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Berger Small Cap
Value Fund ~
Investor Shares
PROSPECTUS January 31, 2000
[LOGO]
The Securities and Exchange Commission has not approved or disapproved any
shares offered in this prospectus or determined whether this prospectus is
accurate or complete. Anyone who tells you otherwise is committing a crime.
Like all mutual funds, an investment in the Fund is not a bank deposit and is
not insured or guaranteed by the FDIC or any other government agency. There
is no guarantee that the Fund will meet its investment goal, and although you
have the potential to make money, you could also lose money in the Fund.
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BERGER FUNDS, BERGER SMALL CAP VALUE FUND and THE BERGER MOUNTAIN LOGO are
registered trademarks of Berger LLC; and other marks referred to herein are
the trademarks or registered trademarks of the respective owners thereof.
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i
BERGER SMALL CAP VALUE FUND INVESTOR SHARES
CONTENTS
BERGER FUNDS-REGISTERED TRADEMARK- are a no-load family of mutual funds. A
mutual fund pools money from shareholders and invests in a portfolio of
securities. This prospectus offers the class of shares designated as Investor
Shares of the Berger Small Cap Value Fund, which shares are available to the
general public. The following section describes the Berger Small Cap Value Fund,
its goal, principal investment strategies and principal risks. It also contains
expense and performance information.
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BERGER SMALL CAP VALUE FUND-REGISTERED TRADEMARK- --
INVESTOR SHARES............................................. 1
The Fund's Goal and Principal Investment Strategies......... 1
Principal Risks............................................. 1
The Fund's Past Performance................................. 2
Fund Expenses............................................... 3
INVESTMENT TECHNIQUES, SECURITIES AND ASSOCIATED RISKS...... 4
Risk and Investment Table................................... 4
Risk and Investment Glossary................................ 6
BUYING SHARES............................................... 9
SELLING (REDEEMING) SHARES.................................. 10
Exchanging Shares........................................... 12
Signature Guarantees/Special Documentation.................. 12
Your Share Price............................................ 13
Other Information About Your Account........................ 14
Distributions and Taxes..................................... 16
Tax-Sheltered Retirement Plans.............................. 17
ORGANIZATION OF THE FUND.................................... 17
Investment Managers......................................... 17
12b-1 Arrangements.......................................... 18
Special Fund Structure...................................... 18
FINANCIAL HIGHLIGHTS FOR THE FUND........................... 19
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1
Berger Small Cap Value Fund Investor Shares
TICKER SYMBOL: BSCVX
[ICON] THE FUND'S GOAL AND PRINCIPAL INVESTMENT STRATEGIES
The Fund aims for capital appreciation. In pursuing that goal, the Fund
primarily invests in the common stocks of small companies whose stock prices are
believed to be undervalued.
The Fund's securities selection focuses on companies that are out of favor
with markets or have not yet been discovered by the broader investment
community.
The Fund's investment manager generally looks for companies with:
- A low price relative to their assets, earnings, cash flow or business
franchise
- Products and services that give them a competitive advantage
- Quality balance sheets and strong management.
The investment manager's philosophy is to weigh a security's downside risk
before considering its upside potential, which may help provide an element of
capital preservation. Under normal circumstances, the Fund invests at least 65%
of its assets in equity securities of small companies whose market
capitalization, at the time of initial purchase, is less than the 12-month
average of the maximum market capitalization for companies included in the
Russell 2000 Index (Russell 2000). This average is updated monthly. The Fund's
investment manager will generally sell a security when it no longer meets the
manager's investment criteria or when it has met the manager's expectations for
appreciation.
[ICON] PRINCIPAL RISKS
You may be interested in the Fund if you are comfortable with
above-average risk and intend to make a long-term investment commitment. Like
all managed funds, there is a risk that the investment manager's strategy for
managing the Fund may not achieve the desired results. In addition, the price of
common stock moves up and down in response to corporate earnings and
developments, economic and market conditions and anticipated events. As a
result, the price of the Fund's investments may go down and you could lose money
on your investment.
The Fund's share price may fluctuate more than that of funds primarily
invested in stocks of mid-sized and large companies. Small company securities
may underperform as compared to the securities of larger companies. They may
also pose greater risk due to narrow product lines, limited financial resources,
less depth in management or a limited trading market for their stocks. The
Fund's investments are often focused in a small number of business sectors. In
addition, the Fund may invest in certain securities with unique risks, such as
special situations.
See "Investment Techniques, Securities and Associated Risks" later in this
prospectus for more information on principal risks and other risks.
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2
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
[ICON] THE FUND'S PAST PERFORMANCE
The information below shows the Fund's performance for the ten-year
period through December 31, 1999. These returns include reinvestment of all
dividends and capital gains distributions and reflect Fund expenses. As with all
mutual funds, past performance does not guarantee future results.
Year-by-year returns show you how the Fund's performance has varied by
illustrating the differences for each full calendar year for the past ten years.
YEAR-BY-YEAR TOTAL RETURN AS OF DECEMBER 31(1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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1990 -21.92%
1991 24.97%
1992 19.61%
1993 16.27%
1994 6.70%
1995 26.06%
1996 25.60%
1997 36.51%
1998 1.43%
1999 14.31%
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Best quarter: 6/30/99 22.00%
Worst quarter: 9/30/90 -17.29%
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Average annual total return is a measure of the Fund's performance over time.
The Fund's average annual return is compared with the Russell 2000. While the
Fund does not seek to match the returns of the Russell 2000, this index is a
good indicator of small company stock market performance. You may not invest in
the Russell 2000 and unlike the Fund, it does not incur fees or charges.
AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 1999(1)
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<CAPTION>
1 YEAR 5 YEARS 10 YEARS
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The Fund 14.31% 20.17% 13.76%
Russell 2000 21.26% 16.69% 13.40%
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1. Returns for periods before February 14, 1997, do not include the .25% 12b-1
fee which has been paid by the Investor Shares class since the Fund adopted
share classes on that date. This would have reduced the Fund's return.
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3
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
[ICON] FUND EXPENSES
As a shareholder in the Fund, you do not pay any sales loads, redemption
or exchange fees, but you do bear indirectly Annual Fund Operating Expenses,
which vary from year to year.
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ANNUAL FUND OPERATING EXPENSES (DEDUCTED DIRECTLY FROM THE FUND)
Management fee(1) .85%
Distribution (12b-1) fee .25%
Other expenses(2) .21%
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TOTAL ANNUAL FUND OPERATING EXPENSES 1.31%
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1. Effective October 1, 1999, the investment advisory fee charged to the Fund
was reduced to the following rates of average daily net assets; 0.85% of the
first $500 million; 0.80% of the next $500 million and 0.75% in excess of $1
billion. The amount shown reflects the restated advisory fees.
2. Effective October 1, 1999, Berger LLC eliminated the administrative fee
charged to the Fund. The fee amount shown reflects the restated expenses.
UNDERSTANDING EXPENSES
Annual Fund operating expenses are paid by the Fund. As a result, they reduce
the Fund's return. Fund expenses include management fees,12b-1 fees and
administrative costs such as shareholder recordkeeping and reports, custodian
and pricing services and registration fees.
EXAMPLE COSTS
The following example helps you compare the cost of investing in the Fund to
the cost of investing in other mutual funds by showing what your costs may be
over time. It uses the same assumptions that other funds use in their
prospectuses:
- $10,000 initial investment
- 5% total return for each year
- Fund operating expenses remain the same for each period
- Redemption after the end of each period
Your actual costs may be higher or lower, so this example should be used for
comparison only. Based on these assumptions your costs at the end of each period
would be:
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<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
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Berger Small Cap Value Fund
Investor Shares $133 $415 $718 $1,579
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4
Berger Small Cap Value Fund
Investor Shares
INVESTMENT TECHNIQUES, SECURITIES AND ASSOCIATED RISKS
RISK AND INVESTMENT TABLE
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BERGER
SMALL CAP
VALUE FUND
DIVERSIFICATION DIAMOND
SMALL COMPANY SECURITIES /Y/
MARKET, LIQUIDITY AND INFORMATION RISK
SECTOR FOCUS /Y/
MARKET AND LIQUIDITY RISK
FOREIGN SECURITIES Y
MARKET, CURRENCY, TRANSACTION, LIQUIDITY, INFORMATION AND
POLITICAL RISK
CONVERTIBLE SECURITIES(1) Y
MARKET, INTEREST RATE, PREPAYMENT AND CREDIT RISK
INVESTMENT GRADE BONDS (NONCONVERTIBLE) Y
INTEREST RATE, MARKET, CALL AND CREDIT RISK
COMPANIES WITH LIMITED OPERATING HISTORIES 5ADIAMOND
MARKET, LIQUIDITY AND INFORMATION RISK
ILLIQUID SECURITIES 10DIAMOND
MARKET, LIQUIDITY AND TRANSACTION RISK
INITIAL PUBLIC OFFERINGS (IPOS) Y
MARKET, LIQUIDITY AND INFORMATION RISK
SPECIAL SITUATIONS /Y/
MARKET AND INFORMATION RISK
TEMPORARY DEFENSIVE MEASURES Y
OPPORTUNITY RISK
BORROWING 5ADIAMOND
LEVERAGE RISK
HEDGING STRATEGIES
OPTIONS(2) (EXCHANGE-TRADED AND OVER-THE-COUNTER) 5
HEDGING, CREDIT, CORRELATION AND LEVERAGE RISK
WRITING (SELLING) COVERED CALL OPTIONS(2) 10
(EXCHANGE-TRADED AND OVER-THE-COUNTER)
OPPORTUNITY, CREDIT AND LEVERAGE RISK
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5
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
BEFORE YOU INVEST...
in the Fund, make sure you understand the risks involved. All investments
involve risk. Generally, the greater the risk, the greater the potential for
return. The reverse is also generally true, the lower the risk, the lower the
potential for return.
LIKE ALL MUTUAL FUNDS, AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS
NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. THE FUND
IS NOT A COMPLETE INVESTMENT PROGRAM, BUT MAY SERVE TO DIVERSIFY OTHER TYPES OF
INVESTMENTS IN YOUR PORTFOLIO. THERE IS NO GUARANTEE THAT THE FUND WILL MEET ITS
INVESTMENT GOAL, AND ALTHOUGH YOU HAVE THE POTENTIAL TO MAKE MONEY, YOU COULD
ALSO LOSE MONEY BY INVESTING IN THE FUND.
The table on the opposite page will help you further understand the risks the
Fund takes by investing in certain securities and the investment techniques used
by the Fund. A glossary follows this page. You may get more detailed information
about the risks of investing in the Fund in the Statement of Additional
Information (SAI), including a discussion of debt security ratings in
Appendix A to the SAI.
KEY TO TABLE
Follow down the columns under the name of the Fund. The boxes will tell you:
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/Y/ Yes, the security or technique is permitted by the Fund and
is emphasized by the Fund.
Y Yes, the security or technique is permitted by the Fund.
DIAMOND The restriction is fundamental to the Fund. (Fundamental
restrictions cannot be changed without a shareholder vote.)
5A Use of a security or technique is permitted, but subject to
a restriction of up to 5% of total assets.
5 Use of a security or technique is permitted, but subject to
a restriction of up to 5% of net assets.
10 Use of a security or technique is permitted, but subject to
a restriction of up to 10% of net assets.
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NOTES TO TABLE
1. The Fund has no minimum quality standards for convertible securities,
although it will not invest in defaulted securities. It also will not invest
20% or more of its assets in convertible securities rated below investment
grade or in unrated convertible securities that the sub-advisor considers to
be below investment grade.
2. The Fund may use options only for hedging. Not more than 5% of the Fund's
net assets may be used for premiums for options, although the Fund may have
more at risk under these contracts than the premium. However, the Fund's
aggregate obligations under these contracts may not exceed the total market
value of the assets being hedged, such as some or all of the value of the
Fund's equity securities.
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6
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
RISK AND INVESTMENT GLOSSARY
BORROWING refers to a loan of money from a bank or other financial
institution undertaken by the Fund for temporary or emergency reasons only.
CALL RISK is the possibility that an issuer may redeem or "call" a fixed
income security before maturity at a price below its current market price. An
increase in the likelihood of a call may reduce the security's price.
COMMON STOCK is a share of ownership (equity) interest in a company.
COMPANIES WITH LIMITED OPERATING HISTORIES are securities issued by companies
that have been in continuous operation for less than three years. Sometimes
called "unseasoned" issuers.
CONVERTIBLE SECURITIES are debt or equity securities which may be converted
on specified terms into stock of the issuer.
CORRELATION RISK occurs when the Fund "hedges" -- uses one investment to
offset the Fund's position in another. If the two investments do not behave in
relation to one another the way Fund managers expect them to, then unexpected
results may occur.
CREDIT RISK means that the issuer of a security or the counterparty to an
investment contract may default or become unable to pay its obligations when
due.
CURRENCY RISK happens when the Fund buys or sells a security denominated in
foreign currency. Foreign currencies "float" in value against the U.S. dollar.
Adverse changes in foreign currency values can cause investment losses when the
Fund's investments are converted to U.S. dollars.
DIVERSIFICATION means a diversified fund may not, with respect to at least
75% of its assets, invest more than 5% in the securities of one company. A
nondiversified fund may be more volatile than a diversified fund because it
invests more of its assets in a smaller number of companies and the gains or
losses on a single stock will therefore have a greater impact on the fund's
share price. The Fund is a diversified fund.
FOREIGN SECURITIES are issued by companies located outside of the United
States. The Fund considers a company to be located outside the United States if
the principal securities trading market for its equity securities is located
outside the U.S. or it is organized under the laws of, and has a principal
office in, a country other than the U.S.
HEDGING RISK comes into play when the Fund uses a security whose value is
based on an underlying security or index to "offset" the Fund's position in
another security or currency. The objective of hedging is to offset potential
losses in one security with gains in the hedge. But a hedge can eliminate or
reduce gains as well as offset losses. (Also see "Correlation risk.")
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7
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
ILLIQUID SECURITIES are securities which by their nature cannot be sold
readily. The Fund will not invest more than 10% of its assets in these
securities.
INFORMATION RISK means that information about a security or issuer might not
be available, complete, accurate or comparable.
INITIAL PUBLIC OFFERING (IPO) is the sale of a company's securities to the
public for the first time. IPO companies can be small and have limited operating
histories. The price of IPO securities can be highly unstable due to prevailing
market psychology and the small number of shares available. In addition, the
quality and number of IPOs available for purchase may diminish in the future,
and their contribution to Fund performance may be less significant as the Fund
grows in size.
INTEREST RATE RISK is the risk that changes in interest rates will adversely
affect the value of an investor's securities. When interest rates rise, the
value of fixed-income securities will generally fall. Conversely, a drop in
interest rates will generally cause an increase in the value of fixed-income
securities. Longer-term securities are subject to greater interest rate risk.
INVESTMENT GRADE BONDS are rated BBB (STANDARD & POOR'S) or Baa (MOODY'S) or
above. Bonds rated below investment grade are subject to greater credit risk
than investment grade bonds.
LEVERAGE RISK occurs in some securities or techniques that tend to magnify
the effect of small changes in an index or a market. This can result in a loss
that exceeds the amount that was invested in the contract.
LIQUIDITY RISK occurs when investments cannot be sold readily. The Fund may
have to accept a less-than-desirable price to complete the sale of an illiquid
security or may not be able to sell it at all.
MARKET CAPITALIZATION is the total current market value of a company's
outstanding common stock.
MARKET RISK exists in all mutual funds and means the risk that the prices of
securities in a market, a sector, or an industry will fluctuate, and that such
movements might reduce an investment's value.
OPPORTUNITY RISK means missing out on an investment opportunity because the
assets necessary to take advantage of it are committed to less advantageous
investments or strategies.
OPTIONS are contracts giving the holder the right but not the obligation to
purchase or sell a security on or before a predetermined future date for a fixed
price. Options on securities indexes are similar, but settle in cash.
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8
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
POLITICAL RISK comes into play with investments, particularly foreign
investments, which may be adversely affected by nationalization, taxation, war,
government instability or other economic or political actions or factors.
PREPAYMENT RISK is the risk that, as interest rates fall, borrowers are more
likely to refinance their debts. As a result, the principal on certain
fixed-income securities may be paid earlier than expected, which could cause
investment losses and cause prepaid amounts to have to be reinvested at a
relatively lower interest rate.
SECTOR FOCUS occurs when a significant portion of the Fund's assets are
invested in a relatively small number of related industries. The Fund will not
concentrate more than 25% of its total assets in any one industry. Sector focus
may increase both market and liquidity risk.
SMALL COMPANY SECURITIES are securities issued by small companies, as
measured by their market capitalization. The market capitalization range
targeted by the Fund appears under the heading "The Fund's Goal and Principal
Investment Strategies." In general, the smaller the company, the greater its
risks.
SPECIAL SITUATIONS are companies about to undergo a structural, financial or
management change which may significantly affect the value of their securities.
TEMPORARY DEFENSIVE MEASURES may be taken when the Fund's investment manager
believes they are warranted due to market conditions. When this happens, the
Fund may increase its investment in government securities and other short-term
securities without regard to the Fund's investment restrictions, policies or
normal investment emphasis.
TRANSACTION RISK means that the Fund may be delayed or unable to settle a
transaction or that commissions and settlement expenses may be higher than
usual.
WRITING (SELLING) COVERED CALL OPTIONS is the selling of a contract to
another party which gives them the right but not the obligation to buy a
particular security from you. The Fund will write call options only if it
already owns the security (if it is "covered").
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9
Berger Small Cap Value Fund
Investor Shares
BUYING SHARES
SEND NEW ACCOUNT APPLICATIONS TO
Berger Funds
P.O. Box 219958
Kansas City, MO 64121-9958
OR FOR OVERNIGHT, CERTIFIED OR REGISTERED MAIL ONLY
Berger Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
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Minimum Initial Investments:
Regular investment $2,000
Low Minimum Investment Plan $ 100
Minimum Subsequent Investments:
Regular investment $ 50
Regular automatic investment $ 50
Low Minimum Investment Plan $ 100
(Required monthly automatic
investments)
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BY MAIL
Read this prospectus.
Fill out the application if you are opening a new account.
Make out a check to BERGER FUNDS for the amount you want to invest.
Send the application and check to the Berger Funds in the envelope provided.
To add to an existing account, be sure to include your account number on your
check and mail it to the appropriate address above.
BY TELEPHONE
If you already have a Berger Funds account, you may purchase additional
shares by telephone order.
You must pay for them within three business days by wire, electronic funds
transfer or overnight delivery of a check.
Call (800) 551-5849 for current wire or electronic funds transfer
instructions.
BY ONLINE ACCESS
If you have established a Berger Funds account with electronic funds transfer
privileges, you may purchase additional shares via online access.
You will find us online at bergerfunds.com.
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10
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
BY SYSTEMATIC INVESTMENT PLAN
To automatically purchase more shares on a regular basis for a regular
minimum or Low Minimum Investment Plan account, fill out the Systematic
Investment Plan section of the application. Investments are transferred
automatically from your bank account.
The Low Minimum Investment Plan is designed for investors who would like to
begin a regular investment program but are reluctant to commit to higher lump
sum initial investments. In order to qualify for the Low Minimum Investment
Plan, an investor MUST commit to automatic monthly investments totaling no less
than $100 per month per account. Automatic monthly investments must be made
until the value of each account opened under the Plan is at least $2,000 or the
account will be assessed an annual charge.
ALL SHAREHOLDERS ARE AUTOMATICALLY GRANTED TELEPHONE AND ONLINE TRANSACTION
PRIVILEGES UNLESS THEY DECLINE THEM EXPLICITLY IN WRITING, EITHER ON THE ACCOUNT
APPLICATION OR BY WRITING TO THE BERGER FUNDS AT THE ADDRESS ABOVE.
