<PAGE>
Registration Nos. 33-47507
811-6652
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. _____
Post-Effective Amendment No. 11 X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 13 X
JULIUS BAER INVESTMENT FUNDS
(formerly BJB Investment Funds)
(Exact name of Registrant as Specified in Charter)
330 Madison Avenue, New York, New York 10017
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 297-3600
Michael K. Quain
President
c/o Bank Julius Baer & Co. Ltd., (New York Branch)
330 Madison Avenue
New York, New York 10017
(Name and Address of Agent for Service)
--------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box):
_____ immediately upon filing pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
On March 1, 1999 pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of rule 485.
Title of Securities Being Registered: Shares of Beneficial Interest
<PAGE>
JULIUS BAER INVESTMENT
FUNDS
Prospectus
March 1, 1999
Julius Baer International Equity Fund
Julius Baer Global Income Fund
Neither the Securities and Exchange Commission nor any state securities
commission has approved any Fund's shares as an investment or
determined whether this prospectus is accurate or complete. Anyone who
tells you otherwise is committing a crime.
<PAGE>
Contents
The Funds
<TABLE>
<S> <C>
What every investor Julius Baer Investment Funds
should know about
the Funds Risk/Return Summaries
Investments, Risks,
Performance and Fees
Investment Strategies and
Risks
The Funds' Management
Your Investment
Information for
managing your Investing in the Funds
Fund account Opening an Account
Pricing of Fund Shares
Purchasing Your Shares
Selling Your Shares
Distribution and Shareholder Servicing
Plans
Distributions and Taxes
Distributions
Tax Information
Where to find more information
about Julius Baer Investment Funds For More Information
Back Cover
</TABLE>
2
<PAGE>
JULIUS BAER INVESTMENT FUNDS
Julius Baer Investment Funds (the Trust) is a mutual fund group that currently
offers two funds: Julius Baer International Equity Fund and Julius Baer Global
Income Fund. Each Fund has a different investment goal and risk level. Bank
Julius Baer & Co., Ltd., New York Branch (the Adviser) manages the assets of
each Fund.
Each Fund currently offers only Class A shares, although Class B shares have
been authorized for each Fund.
RISK/RETURN SUMMARIES
Investments, Risks, Performance and Fees
The following information is only a summary of important information that you
should know about each Fund. More detailed information is included elsewhere in
this Prospectus and in the Statement of Additional Information (SAI) and should
be read in addition to this summary.
As with any mutual fund, there is no guarantee that either Fund will achieve its
goals. Each Fund's share price will fluctuate and you may lose money when
selling shares. A Fund's past performance does not necessarily indicate how that
Fund will perform in the future.
An investment in either of the Funds is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
3
<PAGE>
Julius Baer International Equity Fund
The Fund's Investment Goal
Q. What is the Fund's investment goal?
A. The International Equity Fund seeks long term growth of capital.
Its Principal Investment Strategies
Q. What is the Fund's principal investment strategy?
A. The Fund invests in a wide variety of international equity
securities issued anywhere in the world, normally excluding the U.S.
The Adviser will choose securities in industries and companies it believes are
experiencing favorable demand for their products or services. The Adviser's
selection process focuses on growth potential rather than income. Other
considerations include expected levels of inflation, government policies or
actions, currency relationships and prospects for economic growth in a country
or region.
In selecting its investments, the portfolio manager focuses on securities
located in at least five different countries, although the Fund may at times
invest all of its assets in fewer than five countries. The Fund will normally
invest at least 65% of its total assets in no less than three different
countries outside the U.S. The Fund will invest a portion of its assets in
securities of issuers located in developing countries.
The Fund may also invest in debt securities of U.S. or foreign issuers,
including (up to 10%) in high risk and high yield, non-investment grade
instruments commonly known as junk bonds.
The Key Risks
You could lose money on your investment in the Fund, or the Fund could return
less than other investments. Some of the main risks of investing in the Fund are
listed below:
o Market Risk: the possibility that the Fund's investments in equity
securities will lose value because of declines in the stock market;
o Foreign Investing Risk: the possibility that the Fund's investments in
foreign securities will lose value because of currency exchange rate
fluctuations, price volatility, uncertain political conditions and other
factors.
4
<PAGE>
o The use of futures, options and forward contracts exposes the Fund to
additional investment risks and transaction costs. These are described more
fully in the SAI.
5
<PAGE>
The bar chart shown below indicates the risks of investing in the International
Equity Fund by showing changes in the performance of the Fund's shares from year
to year since the Fund commenced operations. How the Fund has performed in the
past is not necessarily an indication of how the Fund will perform in the
future.
[BAR CHART]
International Equity Fund*
Calendar Year
--------------------------------
1994 1995 1996 1997
---- ---- ---- ----
Total Return -33.58% -0.19% 17.66% 15.33%
*The International Equity Fund's total return for the fiscal year ended
October 31, 1998, was 16.10%.
During the periods shown in the Bar Chart, the highest quarterly return
was 10.65% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -22.49% (for the quarter ended March 31, 1994).
The table below shows how the Fund's average annual total returns for the
periods shown compare to those of the Morgan Stanley Capital International EAFE
Index (MSCI EAFE Index) and to the Lipper International Equity Fund Index. The
MSCI EAFE Index is an unmanaged index that measures stock performance in Europe,
Australia and the Far East. The Lipper International Equity Fund Index is a
composite index of the annual returns of mutual funds that have an investment
style similar to that of the International Equity Fund.
Average Annual Total Returns
(for the periods ended December 31, 1997)
- --------------------------------------------------------------------------------
Past One Year Since Fund's Inception
- --------------------------------------------------------------------------------
International Equity Fund 15.33% 3.69%
- --------------------------------------------------------------------------------
MSCI EAFE Index 1.78% 6.45%
- --------------------------------------------------------------------------------
Lipper International Equity
Fund Index % %
- --------------------------------------------------------------------------------
6
<PAGE>
The Fund's Fees and Expenses
Shareholder Fees - fees paid directly from your investment
There are no fees or sales loads charged to your account when
you buy or sell Fund shares. However, if you sell shares and
request your money by wire transfer, there is a $12.00 fee.
(Your bank may also charge you a fee for receiving wires.)
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses - expenses that are
deducted from fund assets
- --------------------------------------------------------------------------------
Management Fees 1.00%
- --------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees 0.25%
- --------------------------------------------------------------------------------
Other Expenses 0.84%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.09%
- --------------------------------------------------------------------------------
Example of Effect of the Fund's Operating Expenses
The following Example is intended to help you compare the cost of investing in
the International Equity Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. While
your return may vary, the Example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
- ---------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
- ---------------------------------------------------------------------
$212 $655 $1,124 $2,421
- ---------------------------------------------------------------------
7
<PAGE>
Julius Baer Global Income Fund
The Fund's Investment Goal
Q. What is the Fund's investment goal?
A. The Global Income Fund seeks to maximize current income consistent
with the protection of principal.
Its Principal Investment Strategies
Q. What is the Fund's principal investment strategy?
A. The Fund invests in a non-diversified portfolio of fixed-income
securities of issuers located anywhere in the world, including the U.S.
The Fund invests primarily (at least 65% of total assets) in high
quality fixed-income securities consisting of bonds, debentures and
notes. The securities in which the Fund invests may be issued by
governments, supranational entities or corporations.
The Adviser chooses individual investments based on many factors such as yield,
duration, maturity, classification and quality. The Adviser also considers the
local economy and political environment, expected movements in interest rates,
the strength and relative value of a particular currency, and the supply of a
type of security relative to expected demand.
[The Adviser expects the Fund to have a duration of approximately four years.]
The Fund will normally invest in the securities of issuers located in at least
three different countries. The Fund will invest less than 40% of its total
assets in any one country other than the U.S.
The Fund will invest less than 25% of its total assets in securities issued by:
- any one foreign government, its agencies, instrumentalities, or political
subdivisions;
- supranational entities as a group.
The Key Risks
As a non-diversified investment company, the Global Income Fund may invest a
greater proportion of its assets in the obligations of a smaller number of
issuers than a diversified fund and, as a result, may be subject to greater risk
with respect to its portfolio securities.
8
<PAGE>
You could lose money on your investment in the Fund, or the Fund could return
less than other investments if:
o Interest Rate Risk: the possibility that the Fund's investments in
fixed-income securities will lose value because of changes in interest
rates;
o Foreign Investing Risk: the possibility that the Fund's investments in
foreign securities will lose value because of currency exchange rate
fluctuations, price volatility, uncertain political conditions and other
factors.
o The use of futures, options and forward contracts exposes the Fund to
additional investment risks and transaction costs. These are described more
fully in the SAI.
9
<PAGE>
The bar chart shown below indicates the risks of investing in the Global Income
Fund. It shows changes in the performance of the Fund's shares from year to year
since the Fund commenced operations. How the Fund has performed in the past is
not necessarily an indication of how the Fund will perform in the future.
[BAR CHART]
Global Income Fund*
Calendar Year
------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Total Return 11.47% -6.61% 19.15% 5.73% 2.83%
*The Global Income Fund's total return for the fiscal year ended
October 31, 1998, was 9.43%.
During the periods shown in the Bar Chart, the highest quarterly return
was 6.98% (for the quarter ended March 31, 1995) and the lowest
quarterly return was -3.63% (for the quarter ended June 30, 1994).
The table below shows how the Fund's average annual returns for the periods
shown compare to those of a benchmark composed of 50% of the Salomon Brothers
3-7 Year World Government Bond Index and 50% of the Lehman Brothers Intermediate
Government/Corporate Index. The Salomon Brothers 3-7 Year World Government Bond
Index is a ________________________. The Lehman Brothers Intermediate
Government/Corporate Index is an unmanaged composite of intermediate duration
consisting of publicly-issued, fixed-rate, non-convertible domestic bonds.
Average Annual Total Returns
(for the periods ended December 31, 1997)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Past One Year Past Five Years Since Fund's
------------- --------------- Inception
---------
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Income Fund 2.83% 6.15% 6.26%
- ------------------------------------------------------------------------------------------------------------------
50% Salomon Brothers 3-7 Year 4.90% 7.51% 7.46%
World Government Bond Index/ 50%
Lehman Brothers Intermediate
Government/Corporate Index
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
The Fund's Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Global Income Fund.
Shareholder Fees - fees paid directly from your investment
There are no fees or sales loads charged to your account when
you buy or sell Fund shares. However, if you sell shares and
request your money by wire transfer, there is a $12.00 fee.
(Your bank may also charge you a fee for receiving wires.)
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (expenses that are
deducted from fund assets)
- --------------------------------------------------------------------------------
Management Fees 0.65%*
- --------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees 0.25%
- --------------------------------------------------------------------------------
Other Expenses 0.93%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.83%
- --------------------------------------------------------------------------------
* Commencing on September 1, 1998, the Adviser agreed to waive half of
the Management Fee charged to the Global Income Fund. Net of this
waiver Total Annual Fund Operating Expenses would have been reduced
to 1.77%. The Adviser can end the waiver at any time.
Example of Effect of the Fund's Operating Expenses
The following Example is intended to help you compare the cost of investing in
the Global Income Fund with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. While
your return may vary, the Example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
- --------------------------------------------------------------------------------
$186 $576 $990 $2,148
- --------------------------------------------------------------------------------
11
<PAGE>
INVESTMENT STRATEGIES AND RISKS
Julius Baer International Equity Fund
The Fund's investment goal
The International Equity Fund seeks long term growth of capital.
The Fund's investment strategies
The Fund seeks to achieve its goal by investing primarily in a diversified
portfolio of common stocks, convertible securities and preferred stocks of
foreign issuers of all sizes. The Fund will not normally invest in the
securities of U.S. issuers. In addition to the strategies discussed earlier, the
Fund may also engage in some or all of the strategies discussed here or in the
SAI.
The Fund intends to invest in securities denominated in the currencies of a
variety of countries. The Fund may also invest in securities denominated in
multinational currencies such as European Currency Units and the Euro. To
attempt to protect the Fund against a decline in the value of portfolio
securities due to fluctuations in currency exchange rates, the Adviser may enter
into currency hedges which may decrease or offset any losses from such
fluctuations.
The Fund may invest up to 10% of its total assets in equity warrants and
interest rate warrants. Equity warrants give the Fund the right to buy newly
issued securities of a company at a fixed price. Interest rate warrants give the
Fund the right to buy or sell a specific bond issue or interest rate index at a
set price.
The Fund may invest in American Depository Receipts (ADRs), Global Depository
Receipts (GDRs) and European Depository Receipts (EDRs) issued by sponsored or
unsponsored facilities. ADRs are usually issued by a U.S. bank or trust company
and traded on a U.S. exchange. GDRs may be issued by institutions located
anywhere in the world and traded in any securities market. EDRs are issued in
Europe and used in bearer form in European markets.
Depository Receipts:
receipts, typically issued by a bank or trust company, which represent
ownership of underlying securities issued by a foreign company and held by
the bank or trust company.
Most of the purchases and sales made by the Fund will be made in the primary
trading market for the particular security. The primary market is usually in the
country in which the issuer has its main office. The Fund will generally invest
in large and well established companies, but may also invest in smaller emerging
growth companies.
When the Fund invests in fixed-income securities it will limit such investments
to securities of U.S. companies, the U.S. government, foreign governments, U.S.
and foreign governmental entities and supranational organizations. When the Fund
invests in such fixed-income securities it may earn increased investment income
(which would subject shareholders to tax liability when distributed), the Fund
would be foregoing market advances or declines to the extent it is not invested
in equity markets.
The Fund may also invest up to 5% of its total assets in gold bullion and coins
which earn no investment income but are regularly traded in the market.
