time during the past
two years, engaged in any other business, profession, vocation or employment of
a substantial nature, except that certain directors and officers of AAA also
hold various positions with, and engage in business for, AAA affiliates:
<TABLE>
<CAPTION>
-------------------------------- ------------------------ ------------------------------------ --------------------
NAME POSITION WITH ALLIED OTHER BUSINESS CONNECTIONS TYPE OF BUSINESS
ASSET ADVISORS, INC.
-------------------------------- ------------------------ ------------------------------------ --------------------
<S> <C> <C> <C>
Bassam Osman Director, President Chairman Religious,
The North American Islamic Trust Financial,
(Shareholder of AAA) Education
M.D. (Neurologist) Medicine
Director Finance
Amana Mutual Funds
Mohammad Naziruddin Ali Secretary General Manager Religious,
The North American Islamic Trust Financial,
(Shareholder of AAA) Education
Muzamil Siddiqi Director Director Religious,
The Islamic Society of Orange Educational
County
Adjunct Professor Educational
California State University
Gaddoor Saidi Director Partner Travel
Dar El-Eiman for Hajj
Partner Real Estate
Mecca Investment Int.
Mujeeb-ur-Rehman Cheema Director Managing Director Energy
Hawkins International, Inc.
-------------------------------- ------------------------ ------------------------------------ --------------------
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Rafferty Capital Markets, Inc., 1311 Mamaroneck Avenue, White Plains,
New York 10605, serves as principal underwriter for the Allied Asset Advisors
Funds, Ingenuity Capital Trust, Potomac Funds, Badgley Funds, Homestate Group,
Texas Capital Value Funds, Brazos Mutual Funds, Bremer Investment Funds, Inc.,
Bearguard Funds, Inc., Kirr Marbauch Partners Funds, Inc., Golf Associated Fund
and Leuthold Funds.
(b) The director and officers of Rafferty Capital Markets, Inc. are:
<TABLE>
<CAPTION>
-------------------------- ------------------------------------------- -----------------------------------------
NAME POSITIONS AND OFFICES WITH UNDERWRITER POSITIONS AND OFFICES WITH REGISTRANT
-------------------------- ------------------------------------------- -----------------------------------------
<S> <C> <C>
Thomas A. Mulrooney President None
Lawrence C. Rafferty Director None
Stephen P. Sprague CFO/FINOP None
-------------------------- ------------------------------------------- -----------------------------------------
</TABLE>
The principal business address of each of the persons listed above is 1311
Mamaroneck Avenue, White Plains, New York 10605.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The books and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 are maintained in the following locations:
<TABLE>
<CAPTION>
--------------------------------------------------------------------- --------------------------------------
RECORDS RELATING TO: ARE LOCATED AT:
--------------------------------------------------------------------- --------------------------------------
<S> <C>
Registrant's Fund Accounting, Administrator and Transfer Agent Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
Registrant's Investment Advisor Allied Asset Advisors, Inc.
745 McClintock Drive, Suite 114
Burr Ridge, IL 60521
Registrant's Custodian Firstar Bank, N.A.
425 Walnut Street
Cincinnati, OH 54202
--------------------------------------------------------------------- --------------------------------------
</TABLE>
ITEM 29. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A AND B.
Inapplicable
ITEM 30. UNDERTAKINGS.
The Registrant hereby undertakes to furnish each person to whom a
Prospectus for one or more of the series of the Registrant is delivered with a
copy of the relevant latest annual report to shareholders, upon request and
without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Registration Statement to be signed below on its behalf by the undersigned,
thereunto duly authorized, in the Village of Burr Ridge and the State of
Illinois on the 6th day of June, 2000.
ALLIED ASSET ADVISORS FUNDS
BY: /S/ BASSAM OSMAN
--------------------
Bassam Osman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on June 6, 2000.
SIGNATURE TITLE
/S/ BASSAM OSMAN Trustee, Chairperson and President
--------------------------
Bassam Osman
*/S/ MUZAMIL SIDDIQI Trustee
--------------------------
Muzamil Siddiqi
*/S/ ABDALLA IDRIS ALI Trustee
--------------------------
Abdalla Idris Ali
*/S/ JAMAL SAID Trustee
--------------------------
Jamal Said
*/S/ MOHAMMED KAISERUDDIN Trustee
--------------------------
Mohammed Kaiseruddin
/S/ MAZEN ASBAHI Trustee
--------------------------
Mazen Asbahi
*Signed by
/S/ BASSAM OSMAN
--------------------------
Bassam Osman
as Attorney in Fact pursuant to the Power of Attorney dated May 4, 2000 filed
May 23, 2000 with Registrant's Pre-Effective Amendment No. 1 to the Registration
Statement.