YOU MAY GIVE UP SOME LEVEL OF SECURITY BY CHOOSING TO BUY AND SELL SHARES BY
TELEPHONE OR ONLINE RATHER THAN BY MAIL.
IMPORTANT NOTES ABOUT PAYING FOR YOUR SHARES
Your check must be made payable to BERGER FUNDS.
You may NOT purchase shares by cash, credit card, third-party checks or
checks drawn on foreign banks.
Telephone and online purchase orders may not exceed $100,000 on the date the
order is placed. Shares previously bought by telephone or online access are
included in calculating account size only if payment has been received for those
shares.
Orders not paid for on time will be canceled and shares will be redeemed from
your account to compensate for any decline in price of the shares canceled.
The Fund reserves the right to reject any order and to waive or reduce
minimums, or increase minimums following notice.
SELLING (REDEEMING) SHARES
BY MAIL
Send a written request indicating your account number and the dollar amount
or number of shares you are redeeming to the appropriate address shown under
"Buying Shares."
Your request must be signed by each registered shareholder, with the
signature(s) appearing exactly as they do on your account registration.
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11
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
BY TELEPHONE
Call (800) 551-5849.
BY ONLINE ACCESS
You will find us online at bergerfunds.com.
FOR LIMITATIONS ON TELEPHONE AND ONLINE REDEMPTIONS SEE "SIGNATURE GUARANTEES
/ SPECIAL DOCUMENTATION" BELOW.
TELEPHONE AND ONLINE REDEMPTIONS ARE NOT AVAILABLE FOR SHARES HELD IN
RETIREMENT ACCOUNTS SPONSORED BY THE FUND.
BY SYSTEMATIC WITHDRAWAL PLAN
Shares may be redeemed automatically ($50 minimum) monthly, quarterly, semi-
annually or annually.
A systematic withdrawal plan may be established if you own shares in the Fund
worth at least $5,000.
Call (800) 551-5849 for more information and forms.
IMPORTANT NOTES ABOUT PAYMENT FOR YOUR REDEEMED SHARES
IN TIMES OF EXTREME ECONOMIC OR MARKET CONDITIONS, TRANSACTIONS BY TELEPHONE
OR ONLINE MAY BE DIFFICULT.
Generally, payment for your redeemed shares will be sent to you within three
business days after receipt of your redemption request in good order.
You may receive payment for redeemed shares via wire or electronic funds
transfer. You may elect these services on the account application or send to the
Berger Funds a written request providing your bank information with your
signature guaranteed. (See "Signature Guarantees/Special Documentation" below.)
Wire and electronic funds transfers are subject to a $1,000 minimum and
$100,000 maximum.
You will be charged $10 if you request a wire transfer. There is no charge
for an electronic funds transfer.
A wire transfer will be sent the next business day after receipt of your
order, and an electronic funds transfer will be sent the second business day
after receipt of your order.
Proceeds from the redemption of shares purchased by check may be delayed
until full payment for the shares has been received and cleared, which may take
up to 15 days from the purchase date.
<PAGE>
12
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
INFORMATION ABOUT YOUR ACCOUNT
EXCHANGING SHARES
Shares of the Fund described in this prospectus may be exchanged for shares
of any other Berger Fund or for shares in the Cash Account Trust Portfolios (the
CAT Portfolios). The CAT Portfolios are three separately managed, unaffiliated
money market funds: the Money Market Portfolio, the Government Securities
Portfolio and the Tax-Exempt Portfolio.
The exchange privilege with the CAT Portfolios does not constitute an
offering or recommendation of the shares of these portfolios by the Berger Funds
or Berger LLC. Berger LLC is compensated for administrative services it performs
with respect to the CAT Portfolios.
When exchanging shares:
- Each account must be registered identically -- have the same signatures
and addresses.
- Each Fund or CAT Portfolio must be legally eligible for sale in your state
of residence.
- You may exchange out of each of the Berger Funds up to four times per
calendar year. At this time, there is no limit on the number of exchanges
permitted out of the CAT Portfolios.
- You may exchange by telephone, online access or mail.
- You are responsible for obtaining and reading the prospectus for the Fund
or CAT Portfolio into which you are exchanging.
- An exchange out of a Berger Fund results in the sale of that Fund's shares
and the purchase of another, normally resulting in a taxable event for
you.
- Exchanges into any new Fund or CAT Portfolio are subject to that Fund's or
Portfolio's initial and subsequent investment minimums.
The Fund may terminate or modify the exchange privilege in the future.
SIGNATURE GUARANTEES / SPECIAL DOCUMENTATION
The Fund uses Signature Guarantees to protect you and the Fund from possible
fraudulent requests for redeemed shares. Your redemption request must be in
writing and accompanied by a Signature Guarantee if:
- Your request exceeds $100,000.
- You request that payment be made to a name other than the one on your
account registration.
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13
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
- You request that payment be mailed to an address which has been changed
within 30 days of your redemption request or to an address other than the
one of record.
- You change or add information relating to your designated bank.
Berger Funds reserve the right to require Signature Guarantees under other
certain circumstances.
You can get a Signature Guarantee from most broker-dealers, national or state
banks, credit unions, federal savings and loan associations or other eligible
institutions. YOU CANNOT OBTAIN A SIGNATURE GUARANTEE FROM A NOTARY PUBLIC.
Make sure the Signature Guarantee appears:
- Together with the signature(s) of all registered owner(s) of the redeemed
shares on the written redemption request.
- On any share certificates you hold for the redeemed shares or on a
separate statement of assignment (stock power) which may be obtained from
a bank or broker.
Additional documents are required for redemptions by corporations, executors,
administrators, trustees and guardians. For instructions, call (800) 551-5849 or
write to the Berger Funds, P.O. Box 219958, Kansas City, MO 64121-9958.
YOUR SHARE PRICE
The price at which you buy, sell or exchange Fund shares is the share price
or net asset value (NAV). The share price for the Investor Shares of the Fund is
determined by adding the Investor Shares' pro rata portion of the total value of
the Fund's investments, cash and other assets, deducting the Investor Shares'
pro rata portion of the Fund's liabilities and the liabilities attributable
directly to the Investor Shares, and then dividing that value by the total
number of the Investor Shares outstanding. Share price is calculated separately
for each class of Fund shares.
The Fund's share price is calculated at the close of the regular trading
session of the New York Stock Exchange (normally 4:00 p.m. New York time) each
day that the Exchange is open. Share price is not calculated on the days that
the Exchange is closed.
FOR A PURCHASE, REDEMPTION OR EXCHANGE OF FUND SHARES, YOUR PRICE IS THE
SHARE PRICE NEXT CALCULATED AFTER YOUR REQUEST IS RECEIVED IN GOOD ORDER BY THE
FUND, ITS AUTHORIZED AGENT OR DESIGNEE. TO RECEIVE A SPECIFIC DAY'S PRICE, YOUR
REQUEST MUST BE RECEIVED BEFORE THE CLOSE OF THE NEW YORK STOCK EXCHANGE ON THAT
DAY.
When the Fund calculates its share price, it values the securities it holds
at market value. Sometimes market quotes for some securities are not available
or are not
<PAGE>
14
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
representative of market value. Examples would be when events occur that
materially affect the value of a security at a time when the security is not
trading or when the securities are illiquid. In that case, securities may be
valued in good faith at fair value, using consistently applied procedures
decided on by the trustees. Money market instruments maturing within 60 days are
valued at amortized cost, which approximates market value. Assets and
liabilities expressed in foreign currencies are converted into U.S. dollars at
the prevailing market rates quoted by one or more banks or dealers shortly
before the close of the Exchange.
The Fund's foreign securities may trade on days that the Exchange is closed
and the Fund's daily share price is not calculated. As a result, the Fund's
daily share price may be affected and you will not be able to purchase or redeem
shares.
OTHER INFORMATION ABOUT YOUR ACCOUNT
SECURITY CONSIDERATIONS
You may give up some level of security by choosing to buy or sell shares by
telephone or online, rather than by mail. The Fund uses procedures designed to
give reasonable assurance that telephone and online instructions are genuine,
including recording the transactions, testing the identity of the shareholder
placing the order and sending prompt written confirmation of transactions to the
shareholder of record. The Fund, and its service providers, are not liable for
acting upon instructions communicated by telephone or online that they believe
to be genuine if these procedures are followed.
CONFIRMATION OF YOUR PURCHASES AND REDEMPTIONS
After any transaction, you will receive written confirmation including the
share price and the dollar amount and number of shares bought or redeemed.
Exception: Shares purchased under Systematic Investment Plans or redeemed under
Systematic Withdrawal Plans will be confirmed quarterly. Partial shares will be
calculated to three decimal places.
SHAREHOLDER REPORTS
To reduce expenses, the Fund may mail only one copy of most financial
reports, prospectuses and proxies to your household, even if you have more than
one account in the Fund. Call (800) 551-5849 if you need additional copies of
financial reports or prospectuses.
SHARE CERTIFICATES
To assist in minimizing administrative costs, share certificates will not be
issued. Records of share ownership are maintained by the Fund's transfer agent
in book entry form. If you are selling shares previously issued in certificate
form, you need to include the certificate along with your redemption or exchange
request. If you have lost your certificate, please call us at (800) 551-5849.
<PAGE>
15
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
PURCHASES THROUGH BROKER-DEALERS
You may buy Fund shares through certain broker-dealers or other financial
organizations, but these organizations may charge you a fee or may have
different minimums for first-time or additional investments which are not
applicable if you buy shares directly from the Fund.
THIRD PARTY ADMINISTRATORS
Certain brokerage firms and other companies may provide administrative
services (such as sub-transfer agency, recordkeeping or shareholder
communications services) to investors purchasing shares of the Fund through
those companies. The Fund's advisor or the Fund (if approved by its trustees)
may pay fees to these companies for their services. These companies may also be
appointed as agents for or authorized by the Fund to accept on its behalf
purchase and redemption requests that are received in good order. Subject to
Fund approval, certain of these companies may be authorized to designate other
entities to accept purchase and redemption orders on behalf of the Fund.
DATE-RELATED INFORMATION
Mutual funds and businesses around the world could be adversely affected if
computers do not properly process date-related information. The Fund's advisor
is addressing these issues for its computers and is getting reasonable
assurances from the Fund's other major service providers that they too are
addressing these issues to preserve smooth functioning of the Fund's trading,
pricing, shareholder account, custodial and other operations. There can be no
assurances, however, that all problems will be avoided.
These computer problems could also adversely affect the Fund's investments.
Improperly functioning computers may disrupt securities markets generally or
result in overall economic uncertainty. Individual companies may also be
adversely affected by the cost of fixing their computers, which could be
substantial. The Fund's investment manager considers these issues when
evaluating investments for the Fund.
REDEMPTIONS IN-KIND
The Fund intends to redeem its shares only for cash, although in order to
protect the interest of remaining shareholders, it retains the right to redeem
its shares in-kind under unusual circumstances. In-kind payment means payment
will be made to you in portfolio securities rather than cash. If this occurs,
you will incur transaction costs if you sell the securities for cash. You may
have difficulty selling the securities and recovering the amount of your
redemption if the securities are illiquid.
<PAGE>
16
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
ACCOUNT MINIMUMS
The Fund will charge all shareholder accounts with a balance of less than
$2,000 that are not making automatic monthly investments an annual fee of $10.
This charge is designed to help offset the proportionately higher costs of
maintaining small accounts.
This charge will apply to accounts that have been over $2,000 at some point
in time only if the balance has dropped below this amount because shares were
redeemed, not because the share value declined.
Shares in accounts that do not meet the minimum balance requirement
applicable to them as described below may also be subject to involuntary
redemption by the Fund.
REDEMPTIONS BY THE FUND OF CERTAIN ACCOUNTS
To reduce its expenses, the Fund may involuntarily redeem the shares in your
account if your balance drops below $2,000 -- but only if it drops below this
amount because you have redeemed shares, not because the share value has
declined. You will be given 60 days' notice before the Fund undertakes any
involuntary redemption. During that time, you may buy more shares to bring your
account above the minimum.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS OF INCOME AND GAINS
Unless you tell us that you want to receive your distributions in cash, they
will be reinvested automatically in Fund shares. The Fund generally makes two
different kinds of distributions:
- Capital gains from the sale of portfolio securities held by the Fund. The
Fund will distribute any net realized capital gains annually, normally in
December.
- Net investment income from interest or dividends received on securities
held by the Fund. The Fund will distribute its investment income annually,
normally in December.
YOUR TAXES
You generally will owe tax on amounts distributed to you by the Fund in any
non-retirement account whether you reinvest them in additional shares or receive
them in cash.
Distributions of gains from the sale of assets held by the Fund for more than
one year generally are taxable to you at the applicable long-term capital gains
rate, regardless of how long you have owned your Fund shares. Distributions from
other sources generally are taxed as ordinary income.
<PAGE>
17
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
Distributions made by the Fund to you will normally be capital gains. A
portion of those gains may be net short-term capital gains, which are taxed as
ordinary income. The Fund generally will not distribute net investment income,
although any net investment income that is generated as a by-product of managing
its portfolio will be distributed to you.
If you redeem Fund shares that have appreciated in value, you will have a
taxable gain upon redemption. Exchanges are treated as a redemption and purchase
for tax purposes. Therefore, you will also have a taxable gain if you exchange
shares that have appreciated in value.
ADDITIONAL TAX INFORMATION
You should consult your own tax advisor about your particular situation. For
more information about other tax matters, including backup withholding for
certain taxpayers and other tax aspects of redemptions, see the SAI.
TAX-SHELTERED RETIREMENT PLANS
The Fund offers several tax-qualified retirement plans for individuals,
businesses and nonprofit organizations. For information about establishing an
IRA, Roth IRA, profit-sharing or money purchase pension plan, 403(b) Custodial
Account, SEP-IRA, SIMPLE IRA account or other retirement plans, please call
(800) 551-5849 or write to the Berger Funds, P.O. Box 219958, Kansas City, MO
64121-9958. Trustees for existing 401(k) or other plans interested in using Fund
shares as an investment or investment alternative in their plans are invited to
call the Fund at (800) 259-2820.
ORGANIZATION OF THE FUND
INVESTMENT MANAGERS
The following companies provide investment management and administrative
services to the Fund. During the last fiscal year, the Fund paid Berger LLC an
investment advisory fee at the annual rate of 0.90% of the Fund's average daily
net assets. Effective October 1, 1999, the advisory fee for the Fund was reduced
and the administrative fee charged to the Fund was eliminated. These fee
reductions are reflected earlier in this prospectus under "Fund Expenses."
BERGER LLC (Berger) (210 University Blvd., Suite 900, Denver, CO 80206) is
the Fund's investment advisor. Berger serves as investment advisor, sub-advisor,
administrator or sub-administrator to mutual funds and institutional investors.
Berger has been in the investment advisory business for 25 years. When acting as
investment advisor, Berger is responsible for managing the investment operations
of the Fund. Berger also provides administrative services to the Fund.
PERKINS, WOLF, MCDONNELL & COMPANY (PWM) (53 West Jackson Boulevard,
Suite722, Chicago, IL 60604) served as investment advisor to the Berger Small
Cap
<PAGE>
18
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
Value Fund (then known as The Omni Investment Fund) from 1987 to February 1997,
when PWM became the sub-advisor to the Fund. As sub-advisor, PWM provides
day-to-day management of the Fund's investment operations.
Robert H. Perkins has been the investment manager for the Berger Small Cap
Value Fund since the Fund's inception. Mr. Perkins has been an investment
manager since 1970 and serves as President and a director of PWM. Thomas Perkins
has been an investment manager since 1974 and joined PWM as a portfolio manager
in 1998. Thomas Perkins assumed co-management of the Fund in January 1999.
PORTFOLIO TURNOVER
Portfolio changes are made whenever the Fund's investment manager believes
that the Fund's goal could be better achieved by investment in another security,
regardless of portfolio turnover. At times, portfolio turnover for the Fund may
exceed 100% per year. A turnover rate of 100% means the securities owned by the
Fund were replaced once during the year. Higher turnover rates may result in
higher brokerage costs to the Fund and in higher net taxable gains for you as an
investor. The Fund's portfolio turnover rate can be found under the heading
"Financial Highlights for the Fund."
12b-1 ARRANGEMENTS
The Fund is a "no-load" fund, meaning that you pay no sales load or
commissions when you buy or sell Fund shares. However, the Fund has adopted a
12b-1 plan for its Investor Shares class, permitting it to pay a fee in
connection with distribution of those shares. Berger LLC is entitled to be paid
a fee under the plan of 0.25% of the Fund's average daily net assets
attributable to the Investor Shares. Because this fee is paid on an ongoing
basis, this may result in the cost of your investment increasing and over time
may cost you more than other types of sales charges. The fee may be used for
such things as marketing and promotion, compensation to dealers and others who
provide distribution and administrative services, and shareholder support
services (such as routine requests for information).
SPECIAL FUND STRUCTURE
The Fund currently has two classes of shares. The Investor Shares are offered
through this prospectus and are available to the general public. The other class
of shares, Institutional Shares, are offered through a separate prospectus and
are designed for investors who maintain a minimum account balance of $250,000.
Each class of shares has its own expenses so that share price, performance and
distributions will differ between classes. The 12b-1 plan adopted by the Fund
applies only to the Investor Shares. For more information on Institutional
Shares, please call (800) 259-2820. For more information on the multi-class fund
structure, see the SAI.
<PAGE>
19
Berger Small Cap Value Fund
Investor Shares
FINANCIAL HIGHLIGHTS FOR THE FUND
These financial highlights are intended to help you understand the Fund's
financial performance for the periods shown. Certain information reflects
financial results for a single Fund share. Total return shows you how much an
investment in the Fund increased or decreased during each period. Except as
otherwise noted, PricewaterhouseCoopers LLP, independent accountants, audited
this information. Their report is included in the Fund's annual report, which is
available without charge upon request.
BERGER SMALL CAP VALUE FUND -- INVESTOR SHARES
For a Share Outstanding Throughout the Periods
<TABLE>
<CAPTION>
PERIOD FROM
YEARS ENDED FEBRUARY 14,
SEPTEMBER 30, 1997(1) TO
---------------- SEPTEMBER 30,
1999 1998 1997
<S> <C> <C> <C>
- -----------------------------------------------------------------------
Net asset value, beginning of
period $ 17.58 $ 22.28 $ 17.24
- -----------------------------------------------------------------------
From investment operations
Net investment income (loss) (0.02) 0.42 0.03
Net realized and unrealized gains
(losses) on investments and
foreign currency transactions 4.26 (2.58) 5.01
- -----------------------------------------------------------------------
Total from investment
operations 4.24 (2.16) 5.04
- -----------------------------------------------------------------------
Less dividends and distributions
Dividends (from net investment
income) (0.07) (0.17) --
Distributions (from capital
gains) (0.81) (2.37) --
- -----------------------------------------------------------------------
Total dividends and
distributions (0.88) (2.54) --
- -----------------------------------------------------------------------
Net asset value, end of period $ 20.94 $ 17.58 $ 22.28
=======================================================================
Total Return(2) 24.69% (10.98)% 29.23%
=======================================================================
Ratios/Supplemental Data:
Net assets, end of period (in
thousands) $374,063 $108,465 $ 55,211
Net expense ratio to average net
assets(3) 1.37% 1.56% 1.66%(4)
Ratio of net income (loss) to
average net assets 1.36% 0.87% 0.60%(4)
Gross expense ratio to average net
assets 1.37% 1.56% 1.66%(4)
Portfolio turnover rate(2) .66% 69% 81%
</TABLE>
1. Commencement of investment operations for Investor Shares
2. Not annualized
3. Net expenses represent gross expenses reduced by fees waived and/or
reimbursed by the Advisor.