12
<PAGE>
Julius Baer Global Income Fund
The Fund's investment goal
The Global Income Fund seeks to maximize current income consistent with the
protection of principal.
The Fund's principal investment strategy
The Fund seeks to achieve its goal by investing primarily in a non-diversified
portfolio of fixed-income securities (generally bonds, debentures and notes) of
governmental, supranational and corporate issuers denominated in various
currencies, including U.S. dollars. In addition to the strategies discussed
earlier, the Fund may also engage in some or all of the strategies discussed
here or in the SAI.
Non-diversified:
because it is non-diversified the Global Income Fund may invest a larger
portion of its assets in the securities of a smaller number of issuers.
Nevertheless, the Fund will buy no more than 10% of the voting securities,
no more than 10% of the securities of any class and no more than 10% of the
debt securities of any one issuer (other than the U.S. government).
The Adviser expects that the Global Income Fund will have a duration of
approximately four years. Depending on market conditions, longer-term
fixed-income securities may provide more income than securities available for
purchase at a future time. Longer-term fixed-income securities can also have
higher fluctuations in value. If the Fund holds such securities, the value of
the Fund's shares may fluctuate more in value as well.
Duration:
duration takes into account the pattern of a securities cash flow over
time, including how cash flow is affected by prepayments and interest rate
changes. This is a better indicator than maturity which generally measures
only the time until payment is due.
The Fund may buy fixed-income obligations consisting of bonds, debentures and
notes issued or guaranteed by the U.S. or foreign governments, their agencies,
instrumentalities or political subdivisions, as well as supranational entities
organized or supported by several national governments, such as the
International Bank for Reconstruction and Development (the World Bank) or the
European Investment Bank. The Fund may, at times, invest a significant
proportion of its assets in mortgage-backed securities. The Fund also may
purchase debt obligations of U.S. or foreign corporations issued in a currency
other than U.S. dollars.
The Fund intends to invest in securities denominated in the currencies of a
variety of countries. The Fund may also invest in securities denominated in
multinational currencies such as European Currency Units and the Euro. To
attempt to protect the Fund against a decline in the value of portfolio
securities due to fluctuations in currency exchange rates, the Adviser may enter
into currency hedges which may decrease or offset any losses from such
fluctuations.
13
<PAGE>
The Fund will invest in fixed-income securities rated at the time of purchase
"A" or better by Moody's Investors Service, Inc. or Standard & Poor's Rating
Service. If a security is downgraded below "A," the Adviser intends to dispose
of the security within a reasonable time period. Investors should be aware that
ratings are relative and subjective and are not absolute standards of quality.
Equivalent or unrated:
the Fund may invest in securities with equivalent ratings from another
recognized rating agency and non-rated issues that the Adviser believes are
comparable in quality.
General
Can a Fund depart from its normal strategies?
Each Fund may depart from its investment strategies by taking temporary
defensive positions in response to adverse market, economic or political
conditions. During these times, a Fund may not be actively pursuing its
investment goals.
The Funds at a glance
The following two tables can give you a quick basic understanding of the types
of securities each Fund tends to invest in and some of the risks associated with
each Fund's investments. You should read all of the information about a Fund and
its risks before deciding to invest.
How can I tell, at a glance, which types of securities a Fund might invest in?
The following table shows the main types of securities in which each
Fund generally will invest.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
International Equity Fund Global Income Fund
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial Instruments
- --------------------------------------------------------------------------------------------------------
Invests in foreign stocks o
- --------------------------------------------------------------------------------------------------------
Invests in investment grade debt securities o o
- --------------------------------------------------------------------------------------------------------
Invests in below-investment grade debt securities o
- --------------------------------------------------------------------------------------------------------
Invests in foreign debt securities o o
- --------------------------------------------------------------------------------------------------------
Invests in convertible securities and bonds with o o
warrants attached
- --------------------------------------------------------------------------------------------------------
Invests in futures contracts o o
- --------------------------------------------------------------------------------------------------------
Invests in forward currency contracts o o
- --------------------------------------------------------------------------------------------------------
Invests in mortgage-backed securities o
- --------------------------------------------------------------------------------------------------------
Investment Techniques
- --------------------------------------------------------------------------------------------------------
Invests in securities of developing countries o o
- --------------------------------------------------------------------------------------------------------
</TABLE>
How can I tell, at a glance, a Fund's key risks?
The following table shows some of the main risks to which each Fund is
subject. Each risk is described in detail below.
14
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
International Equity Fund Global Income Fund
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Market Risk o
- --------------------------------------------------------------------------------------------------------
Interest Rate Risk o o
- --------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities o
- --------------------------------------------------------------------------------------------------------
Credit Risk o o
- --------------------------------------------------------------------------------------------------------
Below-Investment Grade Securities o
- --------------------------------------------------------------------------------------------------------
Foreign Investing Risk o o
- --------------------------------------------------------------------------------------------------------
Developing Country Risk o o
- --------------------------------------------------------------------------------------------------------
Political Risk o o
- --------------------------------------------------------------------------------------------------------
</TABLE>
Risks of investing in the Funds
Market Risk. A Fund that invests in common stocks is subject to stock market
risk. Stock prices in general may decline over short or even extended periods,
regardless of the success or failure of a particular company's operations. Stock
markets tend to run in cycles, with periods when stock prices generally go up
and periods when they generally go down. Common stock prices tend to go up and
down more than those of bonds.
Interest Rate Risk. A Fund that invests in debt securities is subject to the
risk that the market value of the debt securities will decline because of rising
interest rates. The prices of debt securities are generally linked to the
prevailing market interest rates. In general, when interest rates rise, the
prices of debt securities fall, and when interest rates fall, the prices of debt
securities rise. The price volatility of a debt security also depends on its
maturity. Generally, the longer the maturity of a debt security the greater its
sensitivity to changes in interest rates. To compensate investors for this
higher risk, debt securities with longer maturities generally offer higher
yields than debt securities with shorter maturities.
Mortgage-Backed Securities. Payments from the pool of loans underlying
a Mortgage-backed security may not be enough to meet the monthly
payments of the Mortgage-backed security. If this occurs the
Mortgage-backed security will lose value. Also, prepayments of
mortgages or mortgage foreclosures will shorten the life of the pool of
mortgages underlying a Mortgage-backed security and will affect the
average life of the Mortgage-backed security held by the a Fund.
Mortgage prepayments vary based on several facts including the level of
interest rates, general economic conditions, the location and age of
the mortgage and other demographic conditions. In periods of falling
interest rates, there are usually more prepayments. The reinvestment of
cash received from prepayments will, therefore, usually be at a lower
interest rate than the original investment, lowering a Fund's yield.
Mortgage-backed securities may be less likely to increase in value
during periods of falling interest rates than other debt securities.
Credit Risk. The debt securities in a Fund's portfolio are subject to credit
risk. Credit risk is the possibility that an issuer will fail to make timely
payments of interest or principal. Securities rated in the lowest category of
Investment Grade securities have some risky characteristics and changes in
economic conditions are more likely to cause issuers of these securities to be
unable to make payments.
Below-Investment Grade Securities. Below-Investment Grade securities
are sometimes referred to as junk bonds and are very risky with respect
to their issuers' ability to make payments of interest and principal.
There is a high risk that a Fund which invests in Below-Investment
Grade securities could suffer a loss caused by the default of an issuer
of such securities. Part of the reason for this high risk is that, in
the event of a default or bankruptcy, holders of Below-Investment Grade
securities generally will not receive payments until the holders of all
other debt have been paid. In
15
<PAGE>
addition, the market for Below-Investment Grade securities has, in the
past, had more frequent and larger price changes than the markets for
other securities. Below-Investment Grade securities can also be more
difficult to sell for good value.
Foreign Investing. Investing in foreign securities poses unique risks such as
fluctuation in currency exchange rates, market illiquidity, price volatility,
high trading costs, difficulties in settlement, regulations on stock exchanges,
limits on foreign ownership, less stringent accounting, reporting and disclosure
requirements, and other considerations. In the past, equity and debt instruments
of foreign markets have had more frequent and larger price changes than those of
U.S. markets.
Developing Country Risk. Investments in a country that is still
relatively underdeveloped involves exposure to economic structures that
are generally less diverse and mature than in the U.S. and to political
and legal systems which may be less stable. In the past, markets of
developing countries have had more frequent and larger price changes
than those of developed countries.
Political Risk. Political risk includes a greater potential for
revolts, and the taking of assets by governments. For example, a Fund
may invest in Eastern Europe and former states of the Soviet Union.
These countries were under communist systems that took control of
private industry. This could occur again in this region or others in
which a Fund may invest, in which case the Fund may lose all or part of
its investment in that country's issuers.
16
<PAGE>
Year 2000 Risk
Like other funds and business organizations around the world, the Funds could be
adversely affected if the computer systems used by the Adviser and the Funds'
other service providers do not properly process and calculate date-related
information and data for the year 2000 and beyond. The Funds have been informed
that the Adviser and the Funds' other service providers (i.e., Administrator,
Transfer Agent, Fund Accounting Agent, Distributor and Custodian) have developed
and are implementing clearly defined and documented plans to minimize the risk
associated with the Year 2000 problem. These plans include the following
activities: inventorying of software systems, determining inventory items that
may not function properly after December 31, 1999, reprogramming or replacing
such systems and retesting for Year 2000 readiness. In addition, the service
providers are obtaining assurances from their vendors and suppliers in the same
manner. Non-compliant Year 2000 systems upon which the Funds are dependent may
result in errors and account maintenance failures. The Funds have no reason to
believe that (1) the Year 2000 plans of the Adviser and the Funds' other service
providers will not be completed by December, 1999, and (2) the costs currently
associated with the implementation of their plans will have a material adverse
impact on the business, operations or financial condition of the Funds or their
service providers.
In addition, the Year 2000 problem may adversely affect the companies in which
the Funds invest. For example, these companies may incur substantial costs to
correct the problem and may suffer losses caused by data processing errors.
Since the ultimate costs or consequences of incomplete or untimely resolution of
the Year 2000 problem by the Funds' service providers are unknown to the Funds
at this time, no assurance can be made that such costs or consequences will not
have a material adverse impact on the Funds or their service providers.
The Funds and the Adviser will continue to monitor developments relating to the
Year 2000 problem, including the development of contingency plans for providing
back-up computer services in the event of a systems failure.
Euro Risk
Beginning January 1, 1999, countries participating in the European Monetary
Union began converting their currencies into a new currency unit called the
Euro. The conversion to the Euro, which will continue in stages through 2002, is
expected to reshape the financial markets, banking systems, and monetary
policies in Europe and other parts of the world and could adversely affect the
Funds' investments in those markets.
17
<PAGE>
THE FUNDS' MANAGEMENT
Investment Adviser
Each Fund is managed by Bank Julius Baer & Co., Ltd., New York Branch located at
330 Madison Avenue, New York, New York 10017.
The Adviser is the New York branch of a Swiss bank that has over 50 years
experience in international and global portfolio experience. As of October 31,
1998, the Adviser had $______ billion in assets under management.
The Adviser is responsible for running all of the operations of the Funds,
except for those that are subcontracted to the custodian, transfer agent or
administrator.
Each Fund pays the Adviser a fee for its services. The fee paid by each Fund for
the fiscal year ended October 31, 1998 is shown in the table below.
-----------------------------------------------------------------
Fund Fee (as a % of average daily
net assets)
-----------------------------------------------------------------
International Equity Fund 0.75%
-----------------------------------------------------------------
Global Income Fund 0.58%
-----------------------------------------------------------------
Prior to July 1, 1998 the Julius Baer Global Income Fund was advised by Julius
Baer Investment Management Inc., an affiliate of the Adviser. The advisory fee
rate did not change as a result of the change in adviser.
Portfolio Management of the Funds
Richard Pell, Chief Investment Officer and First Vice President of the Adviser
since January 1995, has been primarily responsible for management of the
International Equity Fund's assets since March 1995 and, since July 1, 1998, has
been primarily responsible for management of the Global Income Fund's assets.
Prior to joining the Adviser, he was Vice President and head of Global
Fixed-Income at Bankers Trust Company.
Rudolph-Riad Younes, CFA, Vice President and Senior Equity Portfolio Manager
with the Adviser since September 1993, has been co-managing the International
Equity Fund with Mr. Pell since April 1995. Prior to joining the Adviser, he was
an Associate Director at Swiss Bank Portfolio Management International from 1991
to 1993.
Karen Arrese, Vice President and Global Fixed-Income Specialist with the Adviser
since July 1998, has been co-managing the Global Income Fund with Mr. Pell since
July 1998. Prior to joining the Adviser, she was a Proprietary Interest Rate and
Currency Trader for Chase Manhattan Bank and prior to that, Global Portfolio
Manager at Standish, Ayer & Wood, Inc.
18
<PAGE>
INVESTING IN THE FUNDS
Opening An Account
To invest in the Funds, you must first complete and sign an account application.
A copy of the application is included with this Prospectus. You can also get an
account application by calling 1-800-435-4659 or by writing to the Funds'
Transfer Agent, Unified Fund Services, Inc. ("Unified")at:
Unified Fund Services, Inc.
P.O. Box 6110
Indianapolis, Indiana 46206-6110
Attention: Julius Baer Investment Funds
Completed and signed account applications may be mailed to Unified at the above
address.
You can also invest in the Funds through your broker. If your broker does not
have a relationship with Unified Management Corporation, the Funds' distributor
(Distributor), you may be charged a transaction fee.
> Investor Alert: The Funds may choose to refuse any purchase order.
Retirement Plans. For information about investing in the Funds through a
tax-deferred retirement plan, such as an Individual Retirement Account (IRA),
self-employed retirement plan (H.R.10), a Simplified Employee Pension IRA
(SEP-IRA) or a profit sharing and money purchase plan, an investor should
telephone the Distributor at 1-800-362-2863 or write to Unified at the address
set forth above.
> Investor Alert: You should consult your tax adviser about the establishment of
retirement plans.
Pricing of Fund Shares
Each Fund's share price, also called net asset value (NAV), is determined as of
the close of trading (normally 4:00 p.m., Eastern time) every day the New York
Stock Exchange (NYSE) is open. The Fund calculates the NAV per share, generally
using market prices, by dividing the total value of the Fund's net assets by the
number of the shares outstanding. Shares are purchased or sold at the next
offering price determined after your purchase or sale order is received and
accepted by the Distributor. The offering price is the NAV.
The Fund's investments are valued based on market value or, if no market value
is available, based on fair value as determined by the Board of Trustees (or
under their direction). All assets and liabilities initially expressed in
foreign currency values will be converted into U.S. dollar values. Some specific
pricing strategies follow:
o All short-term dollar-denominated investments that mature in 60 days or less
are valued on the basis of amortized cost which the Board of Trustees has
determined represents fair value.
o Securities mainly traded on a U.S. exchange are valued at the last sale price
on that exchange or, if no sales occurred during the day, at the mean of the
current quoted bid and asked prices.
19
<PAGE>
o Securities mainly traded on a non-U.S. exchange are generally valued according
to the preceding closing values on that exchange. However, if an event that
may change the value of a security occurs after the time the value was
determined, the Board of Trustees or its delegate might adjust the fair market
value.
Purchasing Your Shares
You should read this Prospectus carefully and then determine how much you want
to invest. Check below to find the minimum investment amount required as well as
to learn about the various ways you can purchase your shares.
------------------------------------------------------------------------
Additional
Type of Investment Initial Investment Investment
------------------------------------------------------------------------
Regular account $2,500 $1,000
------------------------------------------------------------------------
Tax deferred $500 $500
retirement plan other
than an IRA
------------------------------------------------------------------------
Individual $100 $100
Retirement Account
------------------------------------------------------------------------
You can invest in Fund shares in the following ways:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Opening an account Adding to your account
--------------------------------------------------------------------------------------
<S> <C> <C>
o Through A o You can purchase shares through a o You may add to an account established
Broker broker that has a relationship with the through any broker either by contacting
Distributor. your broker or directly through Unified
by using one of the methods described
If you buy shares through a broker, the below.
broker is responsible for forwarding your
order to Unified in a timely manner.
If you place an order with a broker by
4:00 p.m. (Eastern time) on a day when the
NYSE is open for regular trading, and the
order is received by Unified by the end of
its business day, you will receive that
day's price.
o You may also be able to purchase shares
through a broker that does not have a
relationship with the Distributor. Orders
from such a broker received by Unified by
4:00 p.m. (Eastern time) on a day when the
NYSE is open for regular trading will be
effected that day. You may be charged a
transaction fee by your broker.
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C>
o By Check o Please make your check (in U.S.
dollars) payable to the Julius Baer
Investment Funds or the Fund in which you
are investing.
o Send your check with the completed o Make your check payable to the Julius
account application to: Baer Investment Funds or the Fund in
which you are investing.
Julius Baer Investment Funds
P.O. Box 6110
Indianapolis, Indiana 46206-6110 o Write your account number and Fund on
the check.
Your application will be processed subject
to your check clearing.
o Mail your check directly to the Fund at
the address shown here.
--------------------------------------------------------------------------------------
o By Wire o First, telephone the Distributor at o Refer to wire instructions for opening
(800) [ - ] to notify the an account.
Distributor that a bank wire is being
sent. A bank wire received by 4:00 p.m. o Specify in the wire: (1) the name of
(Eastern time) on a day when the NYSE is the Fund, (2) the account number, and (3)
open for regular trading will be effected your name. If Unified receives the
that day. federal funds before the close of regular
trading of the NYSE on a day the NYSE is
o Transfer funds by wire to the following open for regular trading, your purchase
address: of Fund shares will occur as of that day.
[Boston Safe Deposit & Trust Company
ABA 011001234
Global Income Fund DDA No. 166987
International Equity Fund DDA No. 166995]
o Specify in the wire: (1) the name of
the Fund, (2) the account number which
Unified assigned to you, and (3) your
name.
--------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C>
o By
Exchange o First, you should follow the procedures o You may exchange your Fund shares for
under "By Check" or "By Wire" in order to shares of the other Fund described in
get an account number for Fund(s) which this Prospectus at their respective NAVs.
you do not currently own shares of, but
which you desire to exchange shares into.
o You should review the disclosure
o You may exchange shares of a Fund for provided in this Prospectus relating to the
shares of the other Fund at their respective exchanged-for shares carefully before
respective NAVs. making an exchange of your Fund shares.
o You should review the disclosure provided
in this Prospectus relating to the
exchanged-for shares carefully before making
an exchange of your Fund shares.
------------------------------------------------------------------------------------------------
o Through o You may invest in each Fund through
Retirement various Retirement Plans. The Funds'
Plans shares are designed for use with certain types of tax
qualified retirement plans including defined benefit and
defined contribution plans.
o For further information about any of the plans,
agreements, applications and annual fees, contact Unified
or your financial adviser.
------------------------------------------------------------------------------------------------
</TABLE>
More information about wire transfers: A $12.00 service charge is imposed on
shareholders for effecting wire transfers.
More information about exchanges:
> Special Tax Consideration: For federal income tax purposes, an
exchange of shares is treated as a sale of the shares and a purchase
of the shares you receive in exchange. Therefore, you may incur a
taxable gain or loss in connection with the exchange.
o Automatic Investment Plan
You can pre-authorize monthly or quarterly investments of $100 or more in each
Fund to be processed electronically from a checking or savings account. You will
need to complete the appropriate portion of an account application or separate
forms to do this. Contact your broker or the Distributor for more information.
o Processing Organizations
You may also purchase shares of the International Equity Fund through a
"Processing Organization," (e.g., a mutual fund supermarket) which is a
broker-dealer, bank or other financial institution that purchases shares for its
customers. The International Equity Fund has authorized certain Processing
Organizations to accept
22
<PAGE>
purchase and sales orders on its behalf. Before investing in a Fund through a
Processing Organization, you should read any materials provided by the
Processing Organization in conjunction with this Prospectus.
When shares are purchased this way, there may be various differences. The
Processing Organization may:
o charge a fee for its services
o act as the shareholder of record of the shares
o set different minimum initial and additional investment
requirements
o impose other charges and restrictions
o designate intermediaries to accept purchase and sales orders on the
Fund's behalf
The Fund considers a purchase or sales order as received when an authorized
Processing Organization, or its authorized designee, accepts the order. These
orders will be priced based on the Fund's NAV determined after such order is
accepted.
Shares held through a Processing Organization may be transferred into your name
following procedures established by your Processing Organization and the Fund.
Certain Processing Organizations may receive compensation from the Fund, the
Adviser or their affiliates.
Selling Your Shares
You may sell some or all of your Fund shares on any day that the Fund calculates
its NAV. If your request is accepted before the close of regular trading on the
NYSE, you will receive a price based on that day's NAV for the shares your sell.
Otherwise, the price you receive will be based on the NAV that is next
calculated.
--------------------------------------------------
o By Telephone o You can sell or exchange your shares over the
telephone, unless you have specifically declined
this option. If you do not wish to have this
ability, you must mark the appropriate section of
the New Account Application Form.
o To sell your Fund shares by telephone call
[(800) 435-4659] between the hours of 9:00 a.m.
and 4:00 p.m. (Eastern time) on a day when the
NYSE is open for regular trading. You will be
asked:
o the name of the Fund from which the sale
is to be made;
o your account number;
o your name as it exists on the Fund's
records; and
o the number of shares or dollar amount to
be sold.
--------------------------------------------------
23
<PAGE>
--------------------------------------------------
o By Mail o To sell your Fund shares by mail you must write
to Unified at:
Unified Fund Services, Inc.
P.O. Box 6110
Indianapolis, Indiana 46206-6110
Attention: Julius Baer Investment Funds
o specify the name of the Fund from which the sale
is to be made;
o indicate the number of shares or dollar amount
to be sold;
o include your name and account number; and
o sign redemption request exactly as the Shares
are registered.
--------------------------------------------------
> Investor Alert: Unless otherwise specified, proceeds will be sent to
the record owner.
Signature guarantees: Some circumstances (e.g., changing the bank account
designated to receive sale proceeds) require that the request for the sale of
shares have a signature guarantee. A signature guarantee helps protect you
against fraud. You can obtain one from most banks or securities dealers, but not
from a notary public.
Telephone sales: If we receive your share sale request before 4:00 p.m., Eastern
time, on a day when the NYSE is open for regular trading, the sale of your
shares will be processed that day. Otherwise it will occur on the next business
day.
Interruptions in telephone service could prevent you from selling your shares in
this manner when you want to. When you have difficulty making telephone sales,
you should mail (or send by overnight delivery) a written request for sale of
your shares to Unified.
In order to protect your investment assets, Unified intends to only follow
instructions received by telephone that it reasonably believes to be genuine.
However, there is no guarantee that the instructions relied upon will always be
genuine and the Trust will not be liable for those cases. The Trust has certain
procedures to confirm that telephone instructions are genuine. If it does not
follow such procedures in a particular case it may be liable for any losses due
to unauthorized or fraudulent instructions.
24
<PAGE>
o Low Account Balances
Unified may sell your Fund shares if your account balance falls below $1,000 as
a result of redemptions that you have made (as opposed to a reduction from
market changes). [This involuntary sale does not apply to retirement accounts or
custodian accounts under the Uniform Gift to Minors Act/Uniform Transfers to
Minors Act (UGMA/UTMA).] Unified will let you know that your shares are about to
be sold and you will have 60 days to increase your account balance to more than
$1,000.
> Special consideration: Involuntary sales may result in sale of your
Fund shares at a loss or may result in taxable investment gains.
o Receiving Sale Proceeds
Unified will forward the proceeds of your sale to you within seven days.
Fund shares purchased by check: If you purchase Fund shares by personal check,
the proceeds of a sale of those shares will not be sent to you until the check
has cleared, which may take up to 10 days. If you may need your money more
quickly, you should purchase shares by federal funds, bank wire, or with a
certified or cashier's check.
> It is possible that the payments of your sale proceeds could be
postponed or your right to sell your shares could be suspended during
certain circumstances.
Redemptions in kind: The Funds reserve the right to redeem your shares by giving
you securities from the Funds' portfolios under certain circumstance, generally
in connection with very large redemptions.
Distribution and Shareholder Servicing Plans
Each Fund has adopted a distribution and service plan under Rule 12b-1 of the
1940 Act for its Shares. This plan allows each Fund to pay distribution and
other fees for the sale and distribution of its Shares and for services provided
to holders of the Shares.
Under the plan, each Fund pays an annual fee of up to 0.25% of the
average daily net assets of the Fund that are attributable to the
shares. Because these fees are paid out of the Fund's assets on an
ongoing basis, these fees will increase the cost of your investment and
over time may cost you more than paying other types of sales charges.
DISTRIBUTIONS AND TAXES
Distributions
Each Fund intends to distribute to its shareholders substantially all of its
income and capital gains. The table below outlines when income dividends are
declared and paid for each Fund.
25
<PAGE>
- --------------------------------------------------------------------------------
Fund Dividends Declared Dividends Paid
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
International Equity Fund Annually Annually
- --------------------------------------------------------------------------------
Global Income Fund Monthly Monthly
- --------------------------------------------------------------------------------
Distributions of any capital gains earned by a Fund will be made at least
annually.
Tax Information
Distributions: Each Fund will make distributions that may be taxed as ordinary
income or capital gains (which may be taxed at different rates depending on the
length of time a Fund holds its assets). Each Fund's distributions may be
subject to federal income tax whether you reinvest such dividends in additional
shares of a Fund or choose to receive cash.
Ordinary Income: Income and short-term capital gains that are distributed to you
are taxable as ordinary income for federal income tax purposes regardless of how
long you have held your Fund shares.
Long-Term Capital Gains: Long-term capital gains distributed to you are taxable
as long-term capital gains for federal income tax purposes regardless of how
long you have held your Fund shares.
Statements and Notices: You will receive an annual statement outlining the tax
status of your distributions. You will also receive written notices of certain
foreign taxes paid by the Funds and certain distributions paid by the Funds
during the prior taxable year.
> Special tax consideration: You should consult with your tax adviser to address
your own tax situation.
26
<PAGE>
For investors who want more information about the Funds, the following documents
are available free upon request:
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Funds and is legally a part of this prospectus.
Annual/Semi-Annual Reports: The Funds' annual and semi-annual reports provide
additional information about the Funds' investments. In each Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its last
fiscal year. In the Funds' annual report, you will also find certain financial
highlight information which is legally a part of this prospectus.
You can get free copies of the SAI, the reports, other information and answers
to your questions about the Funds by contacting the Funds' transfer agent at:
Unified Fund Services, Inc.
431 N. Pennsylvania Street
Indianapolis, Indiana 46204-1897
(800) 435-4659
You can view the Funds' SAI and the reports at the Public Reference Room of the
Securities and Exchange Commission (SEC).
For a fee, you can get text-only copies by writing to the Public Reference Room
of the SEC, Washington, D.C. 20549-6009. You can also call 1-800-SEC-0330.
You can also view the SAI and receive the reports free from the SEC's Internet
website at http://www.sec.gov.
Julius Baer
Investment Funds
Julius Baer International
Equity Fund
Julius Baer Global Income
Fund
Investment Company Act file no.