4. Annualized
<PAGE>
20
BERGER SMALL CAP VALUE FUND
INVESTOR SHARES
The following supplemental financial highlights are for the Berger Small Cap
Value Fund for periods before February 14, 1997, when the Fund first adopted
share classes and began offering the Investor Shares. Therefore, the 0.25% 12b-1
fee paid by the Investor Shares is not reflected in the data on the table.
Except for information for the period from January 1, 1997 through
February 14, 1997, the information in the table was audited by the Fund's prior
independent accountants. The information for the period from January 1, 1997
through February 14, 1997 is unaudited.
BERGER SMALL CAP VALUE FUND
SUPPLEMENTAL FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Periods
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1997
TO FEBRUARY 14, YEARS ENDED DECEMBER 31,
1997(2) ------------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Per Share Data:(3)
Net asset value,
beginning of period $ 16.48 $ 14.57 $ 12.75 $ 13.99 $ 13.39 $ 11.39 $ 9.23 $ 12.19
- ------------------------------------------------------------------------------------------------------------------
From investment
operations
Net investment income
(loss) (0.02) 0.12 0.09 (0.01) 0.03 0.09 0.14 0.28
Net realized and
unrealized gains
(losses) on investments 0.78 3.62 3.23 0.91 2.14 2.14 2.16 (2.95)
- ------------------------------------------------------------------------------------------------------------------
Total from
investment
operations 0.76 3.74 3.32 0.90 2.17 2.23 2.30 (2.67)
- ------------------------------------------------------------------------------------------------------------------
Less dividends and
distributions
Dividends (from net
investment income) 0.00 (0.11) (0.09) 0.00 (0.03) (0.10) (0.14) (0.29)
Distributions (from
capital gains) 0.00 (1.72) (1.41) (2.14) (1.54) (0.13) 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------
Total dividends and
distributions 0.00 (1.83) (1.50) (2.14) (1.57) (0.23) (0.14) (0.29)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 17.24 $ 16.48 $ 14.57 $ 12.75 $ 13.99 $ 13.39 $ 11.39 $ 9.23
==================================================================================================================
Total Return(4) 4.61% 25.58% 26.07% 6.74% 16.25% 19.59% 25.01% (21.94)%
==================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 38,622 $36,041 $ 31,833 $18,270 $ 16,309 $14,007 $11,940 $ 9,839
Ratio of net income
(loss) to average net
assets (0.87)%(5) 0.69% 0.64% (0.04)% 0.18% 0.73% 1.24% 2.34%
Gross expenses to average
net assets 2.04%(5) 1.48% 1.64% 1.43% 1.31% 1.41% 1.52% 1.84%
Portfolio turnover rate 27% 69% 90% 125% 108% 105% 130% 146%
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1989 1988 1987(1)
<S> <C> <C> <C>
- -------------------------
Per Share Data:(3)
Net asset value,
beginning of period $ 11.21 $ 10.06 $ 11.33
- -------------------------
From investment
operations
Net investment income
(loss) 0.23 0.24 0.21
Net realized and
unrealized gains
(losses) on investments 2.71 1.77 (0.29)
- -------------------------
Total from
investment
operations 2.94 2.01 (0.08)
- -------------------------
Less dividends and
distributions
Dividends (from net
investment income) (0.22) (0.24) (0.20)
Distributions (from
capital gains) (1.74) (0.62) (0.99)
- -------------------------
Total dividends and
distributions (1.96) (0.86) (1.19)
- -------------------------
Net asset value, end of
period $ 12.19 $ 11.21 $ 10.06
=========================
Total Return(4) 26.44% 20.09% (0.68)%
=========================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 13,576 $ 9,976 $ 6,748
Ratio of net income
(loss) to average net
assets 1.85% 2.33% 1.87%(5)
Gross expenses to average
net assets 1.78% 1.44% 1.69%(5)
Portfolio turnover rate 118% 103% 189%
</TABLE>
1. Covers the period from February 1, 1987 to December 31, 1987. Effective
October 20, 1987, the Fund became publicly registered under the Investment
Company Act of 1940. Prior thereto, its shares were not publicly offered.
2. Commencement of Investor Shares class.
3. All per share amounts prior to December 31, 1994 have been adjusted for a
10 for 1 share split which occurred September 30, 1994.
4. Not annualized for periods of less than one full year.
5. Annualized.
<PAGE>
FOR MORE INFORMATION:
Additional information about the Fund's investments is available in the
Fund's semi-annual and annual reports to shareholders. The Fund's annual
report contains a discussion of the market conditions and investment
strategies that affected the Fund's performance over the past year.
You may wish to read the Statement of Additional Information (SAI) for more
information on the Fund and the securities it invests in. The SAI is
incorporated into this prospectus by reference, which means that it is
considered to be part of the prospectus.
You can get free copies of the annual and semi-annual reports and the SAI,
request other information or get answers to your questions about the Fund by
writing or calling the Fund at:
Berger Funds P.O. Box 219958 Kansas City, MO 64121-9958
(800) 333-1001
bergerfunds.com
Text-only versions of Fund documents can be viewed online or downloaded from
the EDGAR database on the SEC's web site at sec.gov.
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington DC. For information on the operation of the Public Reference Room,
call (202) 942-8090. Copies of documents may also be obtained, after paying a
duplicating fee, by sending your request to the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, DC 20549-6009.
INVESTMENT COMPANY ACT FILE NUMBER:
Berger Omni Investment Trust 811-4273
(Berger Small Cap Value Fund - Investor Shares) SCVPROS
<PAGE>
BERGER SMALL CAP VALUE FUND
(A SERIES OF BERGER OMNI INVESTMENT TRUST)
INVESTOR SHARES
STATEMENT OF ADDITIONAL INFORMATION
SHAREHOLDER SERVICES: 1-800-551-5849
This Statement of Additional Information ("SAI") about the Berger
Small Cap Value Fund (the "Fund") is not a prospectus. It relates to the
Prospectus describing the Investor Shares of the Fund, dated January 31, 2000,
as it may be amended or supplemented from time to time, which may be obtained by
writing the Fund at P.O. Box 5005, Denver, Colorado 80217, or calling
1-800-333-1001.
The Fund is a "no load" mutual fund, meaning that a buyer pays no
commissions or sales charge when buying or redeeming shares of the Fund,
although the Fund pays certain costs of distributing its Investor Shares. See
"Section 5, Expenses of the Fund - 12b-1 Plan" below. This SAI provides further
description of the Fund.
The financial statements of the Fund for the fiscal year ended
September 30, 1999, and the related Report of Independent Accountants on those
statements, are incorporated into this SAI by reference from the Berger Fund's
1999 Annual Report to Shareholders dated September 30, 1999. A copy of that
Annual Report is available, without charge, upon request, by calling
1-800-333-1001.
DATED JANUARY 31, 2000
<PAGE>
TABLE OF CONTENTS
&
CROSS-REFERENCES TO PROSPECTUS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SECTION PAGE CROSS-REFERENCES TO
NO. RELATED DISCLOSURES
IN PROSPECTUS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Introduction 1 Table of Contents
- -----------------------------------------------------------------------------------------------------------------------
1. Investment Strategies and Risks of the Fund 1 Berger Small Cap Value Fund;
The Fund's Goal and Principal Investment
Strategies and Principal Risks
- -----------------------------------------------------------------------------------------------------------------------
2. Investment Restrictions 8 Berger Small Cap Value Fund; The Fund's Goal and
Principal Investment Strategies and Principal
Risks; Investment Techniques, Securities and the
Associated Risks
- -----------------------------------------------------------------------------------------------------------------------
3. Management of the Fund 10 Organization of the Berger Funds Family
- -----------------------------------------------------------------------------------------------------------------------
4. Investment Advisor and Sub-Advisor 13 Organization of the Berger Funds Family
- -----------------------------------------------------------------------------------------------------------------------
5. Expenses of the Fund 16 Fund expenses; Organization of the Fund Family;
Financial Highlights for the Fund
- -----------------------------------------------------------------------------------------------------------------------
6. Brokerage Policy 19 Organization of the Fund
- -----------------------------------------------------------------------------------------------------------------------
7. How to Purchase and Redeem Shares in the Fund 21 Buying Shares; Selling (Redeeming) Shares
- -----------------------------------------------------------------------------------------------------------------------
8. How the Net Asset Value is Determined 22 Your Share Price
- -----------------------------------------------------------------------------------------------------------------------
9. Income Dividends, Capital Gains Distributions and Tax 23 Distributions and Taxes
Treatment
- -----------------------------------------------------------------------------------------------------------------------
10. Suspension of Redemption Rights 24 Other Information About Your Account
- -----------------------------------------------------------------------------------------------------------------------
11. Tax-Sheltered Retirement Plans 25 Tax-Sheltered Retirement Plans
- -----------------------------------------------------------------------------------------------------------------------
12. Exchange Privilege and Systematic Withdrawal Plan 27 Exchanging Shares
- -----------------------------------------------------------------------------------------------------------------------
13. Performance Information 28 Financial Highlights for the Fund
- -----------------------------------------------------------------------------------------------------------------------
14. Additional Information 29 Organization of the Fund; Special Fund Structure
- -----------------------------------------------------------------------------------------------------------------------
Financial Information 32 Financial Highlights for the Fund
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
-i-
<PAGE>
INTRODUCTION
The Fund is a series of Berger Omni Investment Trust which was
reorganized as a Massachusetts business trust (the "Trust") in May 1990 from a
Delaware corporation. Prior to February 14, 1997, the Fund and the Trust were
known as The Omni Investment Fund. Fund is a mutual fund, or an open-end,
management investment company. The Fund is a diversified fund.
1. INVESTMENT STRATEGIES AND RISKS OF THE FUND
The Prospectus discusses the investment objective of the Fund and the
principal investment strategies employed to achieve that objective. It also
describes the principal risks of investing in the Fund.
This section contains supplemental information concerning the types of
securities and other instruments in which the Fund may invest, the investment
policies and portfolio strategies that the Fund may utilize and certain risks
attendant to those investments, policies and strategies.
COMMON AND PREFERRED STOCKS. Stocks represent shares of ownership in a
company. Generally, preferred stock has a specified dividend and ranks after
bonds and before common stocks in its claim on income for dividend payments and
on assets should the company be liquidated. After other claims are satisfied,
common stockholders participate in company profits on a pro-rata basis. Profits
may be paid out in dividends or reinvested in the company to help it grow.
Increases and decreases in earnings are usually reflected in a company's stock
price, so common stocks generally have the greatest appreciation and
depreciation potential of all corporate securities. While most preferred stocks
pay dividends, the Fund may purchase preferred stock where the issuer has
omitted, or is in danger of omitting, payment of its dividends. Such investments
would be made primarily for their capital appreciation potential. All
investments in stocks are subject to market risk, meaning that their prices may
move up and down with the general stock market, and that such movements might
reduce their value.
DEBT SECURITIES. Debt securities (such as bonds or debentures) are
fixed-income securities which bear interest and are issued by corporations or
governments. The issuer has a contractual obligation to pay interest at a stated
rate on specific dates and to repay principal on a specific maturity date. In
addition to market risk, debt securities are generally subject to two other
kinds of risk: credit risk and interest rate risk. Credit risk refers to the
ability of the issuer to meet interest or principal payments as they come due.
The lower the rating given a security by a rating service (such as Moody's
Investor Service ("Moody's") and Standard & Poor's ("S&P")), the greater the
credit risk the rating service perceives with respect to that security. The Fund
will not purchase any nonconvertible securities rated below investment grade (Ba
or lower by Moody's, BB or lower by S&P). In cases where the ratings assigned by
more than one rating agency differ, the Fund will consider the security as rated
in the higher category. If nonconvertible securities purchased by the Fund are
downgraded to below investment grade following purchase, the trustees of the
Fund, in consultation with the Fund's sub-advisor, will determine what action,
if any, is appropriate in light of all relevant circumstances. For a further
discussion of debt security ratings, see Appendix A to this SAI.
Interest rate risk refers to the fact that the value of fixed-income
securities (like debt securities) generally fluctuate in response to changes in
interest rates. A decrease in interest rates will generally result in an
increase in the price of fixed-income securities held by the Fund. Conversely,
during periods of rising interest rates, the value of fixed-income securities
held by the Fund will generally decline. Longer-term securities are generally
more sensitive to interest rate changes and are more volatile than shorter-term
securities, but they generally offer higher yields to compensate investors for
the associated risks.
Certain debt securities can also present prepayment risk. For example,
a security may contain redemption and call provisions. If an issuer exercises
these provisions when interest rates are declining, the Fund could sustain
investment losses as well as have to reinvest the proceeds from the security at
lower interest rates, resulting in a decreased return for the Fund.
-1-
<PAGE>
CONVERTIBLE SECURITIES. The Fund may also purchase debt or equity
securities which are convertible into common stock when the sub-advisor believes
they offer the potential for a higher total return than nonconvertible
securities. While fixed-income securities generally have a priority claim on a
corporation's assets over that of common stock, some of the convertible
securities which the Fund may hold are high-yield/high-risk securities that are
subject to special risks, including the risk of default in interest or principal
payments which could result in a loss of income to the Fund or a decline in the
market value of the securities. Convertible securities often display a degree of
market price volatility that is comparable to common stocks. The credit risk
associated with convertible securities generally is reflected by their ratings
by organizations such as Moody's or S&P or a similar determination of
creditworthiness by the Fund's sub-advisor. The Fund has no pre-established
minimum quality standards for convertible securities and may invest in
convertible securities of any quality, including lower rated or unrated
securities. However, the Fund will not invest in any security in default at the
time of purchase and the Fund will invest less than 20% of the market value of
its assets at the time of purchase in convertible securities rated below
investment grade. If convertible securities purchased by the Fund are downgraded
following purchase, or if other circumstances cause 20% or more of the Fund's
assets to be invested in convertible securities rated below investment grade,
the trustees of the Fund, in consultation with the sub-advisor, will determine
what action, if any, is appropriate in light of all relevant circumstances. For
a further discussion of debt security ratings, see Appendix A to this SAI.
SECURITIES OF SMALLER COMPANIES. The Fund may invest in securities of
companies with small or mid-sized market capitalizations. Market capitalization
is defined as total current market value of a company's outstanding common
stock. Investments in companies with smaller market capitalizations may involve
greater risks and price volatility (that is, more abrupt or erratic price
movements) than investments in larger, more mature companies since smaller
companies may be at an earlier stage of development and may have limited product
lines, reduced market liquidity for their shares, limited financial resources or
less depth in management than larger or more established companies. Smaller
companies also may be less significant factors within their industries and may
have difficulty withstanding competition from larger companies. While smaller
companies may be subject to these additional risks, they may also realize more
substantial growth than larger or more established companies.
SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. The Fund may
invest in securities of companies with limited operating histories. The Fund
considers these to be securities of companies with a record of less than three
years' continuous operation, even including the operations of any predecessors
and parents. (These are sometimes referred to as "unseasoned issuers.") These
companies by their nature have only a limited operating history which can be
used for evaluating the company's growth prospects. As a result, investment
decisions for these securities may place a greater emphasis on current or
planned product lines and the reputation and experience of the company's
management and less emphasis on fundamental valuation factors than would be the
case for more mature companies. In addition, many of these companies may also be
small companies and involve the risks and price volatility associated with
smaller companies.
INITIAL PUBLIC OFFERINGS. The Fund may invest in a company's
securities at the time the company first offers securities to the public, that
is, at the time of the company's initial public offering or IPO. Although
companies can be any age or size at the time of their IPOs, they are often
smaller and have a limited operating history, which involve a greater potential
for the value of their securities to be impaired following the IPO. See
"Securities of Smaller Companies" and "Securities of Companies with Limited
Operating Histories" above.
Investors in IPOs can be adversely affected by substantial dilution in
the value of their shares, by sales of additional shares and by concentration of
control in existing management and principal shareholders. In addition, all of
the factors that affect stock market performance may have a greater impact on
the shares of IPO companies.
The price of a company's securities may be highly unstable at the
time of its IPO and for a period thereafter due to market psychology
prevailing at the time of the IPO, the absence of a prior public market, the
small number of shares available and limited availability of investor
information. As a result of this or other factors, the Fund's or sub-advisor
might decide to sell an IPO security more quickly than it would otherwise,
which may result in a significant gain or loss and greater transaction costs
to the Fund. Any
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gains from shares held for 12 months or less will be treated as short-term
gains, taxable as ordinary income to the Fund's shareholders. In addition, IPO
securities may be subject to varying patterns of trading volume and may, at
times, be difficult to sell without an unfavorable impact on prevailing prices.
The effect of an IPO investment can have a magnified impact on the
Fund's performance when the Fund's asset base is small. Consequently, IPOs
may constitute a significant portion of the Fund's returns particularly when
the Fund is small. Since the number of securities issued in an IPO is limited,
it is likely that IPO securities will represent a smaller component of the
Fund's assets as it increases in size, and therefore have a more limited effect
on the Fund's performance.
There can be no assurance that IPOs will continue to be available
for the Fund to purchase. The number or quality of IPOs available for
purchase by the Fund may vary, decrease or entirely disappear. In some cases,
the Fund may not be able to purchase IPOs at the offering price, but may have
to purchase the shares in the aftermarket at a price greatly exceeding the
offering price, making it more difficult for the Fund to realize a profit.
The advisor's IPO trade allocation procedures govern which funds
and other advised accounts participate in the allocation of any IPO. See the
heading "Trade Allocations" under Section 4 below. Under the IPO allocation
procedures of Berger LLC, the Fund generally will not participate in an IPO
if the securities available for allocation to the Fund are insignificant
relative to the Fund's net assets. As a result, any fund or account whose
assets are very large is not likely to participate in the allocation of many
IPOs.
FOREIGN SECURITIES. The Fund may invest in foreign securities, which
may be traded in foreign markets and denominated in foreign currency. The Fund's
investments may also include American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs) which are similar to ADRs, in bearer form, designed
for use in the European securities markets, and in Global Depositary Receipts
(GDRs).
Investments in foreign securities involve some risks that are
different from the risks of investing in securities of U.S. issuers, such as the
risk of adverse political, social, diplomatic and economic developments and,
with respect to certain countries, the possibility of expropriation, taxes
imposed by foreign countries or limitations on the removal of monies or other
assets of the Fund. Moreover, the economies of individual foreign countries will
vary in comparison to the U.S. economy in such respects as growth of gross
domestic product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position. Securities of some foreign
companies, particularly those in developing countries, are less liquid and more
volatile than securities of comparable domestic companies. A developing country
generally is considered to be in the initial stages of its industrialization
cycle. Investing in the securities of developing countries may involve exposure
to economic structures that are less diverse and mature, and to political
systems that can be expected to have less stability than developed countries.
There also may be less publicly available information about foreign
issuers and securities than domestic issuers and securities, and foreign issuers
generally are not subject to accounting, auditing and financial reporting
standards, requirements and practices comparable to those applicable to domestic
issuers. Also, there is generally less government supervision and regulation of
exchanges, brokers, financial institutions and issuers in foreign countries than
there is in the U.S. Foreign financial markets typically have substantially less
volume than U.S. markets. Foreign markets also have different clearance and
settlement procedures and, in certain markets, delays or other factors could
make it difficult to effect transactions, potentially causing the Fund to
experience losses or miss investment opportunities.
Costs associated with transactions in foreign securities are generally
higher than with transactions in U.S. securities. The Fund will incur greater
costs in maintaining assets in foreign jurisdictions and in buying and selling
foreign securities generally, resulting in part from converting foreign
currencies into U.S. dollars. In addition, the Fund might have greater
difficulty taking appropriate legal action with respect to foreign investments
in non-U.S. courts than with respect to domestic issuers in U.S. courts, which
may heighten the risk of possible losses through the holding of securities by
custodians and securities depositories in foreign countries.
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When the Fund is invested in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the value of the investments in its portfolio and the
unrealized appreciation or depreciation of investments insofar as U.S. investors
are concerned. If the foreign currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate of the foreign currency
against the U.S. dollar would adversely affect the dollar value of the foreign
securities. Foreign currency exchange rates are determined by forces of supply
and demand on the foreign exchange markets, which are in turn affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation and other factors.
PASSIVE FOREIGN INVESTMENT COMPANIES (PFICS). The Fund may purchase
the securities of certain companies considered Passive Foreign Investment
Companies (PFICs) under U.S. tax laws. For certain types of PFICs, in addition
to bearing their proportionate share of the Fund's expenses (management fees and
operating expenses), shareholders will also indirectly bear similar expenses of
such PFIC. PFIC investments also may be subject to less favorable U.S. tax
treatment, as discussed in Section 9 below.
ILLIQUID SECURITIES. The Fund is authorized to invest in securities
which are illiquid or not readily marketable because, based upon their nature or
the market for such securities, no ready market is available. However, the Fund
will not purchase any such security, the purchase of which would cause the Fund
to invest more than 10% of its net assets, measured at the time of purchase, in
illiquid securities. Investments in illiquid securities involve certain risks to
the extent that the Fund may be unable to dispose of such a security at the time
desired or at a reasonable price or, in some cases, may be unable to dispose of
it at all. If securities become illiquid following purchase or other
circumstances cause more than 10% of the Fund's net assets to be invested in
illiquid securities, the trustees of the Fund, in consultation with the Fund's
sub-advisor, will determine what action, if any, is appropriate in light of all
relevant circumstances. Repurchase agreements maturing in more than seven days
will be considered as illiquid for purposes of this restriction.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements
with various financial organizations, including commercial banks, registered
broker-dealers and registered government securities dealers. A repurchase
agreement is an agreement under which the Fund acquires a debt security
(generally a debt security issued or guaranteed by the U.S. government or an
agency thereof, a banker's acceptance or a certificate of deposit) from a
commercial bank, broker or dealer, subject to resale to the seller at an agreed
upon price and date (normally, the next business day). A repurchase agreement
may be considered a loan collateralized by securities. The resale price reflects
an agreed upon interest rate effective for the period the instrument is held by
the Fund and is unrelated to the interest rate on the underlying instrument. In
these transactions, the securities acquired by the Fund (including accrued
interest earned thereon) must have a total value equal to or in excess of the
value of the repurchase agreement and are held by the Fund's custodian bank
until repurchased. In addition, the trustees will establish guidelines and
standards for review by the sub-advisor of the creditworthiness of any bank,
broker or dealer party to a repurchase agreement with the Fund. The Fund will
not enter into a repurchase agreement maturing in more than seven days if as a
result more than 10% of the Fund's net assets would be invested in such
repurchase agreements and other illiquid securities.
These transactions must be fully collateralized at all times by debt
securities (generally a security issued or guaranteed by the U.S. Government or
an agency thereof, a banker's acceptance or a certificate of deposit), but
involve certain risks, such as credit risk to the Fund if the other party
defaults on its obligation and the Fund is delayed or prevented from liquidating
the collateral. For example, if the other party to the agreement defaults on its
obligation to repurchase the underlying security at a time when the value of the
security has declined, the Fund may incur a loss upon disposition of the
security. If the other party to the agreement becomes insolvent and subject to
liquidation or reorganization under the Bankruptcy Code or other laws, a court
may determine that the underlying security is collateral for a loan by the Fund
not within the control of the Fund and therefore the realization by the Fund on
such collateral may automatically be stayed and delayed. Further, it is possible
that the Fund may not be able to substantiate its interest in the underlying
security and may be deemed an unsecured creditor of the other party to the
agreement. The Fund expects that these risks can be controlled through careful
monitoring procedures.
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WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase and
sell securities on a when-issued or delayed delivery basis. However, the Fund
currently does not intend to purchase or sell securities on a when-issued or
delayed delivery basis, if as a result more than 5% of its total assets taken at
market value at the time of purchase would be invested in such securities.
When-issued or delayed delivery transactions arise when securities (normally,
equity obligations of issuers eligible for investment by the Fund) are purchased
or sold by the Fund with payment and delivery taking place in the future in
order to secure what is considered to be an advantageous price or yield.
However, the yield available on a comparable security when delivery takes place
may vary from the yield on the security at the time that the when-issued or
delayed delivery transaction was entered into. Any failure to consummate a
when-issued or delayed delivery transaction may result in the Fund missing the
opportunity of obtaining a price or yield considered to be advantageous.
When-issued and delayed delivery transactions may generally be expected to
settle within one month from the date the transactions are entered into, but in
no event later than 90 days. However, no payment or delivery is made by the Fund
until it receives delivery or payment from the other party to the transaction.
When the Fund purchases securities on a when-issued basis, it will
maintain in a segregated account with its custodian cash, U.S. government
securities or other liquid assets having an aggregate value equal to the amount
of such purchase commitments, until payment is made. If necessary, additional
assets will be placed in the account daily so that the value of the account will
equal or exceed the amount of the Fund's purchase commitments.
SPECIAL SITUATIONS. The Fund may also invest in "special situations."
Special situations are companies that have recently experienced or are
anticipated to experience a significant change in structure, management,
products or services which may significantly affect the value of their
securities. Examples of special situations are companies being reorganized or
merged, companies emerging from bankruptcy, companies introducing unusual new
products or which enjoy particular tax advantages. Other examples are companies
experiencing changes in senior management, extraordinary corporate events,
significant changes in cost or capital structure or which are believed to be
probable takeover candidates. The opportunity to invest in special situations,
however, is limited and depends in part on the market's assessment of these
companies and their circumstances. By its nature, a "special situation" company
involves to some degree a break with the company's past experience. This creates
greater uncertainty and potential risk of loss than if the company were
operating according to long-established patterns. In addition, stocks of
companies in special situations may decline or not appreciate as expected if an
anticipated change or development does not occur or is not assessed by the
market as favorably as expected.
HEDGING TRANSACTIONS. As described in the Prospectus, the Fund is
authorized to make limited use of certain types of options, but only for the
purpose of hedging, that is, protecting against market risk due to market
movements that may adversely affect the value of the Fund's securities or the
price of securities that the Fund is considering purchasing. The utilization of
options is also subject to policies and procedures which may be established by
the trustees from time to time. In addition, the Fund is not required to hedge.
Decisions regarding hedging are subject to the sub-advisor's judgment of the
cost of the hedge, its potential effectiveness and other factors the sub-advisor
considers pertinent.
A hedging transaction may partially protect the Fund from a decline in
the value of a particular security or its portfolio generally, although hedging
may also limit the Fund's opportunity to profit from favorable price movements,
and the cost of the transaction will reduce the potential return on the security
or the portfolio. In addition, hedging transactions do not eliminate
fluctuations in the prices of the underlying securities the Fund owns or intends
to acquire.
Use of these instruments by the Fund involves the potential for a loss
that, in the case of a call option written by the Fund, may exceed the premium
received for the option. However, the Fund is permitted to use such instruments
for hedging purposes only, and only if the aggregate amount of its obligations
under these contracts does not exceed the total market value of the assets the
Fund is attempting to hedge, such as a portion or all of its exposure to equity
securities. To help ensure that the Fund will be able to meet its obligations
under options written by the Fund, the Fund will be required to maintain liquid
assets in a segregated account with its custodian bank or to set aside portfolio
securities to "cover" its position in these contracts.
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The principal risks of the Fund utilizing options are: (a) losses
resulting from market movements not anticipated by the Fund; (b) possible
imperfect correlation between movements in the prices of options and movements
in the prices of the securities or positions hedged or used to cover such
positions; (c) lack of assurance that a liquid secondary market will exist for
any particular options at any particular time, and possible exchange-imposed
price fluctuation limits, either of which may make it difficult or impossible to
close a position when so desired; and (d) the need for additional information
and skills beyond those required for the management of a portfolio of
traditional securities. In addition, when the Fund enters into an
over-the-counter contract with a counterparty, the Fund will assume counterparty
credit risk, that is, the risk that the counterparty will fail to perform its
obligations, in which case the Fund could be worse off than if the contract had
not been entered into.
The following is additional information concerning the options which
the Fund may utilize, provided that no more than 5% of the Fund's net assets at
the time the contract is entered into may be used for premiums paid for the
purchase of options. In addition, the Fund may only write call options that are
covered and only up to 10% of the Fund's net assets. The following information
should be read in conjunction with the information concerning the Fund's use of
options and the risks of such instruments contained in the Prospectus.
OPTIONS ON SECURITIES AND SECURITIES INDICES. The Fund may buy or sell
put or call options and write covered call options on securities that are traded
on United States or foreign securities exchanges or over-the-counter. Buying an
option involves the risk that, during the option period, the price of the
underlying security will not increase (in the case of a call) to above the
exercise price, or will not decrease (in the case of a put) to below the
exercise price, in which case the option will expire without being exercised and
the holder would lose the amount of the premium. Writing a call option involves
the risk of an increase in the market value of the underlying security, in which
case the option could be exercised and the underlying security would then be
sold by the Fund to the option holder at a lower price than its current market
value and the Fund's potential for capital appreciation on the security would be
limited to the exercise price. Moreover, when the Fund writes a call option on a
securities index, the Fund bears the risk of loss resulting from imperfect
correlation between movements in the price of the index and the price of the
securities set aside to cover such position. Although they entitle the holder to
buy equity securities, call options to purchase equity securities do not entitle
the holder to dividends or voting rights with respect to the underlying
securities, nor do they represent any rights in the assets of the issuer of
those securities.
A call option written by the Fund is "covered" if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option is also deemed to be covered if the Fund holds a call on the same
security and in the same principal amount as the call written and the exercise
price of the call held (i) is equal to or less than the exercise price of the
call written or (ii) is greater than the exercise price of the call written if
the difference is maintained by the Fund in liquid assets in a segregated
account with its custodian.
The writer of a call option may have no control when the underlying
securities must be sold. Whether or not an option expires unexercised, the
writer retains the amount of the premium. This amount, of course, may, in the
case of a covered call option, be offset by a decline in the market value of the
underlying security during the option period.
The writer of an exchange-traded call option that wishes to terminate
its obligation may effect a "closing purchase transaction." This is accomplished
by buying an option of the same series as the option previously written. The
effect of the purchase is that the writer's position will be cancelled by the
clearing corporation. If the Fund desires to sell a particular security from the
Fund's portfolio on which the Fund has written a call option, the Fund will
effect a closing transaction prior to or concurrent with the sale of the
security. However, a writer may not effect a closing purchase transaction after
being notified of the exercise of an option. An investor who is the holder of an
exchange-traded option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously bought. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
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The Fund will realize a profit from a closing transaction if the price
of the purchase transaction is less than the premium received from writing the
option or the price received from a sale transaction is more than the premium
paid to buy the option; the Fund will realize a loss from a closing transaction
if the price of the purchase transaction is more than the premium received from
writing the option or the price received from a sale transaction is less than
the premium paid to buy the option. Because increases in the market price of a
call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
An option position may be closed out only where there exists a
secondary market for an option of the same series. If a secondary market does
not exist, it might not be possible to effect closing transactions in particular
options with the result that the Fund would have to exercise the options in
order to realize any profit. If the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or the Fund delivers the underlying security
upon exercise. Reasons for the absence of a liquid secondary market may include
the following: (i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national securities exchange on
which the option is traded ("Exchange") on opening or closing transactions or
both, (iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
Exchange, (v) the facilities of an Exchange or of the Options Clearing
Corporation ("OCC") may not at all times be adequate to handle current trading
volume, or (vi) one or more Exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by the
OCC as a result of trades on that Exchange would continue to be exercisable in
accordance with their terms.
In addition, when the Fund enters into an over-the-counter option
contract with a counterparty, the Fund assumes counterparty credit risk, that
is, the risk that the counterparty will fail to perform its obligations, in
which case the Fund could be worse off than if the contract had not been entered
into.
An option on a securities index is similar to an option on a security
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, on exercise of the option, an amount of cash if the closing level of
the securities index on which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The Fund may buy call options on securities or securities indices to
hedge against an increase in the price of a security or securities that the Fund
may buy in the future. The premium paid for the call option plus any transaction
costs will reduce the benefit, if any, realized by the Fund upon exercise of the
option, and, unless the price of the underlying security or index rises
sufficiently, the option may expire and become worthless to the Fund. The Fund
may buy put options to hedge against a decline in the value of a security or its
portfolio. The premium paid for the put option plus any transaction costs will
reduce the benefit, if any, realized by the Fund upon exercise of the option,
and, unless the price of the underlying security or index declines sufficiently,
the option may expire and become worthless to the Fund.
An example of a hedging transaction using an index option would be if
the Fund were to purchase a put on a stock index, in order to protect the Fund
against a decline in the value of all securities held by it to the extent that
the stock index moves in a similar pattern to the prices of the securities held.
While the correlation between stock indices and price movements of the stocks in
which the Fund will generally invest may be imperfect, the Fund expects,
nonetheless, that the use of put options that relate to such indices will, in
certain circumstances, protect against declines in values of specific portfolio
securities or the Fund's portfolio generally. Although the purchase of a put
option may partially protect the Fund from a decline in the value of a
particular security or its portfolio generally, the cost of a put will reduce
the potential return on the security or the portfolio.
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TEMPORARY DEFENSIVE MEASURES. The Fund may increase its investment in
government securities, and other short-term, interest-bearing securities without
regard to the Fund's otherwise applicable percentage limits, policies or its
normal investment emphasis when its sub-advisor believes market conditions
warrant a temporary defensive position. Taking larger positions in such
short-term investments may serve as a means of preserving capital in unfavorable
market conditions. When in a defensive position, the Fund could miss the
opportunity to participate in any stock or bond market advances that occur
during those periods, which the Fund might have been able to participate in if
it had remained more fully invested.
PORTFOLIO TURNOVER. The portfolio turnover rates of the Fund are shown
in the Financial Highlights table included in the Prospectus. The annual
portfolio turnover rates of the Fund have exceeded 100%. A 100% annual turnover
rate results, for example, if the equivalent of all of the securities in the
Fund's portfolio are replaced in a period of one year. Investment changes in the
Fund will be made whenever the invesment manager deems them appropriate even if
this results in a higher portfolio turnover rate. In addition, portfolio
turnover may increase as a result of large amounts of purchases and redemptions
of shares of the Fund due to economic, market or other factors that are not
within the control of management.
Higher portfolio turnover will necessarily result in correspondingly
higher brokerage costs for the Fund. The existence of a high portfolio turnover
rate has no direct relationship to the tax liability of the Fund, although sales
of certain stocks will lead to realization of gains, and, possibly, increased
taxable distributions to shareholders. The Fund's brokerage policy is discussed
further below under Section 6--Brokerage Policy, and additional information
concerning income taxes is located under Section 9--Income Dividends, Capital
Gains Distributions and Tax Treatment.
2. INVESTMENT RESTRICTIONS
The investment objective of the Fund is capital appreciation.
The Fund has also adopted certain investment policies, strategies,
guidelines and procedures in pursuing its objective. These may be changed
without a shareholder vote. The principal policies and strategies used by the
Fund are described in the Prospectus.
In addition, the Fund has adopted certain fundamental and
non-fundamental restrictions on its investments and other activities, which are
listed below. Fundamental restrictions may not be changed without the approval
of (i) 67% or more of the voting securities of the Fund present at a meeting of
shareholders thereof if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy, or (ii) more than 50% of the
outstanding voting securities of the Fund. Non-fundamental restrictions may be
changed in the future by action of the trustees without shareholder vote.
The following fundamental restrictions apply to the Fund. The Fund may
not:
(1) Issue senior securities as defined in the Investment Company
Act of 1940;
(2) Invest in companies for the purpose of acquiring control or
management thereof;
(3) Invest or hold securities of any issuer if the officers and
trustees of the Fund and its advisor own individually more than one-half (1/2)
of 1% of the securities of such issuer or together own more than 5% of the
securities of such issuer;
(4) Invest in other investment companies, except in connection
with a plan of merger, consolidation, reorganization or acquisition of assets,
or in the open market involving no commission or profit to a sponsor or dealer
(other than a customary broker's commission);
(5) Participate on a joint or joint and several basis in any
trading account in securities;
(6) Purchase securities of any company with a record of less
than three (3) years continuous operation (including that of predecessors) if
such purchase would cause the cost of the Fund's investments in all such
companies to exceed 5% of the Fund's total assets;
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(7) Invest in securities (except those of the U.S. government or
its agencies) of any issuer if immediately thereafter the Fund would then own
more than 10% of that issuer's voting securities;
(8) Loan cash or portfolio securities, except in connection with
the acquisition of debt securities which the Fund's investment policies and
restrictions permit it to purchase;
(9) Borrow money in excess of 5% of the value of its assets and,
then, only as a temporary measure for extraordinary or emergency purposes;
(10) Pledge, mortgage or hypothecate any of its assets to secure
a debt;
(11) Purchase or sell real estate or any other interests in real
estate (including real estate limited partnership interests);
(12) Purchase securities on margin or sell short;
(13) Invest in commodities or commodity contracts;
(14) Act as an underwriter of securities of other issuers or
invest in portfolio securities which the Fund might not be free to sell to the
public without registration of such securities under the Securities Act of 1933
("Restricted Securities");
(15) Invest more than 10% of the value of its net assets in
illiquid securities, including Restricted Securities, securities which are not
readily marketable, repurchase agreements maturing in more than seven (7) days,
written over-the-counter ("OTC") options and securities used as cover for
written OTC options;
(16) Invest in oil, gas or mineral leases;
(17) Invest more than 5% of the value of its net assets in
warrants or more than 2% of its net assets in warrants that are not listed on
the New York Stock Exchange, the American Stock Exchange, or the NASDAQ National
Market System;
(18) Invest more than 25% of the value of its assets, at the time
of purchase, in securities of companies principally engaged in a particular
industry, although the Fund may as a temporary defensive measure invest up to
100% of its total assets in obligations issued or guaranteed by the U.S.
government or its agencies; or
(19) With respect to 75% of the Fund's total assets, purchase the
securities of any one issuer (except U.S. government securities) if immediately
after and as a result of such purchase (a) the value of the holdings of the Fund
in the securities of such issuer exceeds 5% of the value of the Fund's total
assets or (b) the Fund owns more than 10% of the outstanding voting securities
of such issuer.
In applying the Fund's industry concentration restriction (number (18)
above), the Fund uses the industry groups used in the Data Monitor Portfolio
Monitoring System of William O'Neil & Co. Incorporated.
The trustees have adopted additional non-fundamental investment
restrictions for the Fund. These limitations may be changed by the trustees
without a shareholder vote. The non-fundamental investment restrictions include
the following:
(1) Only for the purpose of hedging, the Fund may purchase and
sell put and call options, but no more than 5% of the Fund's net assets at the
time of purchase may be invested in premiums for options. The Fund may only
write call options that are covered and only up to 10% of the Fund's net assets.
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(2) The Fund may not purchase or sell securities on a
when-issued or delayed delivery basis, if as a result more than 5% of its total
assets taken at market value at the time of purchase would be invested in such
securities.
Investment restrictions that involve a maximum percentage of
securities or assets will not be considered to be violated unless an excess over
the percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of the Fund.
3. MANAGEMENT OF THE FUND
The Fund is supervised by trustees who are responsible for major
decisions about the Fund's policies and overall Fund oversight. The Fund's board
hires the companies that run day-to-day Fund operations, such as the investment
advisor, administrator, transfer agent and custodian.
The trustees and executive officers of the Fund are listed below,
together with information which includes their principal occupations during the
past five years and other principal business affiliations.
MICHAEL OWEN, 114 A Gallatin Dr., Bozeman, MT 59718, DOB: 1937.