811-6652
27
<PAGE>
JULIUS BAER INVESTMENT FUNDS
(formerly BJB Investment Funds)
Julius Baer International Equity Fund
Julius Baer Global Income Fund
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1999
This Statement of Additional Information (the "SAI") is not a Prospectus, but
it relates to the Prospectus of Julius Baer Investment Funds dated March 1,
1999.
Financial Statements are incorporated by reference into this SAI from the
Funds' most recent annual report.
You can get a free copy of the Prospectus for the Julius Baer Investment Funds
or the Funds' most recent annual and semi-annual reports, request other
information and discuss your questions about the Funds by contacting the
Transfer Agent at:
Unified Fund Services, Inc.
431 N. Pennsylvania Street
Indianapolis, Indiana 46204-1897
(800) 435-4659
You can view the Funds' Prospectus as well as other reports at the Public
Reference Room of the Securities and Exchange Commission.
You can get text-only copies:
For a fee by writing to or calling the Public Reference Room o
f the Commission, Washington, D.C. 20549-6009.
Telephone: 1-800-SEC-0330.
Free from the Commission's Internet website at
http:/www.sec.gov
<PAGE>
Contents
--------
Page
The Trust and the Funds
Description of the Funds, Their Investments and Risks
Common Investment Strategies
Investment Policies
Management of the Trust
Capital Stock
Additional Purchase and Redemption Information
Additional Information Concerning Exchange Privilege
Additional Information Concerning Taxes
Calculation of Performance Data
Independent Auditors
Counsel
Financial Statements
Appendix
2
<PAGE>
THE TRUST AND THE FUNDS
Julius Baer Investment Funds (the "Trust") is composed of two funds:
the Julius Baer International Equity Fund (the "Equity Fund") and the Julius
Baer Global Income Fund (the "Income Fund") (each, a "Fund" and collectively,
the "Funds").
The Trust was formed as a Massachusetts business trust under the laws
of The Commonwealth of Massachusetts pursuant to a Master Trust Agreement dated
April 30, 1992 and amended on June 22, 1992, September 16, 1993, January 1,
1995 and July 1, 1998 (the "Trust Agreement"). On July 1, 1998, the Trust
changed its name from BJB Investment Funds to Julius Baer Investment Funds. At
the same time, the name of each of the BJB International Equity Fund and the
BJB Global Income Fund was changed to Julius Baer International Equity Fund and
the Julius Baer Global Income Fund.
The Prospectus, dated March 1, 1999, provides the basic information
investors should know before investing, and may be obtained without charge by
calling Unified Fund Services, Inc. (the "Transfer Agent") at the telephone
number listed on the cover. This SAI, which is not a prospectus, is intended to
provide additional information regarding the activities and operations of the
Trust and should be read in conjunction with the Prospectus. This SAI is not an
offer of any Fund for which an investor has not received a Prospectus.
DESCRIPTION OF THE FUNDS, THEIR INVESTMENTS AND RISKS
CLASSIFICATION
The Income Fund is a non-diversified, open-end management investment
company. The Equity Fund is a diversified open-end management company.
PORTFOLIO INVESTMENTS
INCOME FUND. The Income Fund may invest in a wide variety of fixed-income
securities issued anywhere in the world, including the United States. The
Income Fund may purchase debt obligations consisting of bonds, debentures and
notes issued or guaranteed by the United States or foreign governments, their
agencies, instrumentalities or political subdivisions, as well as supranational
entities organized or supported by several national governments, such as the
International Bank for Reconstruction and Development (the "World Bank") or the
European Investment Bank. The Income Fund also may purchase debt obligations of
U.S. or foreign corporations that are issued in a currency other than U.S.
dollars. The Income Fund currently contemplates that it will invest in
obligations denominated in the currencies of a variety of countries, including,
but not limited to, Australia, Austria, Belgium, Canada, Czech Republic,
Denmark, Finland, France, Germany, Greece, Hong Kong, Indonesia, Italy, Japan,
Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, South Africa,
Spain, Sweden, Switzerland, the United Kingdom and the United States. The
Income Fund may invest in securities issued in multi-national currency units,
such as European Currency Units ("ECUs"), which is a composite of the
currencies of several European countries. The Income Fund may also invest in
the single European currency (the "Euro"). In order to seek to protect against
a decline in value of the Income Fund's assets due to fluctuating currency
values, the Income Fund intends to engage in certain hedging strategies, as
described under "Common Investment Strategies" below.
In selecting particular investments for the Income Fund, the Adviser
will seek to mitigate investment risk by limiting its investments to quality
fixed-income securities. The Income Fund may not
3
<PAGE>
invest in governmental or corporate bonds rated at the time of purchase below
"A" by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Rating
Service, a division of McGraw-Hill Companies ("S&P"). The Income Fund may
invest in securities with equivalent ratings from another recognized rating
agency and non-rated issues that are determined by the Adviser to have
financial characteristics that are comparable and that are otherwise similar in
quality to the rated issues it purchases. If a security is downgraded below the
minimum rating necessary for investment by the Income Fund, the Income Fund
intends to dispose of the security within a reasonable time period. Investors
should be aware that ratings are relative and subjective and are not absolute
standards of quality. For a description of the rating systems of Moody's and
S&P, see the Appendix to this Prospectus.
The Adviser will allocate investments among securities of particular
issuers on the basis of its views as to the yield, duration, maturity, issue
classification and quality characteristics of the securities, coupled with
expectations regarding the economy, movements in the general level and term of
interest rates, currency values, political developments and variations in the
supply of funds available for investment in the world bond market relative to
the demands placed upon it. Fixed-income securities denominated in currencies
other than the U.S. dollar or in multinational currency units are evaluated on
the strength of the particular currency against the U.S. dollar as well as on
the current and expected levels of interest rates in the country or countries.
Currencies generally are evaluated on the basis of fundamental economic
criteria (e.g., relative inflation and interest rate levels and trends, growth
rate forecasts, balance of payments status and economic policies) as well as
technical and political data. In addition to the foregoing, the Income Fund may
seek to take advantage of differences in relative values of fixed-income
securities among various countries.
EQUITY FUND. The Equity Fund may invest in a wide variety of international
equity securities issued anywhere in the world, normally excluding the United
States. The Equity Fund currently contemplates that it will invest in
securities denominated in the currencies of a variety of countries, including,
but not limited to, Argentina, Australia, Austria, Belgium, Brazil, Canada,
Chile, China, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hong
Kong, Israel, Italy, Japan, Korea, Malaysia, Mauritius, Mexico, the
Netherlands, New Zealand, Pakistan, Peru, Poland, Portugal, Russia, Singapore,
Spain, Sweden, Switzerland, Thailand, the United Kingdom, the United States and
Venezuela. The Equity Fund also may invest up to 10% of its total assets in
equity warrants and interest rate warrants of international issuers. However,
the Equity Fund will not invest more than 2% of its net assets in warrants that
are not listed on a recognized U.S. or foreign exchange. Equity warrants are
securities that give the holder the right, but not the obligation, to subscribe
for newly created equity issues of the issuing company or a related company at
a fixed price either on a certain date or during a set period. Interest rate
warrants are rights that are created by an issuer, typically a financial
institution, entitling the holder to purchase, in the case of a call, or sell,
in the case of a put, a specific bond issue or an interest rate index (Bond
Index) at a certain level over a fixed time period. Interest rate warrants can
typically be exercised in the underlying instrument or settled in cash. The
Equity Fund may invest in securities issued in multi-national currency units,
such as ECUs, American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs") or European Depository Receipts ("EDRs") (collectively, "Depository
Receipts"). ADRs are receipts, typically issued by a U.S. bank or trust
company, which evidence ownership of underlying securities issued by a foreign
corporation. GDRs may be traded in any public or private securities market and
may represent securities held by institutions located anywhere in the world.
EDRs are receipts issued in Europe which evidence a similar ownership
arrangement. Generally, ADRs, in registered form, are designed for use in the
U.S. securities markets and EDRs, in bearer form, are designed for use in
European securities markets. The Equity Fund may invest in Depository Receipts
through "sponsored" or "unsponsored" facilities if issues of such Depository
Receipts are available and are consistent with the
4
<PAGE>
Equity Fund's investment objective. A sponsored facility is established jointly
by the issuer of the underlying security and a depository, whereas a depository
may establish an unsponsored facility without participation by the issuer of
the deposited security. Holders of unsponsored Depository Receipts generally
bear all the costs of such facilities and the depository of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities. In order to seek to protect against a decline in value of
the Equity Fund's assets due to fluctuating currency rates, the Equity Fund
intends to engage in certain hedging strategies, as described under "Common
Investment Strategies" below.
The Equity Fund will invest substantially all of its assets in equity
securities when the Adviser believes that the relevant market environment
favors profitable investing in those securities. Equity investments are
selected in industries and companies that the Adviser believes are experiencing
favorable demand for their products and services, and which operate in a
favorable regulatory and competitive climate. The Adviser's analysis and
selection process focuses on growth potential; investment income is not a
consideration. In addition, factors such as expected levels of inflation,
government policies influencing business conditions, the outlook for currency
relationships and prospects for economic growth among countries, regions or
geographic areas may warrant consideration in selecting foreign equity
securities. Generally, the Equity Fund intends to invest in marketable
securities that are not restricted as to public sale. Most of the purchases and
sales of securities by the Equity Fund will be effected in the primary trading
market for the securities. The primary trading market for a given security
generally is located in the country in which the issuer has its principal
office. While no assurances can be given as to the specific issuers of the
equity securities in which the Fund will invest, the Fund intends to seek out
the securities of large well-established issuers. However, the Equity Fund will
invest in the equity securities of smaller emerging growth companies when the
Adviser believes that such investments represent a beneficial investment
opportunity for the Fund.
Although the Equity Fund normally invests primarily in equity
securities, it may increase its cash or non-equity position when the Adviser is
unable to locate investment opportunities with desirable risk/reward
characteristics. The Equity Fund may invest in preferred stocks that are not
convertible into common stock, government securities, corporate bonds and
debentures, including high-risk and high-yield debt instruments (but in no
event will an amount exceeding 10% of the Fund's total assets be invested in
such high-risk/high-yield securities), high-grade commercial paper,
certificates of deposit or other debt securities when the Adviser perceives an
opportunity for capital growth from such securities or so that the Equity Fund
may receive a return on idle cash. The Equity Fund also may invest up to 5% of
its total assets in gold bullion and coins, which, unlike investments in many
securities, earn no investment income. Since a market exists for such
investments, the Adviser believes gold bullion and coins should be considered a
liquid investment. The Equity Fund intends to limit its investments in debt
securities to securities of U.S. companies, the United States government,
foreign governments, domestic or foreign governmental entities and
supranational organizations such as the European Economic Community and the
World Bank. When the Equity Fund invests in such securities, investment income
may increase and may constitute a large portion of the return of the Fund but,
under these certain circumstances, the Equity Fund would not expect to
participate in market advances or declines to the extent that it would if it
remained fully invested in equity securities.
5
<PAGE>
COMMON INVESTMENT STRATEGIES
In attempting to achieve their investment objectives, the Funds may
engage in a variety of investment strategies.
Convertible Securities and Bonds with Warrants Attached
Each Fund may invest in fixed-income obligations convertible into
equity securities, and bonds issued as a unit with warrants. Convertible
securities in which a Fund may invest, comprised of both convertible debt and
convertible preferred stock, may be converted at either a stated price or at a
stated rate into underlying shares of common stock. Because of this feature,
convertible securities enable an investor to benefit from increases in the
market price of the underlying common stock. Convertible securities provide
higher yields than the underlying equity securities, but generally offer lower
yields than non-convertible securities of similar quality. The value of
convertible securities fluctuates in relation to changes in interest rates like
bonds, and, in addition, fluctuates in relation to the underlying common stock.
Neither Fund intends to retain in its portfolio the common stock received upon
conversion of a convertible security or exercise of a warrant and will sell
such stocks as promptly as it can and in a manner that it believes will reduce
the risk to the Fund of a loss in connection with the sale. Neither Fund
intends to retain in its portfolio any warrant acquired as a unit with bonds if
the warrant begins to trade separately from the related bond.
Money Market Investments
Each Fund may invest up to 20% of its total assets in short-term
investment grade money market obligations. In addition, on occasion, the
Adviser may deem it advisable to adopt a temporary defensive posture by
investing a larger percentage of its assets in short-term money market
obligations. These short-term instruments, which may be denominated in various
currencies, consist of obligations of U.S. and foreign governments, their
agencies or instrumentalities; obligations of foreign and U.S. banks; and
commercial paper of corporations that, at the time of purchase, have a class of
debt securities outstanding that is rated A-2 or higher by S&P or Prime-2 or
higher by Moody's or is determined by the Adviser to be of equivalent quality.
Any short-term obligation rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by
Moody's, the equivalent from another rating service or, if unrated, in the
opinion of the Adviser determined to be an issue of comparable quality, will be
a permitted investment. For temporary defensive purposes, including during
times of international political or economic uncertainty, each Fund could also
invest without limit in securities denominated in U.S. dollars through
investment in obligations issued or guaranteed by the United States government,
its agencies or instrumentalities ("U.S. government securities") (including
repurchase agreements with respect to such securities).
U.S. Government Securities
The U.S. government securities in which each Fund may invest consist
of: direct obligations of the United States Treasury (such as Treasury bills,
Treasury notes and Treasury bonds), and obligations issued by U.S. government
agencies and instrumentalities, including instruments that are supported by the
full faith and credit of the United States (such as securities of the
Government National Mortgage Association); instruments that are supported by
the right of the issuer to borrow from the United States Treasury (such as
securities of Federal Home Loan Banks); and instruments that are supported by
the credit of the instrumentality (such as securities of the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation).