Self-employed as a financial and management consultant, and in real
estate development. From 1993 to June 1999, Dean, and from 1989 to
1993, a member of the Finance faculty, of the College of Business,
Montana State University. Formerly (1976-1989), Chairman and Chief
Executive Officer of Royal Gold, Inc. (mining). Chairman of the Board
of Berger Growth Fund and Berger Growth and Income Fund. Chairman of
the Trustees of Berger Investment Portfolio Trust, Berger
Institutional Products Trust, Berger/BIAM Worldwide Funds Trust,
Berger/BIAM Worldwide Portfolios Trust and Berger Omni Investment
Trust.
* JACK R. THOMPSON, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1949. President and a director since May 1999 (Executive Vice
President from February 1999 to May 1999) of Berger Growth Fund and
Berger Growth and Income Fund. President and a trustee since May 1999
(Executive Vice President from February 1999 to May 1999) of Berger
Investment Portfolio Trust, Berger Institutional Products Trust,
Berger/BIAM Worldwide Funds Trust, Berger/BIAM Worldwide Portfolios
Trust and Berger Omni Investment Trust. President and Director since
June, 1999 (Executive Vice President from February 1999 to June 1999)
of Berger LLC. Audit Committee Member of the Public Employees'
Retirement Association of Colorado (pension plan) since November 1997.
Self-employed as a consultant from July 1995 through February 1999.
Director of Wasatch Advisors (investment management) from February
1997 to February 1999. Director of Janus Capital Corporation
(investment management) from June 1984 through June 1995, and
Executive Vice President of the Corporation from April 1989 through
June 1995. Treasurer of Janus Capital Corporation from November 1983
through October 1989. Trustee of the Janus Investment Funds from
December 1990 through June 1995, and Senior Vice President of the
Trust from May 1993 through June 1995. President and a director of
Janus Service Corporation (transfer agent) from January 1987 through
June 1995. President and a director of Fillmore Agency, Inc.
(advertising agency), from January 1990 through June 1995. Executive
Vice President and a director of Janus Capital International, Ltd.
(investment advisor) from September 1994 through June 1995. President
and a director of Janus Distributors, Inc. (broker/dealer), from May
1991 through June 1995. Director of IDEX Management, Inc. (investment
management), from January 1985 through June 1995. Trustee and Senior
Vice President of the of the Janus Aspen Funds from May 1993 through
June 1995.
DENNIS E. BALDWIN, 3481 South Race Street, Englewood, CO 80110, DOB: 1928.
President, Baldwin Financial Counseling. Formerly (1978-1990), Vice
President and Denver Office Manager of Merrill Lynch Capital Markets.
Director of Berger Growth Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
-10-
<PAGE>
LOUIS R. BINDNER, 1075 South Fox, Denver, CO 80223, DOB: 1925. President,
Climate Engineering, Inc. (building environmental systems). Director
of Berger Growth Fund and Berger Growth and Income Fund. Trustee of
Berger Investment Portfolio Trust, Berger Institutional Products
Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM Worldwide
Portfolios Trust and Berger Omni Investment Trust.
KATHERINE A. CATTANACH, 672 South Gaylord, Denver, CO 80209, DOB: 1945.
Managing Principal, Sovereign Financial Services, Inc. (investment
consulting firm). Formerly (1981-1988), Executive Vice President,
Captiva Corporation, Denver, Colorado (private investment management
firm). Ph.D. in Finance (Arizona State University); Chartered
Financial Analyst (CFA). Director of Berger Growth Fund and Berger
Growth and Income Fund. Trustee of Berger Investment Portfolio Trust,
Berger Institutional Products Trust, Berger/BIAM Worldwide Funds
Trust, Berger/BIAM Worldwide Portfolios Trust and Berger Omni
Investment Trust.
PAUL R. KNAPP, 33 North LaSalle Street, Suite 1900, Chicago, IL 60602,
DOB: 1945. Since 1991, Chairman, President, Chief Executive Officer
and a director of Catalyst Institute (international public policy
research organization focused primarily on financial markets and
institutions). Since September 1997, President, Chief Executive
Officer and a director of DST Catalyst, Inc. (international financial
markets consulting, software and computer services company) a 81%
owned subsidiary of DST Systems, Inc. Director (since February 1998)
and a Vice President (February 1998 - November 1998) of West Side
Investments, Inc. (investments), a wholly-owned subsidiary of DST
Systems, Inc. Previously (1991 - September 1997), Chairman, President,
Chief Executive Officer and a director of Catalyst Consulting
(international financial institutions business consulting firm). Prior
thereto (1988-1991), President, Chief Executive Officer and a director
of Kessler Asher Group (brokerage, clearing and trading firm).
Director of Berger Growth Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
HARRY T. LEWIS, JR., 370 17th Street, Suite 3560, Denver, CO 80202,
DOB: 1933. Self-employed as a private investor. Formerly (1981-1988),
Senior Vice President, Rocky Mountain Region, of Dain Bosworth
Incorporated and member of that firm's Management Committee. Director
of J.D. Edwards & Co. (computer software company) since 1995. Director
of Berger Growth Fund and Berger Growth and Income Fund. Trustee of
Berger Investment Portfolio Trust, Berger Institutional Products
Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM Worldwide
Portfolios Trust and Berger Omni Investment Trust.
WILLIAM SINCLAIRE, 3049 S. Perry Park Road, Sedalia, CO 80135, DOB: 1928.
President, Santa Clara LLC (privately owned agriculture company).
Director of Berger Growth Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
* JANICE M. TEAGUE, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1954. Vice President and Secretary (since November 1998) and
Assistant Secretary (October 1996 to November 1998) of the Berger
Funds. Vice President (since October 1997), Secretary (since November
1998) and Assistant Secretary (September 1996 through November 1998)
with Berger LLC. Vice President and Secretary with Berger Distributors
LLC, since August 1998. Formerly, self-employed as a business
consultant from June 1995 through September 1996, Secretary of the
Janus Funds from January 1990 to May 1995 and Assistant Secretary of
Janus Capital Corporation from October 1989 to May 1995.
* DAVID J. SCHULTZ, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1950. Vice President and Treasurer (since November 1998) and
Assistant Treasurer (September 1996 to November 1998) of the Berger
Funds. Vice President (since February 1997) and Controller (since
August 1994) with Berger LLC. Chief Financial Officer and Treasurer
(since May 1996), Assistant Secretary (since August 1998) and
Secretary (May 1996 to August 1998) with Berger Distributors
-11-
<PAGE>
LLC Formerly, Partner with Smith, Brock & Gwinn (accounting firm) from
January 1984 to August 1994.
* BRIAN S. FERRIE, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1958. Vice President of the Berger Funds since November 1998.
Vice President (since February 1997) and Chief Compliance Officer
(since August 1994) with Berger LLC. Chief Compliance Officer with
Berger Distributors LLC, since May 1996. Formerly, Compliance Officer
with United Services Advisor, Inc., from January 1988 to July 1994,
and Director of Internal Audit of United Services Funds from January
1987 to July 1994.
* JOHN PAGANELLI, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1967. Assistant Treasurer of the Berger Funds since November
1998. Vice President (since November 1998) and Manager of Accounting
(January 1997 through November 1998) with Berger LLC. Formerly,
Manager of Accounting (December 1994 through October 1996) and Senior
Accountant (November 1991 through December 1994) with Palmeri Fund
Administrators, Inc.
- ----------------
* Interested person (as defined in the Investment Company Act of 1940) of the
Fund and of the Fund's advisor or sub-advisor.
The trustees of the Fund have adopted a trustee retirement age of 75
years.
TRUSTEE COMPENSATION
The officers of the Fund received no compensation from the Fund during
the fiscal year ended September 30, 1999. However, trustees of the Fund who are
not "interested persons" of the Fund or its advisor or sub-advisor are
compensated for their services according to a fee schedule, allocated among the
Berger Funds. Neither the officers of the Fund nor the trustees receive any form
of pension or retirement benefit compensation from the Fund.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended September 30, 1999, for each current trustee of the
Fund as a director or trustee of the Berger Funds.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
NAME AND POSITION AGGREGATE AGGREGATE
WITH BERGER FUNDS COMPENSATION FROM COMPENSATION(1)
THE FUND FROM
ALL BERGER FUNDS(2)
- ----------------------------------------------------------------------------
<S> <C> <C>
Dennis E. Baldwin(3) $3,075 $47,600
- ----------------------------------------------------------------------------
Louis R. Bindner(3) $5,747 $47,600
- ----------------------------------------------------------------------------
Katherine A. Cattanach(3) $5,747 $47,600
- ----------------------------------------------------------------------------
Paul R. Knapp(3) $5,682 $47,000
- ----------------------------------------------------------------------------
Harry T. Lewis(3) $5,747 $47,600
- ----------------------------------------------------------------------------
Michael Owen(3) $6,955 $57,600
- ----------------------------------------------------------------------------
William Sinclaire3) $5,747 $47,600
- ----------------------------------------------------------------------------
Jack R. Thompson (3),(4),(5) $ 0 $ 0
- ----------------------------------------------------------------------------
</TABLE>
(1) Of the aggregate amounts shown for each director/trustee, the
following amounts were deferred under applicable deferred compensation plans:
Dennis E. Baldwin $24,316; Louis R. Bindner $15,333; Katherine A. Cattanach
$47,393; Michael Owen $6,651; William Sinclaire $40,423.
(2) Includes the Berger Growth Fund, the Berger Growth and Income Fund,
the Berger Investment Portfolio Trust (seven series), the Berger Institutional
Products Trust (four series), the Berger/BIAM Worldwide Portfolios Trust (one
series), the Berger/BIAM Worldwide
-12-
<PAGE>
Funds Trust (three series) and the Berger Omni Investment Trust (one series).
Aggregate compensation figures do not include first-year estimates for any Fund
in existence for less than one year.
(3) Director of Berger Growth Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional Products
Trust, Berger/BIAM Worldwide Portfolios Trust, Berger/BIAM Worldwide Funds Trust
and Berger Omni Investment Trust.
(4) Interested person of Berger LLC.
(5) President of Berger Growth Fund, Berger Growth and Income Fund, Berger
Investment Portfolio Trust, Berger Institutional Products Trust, Berger/BIAM
Worldwide Portfolios Trust, Berger/BIAM Worldwide Funds Trust and Berger Omni
Investment Trust.
Trustees may elect to defer receipt of all or a portion of their fees
pursuant to a fee deferral plan adopted by certain of the Berger Funds. Under
the plan, deferred fees are credited to an account and adjusted thereafter to
reflect the investment experience of whichever of the Berger Funds (or approved
money market funds) is designated by the trustee for this purpose. Pursuant to
an SEC exemptive order, those Berger Funds that have adopted the plan are
permitted to purchase shares of the designated funds in order to offset their
obligation to the trustees participating in the plan. Purchases made pursuant to
the plan are excepted from any otherwise applicable investment restriction
limiting the purchase of securities of any other investment company. The
obligation of a Berger Fund to make payments of deferred fees under the plan is
a general obligation of that fund.
As of January 4, 2000, the current officers and trustees of the Fund
as a group owned of record or beneficially less than 1% of the outstanding
shares of the Fund.
4. INVESTMENT ADVISOR AND SUB-ADVISOR
BERGER LLC - INVESTMENT ADVISOR
Berger LLC, 210 University Boulevard, Suite 900, Denver, CO 80206, is
the investment advisor to the Fund. Berger LLC is responsible for managing the
investment operations of the Fund and the composition of its investment
portfolio. Berger LLC also acts as the Fund's administrator and is responsible
for such functions as monitoring compliance with all applicable federal and
state laws.
Berger LLC has been in the investment advisory business for 25 years.
It serves as investment advisor or sub-advisor to mutual funds and institutional
investors and had assets under management of approximately $6.1 billion as of
December 31, 1999. Berger LLC is a subsidiary of Stilwell Management Inc.
("Stilwell"), which owns more than 80% of Berger LLC, and is an indirect
subsidiary of Stilwell Financial, Inc. ("Stilwell Financial"), which in turn is
a wholly owned subsidiary of Kansas City Southern Industries, Inc. ("KCSI").
KCSI is a publicly traded holding company with principal operations in rail
transportation, through its subsidiary The Kansas City Southern Railway Company,
and financial asset management businesses. Stilwell also owns approximately 32%
of the outstanding shares of DST Systems, Inc. ("DST"), a publicly traded
information and transaction processing company which acts as the Fund's
sub-transfer agent. DST, in turn, owns 100% of DST Securities, a registered
broker-dealer, which executes portfolio trades for the Fund.
KCSI announced its intention to separate the transportation and
financial services segments through a proposed dividend of the stock of Stilwell
Financial. On July 12, 1999 KCSI announced that the Internal Revenue Service
issued a favorable tax ruling permitting KCSI to separate its financial services
segment from its transportation segment. Completion of this separation is
expected to occur in the year 2000.
THE SUB-ADVISOR
Perkins, Wolf, McDonnell & Company (the "Sub-Advisor" or "PWM"), 53
West Jackson Boulevard, Suite 722, Chicago, Illinois 60604, has been engaged as
the Fund's investment sub-advisor. The Sub-Advisor was organized in 1980 under
the name Mac-Per-Wolf Co. to operate as a securities broker-dealer. In September
1983, it changed its name to Perkins, Wolf, McDonnell & Company. The Sub-Advisor
is a member of the National Association of Securities Dealers, Inc. (the "NASD")
and, in 1984, became registered as an investment adviser with the SEC.
-13-
<PAGE>
PWM was the Fund's investment advisor from the date the Fund commenced
operations in 1985 to February 1997. PWM became the investment sub-advisor to
the Fund on February 14, 1997, following shareholder approval of a new
Sub-Advisory Agreement between the Advisor and the Sub-Advisor. PWM has also
been the investment sub-advisor to the Berger Mid Cap Value Fund since it
commenced operations in August 1998.
Thomas M. Perkins and Robert H. Perkins, as co-investment managers,
are responsible for the day-to-day investment management of the Fund. Robert
Perkins has been an investment manager since 1970 and serves as President and a
director of PWM. Thomas Perkins has been an investment manager since 1974 and
joined PWM as a portfolio manager in 1998. Robert Perkins owns 49% of PWM.
Robert Perkins and Thomas Perkins are brothers. Gregory E. Wolf owns 20% of PWM
and serves as its Treasurer and a director.
INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT
Under the Investment Advisory Agreement between the Advisor and the
Fund, the Advisor is responsible for managing the investment operations of the
Fund and the composition of its investment portfolio. Under the Investment
Advisory Agreement, the Advisor was compensated for its services to the Fund by
the payment of a fee at the annual rate of 0.90% (.90 of 1%) of the average
daily net assets of the Fund, for the fiscal year ended September 30, 1999. This
fee is accrued daily and payable monthly. The Investment Advisory Agreement
provides that the investment advisor shall not be liable for any error of
judgment or mistake of law or for any loss arising out of any investment or for
any act or omission taken with respect to the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder and
except to the extent otherwise provided by law.
Effective October 1, 1999, the investment advisory fee charged to the
Fund was reduced according to the following schedule:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUND AVERAGE DAILY NET ASSETS ANNUAL RATE
- -------------------------------------------------------------------------------
<S> <C> <C>
Berger Small Cap Value Fund First $500 million .85%
Next $500 million .80%
Over $1 billion .75%
- -------------------------------------------------------------------------------
</TABLE>
The Investment Advisory Agreement will continue in effect until April
2000, and thereafter from year to year if such continuation is specifically
approved at least annually by the trustees or by vote of a majority of the
outstanding shares of the Fund and in either case by vote of a majority of the
trustees of the Fund who are not "interested persons" (as that term is defined
in the Investment Company Act of 1940) of the Fund or the Advisor or
Sub-Advisor. The Agreement is subject to termination by the Fund or the Advisor
on 60 days' written notice, and terminates automatically in the event of its
assignment.
Under the Sub-Advisory Agreement between the Advisor and the
Sub-Advisor, the Sub-Advisor is responsible for day-to-day investment management
of the Fund. The Sub-Advisor manages the investments in the Fund and determines
what securities and other investments will be acquired, held or disposed of,
consistent with the investment objective and policies established by the
trustees of the Fund. The Fund pays no fees directly to the Sub-Advisor. The
Sub-Advisor will receive from the Advisor a fee at the annual rate of 0.425% of
the first $500 million of average daily net assets of the Fund, 0.40% of the
next $500 million, and 0.375% of any amount in excess of $1 billion. The
Sub-Advisory Agreement provides that the Sub-Advisor shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission taken with respect to the Fund, except for
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
thereunder and except to the extent otherwise provided by law.
-14-
<PAGE>
The Sub-Advisory Agreement will continue in effect until April
2000, and thereafter from year to year if such continuation is specifically
approved at least annually by the trustees or by vote of a majority of the
outstanding shares of the Fund and in either case by vote of a majority of
the trustees of the Fund who are not "interested persons" (as that term is
defined in the Investment Company Act of 1940) of the Fund or the Advisor or
the Sub-Advisor. The Sub-Advisory Agreement is subject to termination by the
Fund or the Sub-Advisor on 60 days' written notice, and terminates
automatically in the event of its assignment and in the event of termination
of the Investment Advisory Agreement.
OTHER ARRANGEMENTS BETWEEN THE ADVISOR AND SUB-ADVISOR
The Advisor and Sub-Advisor entered into an Agreement, dated November
18, 1996, as amended January 27, 1997, April 8, 1998 and November 17, 1999 (the
"November 18 Agreement"), under which, among other things, the Sub-Advisor
agreed that, so long as Berger LLC acts as the Fund's Advisor and PWM provides
sub-advisory or other services in connection with the Fund, the Sub-Advisor will
not manage or provide advisory services to any registered investment company
that is in direct competition with the Fund.
The November 18 Agreement also provides that if the Sub-Advisory
Agreement is terminated before February 14, 2005 (other than for cause), and
provided Berger LLC remains as the Fund's Advisor, Berger LLC and PWM will enter
into a consulting agreement for PWM to provide consulting services to Berger LLC
with respect to the Fund, subject to any requisite approvals under the
Investment Company Act of 1940. Under the Consulting Agreement, PWM would
provide training and assistance to Berger LLC analysts and marketing support
appropriate to the Fund and would be paid a fee at an annual rate of 0.10% of
the first $100 million of average daily net assets of the Fund, 0.05% of the
next $100 million and 0.02% on any part in excess of $200 million. No part of
the consulting fee would be borne by the Fund.
TRADE ALLOCATIONS
While investment decisions for the Fund are made independently by the
sub-advisor, the same investment decision may be made for a Fund and one or more
accounts advised by the advisor or sub-advisor. In this circumstance, should
purchase and sell orders of the same class of security be in effect on the same
day, the orders for such transactions may be combined by the advisor or
sub-advisor in order to seek the best combination of net price and execution for
each. Client orders partially filled will, as a general matter, be allocated pro
rata in proportion to each client's original order, although exceptions may be
made to avoid, among other things, odd lots and de minimis allocations.
Execution prices for a combined order will be averaged so that each
participating client receives the average price paid or received. While in some
cases, this policy might adversely affect the price paid or received by a Fund
or other participating accounts, or the size of the position obtained or
liquidated, the advisor or sub-advisor will aggregate orders if it believes that
coordination of orders and the ability to participate in volume transactions
will result in the best overall combination of net price and execution.
RESTRICTIONS ON PERSONAL TRADING
Berger LLC and PWM each permit their directors, officers and employees
to purchase and sell securities for their own accounts in accordance with a
policy regarding personal investing in their respective firm Codes of Ethics.
The policies require all covered persons to conduct their personal securities
transactions in a manner which does not operate adversely to the interests of
the Fund or the firms' other advisory clients. Directors and officers of the
firms, investment personnel and other designated persons deemed to have access
to current trading information ("access persons") are required to pre-clear all
transactions in securities not otherwise exempt under the relevant policy.