Currency Hedging Transactions
6
<PAGE>
The Adviser may seek to limit losses through the use of currency
forward contracts, currency and interest rate futures contracts and options on
such futures contracts and options on currencies. These strategies will be used
for hedging purposes only and not for speculation. Each Fund may attempt to
decrease any losses from changes in currency exchange rates by entering into
currency hedging transactions in connection with up to 100% of its total
portfolio.
Currency and Interest Rate Futures Contracts and Options on Futures
A foreign currency futures contract provides for the future sale by
one party and the purchase by the other party of a certain amount of a
specified foreign currency at a specified price, date, time and place. Interest
rate futures contracts are standardized contracts traded on commodity exchanges
involving an obligation to purchase or sell a predetermined amount of debt
security at a fixed date and price. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time prior to the
expiration date of the option. When deemed advisable by the Adviser, each Fund
may enter into currency futures contracts, interest rate futures contracts or
related options that are traded on U.S. or foreign exchanges. The Equity Fund
also may enter into options contracts relating to gold bullion. Such
investments by a Fund will be made solely for the purpose of hedging against
the effects of changes in the value of its portfolio securities due to
anticipated changes in interest rates, currency values and market conditions
and when the transactions are economically appropriate to the reduction of
risks inherent in the management of a Fund. A Fund may not enter into futures
contracts and options on futures contracts that are not considered "bona fide"
hedges under regulations of the Commodity Futures Trading Commission. With
respect to each long position in a futures contract or option thereon, the
underlying commodity value of such contract always will be covered by cash and
cash equivalents or other liquid obligations set aside, plus accrued profits
held at a Fund's custodian or at the commodity dealer, or a corresponding chart
position.
Currency Exchange Transactions and Options on Foreign Currencies
Each Fund may engage in currency exchange transactions and purchase
put and call options on foreign currencies. Each Fund will conduct its currency
exchange transactions either on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market or through entering into forward
contracts to purchase or sell currencies. A forward currency contract involves
an obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon by
the parties, at a price set at the time of the contract. These contracts are
entered into in the interbank market conducted directly between currency
traders (usually large U.S. or foreign commercial banks) and their customers.
The Funds may enter into a forward contract in the following two circumstances:
(1) When a Fund purchases a foreign currency denominated security for
settlement in the near future, it may immediately purchase in the
forward market the foreign currency needed to pay for and settle the
transaction.
(2) When the Adviser believes that the currency of a specific country
may deteriorate against another currency, a Fund may enter into a
forward contract to sell the less attractive currency and buy the more
attractive one. The amount in question could be more or less than the
value of a Fund's securities denominated in the less attractive
currency. While such actions are intended to protect the Funds from
adverse currency movements, there is a risk that the currency
movements involved will not be properly anticipated. Use of this
currency hedging technique may also be
7
<PAGE>
limited by management's need to protect the U.S. tax status of the
Funds as regulated investment companies.
To support its obligation when a Fund enters into a forward contract
to buy or sell currencies, such Fund will either deposit with its custodian in
a segregated account cash or other liquid obligations having a value at least
equal to its obligation or continue to own or have the right to sell or
acquire, respectively the currency subject to the forward contract.
An option on a foreign currency, which may be entered into on a U.S.
or foreign exchange or in the over-the-counter market, gives the purchaser, in
return for a premium, the right to sell, in the case of a put, and buy, in the
case of a call, the underlying currency at a specified price during the term of
the option.
Each Fund may also invest in instruments offered by brokers that
combine forward contracts, options and securities in order to reduce foreign
currency exposure.
Covered Option Writing
Each Fund may write options to generate current income or as hedges to
reduce investment risk. Each Fund may write put and call options on up to 25%
of the net asset value of the securities in its portfolio and will realize fees
(referred to as "premiums") for granting the rights evidenced by the options. A
put option embodies the right of its purchaser to compel the writer of the
option to purchase from the option holder an underlying security at a specified
price at any time during the option period. In contrast, a call option embodies
the right of its purchaser to compel the writer of the option to sell to the
option holder an underlying security at a specified price at any time during
the option period. Thus, the purchaser of a put option written by a Fund has
the right to compel such Fund to purchase from it the underlying security at
the agreed-upon price for a specified time period, while the purchaser of a
call option written by a Fund has the right to purchase from such Fund the
underlying security owned by the Fund at the agreed-upon price for a specified
time period.
Upon the exercise of a put option written by a Fund, such Fund may
suffer an economic loss equal to the difference between the price at which the
Fund is required to purchase the underlying security and its market value at
the time of the option exercise, less the premium received for writing the
option. Upon the exercise of a call option written by a Fund, such Fund may
suffer an economic loss equal to the excess of the security's market value at
the time of the option's exercise over the greater of (i) the Fund's
acquisition cost of the security and (ii) the exercise price, less the premium
received for writing the option.
The Funds will write only covered options. Accordingly, whenever a
Fund writes a call option it will continue to own or have the present right to
acquire the underlying security for as long as it remains obligated as the
writer of the option. To support its obligation to purchase the underlying
security if a put option is exercised, a Fund will either (1) deposit with its
custodian in a segregated account cash, U.S. government securities or other
liquid assets having a value at least equal to the exercise price of the
underlying securities or (2) continue to own an equivalent number of puts of
the same "series" (that is, puts on the same underlying security having the
same exercise prices and expiration dates as those written by the Fund), or an
equivalent number of puts of the same "class" (that is, puts on the same
underlying security) with exercise prices greater than those that it has
written (or, if the exercise prices of the puts it holds are less than the
exercise prices of those it has written, it will deposit the difference with
its custodian in a segregated account).
8
<PAGE>
Each Fund may engage in a closing purchase transaction to realize a
profit, to prevent an underlying security from being called or put or, in the
case of a call option, to unfreeze an underlying security (thereby permitting
its sale or the writing of a new option on the security prior to the
outstanding option's expiration). To effect a closing purchase transaction, a
Fund would purchase, prior to the holder's exercise of an option that a Fund
has written, an option of the same series as that on which such Fund desires to
terminate its obligation. The obligation of a Fund under an option that it has
written would be terminated by a closing purchase transaction, but the Fund
would not be deemed to own an option as the result of the transaction. There
can be no assurance that a Fund will be able to effect closing purchase
transactions at a time when it wishes to do so. To facilitate closing purchase
transactions, however, the Fund will write options only if a secondary market
for the option exists on a recognized securities exchange or in the
over-the-counter market. Option writing for the Funds may be limited by
position and exercise limits established by securities exchanges and the
National Association of Securities Dealers, Inc. (the "NASD"). Furthermore, a
Fund may, at times, have to limit its option writing in order to qualify as a
regulated investment company under the Code. Each Fund may enter into options
transactions as hedges to reduce investment risk, generally by making an
investment expected to move in the opposite direction of a portfolio position.
A hedge is designed to offset a loss on a portfolio position with a gain on the
hedge position. The Funds bear the risk that the prices of the securities being
hedged will not move in the same amount as the hedge. Each Fund will engage in
hedging transactions only when deemed advisable by the Adviser. Successful use
by a Fund of options will depend on the Adviser's ability to correctly predict
movements in the direction of the security or currency underlying the option
used as a hedge. Losses incurred in hedging transactions and the costs of these
transactions will affect a Fund's performance.
Purchasing Put and Call Options on Securities
Each Fund may purchase put and call options that are traded on foreign
as well as U.S. exchanges and in the over-the-counter market. A Fund may
utilize up to 2% of its assets to purchase put options on portfolio securities
and may do so at or about the same time that it purchases the underlying
security or at a later time. By buying a put, a Fund limits its risk of loss
from a decline in the market value of the security until the put expires. Any
appreciation in the value of and yield otherwise available from the underlying
security, however, will be partially offset by the amount of the premium paid
for the put option and any related transaction costs. A Fund may utilize up to
2% of its assets to purchase call options on portfolio securities. Call options
may be purchased by a Fund in order to acquire the underlying securities for
the Fund at a price that avoids any additional cost that would result from a
substantial increase in the market value of a security. A Fund also may
purchase call options to increase its return to investors at a time when the
call is expected to increase in value due to anticipated appreciation of the
underlying security.
Prior to their expirations, put and call options may be sold in
closing sale transactions (sales by a Fund, prior to the exercise of options
that it has purchased, of options of the same series), and profit or loss from
the sale will depend on whether the amount received is more or less than the
premium paid for the option plus the related transaction costs. If an option
purchased is not sold or exercised when it has remaining value, or if the
market price of the underlying security remains equal to or greater than the
exercise price, in the case of a put, or remains equal to or below the exercise
price, in the case of a call, during the life of the option, the option will
expire worthless and a Fund will lose the premium paid for the option.
Short Sales Against the Box
9
<PAGE>
Each Fund may make short sales of its portfolio holdings if, at times
when a short position is open, a Fund owns the security sold short or owns debt
securities convertible or exchangeable into the security sold short. Short
sales of this kind are referred to as short sales "against the box." The
broker-dealer that executes a short sale generally invests cash proceeds of the
sale until they are paid to a Fund. Arrangements may be made with the
broker-dealer to obtain a portion of the interest earned by the broker on the
investment of short sale proceeds. Each Fund will segregate the security sold
short or convertible or exchangeable debt securities in a special account with
its custodian. Not more than 10% of a Fund's net assets (taken at current
value) may be held as collateral for such sales at any one time.
Securities of Other Investment Companies
Each Fund may invest in securities of other investment companies to
the extent permitted under the 1940 Act. Presently, under the 1940 Act, a fund
is permitted to hold securities of another investment company in amounts which
(a) do not exceed 3% of the total outstanding voting stock of such company, (b)
do not exceed 5% of the value of a fund's total assets and (c) when added to
all other investment company securities held by such fund, do not exceed 10% of
the value of the fund's total assets. Investors should note that investment by
a Fund in the securities of other investment companies would involve the
payment of duplicative fees (once with the Fund and again with the investment
company in which the Fund invests). Each Fund intends not to invest more than
5% of its total assets in the securities of other investment companies.
Repurchase Agreements
Each Fund may enter into repurchase agreements on portfolio securities
with member banks of the Federal Reserve System and certain non-bank dealers.
Repurchase agreements are contracts under which the buyer of a security
simultaneously commits to resell the security to the seller at an agreed-upon
price and date. Under the terms of a typical repurchase agreement, a Fund would
acquire an underlying security for a relatively short period (usually not more
than one week) subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during such Fund's holding period. The value of the underlying securities will
at all times be at least equal to the total amount of the purchase obligation,
including interest. The Fund bears a risk of loss in the event that the other
party to a repurchase agreement defaults on its obligations or becomes bankrupt
and the Fund is delayed or prevented from exercising its right to dispose of
the collateral securities, including the risk of a possible decline in the
value of the underlying securities during the period while the Fund seeks to
assert this right. The Adviser, acting under the supervision of the Trust's
Board of Trustees, monitor the creditworthiness of those bank and non-bank
dealers with which the Funds enter into repurchase agreements to evaluate this
risk. A repurchase agreement is considered to be a loan under the 1940 Act.
Under normal market conditions, a Fund may invest up to 20% of its total assets
in repurchase agreements, although, for temporary defensive purposes, a Fund
may invest in these agreements without limit.
When-Issued Securities and Delayed Delivery Transactions
Each Fund may utilize up to 20% of its total assets to purchase
securities on a when-issued basis and purchase or sell securities on a
delayed-delivery basis. In these transactions, payment for and delivery of the
securities occurs beyond the regular settlement dates, normally within 30-45
days after the transaction. A Fund will not enter into a when-issued or
delayed-delivery transaction for the purpose of leverage, although, to the
extent the Fund is fully invested, these transactions will have the same effect
on net asset value per share as leverage. A Fund may, however, sell the right
to acquire a when-issued
10
<PAGE>
security prior to its acquisition or dispose of its right to deliver or receive
securities in a delayed-delivery transaction if its Adviser deems it
advantageous to do so. The payment obligation and the interest rate that will
be received in when-issued and delayed-delivery transactions are fixed at the
time the buyer enters into the commitment. Due to fluctuations in the value of
securities purchased or sold on a when-issued or delayed-delivery basis, the
yields obtained on such securities may be higher or lower than the yields
available in the market on the dates when the investments are actually
delivered to the buyers. A Fund will not accrue income with respect to a debt
security it has purchased on a when-issued or delayed-delivery basis prior to
its stated delivery date but will continue to accrue income on a
delayed-delivery security it has sold. When-issued securities may include
securities purchased on a "when, as and if issued" basis under which the
issuance of the security depends on the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization or debt restructuring. A Fund
will establish a segregated account with its custodian consisting of cash, U.S.
government securities or other liquid assets in an amount equal to the amount
of its when-issued and delayed-delivery purchase commitments, and will
segregate the securities underlying commitments to sell securities for delayed
delivery. Placing securities rather than cash in the segregated account may
have a leveraging effect on a Fund's net assets.
Rule 144A Securities
Each Fund may purchase securities that are not registered under the
Securities Act of 1933, as amended (the "1933 Act"), but that can be sold to
"qualified institutional buyers" in accordance with the requirements stated in
Rule 144A under the 1933 Act ("Rule 144A Securities"). A Rule 144A Security may
be considered illiquid and therefore subject to a Fund's 15% limitation on the
purchase of illiquid securities, unless the Trust's Board of Trustees
determines on an ongoing basis that an adequate trading market exists for the
security. This investment practice could have the effect of increasing the
level of illiquidity in a Fund to the extent that qualified institutional
buyers become uninterested for a time in purchasing Rule 144A Securities. The
Board of Trustees may adopt guidelines and delegate to the Adviser the daily
function of determining and monitoring liquidity of Rule 144A Securities,
although the Board of Trustees will retain ultimate responsibility for any
determination regarding liquidity. The Board of Trustees will consider all
factors in determining the liquidity of Rule 144A Securities. The Board of
Trustees will carefully monitor any investments by the Funds in Rule 144A
Securities.
Lending Portfolio Securities
Each Fund is authorized to lend securities it holds to brokers,
dealers and other financial organizations. Loans of a Fund's securities may not
exceed 33 1/3% of the Fund's net assets. A Fund's loans of securities will be
collateralized by cash, letters of credit or U.S. government securities that
will be maintained at all times in a segregated account with such Fund's
custodian in an amount at least equal to the current market value of the loaned
securities. From time to time, a Fund may pay a part of the interest earned
from the investment collateral received for securities loaned to the borrower
and/or a third party that is unaffiliated with the Fund and that is acting as a
"finder."
By lending its portfolio securities, a Fund can increase its income by
continuing to receive interest on the loaned securities, by investing the cash
collateral in short-term instruments or by obtaining yield in the form of
interest paid by the borrower when U.S. government securities are used as
collateral. A Fund will adhere to the following conditions whenever it lends
its securities: (1) the Fund must receive at least 100% cash collateral or
equivalent securities from the borrower, which securities will be maintained by
daily marking-to-market; (2) the borrower must increase the collateral whenever
the market value of the securities loaned rises above the level of the
collateral; (3) the Fund must be able to terminate the loan at any time; (4)
the Fund must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities, and any
increase in market value; (5)
11
<PAGE>
the Fund may pay only reasonable custodian fees in connection with the loan;
and (6) voting rights on the loaned securities may pass to the borrower except
that, if a material event adversely affecting the investment in the loaned
securities occurs, the Fund must terminate the loan and regain the right to
vote the securities.
High-Yield/High-Risk Bonds
The Equity Fund may invest up to 10% of its total assets in
high-yield/high-risk bonds. Lower rated bonds involve a higher degree of credit
risk, the risk that the issuer will not make interest or principal payments
when due. Such bonds may have predominantly speculative characteristics. In the
event of an unanticipated default, the Fund would experience a reduction in its
income and could expect a decline in the market value of the securities so
affected. More careful analysis of the financial condition of each issuer of
lower grade securities is therefore necessary. During an economic downturn or
substantial period of rising interest rates, highly leveraged issuers may
experience financial stress which would adversely affect their ability to
service their principal and interest payment obligations, to meet projected
business goals and to obtain additional financing.
The market prices of lower grade securities are generally less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic or political changes or, in the case of corporate
issuers, individual corporate developments. Periods of economic or political
uncertainty and change can be expected to result in volatility of prices of
these securities. Lower rated securities may also have less liquid markets than
higher rated securities, and their liquidity as well as their value may be
adversely affected by adverse 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.
Unrated Debt Securities
Both Funds may invest in unrated debt instruments of foreign and
domestic issuers. Unrated debt, while not necessarily of lower quality than
rated securities, may not have as broad a market. Sovereign debt of foreign
governments is generally rated by country. Because these ratings do not take
into account individual factors relevant to each issue and may not be updated
regularly, the Adviser may treat such securities as unrated debt. See the
Appendix for a description of bond rating categories.
ADDITIONAL INFORMATION ON INVESTMENT PRACTICES
Foreign Investments. Investors should recognize that investing in
foreign companies involves certain considerations, including those discussed
below, which are not typically associated with investing in U.S. issuers. Since
the Funds will be investing substantially in securities denominated in
currencies other than the U.S. dollar, and since the Funds may temporarily hold
funds in bank deposits or other money market investments denominated in foreign
currencies, the Funds may be affected favorably or unfavorably by exchange
control regulations or changes in the exchange rate between such currencies and
the dollar. A change in the value of a foreign currency relative to the U.S.
dollar will result in a corresponding change in the dollar value of a Fund's
assets denominated in that foreign currency. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned,
gains and losses realized on the sale of securities and net investment income
and gains, if any, to be distributed to shareholders by the Funds.
The rate of exchange between the U.S. dollar and other currencies is
determined by the forces of supply and demand in the foreign exchange markets.
Changes in the exchange rate may result over time from the interaction of many
factors directly or indirectly affecting economic and political conditions in
12
<PAGE>
the United States and a particular foreign country, including economic and
political developments in other countries. Of particular importance are rates
of inflation, interest rate levels, the balance of payments and the extent of
government surpluses or deficits in the United States and the particular
foreign country, all of which are in turn sensitive to the monetary, fiscal and
trade policies pursued by the governments of the United States and other
foreign countries important to international trade and finance. Governmental
intervention may also play a significant role. National governments rarely
voluntarily allow their currencies to float freely in response to economic
forces. Sovereign governments use a variety of techniques, such as intervention
by a country's central bank or imposition of regulatory controls or taxes, to
affect the exchange rates of their currencies.
Many of the foreign securities held by the Funds will not be
registered with, nor the issuers thereof be subject to reporting requirements
of, the Securities and Exchange Commission (the "SEC"). Accordingly, there may
be less publicly available information about the securities and about the
foreign company or government issuing them than is available about a domestic
company or government entity. Foreign issuers are generally not subject to
uniform financial reporting standards, practices and requirements comparable to
those applicable to U.S. issuers. In addition, with respect to some foreign
countries, there is the possibility of expropriation or confiscatory taxation,
limitations on the removal of funds or other assets of the Funds, political or
social instability, or domestic developments which could affect U.S.
investments in those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payment positions. The Funds may
invest in securities of foreign governments (or agencies or instrumentalities
thereof), and many, if not all, of the foregoing considerations apply to such
investments as well.
Securities of some foreign companies are less liquid and their prices
are more volatile than securities of comparable domestic companies. Certain
foreign countries are known to experience long delays between the trade and
settlement dates of securities purchased or sold. Due to the increased exposure
to the Funds of market and foreign exchange fluctuations brought about by such
delays, and due to the corresponding negative impact on Fund liquidity, the
Funds will avoid investing in countries which are known to experience
settlement delays which may expose the Funds to unreasonable risk of loss.
The interest payable on each Fund's foreign securities may be subject
to foreign withholding taxes, and while investors may be able to claim some
credit or deduction for such taxes with respect to their allocated shares of
such foreign tax payments, the general effect of these taxes will be to reduce
the Fund's income. Additionally, the operating expenses of the Fund, such as
custodial costs, valuation costs and communication costs, as well as the rate
of the investment advisory fees, are higher than those costs incurred by
investment companies investing exclusively in U.S. securities, but are not
higher than those paid by many other international funds.
Each Fund will not invest more than 25% or more of its assets
in the securities of supranational entities.
Futures Activities. The Funds may enter into futures contracts for the
purchase and sale of fixed-income securities or foreign currencies and purchase
or write related options that are traded on foreign as well as U.S. exchanges.
These investments may be made solely for the purpose of hedging against changes
in the value of its portfolio securities due to anticipated changes in interest
rates, currency values and/or market conditions when the transactions are
economically appropriate to the reduction of risks inherent in the management
of the Funds and not for purposes of speculation.
13
<PAGE>
Futures Contracts. A futures contract for the purchase or sale of
fixed-income securities provides for the future sale by one party and the
purchase by the other party of a certain amount of a specific debt instrument
at a specified price, date, time and place. A foreign currency futures contract
provides for the future sale by one party and the purchase by the other party
of a certain amount of a specified foreign currency at a specified price, date,
time and place.
Entering into a futures contract enables a Fund to seek to protect its
assets from fluctuations in value without necessarily buying or selling the
assets. A Fund may not enter into futures transactions, other than those
considered to be "bona fide" hedging by the Commodity Futures Trading
Commission, if the sum of the amount of initial margin deposits on its existing
futures contracts and premiums paid for unexpired options would exceed 5% of
the fair market value of such Fund's total assets, after taking into account
unrealized profits and unrealized losses on commodity contracts into which it
has entered. A Fund will not use leverage when it enters into long futures or
options contracts and for each such long position such Fund will deposit cash,
or other liquid obligations, having a value equal to the underlying commodity
value of the contract as collateral with its custodian or approved futures
commission merchant ("FCM") in a segregated account.
The purpose of entering into a futures contract is to protect a Fund
from fluctuations in value of its portfolio securities without its necessarily
buying or selling the securities. Of course, since the value of portfolio
securities will far exceed the value of the futures contracts sold by a Fund,
an increase in the value of the futures contracts could only mitigate but not
totally offset the decline in the value of such Fund's assets. No consideration
is paid or received by a Fund upon entering into a futures contract. Upon
entering into a futures contract, a Fund will be required to deposit in a
segregated account with its custodian or approved FCM an amount of cash or
other liquid obligations equal to a portion of the contract amount. This amount
is known as "initial margin" and is in the nature of a performance bond or good
faith deposit on the contract which is returned to such Fund upon termination
of the futures contract, assuming all contractual obligations have been
satisfied. The broker will have access to amounts in the margin account if the
Fund fails to meet its contractual obligations. Subsequent payments, known as
"variation margin," to and from the broker, will be made daily as the price of
the securities underlying the futures contract fluctuates, making the long and
short positions in the futures contract more or less valuable, a process known
as "marking-to-market." At any time prior to the expiration of a futures
contract, a Fund may elect to close the position by taking an opposite
position, which will operate to terminate such Fund's existing position in the
contract.
There are several risks in connection with the use of futures
contracts as a hedging device. Successful use of futures contracts is subject
to the ability of Bank Julius Baer & Co., Ltd., New York Branch (the
"Adviser"), the investment adviser to predict correctly movements in the price
of the securities or currencies and the direction of the stock indices
underlying the particular hedge. These predictions and, thus, the use of
futures contracts involve skills and techniques that are different from those
involved in the management of the portfolio securities being hedged. In
addition, there can be no assurance that there will be a correlation between
movements in the price of the underlying securities or currencies and movements
in the price of the securities which are the subject of the hedge. A decision
concerning whether, when and how to hedge involves the exercise of skill and
judgment and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or trends in interest rates.
Positions in futures contracts and options on futures contracts may be
closed out only on the exchange on which they were entered into (or through a
linked exchange). No secondary market exists for such contracts. Although the
Funds intend to enter into futures contracts only if there is an active market
for such contracts, there is no assurance that an active market will exist for
the contracts at any
14
<PAGE>
particular time. Most futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be made
that day at a price beyond that limit. It is possible that futures contract
prices could move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting the Funds to substantial losses. In such event, and in
the event of adverse price movements, a Fund would be required to make daily
cash payments of variation margin. In such circumstances, an increase in the
value of the portion of such Fund's securities being hedged, if any, may
partially or completely offset losses on the futures contract. However, as
described above, there is no guarantee that the price of the securities being
hedged will, in fact, correlate with the price movements in a futures contract
and thus provide an offset to losses on the futures contract.
If a Fund has hedged against the possibility of an event adversely
affecting the value of securities held in its portfolio and that event does not
occur, such Fund will lose part or all of the benefit of the increased value of
securities which it has hedged because it will have offsetting losses in its
futures positions. Losses incurred in hedging transactions and the costs of
these transactions will affect a Fund's performance. In addition, in such
situations, if a Fund had insufficient cash, it might have to sell securities
to meet daily variation margin requirements at a time when it would be
disadvantageous to do so. These sales of securities could, but will not
necessarily, be at increased prices which reflect the change in interest rates
or currency values, as the case may be.
Options on Futures Contracts. The Funds may purchase and write put and
call options on interest rate and foreign currency futures contracts that are
traded on a U.S. exchange or board of trade as a hedge against changes in
interest rates and market conditions, and may enter into closing transactions
with respect to such options to terminate existing positions. There is no
guarantee that such closing transactions can be effected.
An option on an interest rate futures contract, as contrasted with the
direct investment in such a contract, gives the purchaser the right, in return
for the premium paid, to assume a position in a fixed-income security futures
contract at a specified exercise price at any time prior to the expiration date
of the option. An option on a foreign currency futures contract, as contrasted
with the direct investment in the contract, gives the purchaser the right, but
not the obligation, to assume a long or short position in the relevant
underlying currency at a predetermined exercise price at a time in the future.
Upon exercise of an option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of
the accumulated balance in the writer's futures margin account, which
represents the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract. The potential loss
related to the purchase of an option on futures contracts is limited to the
premium paid for the option (plus transaction costs). Because the value of the
option is fixed at the point of sale, there are no daily cash payments to
reflect changes in the value of the underlying contract; however, the value of
the option does change daily and that change would be reflected in the net
asset value of the Funds.
There are several risks relating to options on futures contracts. The
ability to establish and close out positions on such options will be subject to
the existence of a liquid market. In addition, the purchase of put or call
options will be based upon predictions as to anticipated trends in interest
rates and securities markets by a Fund's Adviser, which could prove to be
incorrect. Even if those expectations were correct, there may be an imperfect
correlation between the change in the value of the options and of the portfolio
securities hedged.
15
<PAGE>
Currency Hedging Transactions. The value in U.S. dollars of the assets
of the Funds that are invested in foreign securities may be affected favorably
or unfavorably by changes in foreign currency exchange rates and exchange
control regulations, and the Funds may incur costs in connection with
conversions between various currencies. The Funds, therefore, may engage in
currency hedging transactions to protect against uncertainty in the level of
future exchange rates. Income received from such transactions could be used to
pay a Fund's expenses and would increase an investor's total return. The Funds
will conduct foreign currency transactions either on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign currency market or through forward
foreign exchange contracts to purchase or sell currency. The Funds also are
authorized to purchase and sell listed foreign currency options and options on
foreign currency futures for hedging purposes.
The following is a description of the hedging instruments the Funds may utilize
with respect to foreign currency exchange rate fluctuation risks.
Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. A Fund's dealings in
forward currency exchange will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or
sale of forward currency with respect to specific receivables or payables of a
Fund generally accruing in connection with the purchase or sale of its
portfolio securities. Position hedging is the sale of forward currency with
respect to portfolio security positions denominated or quoted in that currency
or in another currency in which portfolio securities are denominated, the
movements of which tend to correlate to the movement in the currency sold
forward (the "hedged currency"). A Fund may not position hedge with respect to
a particular currency to an extent greater than the aggregate market value (at
the time of making such sale) of the securities held in its portfolio
denominated or quoted in or currently convertible into that particular currency
or the hedged currency. If a Fund enters into a position hedging transaction,
cash or liquid securities will be placed in a segregated account in an amount
equal to the value of that Fund's total assets committed to the consummation of
the forward contract or the Fund will own the currency subject to the hedge, or
the right to buy or sell it as the case may be. If the value of the securities
placed in the segregated account declines, additional cash or securities will
be placed in the account so that the value of the account will equal the amount
of such Fund's commitment with respect to the contract. Hedging transactions
may be made from any foreign currency into U.S. dollars or into other
appropriate currencies.
At or before the maturity of a forward contract, a Fund may either
sell a portfolio security and take delivery of the currency, or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which such Fund will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund, at the time of execution of the offsetting transaction,
will incur a gain or a loss to the extent that movement has occurred in forward
contract prices. Should forward prices decline during the period between a
Fund's entering into a forward contract for the sale of a currency and the date
it enters into an offsetting contract for the purchase of the currency, the
Fund will realize a gain to the extent the price of the currency it has agreed
to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent the price of
the currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
The cost to a Fund of engaging in currency transactions varies with
factors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because transactions in currency
exchange are usually conducted on a principal basis, no fees or commissions are
16
<PAGE>
involved. The use of forward currency contracts does not eliminate fluctuations
in the underlying prices of the securities, but it does establish a rate of
exchange that can be achieved in the future. In addition, although forward
currency contracts limit the risk of loss due to a decline in the value of the
hedged currency, at the same time, they limit any potential gain that might
result should the value of the currency increase.
If a devaluation is generally anticipated, a Fund may not be able to
contract to sell the currency at a price above the devaluation level it
anticipates. In light of the requirements that the Funds must meet to qualify
as regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code") for a given year, the Funds currently intend to limit
their gross income from currency transactions to less than 10% of gross income
for that taxable year.
Foreign Currency Options. The Funds may purchase put and call options
on foreign currencies for the purpose of hedging against changes in future
currency exchange rates. Foreign currency options generally have three, six and
nine month expiration cycles. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher than the spot
price of the currency at the time the option expires. Call options convey the
right to buy the underlying currency at a price which is expected to be lower
than the spot price of the currency at the time the option expires.
A Fund may use foreign currency options under the same circumstances
that it could use forward currency exchange transactions. A decline in the
dollar value of a foreign currency in which a Fund's securities are
denominated, for example, will reduce the dollar value of the securities, even
if their value in the foreign currency remains constant. In order to protect
against such diminution in the value of securities it holds, a Fund may
purchase put options on the foreign currency. If the value of the currency does
decline, such Fund will have the right to sell the currency for a fixed amount
in dollars and will thereby offset, in whole or in part, the adverse effect on
its securities that otherwise would have resulted. Conversely, if a rise in the
dollar value of a currency in which securities to be acquired are denominated
is projected, thereby potentially increasing the cost of the securities, a Fund
may purchase call options on the particular currency. The purchase of these
options could offset, at least partially, the effects of the adverse movements
in exchange rates. The benefit to a Fund derived from purchases of foreign
currency options, like the benefit derived from other types of options, will be
reduced by the amount of the premium and related transaction costs. In
addition, if currency exchange rates do not move in the direction or to the
extent anticipated, a Fund could sustain losses on transactions in foreign
currency options that would require it to forego a portion or all of the
benefits of advantageous changes in the rates.
Foreign Currency Futures and Related Options. The Funds may enter into
currency futures contracts to purchase and sell currencies. They also may
purchase options on currency futures. Foreign currency futures are similar to
forward currency contracts, except that they are traded on commodities
exchanges and are standardized as to contract size and delivery date. In
investing in such transactions, a Fund would incur brokerage costs and would be
required to make and maintain certain "margin" deposits. A Fund also would be
required to segregate assets or otherwise cover, as described above, the
futures contracts requiring the purchase of foreign currencies. These
limitations are described more fully above under the heading "Futures
Activities." Most currency futures call for payment or delivery in U.S.
dollars.
Options on foreign currency futures entitle a Fund, in return for the
premium paid, to assume a position in an underlying foreign currency futures
contract. An option on a foreign currency futures contract, in contrast to a
direct investment in the contract, gives the purchaser the right, but not the
17
<PAGE>
obligation, to assume a long or short position in the relevant underlying
currency at a predetermined price at a time in the future.
Currency futures and related options are subject to the risks of other
types of futures activities, as described above. In addition, while the value
of currency futures and options on futures can be expected to correlate with
exchange rates, it will not reflect other factors that may affect the value of
a Fund's investments. A currency hedge, for example, should protect a
Yen-denominated security against a decline in the Yen, but will not protect a
Fund against price decline if the issuer's creditworthiness deteriorates.
Because the value of a Fund's investments denominated in foreign currency will
change in response to many factors other than exchange rates, it may not be
possible to match the amount of currency futures contracts to the value of the
Fund's investments denominated in that currency over time.
A more detailed discussion of futures contracts and options on futures
contracts, including the risks associated with such transactions and certain
limitations on the percentage of assets that may be used in such transactions,
can be found above under the heading "Futures Activities."
Options on Securities. In order to hedge against adverse market
shifts, a Fund may utilize up to 2% of its total assets to purchase put options
on securities and an additional 2% of its total assets to purchase call options
on securities, in each case that are traded on foreign as well as U.S.
exchanges or in the over-the-counter market. In addition, a Fund may write
covered call options and put options on up to 25% of the net asset value of the
securities in its portfolio. A Fund realizes fees (referred to as "premiums")
for granting the rights evidenced by the call options it has written. A put
option embodies the right of its purchaser to compel the writer of the option
to purchase from the option holder an underlying security at a specified price
at any time during the option period. In contrast, a call option embodies the
right of its purchaser to compel the writer of the option to sell to the option
holder an underlying security at a specified price at any time during the
option period. Thus, the purchaser of a call option written by a Fund has the
right to purchase from such Fund the underlying security owned by the Fund at
the agreed-upon price for a specified time period. A Fund may write only
covered call options. Accordingly, whenever a Fund writes a call option it will
continue to own or have the present right to acquire the underlying security
without additional consideration for as long as it remains obligated as the
writer of the option.
The principal reason for writing covered call options on a security is
to attempt to realize, through the receipt of premiums, a greater return than
would be realized on the securities alone. In return for a premium, a Fund as
the writer of a covered call option forfeits the right to any appreciation in
the value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). Nevertheless,
a Fund as the call writer retains the risk of a decline in the price of the
underlying security. The size of the premiums that a Fund may receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option-writing activities.
Options written by a Fund will normally have expiration dates between
one and nine months from the date written. The exercise price of the options
may be below, equal to or above the market values of the underlying securities
at the times the options are written. In the case of call options, these
exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. A Fund may write (a) in-the-money call
options when its Adviser expects that the price of the underlying security will
remain flat or decline moderately during the option period, (b) at-the-money
call options when its Adviser expects that the price of the underlying security
will remain flat or advance moderately during the option period and (c)
out-of-the-money call options when its Adviser expects that the premiums
received from writing the call option plus the appreciation in market price of
the underlying
18
<PAGE>
security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. In any of the
preceding situations, if the market price of the underlying security declines
and the security is sold at this lower price, the amount of any realized loss
will be offset wholly or in part by the premium received.
So long as the obligation of a Fund as the writer of an option
continues, such Fund may be assigned an exercise notice by the broker-dealer
through which the option was sold, requiring the Fund to deliver the underlying
security against payment of the exercise price. This obligation terminates when
the option expires or the Fund effects a closing purchase transaction. A Fund
can no longer effect a closing purchase transaction with respect to an option
once it has been assigned an exercise notice. To secure its obligation to
deliver the underlying security when it writes a call option, a Fund will be
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing Corporation (the "Clearing
Corporation") and of the securities exchange on which the option is written.
An option position may be closed out only where there exists a
secondary market for an option of the same series on a recognized securities
exchange or in the over-the-counter market. The Funds may purchase and write
options on securities on U.S. and foreign securities exchanges or in the
over-the-counter market.
A Fund may realize a profit or loss upon entering into a closing
transaction. In cases where a Fund has written an option, it will realize a
profit if the cost of the closing purchase transaction is less than the premium
received upon writing the original option and will incur a loss if the cost of
the closing purchase transaction exceeds the premium received upon writing the
original option. Similarly, when a Fund has purchased an option and engages in
a closing sale transaction, whether such Fund realizes a profit or loss will
depend upon whether the amount received in the closing sale transaction is more
or less than the premium the Fund initially paid for the original option plus
the related transaction costs.
Although a Fund will generally purchase or write only those options
for which its Adviser believes there is an active secondary market so as to
facilitate closing transactions, there is no assurance that sufficient trading
interest will exist to create a liquid secondary market on a securities
exchange for any particular option or at any particular time, and for some
options no such secondary market may exist. A liquid secondary market in an
option may cease to exist for a variety of reasons. In the past, for example,
higher than anticipated trading activity or order flow or other unforeseen
events have at times rendered certain of the facilities of the Clearing
Corporation and various securities exchanges inadequate and resulted in the
institution of special procedures, such as trading rotations, restrictions on
certain types of orders or trading halts or suspensions in one or more options.
There can be no assurance that similar events, or events that may otherwise
interfere with the timely execution of customers' orders, will not recur. In
such event, it might not be possible to effect closing transactions in
particular options. Moreover, a Fund's ability to terminate options positions
established in the over-the-counter market may be more limited than for
exchange-traded options and also may involve the risk that securities dealers
participating in over-the-counter transactions would fail to meet their
obligations to a Fund. Each Fund, however, intends to purchase over-the-counter
options only from dealers whose debt securities, as determined by its Adviser,
are considered to be investment grade. If, as a covered call option writer, a
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
it delivers the underlying security upon exercise. In either case, a Fund would
continue to be at market risk on the security and could face higher transaction
costs, including brokerage commissions.
19
<PAGE>
Securities exchanges generally have established limitations governing
the maximum number of calls and puts of each class which may be held or
written, or exercised within certain time periods, by an investor or group of
investors acting in concert (regardless of whether the options are written on
the same or different securities exchanges or are held, written or exercised in
one or more accounts or through one or more brokers). It is possible that the
Funds and other clients of the Adviser and certain of its affiliates may be
considered to be such a group. A securities exchange may order the liquidation
of positions found to be in violation of these limits and it may impose certain
other sanctions. Dollar amount limits apply to U.S. government securities.
These limits may restrict the number of options a Fund will be able to purchase
on a particular security.
In the case of options written by a Fund that are deemed covered by
virtue of such Fund's holding convertible or exchangeable preferred stock or
debt securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, a Fund may purchase or
temporarily borrow the underlying securities for purposes of physical delivery.
By so doing, a Fund will not bear any market risk, since the Fund will have the
absolute right to receive from the issuer of the underlying security an equal
number of shares to replace the borrowed stock, but a Fund may incur additional
transaction costs or interest expenses in connection with any such purchase or
borrowing.
Additional risks exist with respect to certain of the U.S. government
securities for which a Fund may write covered call options. If a Fund writes
covered call options on mortgage-backed securities, the mortgage-backed
securities that it holds as cover may, because of scheduled amortization or
unscheduled prepayments, cease to be sufficient cover. If this occurs, a Fund
will compensate for the decline in the value of the cover by purchasing an
appropriate additional amount of mortgage-backed securities.
In addition to writing covered options for other purposes, a Fund may
enter into options transactions as hedges to reduce investment risk, generally
by making an investment expected to move in the opposite direction of a
portfolio position. A hedge is designed to offset a loss on a portfolio
position with a gain on the hedged position; at the same time, however, a
properly correlated hedge will result in a gain on the portfolio position being
offset by a loss on the hedged position. A Fund bears the risk that the prices
of the securities being hedged will not move in the same amount as the hedge. A
Fund will engage in hedging transactions only when deemed advisable by its
Adviser. Successful use by a Fund of options will be subject to its Adviser's
ability to predict correctly movements in the direction of the securities
underlying the option used as a hedge. Losses incurred in hedging transactions
and the costs of these transactions will affect a Fund's performance.
Options on Gold. For hedging purposes, the Equity Fund may purchase
put and call options on gold and write covered call options on gold in an
amount which, when added to its assets committed to margin and premiums for
gold futures contracts and related options, does not exceed 5% of the Equity
Fund's net assets. The Equity Fund will only enter into gold options that are
traded on a regulated domestic commodities exchange or foreign commodities
exchanges approved for this purpose by the Commodity Futures Trading
Commission.
Short Sales "Against the Box." In a short sale, a Fund sells a
borrowed security and has a corresponding obligation to the lender to return
the identical security. A Fund may engage in short sales if at the time of the
short sale such Fund owns or has the right to obtain an equal amount of the
security being sold short. This investment technique is known as a short sale
"against the box."
20
<PAGE>
In a short sale, the seller does not immediately deliver the
securities sold and is said to have a short position in those securities until
delivery occurs. If a Fund engages in a short sale, the collateral for the
short position will be maintained by such Fund's custodian or qualified
sub-custodian. While the short sale is open, a Fund will maintain in a
segregated account an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for such
equivalent securities. These securities constitute such Fund's long position.