Requests for authority to trade will be denied pre-clearance when, among other
reasons, the proposed personal transaction would be contrary to the provisions
of the relevant policy or would be deemed to adversely affect any transaction
then known to be under consideration for or currently being effected on behalf
of any client account, including the Fund.
In addition to the pre-clearance requirements described above, the
policy subjects directors and officers of Berger LLC and PWM, investment
personnel and other access persons to various trading
-15-
<PAGE>
restrictions and reporting obligations. All reportable transactions are reviewed
for compliance with the policy. The policies are administered by the respective
firms and the provisions of the policies are subject to interpretation by and
exceptions authorized by their respective boards of directors.
5. EXPENSES OF THE FUND
In addition to paying an investment advisory fee to Berger LLC, the
Fund pays all of its expenses not assumed by Berger LLC, including, but not
limited to, custodian and transfer agent fees, legal and accounting expenses,
administrative and record keeping expenses, interest charges, federal and state
taxes, costs of share certificates, expenses of shareholders' meetings,
compensation of trustees who are not interested persons of Berger LLC, expenses
of printing and distributing reports to shareholders and federal and state
administrative agencies, and all expenses incurred in connection with the
execution of its portfolio transactions, including brokerage commissions on
purchases and sales of portfolio securities, which are considered a cost of
securities of the Fund. The Fund also pays all expenses incurred in complying
with all federal and state laws and the laws of any foreign country applicable
to the issue, offer or sale of shares of the Fund, including, but not limited
to, all costs involved in preparing and printing prospectuses for shareholders
of the Fund.
Under a separate Administrative Services Agreement with respect to the
Fund, Berger LLC performs certain administrative and recordkeeping services not
otherwise performed by the Fund's custodian and recordkeeper, including the
preparation of financial statements and reports to be filed with the Securities
and Exchange Commission and state regulatory authorities. Effective October 1,
1999, Berger LLC eliminated the 0.01% administrative fee charged to the Fund.
The administrative services fees may be changed by the Fund's trustees without
shareholder approval. In addition, effective October 1, 1999, the investment
advisory fee charged to the Fund was reduced. The advisory fee reduction is
reflected earlier under Investment Advisory Agreement.
The following table shows the total dollar amounts of advisory fees
and administrative services fees paid by the Fund for the periods indicated.
<TABLE>
<CAPTION>
BERGER SMALL CAP VALUE FUND
- ----------------------------------------------------------------------------------------------------------
Fiscal Year Ended Investment Administrative Advisory Fee TOTAL
September 30, Advisory Fee(3) Service Fee(4) Waiver
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 $3,996,000 $44,000 $ 0 $4,040,000
- ----------------------------------------------------------------------------------------------------------
1998 $ 1,515,000 $ 17,000 $ 0 $ 1,532,000
- ----------------------------------------------------------------------------------------------------------
1997(1)(2) $ 418,000 $ 4,000 $ 0 $ 422,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) On February 14, 1997, new fee arrangements came into effect for the Fund
with shareholder approval, at which time Berger LLC became the Fund's advisor
and administrator and PWM, the Fund's former investment advisor, became the
Fund's sub-advisor.
(2) Under the Investment Advisory Agreement in effect for the Fund until
February 14, 1997, the Fund paid an advisory fee to PWM at an annual rate of
1.00% of the Fund's average daily net assets. The Fund's fiscal year end was
changed from December 31 to September 30 during 1997. Accordingly, amounts shown
for 1997 cover the period January 1, 1997, through September 30, 1997.
(3) Effective October 1, 1999, the investment advisory fee charged to the Fund
was reduced from .90% to the following rates of average daily net assets: 0.85%
of the first $500 million; 0.80% of the next $500 million and 0.75% in excess of
$1 billion.
(4) Effective October 1, 1999, the 0.01% administrative services fee was
eliminated.
The Fund has appointed Investors Fiduciary Trust Company ("IFTC"), 801
Pennsylvania, Kansas City, MO 64105, as its recordkeeping and pricing agent. In
addition, IFTC also serves as the Fund's custodian, transfer agent and dividend
disbursing agent. IFTC has engaged DST as sub-agent to provide transfer agency
and dividend disbursing services for the Fund. As noted in the previous section,
approximately 32% of the outstanding shares of DST are owned by Stilwell.
-16-
<PAGE>
As recordkeeping and pricing agent, IFTC calculates the daily net
asset value of the Fund and performs certain accounting and recordkeeping
functions required by the Fund. The Fund pays IFTC a monthly base fee plus an
asset-based fee. IFTC is also reimbursed for certain out-of-pocket expenses.
IFTC, as custodian, and its subcustodians have custody and provide for
the safekeeping of the Fund's securities and cash, and receive and remit the
income thereon as directed by the management of the Fund. The custodian and
subcustodians do not perform any managerial or policy-making functions for the
Fund. For its services as custodian, IFTC receives an asset-based fee plus
certain transaction fees and out-of-pocket expenses. Under the Custodian
Agreement in effect for the Fund until January 1, 1997, PWM, then the Fund's
investment advisor, acted as the Fund's custodian and was not compensated under
that Agreement other than by the reimbursement of its costs in providing such
services.
As transfer agent and dividend disbursing agent, IFTC (through DST, as
sub-agent) maintains all shareholder accounts of record; assists in mailing all
reports, proxies and other information to the Fund's shareholders; calculates
the amount of, and delivers to the Fund's shareholders, proceeds representing
all dividends and distributions; and performs other related services. For these
services, IFTC receives a fee from the Fund at an annual rate of $14.00 per open
Fund shareholder account, subject to preset volume discounts, plus certain
transaction fees and fees for closed accounts, and is reimbursed for
out-of-pocket expenses, which fees in turn are passed through to DST as
sub-agent.
All of IFTC's fees are subject to reduction pursuant to an agreed upon
formula for certain earnings credits on the cash balances of the Fund. Earnings
credits received by the Fund are disclosed on the Fund's Statement of Operations
in the Annual Report incorporated by reference into this Statement of Additional
Information.
12b-1 PLAN
The Fund has adopted a 12b-1 plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, which provides for the payment to
Berger LLC of a 12b-1 fee of 0.25% per annum of the Fund's average daily net
assets attributable to the Investor Shares to finance activities primarily
intended to result in the sale of those shares. The Plan is intended to benefit
the Investor Shares class of the Fund by attracting new assets into the class
and thereby affording potential cost reductions due to economies of scale.
The expenses paid by Berger LLC may include, but are not limited to:
- -- payments made to, and costs incurred by, the Fund's principal
underwriter in connection with the distribution of Investor Shares,
including payments made to and expenses of officers and registered
representatives of the Distributor;
- -- payments made to and expenses of other persons (including employees of
Berger LLC) who are engaged in, or provide support services in
connection with, the distribution of Investor Shares, such as
answering routine telephone inquiries and processing shareholder
requests for information;
- -- compensation (including incentive compensation and/or continuing
compensation based on the amount of customer assets maintained in the
Fund) paid to securities dealers, financial institutions and other
organizations which render distribution and administrative services in
connection with the distribution of Investor Shares, including
services to holders of Investor Shares and prospective investors;
- -- costs related to the formulation and implementation of marketing and
promotional activities, including direct mail promotions and
television, radio, newspaper, magazine and other mass media
advertising;
- -- costs of printing and distributing prospectuses and reports to
prospective shareholders of Investor Shares;
- -- costs involved in preparing, printing and distributing sales
literature for Investor Shares;
-17-
<PAGE>
- -- costs involved in obtaining whatever information, analyses and reports
with respect to market and promotional activities on behalf of the
Fund relating to Investor Shares that Berger LLC deems advisable;
- -- and such other costs relating to Investor Shares as the Fund may from
time to time reasonably deem necessary or appropriate in order to
finance activities primarily intended to result in the sale of
Investor Shares.
Such 12b-1 fee payments are to be made by the Fund to Berger LLC with
respect to each fiscal year of the Fund without regard to the actual
distribution expenses incurred by Berger LLC in such year; that is, if the
distribution expenditures incurred by Berger LLC are less than the total of such
payments in such year, the difference is not to be reimbursed to the Fund by
Berger LLC, and if the distribution expenditures incurred by Berger LLC are more
than the total of such payments, the excess is not to be reimbursed to Berger
LLC by the Fund.
From time to time the Fund may engage in activities which jointly
promote the sale of Investor Shares and other funds that are or may in the
future be advised or administered by Berger LLC, which costs are not readily
identifiable as related to any one fund. In such cases, the Fund's 12b-1 fees
may be used to finance the joint promotion of the shares of the Investor Shares,
along with the shares of the other fund. Berger LLC allocates the cost of such
joint promotional activity among the funds involved on the basis of their
respective net assets, unless otherwise directed by the trustees.
The current 12b-1 Plan will continue in effect until the end of April
2000, and from year to year thereafter if approved at least annually by the
Fund's trustees and those trustees who are not interested persons of the Fund
and have no direct or indirect financial interest in the operation of the Plan
or any related agreements by votes cast in person at a meeting called for such
purpose. The Plan may not be amended to increase materially the amount to be
spent on distribution of Investor Shares without shareholder approval.
For the fiscal year ended September 30, 1999, $545,000 was paid to
Berger LLC pursuant to the Plan.
OTHER EXPENSE INFORMATION
The trustees of the Fund have authorized portfolio transactions to be
placed on an agency basis through DST Securities, Inc. ("DSTS"), a wholly-owned
broker-dealer subsidiary of DST. When transactions are effected through DSTS,
the commission received by DSTS is credited against, and thereby reduces,
certain operating expenses that the Fund would otherwise be obligated to pay. No
portion of the commission is retained by DSTS. DSTS may be considered an
affiliate of Berger LLC due to the ownership interest of Stilwell in both DST
and Berger LLC.
The Fund and/or its Advisor may enter into arrangements with certain
brokerage firms and other companies(such as recordkeepers and administrators) to
provide administrative services (such as sub-transfer agency, recordkeeping,
shareholder communications, sub-accounting and/or other services) to investors
purchasing shares of the Fund through those firms or companies. The Fund's
Advisor or the Fund (if approved by its trustees) may pay fees to these
companies for their services. These companies may also be appointed as agents
for or authorized by the Fund to accept on its behalf purchase and redemption
requests that are received in good order. Subject to Fund approval, certain of
these companies may be authorized to designate other entities to accept purchase
and redemption orders on behalf of the Fund.
The Fund's Advisor may also enter into arrangements with organizations
that solicit clients for the Advisor, which may include clients who purchase
shares of the Fund. While the specific terms of each arrangement may differ,
generally, the fee paid by the Advisor under such arrangements is based on the
value of the referred client's assets managed by the Advisor. None of the fees
paid to such organizations will be borne by the Fund.
-18-
<PAGE>
DISTRIBUTOR
The distributor (principal underwriter) of the Fund's shares is Berger
Distributors LLC (the "Distributor"), 210 University Blvd., Suite 900, Denver,
CO 80206. The Distributor may be reimbursed by Berger LLC for its costs in
distributing the Fund's Investor Shares.
6. BROKERAGE POLICY
Although the Fund retains full control over its own investment
policies, under the terms of its Investment Advisory Agreement, Berger LLC as
the Fund's advisor is directed to place the portfolio transactions of the Fund.
A report on the placement of brokerage business is given to the trustees of the
Fund every quarter, indicating the brokers with whom Fund portfolio business was
placed and the basis for such placement. The brokerage commissions paid by the
Fund during the past three fiscal years were as follows:
BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Fiscal Year Fiscal Year
Ended Fiscal Year Ended Ended
September 30, September 30, September 30,
1999 1998 1997(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BERGER SMALL CAP VALUE FUND $ 1,870,000 $ 567,000 $ 306,000
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) The Fund's fiscal year end was changed from December 31 to September 30
during 1997. Accordingly, this covers the period from January 1, 1997 through
September 30, 1997.
The Investment Advisory Agreement authorizes and directs the advisor
to place portfolio transactions for the Fund only with brokers and dealers who
render satisfactory service in the execution of orders at the most favorable
prices and at reasonable commission rates. However, the Agreement specifically
authorizes the advisor to place such transactions with a broker with whom it has
negotiated a commission that is in excess of the commission another broker or
dealer would have charged for effecting that transaction if the advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker viewed in terms of either that particular transaction or the overall
responsibilities of the advisor. Accordingly, the advisor or sub-advisor does
not have an obligation to seek the lowest available commission.
In accordance with this provision of the Agreement, portfolio
brokerage business of the Fund may be placed with brokers who provide useful
brokerage and research services to the advisor or sub-advisor. The Fund's
advisor may consider the value of research provided as a factor in the choice of
brokers. "Research" includes computerized on-line stock quotation systems and
related data feeds from stock exchanges, computerized trade order entry,
execution and confirmation systems, fundamental and technical analysis data and
software, computerized stock market and business news services, economic
research, account performance data and computer hardware used for the receipt of
electronic research services and broker and other third-party equity research,
such as publications or writings which furnish advice as to the value of
securities and advisability of investing, and analyses and reports concerning
issuers, industries, securities, market trends, and portfolio strategies.
Research may be provided orally, in print, or electronically. These services
included a service used by the independent trustees of the Fund in reviewing the
Investment Advisory Agreement.
In some cases, a product or services termed "research" may serve other
functions unrelated to the making of investment decisions. When a product has
such a mixed use, the advisor will make a good faith allocation of the cost of
the product according to the use made of it. The portion of the product that
assists the advisor or sub-advisor in the investment decision-making process may
be paid for with a Fund's commission dollars. The advisor or sub-advisor pays
for the portion of the product that is
-19-
<PAGE>
not "research" with its own funds. Accordingly, the decision whether and how to
allocate the costs of such a product presents a conflict of interest for the
advisor or sub-advisor.
The Fund's advisor does not enter into formal agreements with any
brokers regarding the placement of securities transactions because of any such
brokerage or research services that they provide. An advisor or sub-advisor may,
however, make arrangements with and maintain internal procedures for allocating
transactions to brokers who provide such services to encourage them to provide
services expected to be useful to the advisor's or sub-advisor's clients,
including the Funds. Brokers may suggest a level of business they would like to
receive in return for the brokerage and research they provide. The advisor or
sub-advisor then determines whether to continue receiving the research and
brokerage provided and the approximate amount of commissions it is willing to
pay to continue the brokerage and research arrangement with each broker. The
actual amount of commissions a broker may receive may be more or less than a
broker's suggested allocations, depending on advisor's or sub-advisor's level of
business, market conditions and other relevant factors. Even under these
arrangements, however, the placement of all Fund transactions, must be
consistent with the Funds' brokerage placement and execution policies, and must
be directed to a broker who renders satisfactory service in the execution of
orders at the most favorable prices and at reasonable commission rates.
During the fiscal year ended September 30, 1999 of the brokerage
commissions paid by the Fund, the following amounts were paid to brokers who
provided to the Fund selected brokerage or research services prepared by the
broker or subscribed or paid for by the broker on behalf of the Fund:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
FUND AMOUNT OF TRANSACTIONS AMOUNT OF COMMISSIONS
- ------------------------------------------------------------------------------------
<S> <C> <C>
Berger Small Cap Value Fund $33,733,000 $98,000
- ------------------------------------------------------------------------------------
</TABLE>
These brokerage and research services received from brokers are often
helpful to Berger LLC in performing its investment advisory responsibilities to
the Fund, and the availability of such services from brokers does not reduce the
responsibility of Berger LLC' advisory personnel to analyze and evaluate the
securities in which the Fund invests. The brokerage and research services
obtained as a result of the Fund's brokerage business also will be useful to
Berger LLC in making investment decisions for its other advisory accounts, and,
conversely, information obtained by reason of placement of brokerage business of
such other accounts may be used by Berger LLC in rendering investment advice to
the Fund. Although such brokerage and research services may be deemed to be of
value to Berger LLC, they are not expected to decrease the expenses that Berger
LLC would otherwise incur in performing its investment advisory services for the
Fund nor will the advisory fees that are received by Berger LLC from the Fund be
reduced as a result of the availability of such brokerage and research services
from brokers.
Under the Investment Advisory Agreement in effect until February 14,
1997, the advisor was permitted to place the Fund's brokerage with affiliated
brokers, subject to adhering to certain procedures adopted by the trustees and
subject to obtaining prompt execution or orders at the most favorable net price.
In the Brokerage Commissions table above, $138,000 of the brokerage commissions
shown for the fiscal year ended September 30, 1997 (which constituted all of the
brokerage commissions paid by the Fund for the period January 1, 1997, to
February 14, 1997), were paid to PWM, which is also a registered broker-dealer.
On February 14, 1997, new arrangements for the Berger Small Cap Value Fund came
into effect with shareholder approval and since that time, the trustees have not
authorized the Fund's brokerage to be placed with any broker or dealer
affiliated with the Advisor or Sub-Advisor, except through DSTS under the
circumstances described immediately below.
The trustees of the Fund have authorized portfolio transactions to be
placed on an agency basis through DSTS, a wholly-owned broker-dealer subsidiary
of DST. When transactions are effected through DSTS, the commission received by
DSTS is credited against, and thereby reduces, certain operating expenses that
the Fund would otherwise be obligated to pay. No portion of the commission is
retained by DSTS. DSTS may be considered an affiliate of Berger LLC due to the
ownership interest of Stilwell in both DST and Berger LLC.
-20-
<PAGE>
Included in the brokerage commissions paid by the Fund during the
fiscal year ended September 30, 1999, as stated in the preceding Brokerage
Commissions table, are the following amounts paid to DSTS, which served to
reduce the Fund's out-of-pocket expenses as follows:
DSTS COMMISSIONS AND RELATED EXPENSE REDUCTIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
DSTS Reduction in DSTS Reduction in DSTS Reduction in
Commissions Expenses FYE Commissions Expenses FYE Commissions Expenses FYE
Paid 9/30/98(1) Paid 9/30/98(1) Paid 9/30/97(1)
FYE 9/30/99 FYE 9/30/98 FYE 9/30/97
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Berger Small Cap $ 0 $ 0 $ 0 $ 0 $10,000 $7,000
Value Fund
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No portion of the commission is retained by DSTS. Difference between
commissions paid through DSTS and reduction in expenses constitute commissions
paid to an unaffiliated clearing broker.
The Fund's advisor places securities orders with a limited number of
major institutional brokerage firms chosen for the reliability and quality of
execution; commission rates; quality of research coverage of major U.S.
companies, the U.S. economy and the securities markets; promptness; back office
capabilities; capital strength and financial stability; prior performance in
serving the advisor and its clients; and knowledge of other buyers and sellers.
The advisor selects the broker for each order based on the factors above, as
well as the size, difficulty and other characteristics of the order. The
directors or trustees of the Funds have also authorized sales of shares of the
Funds by a broker-dealer and the recommendations of a broker-dealer to its
customers that they purchase Fund shares to be considered as factors in the
selection of broker-dealers to execute portfolio transactions for the Funds. In
addition, the advisor may also consider payments made by brokers to a Fund or to
other persons on behalf of a Fund for services provided to the Fund for which it
would otherwise be obligated to pay, such as transfer agency fees. In placing
portfolio business with any such broker or dealer, the advisor will seek the
best execution of each transaction.
7. HOW TO PURCHASE AND REDEEM SHARES IN THE FUND
<TABLE>
<S> <C>
MINIMUM INITIAL INVESTMENTS:
Regular investment $2,000
Low Minimum Investment Plan $ 100
MINIMUM SUBSEQUENT INVESTMENTS:
Regular investment $ 50
Automatic investment $ 50
Low Minimum Investment Plan
(required monthly automatic investments) $ 100
</TABLE>
To purchase shares in the Fund, simply complete the application form
enclosed with the Prospectus. Then mail it with a check payable to "Berger
Funds" to the following address:
Berger Funds
P.O. Box 219958
Kansas City, MO 64121
If a shareholder is adding to an existing account, shares may also be
purchased by placing an order by telephone call to the Fund at 1-800-551-5849 or
via on-line access, and remitting payment to DST Systems, Inc. Payment for
shares ordered on-line must be made by electronic funds transfer. In order to
make sure that payment for telephone purchases is received on time, shareholders
are encouraged to remit payment by electronic funds transfer. Shareholders may
also remit payment for telephone purchases by wire or by overnight delivery.
In addition, Fund shares may be purchased through certain
broker-dealers that have established mutual fund programs and certain other
organizations connected with pension and retirement
-21-
<PAGE>
plans. These broker-dealers and other organizations may charge investors a
transaction or other fee for their services, may require different minimum
initial and subsequent investments than the Fund and may impose other charges or
restrictions different from those applicable to shareholders who invest in the
Fund directly. Fees charged by these organizations will have the effect of
reducing a shareholder's total return on an investment in Fund shares. No such
charge will apply to an investor who purchases Fund shares directly from the
Fund as described above.
Procedures for purchasing, selling (redeeming) and exchanging Fund
shares by telephone and online are described in the Prospectus. The Fund may
terminate or modify those procedures and related requirements at any time,
although shareholders of the Fund will be given notice of any termination or
material modification. Berger LLC may, at its own risk, waive certain of those
procedures and related requirements.
8. HOW THE NET ASSET VALUE IS DETERMINED
The net asset value of the Fund is determined once daily, at the close
of the regular trading session of the New York Stock Exchange (the "Exchange")
(normally 4:00 p.m., New York time, Monday through Friday) each day that the
Exchange is open. The Exchange is closed and the net asset value of the Fund is
not determined on weekends and on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day each year.
The share price for the Investor Shares of the Fund is determined by
adding the Investor Shares' pro rata portion of the total value of the Fund's
investments, cash and other assets, deducting the Investor Shares' pro rata
portion of the Fund's liabilities and the liabilities attributable directly to
the Investor Shares, and then dividing that value by the total number of the
Investor Shares outstanding. Since net asset value for the Fund is calculated by
class, and since the Investor Shares and each other class of the Fund has its
own expenses, the per share net asset value of the Fund will vary by class.
In determining net asset value, securities listed or traded primarily
on national exchanges, The Nasdaq Stock Market and foreign exchanges are valued
at the last sale price on such markets, or, if such a price is lacking for the
trading period immediately preceding the time of determination, such securities
are valued at the mean of their current bid and asked prices. Securities that
are traded in the over-the-counter market are valued at the mean between their
current bid and asked prices. The market value of individual securities held by
the Fund will be determined by using prices provided by pricing services which
provide market prices to other mutual funds or, as needed, by obtaining market
quotations from independent broker/dealers. Short-term money market securities
maturing within 60 days are valued on the amortized cost basis, which
approximates market value. All assets and liabilities initially expressed in
terms of non-U.S. dollar currencies are translated into U.S. dollars at the
prevailing market rates as quoted by one or more banks or dealers shortly before
the close of the Exchange. Securities and assets for which quotations are not
readily available or are not representative of market value may be valued at
their fair value determined in good faith pursuant to consistently applied
procedures established by the trustees. Examples would be when events occur that
materially affect the value of a security at a time when the security is not
trading or when the securities are illiquid.
Generally, trading in foreign securities markets is substantially
completed each day at various times prior to the close of the Exchange. The
values of foreign securities used in computing the net asset value of the shares
of the Fund are determined as of the earlier of such market close or the closing
time of the Exchange. Occasionally, events affecting the value of such
securities may occur between the times at which they are determined and the
close of the Exchange, or when the foreign market on which such securities trade
is closed but the Exchange is open, which will not be reflected in the
computation of net asset value. If during such periods, events occur which
materially affect the value of such securities, the securities may be valued at
their fair value as determined in good faith pursuant to consistently applied
procedures established by the trustees.
The Fund's securities may be listed primarily on foreign exchanges or
over-the-counter dealer markets which may trade on days when the Exchange is
closed (such as a customary U.S. holiday) and on which the Fund's net asset
value is not calculated. As a result, the net asset value of the Fund may be
significantly affected by such trading on days when shareholders cannot purchase
or redeem shares of the Fund.
-22-
<PAGE>
9. INCOME DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAX TREATMENT
This discussion summarizes certain federal income tax issues relating
to the Fund. As a summary, it is not an exhaustive discussion of all possible
tax ramifications. Accordingly, shareholders are urged to consult with their tax
advisors with respect to their particular tax consequences.
TAX STATUS OF THE FUND. If the Fund meets certain investment and
distribution requirements, it will be treated as a "regulated investment
company" (a "RIC") under the Internal Revenue Code and will not be subject to
federal income tax on earnings that it distributes in a timely manner to
shareholders. It also may be subject to an excise tax on undistributed income if
it does not meet certain timing requirements for distributions. The Fund intends
to qualify as a RIC annually and to make timely distributions in order to avoid
income and excise tax liabilities.
TAX ON FUND DISTRIBUTIONS. With certain exceptions provided by law,
the Fund will report annually to the Internal Revenue Service and to each
shareholder information about the tax treatment of the shareholder's
distributions. Dividends paid by the Fund, whether received in cash or
reinvested in additional Fund shares, will be treated as ordinary income to the
shareholders. Distributions of net capital gain, whether received in cash or
reinvested in Fund shares, will be taxable to the shareholders, but the rate of
tax will vary depending upon the Fund's holding periods in the assets whose sale
resulted in the capital gain. Dividends and distributions that are declared in
October, November or December but not distributed until the following January
will be considered to be received by the shareholders on December 31.
In general, net capital gains from assets held by the Fund for more
than 12 months will be subject to a maximum tax rate of 20% and net capital
gains from assets held for 12 months or less will be taxed as ordinary income.
Distributions will be subject to these capital gains rates, regardless of how
long a shareholder has held Fund shares. Assets contributed to a Fund in an
in-kind purchase of Fund shares may generate more gain upon their sale than if
the assets had been purchased by the Fund with cash contributed to the Fund in a
cash purchase of Fund shares.
If the Fund's distributions for a taxable year exceeds its tax
earnings and profits available for distribution, all or a portion of its
distributions may be treated as a return of capital. To the extent a
distribution is treated as a return of capital, a shareholder's basis in his or
her Fund shares will be reduced by that amount.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the U.S. Postal Service is unable to deliver checks to
the shareholder's address of record, or if a shareholder's checks remain
uncashed for six months, the Fund reserves the right to reinvest the amount
distributed in additional Fund shares at the then-current NAV and to convert the
shareholder's distribution option from receiving cash to having all dividend and
other distributions reinvested in additional shares. In addition, no interest
will accrue on amounts represented by uncashed distribution or redemption
checks.
TAX ON REDEMPTIONS OF FUND SHARES. Shareholders may be subject to tax
on the redemption of their Fund shares. In general, redemptions may give rise to
a capital gain or loss, the treatment of which will depend on the shareholder's
holding period in the Fund shares. Tax laws may prevent the deduction of a loss
on the sale of Fund shares if the shareholder reinvests in the Fund shortly
before or after the sale giving rise to the loss. Any loss on the redemption or
other sale or exchange of Fund shares held for six months or less will be
treated as a long-term capital loss to the extent of any long-term capital gain
distribution received on the shares.
INCOME FROM FOREIGN SOURCES. Dividends and interest received by the
Fund on foreign securities may give rise to withholding and other taxes imposed
by foreign countries, although these taxes may be reduced by applicable tax
treaties. Foreign taxes will generally be treated as expenses of the Fund,
unless the Fund has more than 50% of its assets invested in foreign corporate
securities at the end of the Fund's taxable year. In that case, if the Fund
makes an election, shareholders of the Fund may be able to
-23-
<PAGE>
deduct (as an itemized deduction) or, claim a foreign tax credit for their share
of foreign taxes, subject to limitations prescribed in the tax law.
If the Fund invests in a foreign corporation that is a passive foreign
investment company (a "PFIC"), special rules apply that may affect the tax
treatment of gains from the sale of the stock and may cause the Fund to incur
IRS tax and interest charges. However, the Fund may be eligible to elect one of
two alternative tax treatments with respect to PFIC shares which would avoid
these taxes and charges, but also may affect, among other things, the amount and
character of gain or loss and the timing of the recognition of income with
respect to PFIC shares. Accordingly, the amounts, character and timing of income
distributed to shareholders of the Fund holding PFIC shares may differ
substantially as compared to a fund that did not invest in PFIC shares.
INCOME FROM CERTAIN TRANSACTIONS. Some or all of the Fund's
investments may include transactions that are subject to special tax rules.
Transactions involving foreign currencies may give rise to gain or loss that
could affect the Fund's ability to make ordinary dividend distributions.
Investment in certain financial instruments, such as options, futures contracts
and forward contracts, may require annual recognition of unrealized gains and
losses. Transactions that are treated as "straddles" may affect the character
and/or timing of other gains and losses of the Fund. If the Fund enters into a
transaction (such as a "short sale against the box") that reduces the risk of
loss on an appreciated financial position that it already holds, the entry into
the transaction may constitute a constructive sale and require immediate
recognition of gain.
BACKUP WITHHOLDING. In general, if a shareholder is subject to backup
withholding, the Fund will be required to withhold federal income tax at a rate
of 31% from distributions to that shareholder. These payments are creditable
against the shareholder's federal income tax liability.
FOREIGN SHAREHOLDERS. Foreign shareholders of the Fund generally will
be subject to a 30% U.S. withholding tax on dividends paid by the Fund from
ordinary income and short-term capital gain, although the rate may be reduced by
a tax treaty. If a foreign shareholder dies while owning Fund shares, those
shares may be subject to U.S. estate taxes.
10. SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended for any period during which
the New York Stock Exchange is closed or the Securities and Exchange Commission
determines that trading on the Exchange is restricted, or when there is an
emergency as determined by the Securities and Exchange Commission as a result of
which it is not reasonably practicable for the Fund to dispose of securities
owned by it or to determine the value of its net assets, or for such other
period as the Securities and Exchange Commission may by order permit for the
protection of shareholders of the Fund.
The Fund intends to redeem its shares only for cash, although it
retains the right to redeem its shares in-kind under unusual circumstances, in
order to protect the interests of the remaining shareholders, by the delivery of
securities selected from its assets at its discretion. The Fund is, however,
governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant to
which the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. For purposes of this threshold, each underlying account holder
whose shares are held of record in certain omnibus accounts is treated as one
shareholder. Should redemptions by any shareholder during any 90-day period
exceed such limitation, the Fund will have the option of redeeming the excess in
cash or in-kind. If shares are redeemed in-kind, the redeeming shareholder
generally will incur brokerage costs in converting the assets to cash. The
redeeming shareholder may have difficulty selling the securities and recovering
the amount of the redemption if the securities are illiquid. The method of
valuing securities used to make redemption in-kind will be the same as the
method of valuing portfolio securities described under Section 8.
-24-
<PAGE>
11. TAX-SHELTERED RETIREMENT PLANS
The Fund offers several tax-qualified retirement plans for
individuals, businesses and non-profit organizations, including a Profit-Sharing
Plan, a Money Purchase Pension Plan, an Individual Retirement Account (IRA), a
Roth IRA and a 403(b) Custodial Account for adoption by employers and
individuals who wish to participate in such Plans. For information on other
types of retirement plans offered by the Fund, please call 1-800-333-1001 or
write to the Fund c/o Berger LLC, P.O. Box 5005, Denver, CO 80217.
PROFIT-SHARING AND MONEY PURCHASE PENSION PLANS
Employers, self-employed individuals and partnerships may make
tax-deductible contributions to the tax-qualified retirement plans offered by
the Fund. All income and capital gains accumulated in the Plans are tax free
until withdrawn. The amounts that are deductible depend upon the type of Plan or
Plans adopted.
If you, as an employer, self-employed person or partnership, adopt the
Profit-Sharing Plan, you may vary the amount of your contributions from year to
year and may elect to make no contribution at all for some years. If you adopt
the Money Purchase Pension Plan, you must commit yourself to make a contribution
each year according to a formula in the Plan that is based upon your employees'
compensation or your earned income. By adopting both the Profit-Sharing and the
Money Purchase Pension Plan, you can increase the amount of contributions that
you may deduct in any one year.
If you wish to purchase shares of the Fund in conjunction with one or
both of these tax-qualified plans, you may use an Internal Revenue Service
approved prototype Trust Agreement and Retirement Plan available from the Fund.
IFTC serves as trustee of the Plan, for which it charges an annual trustee's fee
for the Fund or Cash Account Trust Money Portfolio (discussed below) in which
the participant's account is invested. Contributions under the Plans are
invested exclusively in shares of the Fund or the Cash Account Trust Money
Market Portfolios, which are then held by the trustee under the terms of the
Plans to create a retirement fund in accordance with the tax code.
Distributions from the Profit-Sharing and Money Purchase Pension Plans
generally may not be made without penalty until the participant reaches age 59
1/2 and must begin no later than April 1 of the calendar year following the year
in which the participant attains age 70 1/2. A participant who is not a 5% owner
of the employer may postpone such distributions to April 1 of the calendar year
following the year of retirement. This exception does not apply to distributions
from an individual retirement account (IRA). Except for required distributions
after age 70 1/2, periodic distributions over more than 10 years and the
distribution of any after-tax contributions, distributions are subject to 20%
Federal income tax withholding unless those distributions are rolled directly to
another qualified plan or an IRA. Participants may not be able to receive
distributions immediately upon request because of certain requirements under
federal tax law. Since distributions which do not satisfy these requirements can
result in adverse tax consequences, consultation with an attorney or tax advisor
regarding the Plans is recommended. You should also consult with your tax
advisor regarding state tax law implications of participation in the Plans.
In order to receive the necessary materials to create a Profit-Sharing
or Money Purchase Pension Plan, please write to the Fund, c/o Berger LLC, Inc.,
P.O. Box 5005, Denver, Colorado 80217, or call 1-800-333-1001. Trustees for
401(k) or other existing plans interested in utilizing Fund shares as an
investment or investment alternative in their plans should contact the Fund at
1-800-333-1001.
INDIVIDUAL RETIREMENT ACCOUNT (IRA)
If you are an individual with compensation or earned income, whether
or not you are actively participating in an existing qualified retirement plan,
you can provide for your own retirement by adopting an IRA. Under an IRA, you
can contribute each year up to the lesser of 100% of your compensation or
$2,000. If you are married and you file a joint return, you and your spouse
together may make contributions totaling up to $4,000 to two IRAs (with no more
than $2,000 being contributed to either account) if your joint income is $4,000
or more, even if one spouse has no earned income. If neither you nor your spouse
are active participants in an existing qualified retirement plan, or if your
income does not exceed certain amounts, the amounts contributed to your IRA can
be deducted for Federal income tax purposes whether or not your
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<PAGE>
deductions are itemized. If you or your spouse are covered by an existing
qualified retirement plan, the deductibility of your IRA contributions will be
phased out for federal income tax purposes if your income exceeds specified
amounts, although the income level at which your IRA contributions will no
longer be deductible is higher if only your spouse (but not you) is an active
participant. However, whether your contributions are deductible or not, the
income and capital gains accumulated in your IRA are not taxed until the account
is distributed.
If you wish to create an IRA to invest in shares of the Fund, you may
use the Fund's IRA custodial agreement form which is an adaptation of the form
provided by the Internal Revenue Service. Under the IRA custodial agreement,
IFTC will serve as custodian, for which it will charge an annual custodian fee
for the Fund and each other Berger Fund and Cash Account Trust Money Market
Portfolio in which the IRA is invested.
Distributions from an IRA generally may not be made without penalty
until you reach age 59 1/2 and must begin no later than April 1 of the calendar
year following the year in which you attain age 70 1/2. Since distributions
which do not satisfy these requirements can result in adverse tax consequences,
consultation with an attorney or tax advisor is recommended. You should also
consult with your tax advisor about state taxation of your account.
In order to receive the necessary materials to create an IRA account,
please write to the Fund, c/o Berger LLC, Inc., P.O. Box 5005, Denver, Colorado
80217, or call 1-800-333-1001.
ROTH IRA
If you are an individual with compensation or earned income, you may
contribute up to the lesser of $2,000 or 100% of your compensation to a Roth
IRA, as long as your income does not exceed a specified income level ($95,000
for single individuals, $150,000 for married individuals filing jointly). A Roth
IRA is similar in many respects to a traditional IRA, as described above.
However, the maximum amount you may contribute to a Roth IRA is phased out
between that income level and a maximum income amount ($110,000 and $160,000,
respectively), and you may not make any contribution at all to a Roth IRA if
your income exceeds the maximum income amount. Also, you can make contributions
to a Roth IRA even after you reach age 70-1/2, and you are not required to take
distributions from a Roth IRA prior to your death.
Contributions to a Roth IRA are not deductible for federal income tax
purposes. However, the income and capital gains accumulated in a Roth IRA are
not taxed while held in the IRA, and distributions can be taken tax-free if the
Roth IRA has been established for a minimum of five years and the distribution
is after age 59-1/2, for a first time home purchase, or upon death or
disability.
An individual with an income of less than $100,000 who is not married
filing separately can roll his or her existing IRA into a Roth IRA. However, the
individual must pay taxes on the fair market value of the existing IRA on the
date of the rollover. Please consult your tax advisor concerning Roth IRA
rollovers.
403(b) CUSTODIAL ACCOUNTS
If you are employed by a public school system or certain federally
tax-exempt private schools, colleges, universities, hospitals, religious and
charitable or other nonprofit organizations, you may establish a 403(b)
Custodial Account. Your employer must participate in the establishment of the
account.
If your employer participates, it will automatically deduct the amount
you designate from your gross salary and contribute it to your 403(b) Custodial
Account. The amount which you may contribute annually under a salary reduction
agreement is generally the lesser of $9,500 or your exclusion allowance, which
is based upon a specified formula, and other Internal Revenue Code limits apply.
There is a $50 minimum investment in the 403(b) Custodial Account. Contributions
made to the account reduce the amount of your current income subject to Federal
income tax. Federal income tax is not paid on your contribution until you begin
making withdrawals. In addition, all income and capital gains accumulated in the
account are tax-free until withdrawn.
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<PAGE>
Withdrawals from your 403(b) Custodial Agreement may begin as soon as
you reach age 59 1/2 and must begin no later than April 1 of the year following
the later of the calendar year in which you attain age 70 1/2 or the calendar
year in which you retire. Except for required distributions after age 70 1/2 and
periodic distributions over more than 10 years, distributions are subject to 20%
Federal income tax withholding unless those distributions are rolled directly to
another 403(b) account or annuity or an individual retirement account (IRA). You
may not be able to receive distributions immediately upon request because of
certain notice requirements under federal tax law. Since distributions which do
not satisfy these requirements can result in adverse tax consequences,
consultation with an attorney or tax advisor regarding the 403(b) Custodial
Account is recommended. You should also consult with your tax advisor about
state taxation of your account.
Individuals who wish to purchase shares of a Fund in conjunction with
a 403(b) Custodial Account may use a Custodian Account Agreement and related
forms available from the Funds. IFTC serves as custodian of the 403(b) Custodial
Account, for which it charges an annual custodian fee for each Fund or Cash
Account Trust Money Market Portfolio in which the participant's account is
invested.
In order to receive the necessary materials to create a 403(b)
Custodial Account, please write to the Berger Funds, c/o Berger LLC, P.O. Box
5005, Denver, Colorado 80217, or call 1-800-333-1001.
12. EXCHANGE PRIVILEGE AND SYSTEMATIC WITHDRAWAL PLAN
A shareholder who owns shares of the Fund worth at least $5,000 at the
current net asset value may establish a Systematic Withdrawal account from which
a fixed sum will be paid to the shareholder at regular intervals by the Fund in
which the shareholder is invested.
To establish a Systematic Withdrawal account, the shareholder deposits
Fund shares with the Fund and appoints the Fund as agent to redeem shares in the
shareholder's account in order to make monthly, quarterly, semi-annual or annual
withdrawal payments to the shareholder of a fixed amount. The minimum withdrawal
payment is $50.00. These payments generally will be made on the 25th day of the
month.
Withdrawal payments are not yield or income on the shareholder's
investment, since portions of each payment will normally consist of a return of
the shareholder's investment. Depending on the size of the disbursements
requested and the fluctuation in value of the Fund's portfolio, redemptions for
the purpose of making such disbursements may reduce or even exhaust the
shareholder's account.
The shareholder may vary the amount or frequency of withdrawal
payments, temporarily discontinue them, or change the designated payee or
payee's address, by notifying the Fund. The shareholder may, of course, make
additional deposits of Fund shares in the shareholder's account at any time.
Since redemption of shares to make withdrawal payments is a taxable
event, each investor should consult a tax advisor concerning proper tax
treatment of the redemption.
Any shareholder may exchange any or all of the shareholder's shares in
the Fund for shares of any of the other available Berger Funds or for shares of
the Money Market Portfolio, the Government Securities Portfolio or the
Tax-Exempt Portfolio of the Cash Account Trust ("CAT Portfolios"), separately
managed, unaffiliated money market funds, without charge, after receiving a
current prospectus of the other Fund or CAT Portfolio. The exchange privilege
with the CAT Portfolios does not constitute an offering or recommendation of the
shares of any such CAT Portfolio by the Fund or Berger LLC. Berger LLC is
compensated for administrative services it performs with respect to the CAT
Portfolios.
Exchanges into or out of the Fund are made at the net asset value per
share next determined after the exchange request is received. Each exchange
represents the sale of shares from one Fund and the purchase of shares in
another, which may produce a gain or loss for income tax purposes. An exchange
of shares may be made by written request directed to DST Systems, Inc., via
on-line access, or simply by telephoning the Berger Funds at 1-800-551-5849.
This privilege may be terminated or amended by the Fund, and is not available in
any state in which the shares of the Fund or CAT Portfolio being acquired in the
exchange are not eligible for sale. Shareholders automatically have telephone
and on-line privileges to authorize exchanges unless they specifically decline
this service in the account application or in writing.
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<PAGE>
13. PERFORMANCE INFORMATION
From time to time in advertisements, the Fund may discuss its
performance ratings as published by recognized mutual fund statistical services,
such as Lipper Analytical Services, Inc., CDA Investment Technologies, Inc.,
Morningstar, Inc., or Value Line Investment Survey or by publications of general
interest such as THE WALL STREET JOURNAL, INVESTOR'S BUSINESS DAILY, MONEY,
BARRON'S, FINANCIAL WORLD or KIPLINGER'S PERSONAL FINANCE MAGAZINE. In addition,
the Fund may compare its performance to that of recognized broad-based
securities market indices, including the Standard & Poor's 500 Stock Index, the
Dow Jones Industrial Average, the Russell 2000 Stock Index, the Standard &
Poor's 600 Small Cap Index, the Nasdaq Composite Index, or more narrowly-based
or blended indices which reflect the market sectors in which the Fund invests.
The total return of the Fund is calculated for any specified period of
time by assuming the purchase of shares of the Fund at the net asset value at
the beginning of the period. Each dividend or other distribution paid by the
Fund is assumed to have been reinvested at the net asset value on the
reinvestment date. The total number of shares then owned as a result of this
process is valued at the net asset value at the end of the period. The
percentage increase is determined by subtracting the initial value of the
investment from the ending value and dividing the remainder by the initial
value.
The Fund's total return reflects the Fund's performance over a stated
period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same total return if the
Fund's performance had been constant over the entire period. Total return
figures are based on the overall change in value of a hypothetical investment in
the Fund. Because average annual total returns for more than one year tend to
smooth out variations in the Fund's return, investors should recognize that such
figures are not the same as actual year-by-year results.
All performance figures for the Fund are based upon historical results
and do not assure future performance. The investment return and principal value
of an investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Quotations of average annual total return for the Fund will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund over periods of 1, 3, 5 and 10 years, or
for the period since the Fund's registration statement became effective, if
shorter. These are the rates of return that would equate the initial amount
invested to the ending redeemable value. These rates of return are calculated
pursuant to the following formula: P(1 + T) TO THE POWER OF n = ERV (where P
= a hypothetical initial payment of $1,000, T = the average annual total
return, n = the number of years and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures reflect the deduction of a proportional share of Fund expenses
on an annual basis, and assume that all dividends and distributions are
reinvested when paid.
Shares of the Fund had no class designations until February 14, 1997,
when all of the then-existing shares were designated as Investor Shares and the
Fund commenced offering another class of shares. Total return of the Investor
Shares and other classes of shares of the Fund will be calculated separately.
Because each class of shares is subject to different expenses, the performance
of each class for the same period will differ.
For the 1-year, 3-year, 5-year and 10-year periods ended September 30,
1999, and for the period from October 21, 1987 (date of first public offering)
through September 30, 1999, the average annual total returns for the Investor
Shares of the Fund were 24.69%, 18.08%, 17.39%, 13.15% and 14.75%, respectively.
Performance data for the Investor Shares include periods prior to the
Fund's adoption of class designations on February 14, 1997, and therefore, for
those periods, do not reflect the 0.25% per year 12b-1 fee applicable to the
Investor Shares, which came into effect on that date.
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<PAGE>
14. ADDITIONAL INFORMATION
The Fund was originally organized in November 1984 as a Delaware
corporation. In May 1990, the Fund was reorganized from a Delaware
corporation into a Massachusetts business trust known as The Omni Investment
Fund (the "Trust"). Pursuant to the Fund's reorganization, the Fund as a
series of the Trust assumed all of the assets and liabilities of the Fund as
a Delaware corporation, and Fund shareholders received shares of the
Massachusetts business trust equal both in number and net asset value to
their shares of the Delaware corporation. All references in this SAI to the
Fund and all financial and other information about the Fund prior to such
reorganization are to the Fund as a Delaware corporation. All references
after such reorganization are to the Fund as a series of the Trust. On
February 14, 1997, the name of the Trust was changed to Berger Omni
Investment Trust and the name of the Fund was changed to the Berger Small Cap
Value Fund. The name "Berger Small Cap Value Fund -Registered Trademark-" was
registered as a service mark in September 1998.
The Trust is authorized to issue an indefinite number of shares of
beneficial interest having a par value of $0.01 per share, which may be issued
in any number of series. Currently, the Fund is the only series established
under the Trust, although others may be added in the future. The shares of each
series of the Trust are permitted to be divided into classes. Currently, the
Fund issues two classes of shares: The Investor Shares, to which this SAI
relates, are available to the general public, subject to the Fund's regular
minimum investment requirements as specified in that prospectus (currently
$2,000 minimum initial investment). A separate class of shares, Institutional
Shares, are offered through a separate prospectus and statement of additional
information and are designed for pension and profit-sharing plans, employee
benefit trusts, endowments, foundations and corporations, as well as high net
worth individuals, who are willing to maintain a minimum account balance of
$250,000. Institutional Shares are also made available for purchase and dividend
reinvestment to all holders of the Fund's shares as of February 14, 1997, when
all the Fund's then outstanding shares were designated as Institutional Shares,
subject to a minimum account balance requirement of $500.
Under the Fund's Declaration of Trust, each trustee will continue in
office until the termination of the Trust or his or her earlier death,
resignation, incapacity, retirement or removal. Vacancies will be filled by a
majority vote of the remaining trustees, subject to the provisions of the
Investment Company Act of 1940. Therefore, no annual or regular meetings of
shareholders normally will be held, unless otherwise required by the Declaration
of Trust or the Investment Company Act of 1940. Subject to the foregoing,
shareholders have the power to vote for the election and removal of trustees, to
terminate or reorganize the Trust, to amend the Declaration of Trust, and on any
other matters on which a shareholder vote is required by the Investment Company
Act of 1940, the Declaration of Trust, the Trust's bylaws or the trustees.
Shareholders of the Fund and, where applicable, the other
series/classes of the Trust, generally vote separately on matters relating to
those respective series/classes, although they vote together and with the
holders of any other series/classes of the Trust in the election of trustees of
the Trust and on all matters relating to the Trust as a whole. Shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held on matters submitted to a vote of shareholders. Shares of
the Fund do not have cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of trustees can elect 100%
of the trustees if they choose to do so, and in such event the holders of the
remaining shares will not be able to elect any person as a trustee.
Shares of the Fund are fully paid and non-assessable when issued.
Dividends, distributions and the residual assets of the Fund in the event of
liquidation are distributed to shareholders equally for each outstanding share
of the Fund, subject to any applicable distinctions by class. Shares of the Fund
have no preemptive rights. Fund shares have no subscription rights or conversion
rights, except that shareholders of any class of the Fund may convert their
shares into shares of any other class of the Fund in the event and only in the
event the shareholder ceases to be eligible to purchase or hold shares of the
original class, or becomes eligible to purchase shares of a different class, by
reason of a change in the shareholder's status under the conditions of
eligibility in effect for such class at that time. Shares of the Fund may be
transferred by endorsement or stock power as is customary, but the Fund is not
required to recognize any transfer until it is recorded on the books.
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<PAGE>
Under Massachusetts law, shareholders of the Fund could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by the Fund
or the trustees. The Fund's Declaration of Trust provides for indemnification
out of the property of the Fund for all loss and expense of any shareholder of
the Fund held personally liable for the obligations of the Fund. Accordingly,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund would be unable to meet
its obligations. The possibility that these circumstances would occur is remote.
The trustees intend to conduct the operations of the Fund to avoid, to the
extent possible, liability of shareholders for liabilities of the Fund.
Under governing corporate law, the Fund may enter into a variety of
corporate transactions, such as reorganizations, conversions, mergers and asset
transfers, or may be liquidated. Any such transaction would be subject to a
determination from the trustees that the transaction was in the best interests
of the Fund and its shareholders, and may require obtaining shareholder
approval.
MORE INFORMATION ON SPECIAL FUND STRUCTURE
The Fund has divided its shares into classes and has two classes of
shares outstanding, the Investor Shares covered by this SAI and the
Institutional Shares offered through a separate prospectus and statement of
additional information. The Fund implemented its multi-class structure by
adopting a Rule 18f-3 Plan under the Investment Company Act of 1940
permitting it to issue its shares in classes. The Fund's Rule 18f-3 Plan
governs such matters as class features, dividends, voting, allocation of
income and expenses between classes, exchange and trustee monitoring of the
Plan. Each class is subject to such investment minimums and other conditions
of eligibility as are set forth in the relevant prospectus for the class, as
it may be amended from time to time. Institutional Shares are designed for
institutional, individual, and other investors willing to maintain a higher
minimum account balance, currently set at $250,000. Information concerning
Institutional Shares is available from the Fund at 1-800-259-2820.
Subject to the Trust's Declaration of Trust and any other applicable
provisions, the trustees of the Trust have the authority to create additional
classes, or change existing classes, from time to time, in accordance with Rule
18f-3 under the Act.
PRINCIPAL SHAREHOLDERS
Insofar as the management of the Fund is aware, as of January 4,
2000, no person owned, beneficially or of record, more than 5% of the
outstanding Investor Shares of the Fund, except for the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
OWNER PERCENTAGE
- --------------------------------------------------------------------------------
<S> <C>
Donaldson Lufkin & Jenrette Securities Corporation
No Load Mutual Funds, 14th Flr. 5.19%(1)
P.O. Box 2052
Jersey City, NJ 07303
- --------------------------------------------------------------------------------
Merrill Lynch
Pierce, Fenner & Smith Inc. 6.03%
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
- --------------------------------------------------------------------------------
Northern Trust Co.
P.O. Box 92956 6.71%
Chicago, IL 60675
- --------------------------------------------------------------------------------
Charles Schwab & Co., Inc.
101 Montgomery Street 20.14%(2)
San Francisco, CA 94104
- --------------------------------------------------------------------------------
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<PAGE>
- --------------------------------------------------------------------------------
National Financial Services Corp. ("Fidelity")
200 Liberty St. 28.90%(3)
One World Financial Center
New York, NY 10281
- --------------------------------------------------------------------------------
</TABLE>
(1) In addition, Donaldson Lufkin & Jenrette holds of record 14.70% of the
Institutional Shares class of the Fund, which together with its Investor
Shares, constitute 10.26% of the Fund's total outstanding shares.
(2) In addition, Charles Schwab & Co., Inc., holds of record 17.35% of the
Institutional Shares class of the Fund, which together with its Investor
Shares, constitute 18.65% of the Fund's total outstanding shares.
(3) In addition, Fidelity holds of record 6.36% of the Institutional Shares
class of the Fund, which together with its Investor Shares, constitute 16.88%
of the Fund's total outstanding shares.
Any person owning more than 25% of the outstanding securities of the Fund may be
deemed to control it. Fidelity is believed to hold its shares of the Fund as
nominee for the benefit of its clients or customers.
DISTRIBUTION
The Distributor is the principal underwriter of the Fund's shares. The
Distributor is a wholly-owned subsidiary of Berger LLC. The Distributor is a
registered broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc. The Distributor
acts as the agent of the Fund in connection with the sale of its shares in all
states in which the shares are eligible for sale and in which the Distributor is
qualified as a broker-dealer. David J. Schultz, Chief Financial Officer,
Assistant Secretary and Treasurer of the Distributor, is also Vice President and
Treasurer of the Trust. Janice M. Teague, Vice President and Secretary of the
Distributor, is also Vice President and Secretary of the Trust. Brian Ferrie,
Vice President and Chief Compliance Officer of the Distributor, is also Vice
President of the Trust.
The Trust, on behalf of the Fund, and the Distributor are parties to a
Distribution Agreement that continues through April 2000, and thereafter from
year to year if such continuation is specifically approved at least annually by
the trustees or by vote of a majority of the outstanding shares of the Fund and
in either case by vote of a majority of the trustees of the Trust who are not
"interested persons" (as that term is defined in the Investment Company Act of
1940) of the Trust or the Distributor. The Distribution Agreement is subject to
termination by the Trust or the Distributor on 60 days' prior written notice,
and terminates automatically in the event of its assignment. Under the
Distribution Agreement, the Distributor continuously offers the Fund's shares
and solicits orders to purchase Fund shares at net asset value. The Distributor
is not compensated for its services under the Distribution Agreement, but may be
reimbursed by Berger LLC for its costs in distributing Fund shares.
OTHER INFORMATION
The Fund has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of 1933, as
amended, with respect to the securities of the Fund of which this SAI is a part.
If further information is desired with respect to the Fund or such securities,
reference is made to the Registration Statement and the exhibits filed as a part
thereof.
Davis, Graham & Stubbs LLP, 370 Seventeenth Street, Denver, Colorado,
acts as counsel to the Fund.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 950 Seventeenth Street, Denver,
Colorado, acted as independent accountants for the Fund for the year ended
September 30, 1999. In that capacity, PricewaterhouseCoopers LLP audited the
financial statements of the Fund referenced below under "Financial
Information" and assisted the Fund in connection with the preparation of its
1998 income tax returns.
PricewaterhouseCoopers LLP has been appointed to act as independent
accountants for the Fund for the fiscal year ended September 30, 2000. In
that capacity, PricewaterhouseCoopers LLP will audit
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<PAGE>
the financial statements of the Fund and assist the Fund in connection with
the preparation of its 1999 income tax returns.
FINANCIAL INFORMATION
The following financial statements for the Fund are incorporated
herein by reference from the Annual Report to Shareholders of the Berger Funds
dated September 30, 1999, in each case along with the Report of Independent
Accountants thereon dated November 4, 1999:
Schedule of Investments as of September 30, 1999
Statement of Assets and Liabilities as of September 30, 1999
Statement of Operations for the Fiscal Year Ended September 30, 1999
Statement of Changes in Net Assets for the Fiscal Years Ended
September 30, 1999, and 1998.
Notes to Financial Statements, September 30, 1999
Financial Highlights for each of the periods indicated.
The above-referenced Annual Report is enclosed with a copy of this
SAI. Additional copies of that Annual Report may be obtained upon request
without charge by calling the Fund at 1-800-333-1001.
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<PAGE>
APPENDIX A
HIGH-YIELD/HIGH RISK CONVERTIBLE BONDS
The Fund may invest in convertible securities of any quality,
including unrated securities or securities rated below investment grade (Ba or
lower by Moody's, BB or lower by S&P). However, the Fund will not purchase any
security in default at the time of purchase. The Fund will not invest more than
20% of the market value of its assets at the time of purchase in convertible
securities rated below investment grade.
Securities rated below investment grade are subject to greater risk
that adverse changes in the financial condition of their issuers or in general
economic conditions, or an unanticipated rise in interest rates, may impair the
ability of their issuers to make payments of interest and principal or
dividends. The market prices of lower grade securities are generally less
sensitive to interest rate changes than higher-rated investments, but more
sensitive to economic changes or individual corporate developments. Periods of
economic uncertainty and change can be expected to result in volatility of
prices of these securities. Lower rated securities also may have less liquid
markets than higher rated securities, and their liquidity as well as their value
may be adversely affected by poor economic conditions. Adverse publicity and
investor perceptions as well as new or proposed laws may also have a negative
impact on the market for high-yield/high-risk bonds. In the event of an
unanticipated default, the Fund will experience a reduction in its income and
could expect a decline in the market value of the securities affected. The
prices of these securities may be more volatile and the markets for them may be
less liquid than those for higher-rated securities.
Unrated securities, while not necessarily of lower quality than rated
securities, may not have as broad a market. Unrated securities will be included
in the Fund's percentage limits for investments rated below investment grade,
unless the Fund's sub-advisor deems such securities to be the equivalent of
investment grade. If securities purchased by the Fund are downgraded following
purchase, or if other circumstances cause the Fund to exceed its percentage
limits on assets invested in securities rated below investment grade, the
trustees of the Fund, in consultation with the Fund's sub-advisor, will
determine what action, if any, is appropriate in light of all relevant
circumstances.
Relying in part on ratings assigned by credit agencies in making
investments will not protect the Fund from the risk that the securities will
decline in value, since credit ratings represent evaluations of the safety of
principal, dividend and/or interest payments, and not the market values of such
securities. Moreover, such ratings may not be changed on a timely basis to
reflect subsequent events.
Although the market for high-yield debt securities has been in
existence for many years and from time to time has experienced economic
downturns, this market has involved a significant increase in the use of
high-yield debt securities to fund highly leverage corporate acquisitions and
restructurings. Past experience may not, therefore, provide an accurate
indication of future performance of the high-yield debt securities market,
particularly during periods of economic recession.
Expenses incurred in recovering an investment in a defaulted security
may adversely affect the Fund's net asset value. Moreover, the reduced liquidity
of the secondary market for such securities may adversely affect the market
price of, and the ability of the Fund to value, particular securities at certain
times, thereby making it difficult to make specific valuation determinations.
CORPORATE BOND RATINGS
The ratings of fixed-income securities by Moody's and Standard &
Poor's are a generally accepted measurement of credit risk. However, they are
subject to certain limitations. Ratings are generally based upon historical
events and do not necessarily reflect the future. In addition, there is a period
of time between the issuance of a rating and the update of the rating, during
which time a published rating may be inaccurate.
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KEY TO MOODY'S CORPORATE RATINGS
Aaa-Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa-Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba-Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future. Uncertainty of position
characterizes bonds of this class.
B-Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca-Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic category.
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<PAGE>
KEY TO STANDARD & POOR'S CORPORATE RATINGS
AAA-Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC AND C-Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are out-weighed by the large uncertainties or major risk exposures to adverse
conditions.
C1-The rating C1 is reserved for income bonds on which no interest is
being paid.
D-Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.
PLUS (+) OR MINUS (-)-The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
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