Not more than 10% of a Fund's net assets (taken at current value) may be held
as collateral for such short sales at any one time.
The Funds do not intend to engage in short sales against the box for
investment purposes. A Fund may, however, make a short sale as a hedge, when it
believes that the price of a security may decline, causing a decline in the
value of a security owned by the Fund (or a security convertible or
exchangeable for such security), or when a Fund wants to sell the security at
an attractive current price, but also wishes to defer recognition of gain or
loss for federal income tax purposes and for purposes of satisfying certain
tests applicable to regulated investment companies under the Code. In such
case, any future losses in a Fund's long position should be offset by a gain in
the short position and, conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses are reduced will depend upon the amount of the security sold short
relative to the amount a Fund owns. There will be certain additional
transaction costs associated with short sales against the box, but the Funds
will endeavor to offset these costs with the income from the investment of the
cash proceeds of short sales.
Fixed-Income Investments. The performance of the debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. Generally, shorter
term securities are less sensitive to interest rate changes, but longer term
securities offer higher yields. A Fund's share price and yield will also
depend, in part, on the quality of its investments. While U.S. government
securities are generally of high quality, government securities that are not
backed by the full faith and credit of the United States and other debt
securities may be affected by changes in the creditworthiness of the issuer of
the security. The extent that such changes are reflected in a Fund's share
price will depend on the extent of the Fund's investment in such securities.
U.S. Government Securities. The Funds may invest in debt obligations
of varying maturities issued or guaranteed by the United States government, its
agencies or instrumentalities ("U.S. government securities"). Direct
obligations of the U.S. Treasury include a variety of securities that differ in
their interest rates, maturities and dates of issuance. U.S. government
securities also include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, General Services Administration, Central Bank for Cooperatives,
Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Federal
National Mortgage Association, Maritime Administration, Tennessee Valley
Authority, District of Columbia Armory Board and Student Loan Marketing
Association. The Funds also may invest in instruments that are supported by the
right of the issuer to borrow from the United States Treasury and instruments
that are supported by the credit of the instrumentality. Because the United
States government is not obligated by law to provide support to an
instrumentality it sponsors, a Fund will invest in obligations issued by such
an instrumentality only if its Adviser determines that the credit risk with
respect to the instrumentality does not make its securities unsuitable for
investment by the Fund.
21
<PAGE>
Securities of Other Investment Companies. The Funds may invest in
securities of other investment companies to the extent permitted under the
Investment Company Act of 1940, as amended (the "1940 Act"). Presently, under
the 1940 Act, a fund is permitted to hold securities of another investment
company in amounts which (a) do not exceed 3% of the total outstanding voting
stock of such company, (b) do not exceed 5% of the value of the Fund's total
assets and (c) when added to all other investment company securities held by
the Fund, do not exceed 10% of the value of the Fund's total assets. However, a
Fund does not intend to invest more than 5% of its assets in the securities of
other investment companies.
Repurchase Agreements. A Fund may engage in repurchase agreement
transactions by investing up to 20% of its total assets with respect to any
securities in which it invests. A Fund will enter into repurchase agreements
with member banks of the Federal Reserve System or certain non-bank dealers,
including its administrator. Repurchase agreements are contracts under which
the buyer of a security simultaneously commits to resell the security to the
seller at an agreed-upon price and date. Under each repurchase agreement, the
selling institution will be required to maintain the value of the securities
subject to the repurchase agreement at not less than their repurchase price.
Repurchase agreements involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon a
Fund's ability to dispose of the underlying securities.
When-Issued Securities and Delayed Delivery Transactions. A Fund may
utilize up to 20% of its total assets to purchase securities on a "when-issued"
basis or purchase or sell securities for delayed delivery (i.e., payment or
delivery occur beyond the normal settlement date at a stated price and yield).
When-issued transactions normally settle within 30-45 days. A Fund will enter
into a when-issued transaction for the purpose of acquiring portfolio
securities and not for the purpose of leverage, but may sell the securities
before the settlement date if its Adviser deems it advantageous to do so. The
payment obligation and the interest rate that will be received on when-issued
securities are fixed at the time the buyer enters into the commitment. Due to
fluctuations in the value of securities purchased or sold on a when-issued or
delayed-delivery basis, the yields obtained on such securities may be higher or
lower than the yields available in the market on the dates when the investments
are actually delivered to the buyers.
When a Fund agrees to purchase when-issued or delayed-delivery
securities, its custodian will set aside cash or other liquid obligations equal
to the amount of the commitment in a separate account. Normally, the custodian
will set aside portfolio securities to satisfy a purchase commitment, and in
such a case a Fund may be required subsequently to place additional assets in
the separate account in order to ensure that the value of the account remains
equal to the amount of the Fund's commitment. It may be expected that a Fund's
net assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.
When a Fund engages in when-issued or delayed-delivery transactions, it relies
on the other party to consummate the trade. Failure of the seller to do so may
result in a Fund incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
Convertible Securities. Convertible securities in which a Fund may
invest, including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an
investor to benefit from increases in the market price of the underlying common
stock. Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. Like bonds, the value of convertible securities fluctuates in
relation to changes in interest rates and, in addition, fluctuates in relation
to the underlying common stock.
22
<PAGE>
International Warrants. The Equity Fund may invest up to 10% of its
total assets in warrants of international issuers. The Equity Fund's holdings
of warrants will consist of equity warrants, index warrants, covered warrants,
interest rate warrants and long term options of, or relating to, international
issuers. Warrants are securities that give the holder the right, but not the
obligation, to subscribe for newly created equity issues (consisting of common
and preferred stock, convertible preferred stock and warrants that themselves
are only convertible into common, preferred or convertible preferred stock) of
the issuing company or a related company at a fixed price either on a certain
date or during a set period. The equity issue underlying an equity warrant is
outstanding at the time the equity warrant is issued or is issued together with
the warrant. At the time the Equity Fund acquires an equity warrant convertible
into a warrant, the terms and conditions under which the warrant received upon
conversion can be exercised will have been determined; the warrant received
upon conversion will only be convertible into a common, preferred or
convertible preferred stock.
Equity warrants are generally issued in conjunction with an issue of
bonds or shares, although they also may be issued as part of a rights issue or
scrip issue. When issued with bonds or shares, they usually trade separately
from the bonds or shares after issuance. The Equity Fund will not buy bonds
with warrants attached. Most warrants trade in the same currency as the
underlying stock ("domestic warrants"), but also may be traded in different
currency ("euro-warrants"). Equity warrants are traded on a number of European
exchanges, principally in France, Germany, Japan, Netherlands, Switzerland and
the United Kingdom, and in over-the-counter markets. Since there is a readily
available market for these securities, the Equity Fund Adviser believes that
international warrants should be considered a liquid investment.
Index warrants are rights created by an issuer, typically a financial
institution, entitling the holder to purchase, in the case of a call, or sell,
in the case of a put, an equity index at a certain level over a fixed period of
time. Index warrant transactions settle in cash.
Covered warrants are rights created by an issuer, typically a
financial institution, normally entitling the holder to purchase from the
issuer of the covered warrant outstanding securities of another company (or in
some cases a basket of securities), which issuance may or may not have been
authorized by the issuer or issuers of the securities underlying the covered
warrants. In most cases, the holder of the covered warrant is entitled on its
exercise to delivery of the underlying security, but in some cases the
entitlement of the holder is to be paid in cash the difference between the
value of the underlying security on the date of exercise and the strike price.
The securities in respect of which covered warrants are issued are usually
common stock, although they may entitle the holder to acquire warrants to
acquire common stock. Covered warrants may be fully covered or partially
covered. In the case of a fully covered warrant, the issuer of the warrant will
beneficially own all of the underlying securities or will itself own warrants
(which are typically issued by the issuer of the underlying securities in a
separate transaction) to acquire the securities. The underlying securities or
warrants are, in some cases, held by another member of the issuer's group or by
a custodian or other fiduciary for the holders of the covered warrants.
Interest rate warrants are rights that are created by an issuer,
typically a financial institution, entitling the holder to purchase, in the
case of a call, or sell, in the case of a put, a specific bond issue or an
interest rate index (Bond Index) at a certain level over a fixed time period.
Interest rate warrants can typically be exercised in the underlying instrument
or settle in cash.
Long term options operate much like covered warrants. Like covered
warrants, long term options are call options created by an issuer, typically a
financial institution, entitling the holder to purchase from the issuer
outstanding securities of another issuer. Long term options have an initial
23
<PAGE>
period of one year or more, but generally have terms between three and five
years. At present, long term options are traded only in the Netherlands, where
a distinct market does not exist. Unlike U.S. options, long term European
options do not settle through a clearing corporation that guarantees the
performance of the counterparty. Instead, they are traded on an exchange and
subject to the exchange's trading regulations.
The Equity Fund will acquire only covered warrants, index warrants,
interest rate warrants and long term options issued by entities deemed to be
creditworthy by its Adviser, who will monitor the creditworthiness of such
issuers on an on-going basis. Investment in these instruments involves the risk
that the issuer of the instrument may default on its obligation to deliver the
underlying security or warrants to acquire the underlying security (or cash in
lieu thereof). To reduce this risk, the Equity Fund will limit its holdings of
covered warrants, index warrants, interest rate warrants and long term options
to those issued by entities that either have a class of outstanding debt
securities that is rated investment grade or higher by a recognized rating
service or otherwise are considered by its Adviser to have the capacity to meet
their obligations to the Equity Fund.
INVESTMENT LIMITATIONS
The investment limitations numbered 1 through 11 have been adopted by
the Trust with respect to each Fund as fundamental policies and may not be
changed with respect to a Fund without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. Such majority is defined as the
lesser of (a) 67% or more of the shares present at the meeting, if the holders
of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (b) more than 50% of the outstanding shares.
Investment limitations 12 through 15 may be changed by a vote of the Board of
Trustees at any time.
A Fund may not:
1. Borrow money or issue senior securities except that a Fund may
borrow from banks for temporary or emergency purposes, and not for leveraging,
and then in amounts not in excess of 30% of the value of the Fund's total
assets at the time of such borrowing; or mortgage, pledge or hypothecate any
assets except in connection with any bank borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of the
Fund's total assets at the time of such borrowing. Whenever such borrowings
exceed 5% of the value of the Fund's total assets, the Fund will not make any
investments (including roll-overs). For purposes of this restriction, (a) the
deposit of assets in escrow in connection with the purchase of securities on a
when-issued or delayed-delivery basis and (b) collateral arrangements with
respect to options, futures or forward currency contracts will not be deemed to
be borrowings or pledges of the Fund's assets.
2. Purchase any securities which would cause 25% or more of the value
of the Fund's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the
same industry; provided that there shall be no limit on the purchase of U.S.
government securities.
3. Make loans, except that the Fund may purchase or hold publicly
distributed fixed-income securities, lend portfolio securities in an amount not
exceeding 33-1/3% of the Fund's net assets and enter into repurchase
agreements.
24
<PAGE>
4. Underwrite any issue of securities except to the extent that the
investment in restricted securities and the purchase of fixed-income securities
directly from the issuer thereof in accordance with the Fund's investment
objective, policies and limitations may be deemed to be underwriting.
5. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or invest in real estate
limited partnerships, oil, gas or mineral exploration or development programs
or oil, gas and mineral leases, except that the Fund may invest in (a)
fixed-income securities secured by real estate, mortgages or interests therein,
(b) securities of companies that invest in or sponsor oil, gas or mineral
exploration or development programs and (c) futures contracts and related
options and options on currencies. The entry into forward foreign currency
exchange contracts is not and shall not be deemed to involve investing in
commodities.
6. Make short sales of securities or maintain a short position, except
that the Fund may maintain short positions in forward currency contracts,
options and futures contracts and make short sales "against the box."
7. Purchase, write or sell puts, calls, straddles, spreads or
combinations thereof, except that the Fund may (a) purchase or write options on
securities, indices and currencies and (b) purchase or write options on futures
contracts.
8. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer
of exchange, or as otherwise permitted under the 1940 Act.
9. Purchase more than 10% of the voting securities of any one issuer,
more than 10% of the securities of any class of any one issuer or more than 10%
of the outstanding debt securities of any one issuer; provided that this
limitation shall not apply to investments in U.S. government securities.
10. Purchase securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the maintenance of margin in
connection with options, forward contracts and futures contracts or related
options will not be deemed to be a purchase of securities on margin.
11. Invest more than 15% of the value of the Fund's total assets in
securities which may be illiquid because of legal or contractual restrictions
on resale or securities for which there are no readily available market
quotations. For purposes of this limitation, (a) repurchase agreements with
maturities greater than seven days and (b) time deposits maturing in more than
seven calendar days shall be considered illiquid.
12. Purchase any security if as a result the Fund would then have more
than 5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three
years.
13. Purchase or retain securities of any company if, to the knowledge
of the Fund, any of the Fund's officers or Trustees or any officer or director
of its Adviser individually owns more than 1/2 of 1% of the outstanding
securities of such company and together they own beneficially more than 5% of
the securities.
14. Invest in warrants (other than warrants acquired by the Fund as
part of a unit or attached to securities at the time of purchase) if, as a
result, the investments (valued at the lower of cost or market)
25
<PAGE>
would exceed 5% of the value of each Fund's net assets (10% in the case of the
Equity Fund) of which not more than 2% of each Fund's net assets may be
invested in warrants not listed on a recognized U.S. or foreign stock exchange.
15. Invest in oil, gas or mineral leases.
A Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states. Should
a Fund determine that any such commitment is no longer in the best interest of
the Fund and its shareholders, such Fund will revoke the commitment by
terminating the sale of Fund shares in the state involved. If a percentage
restriction is adhered to at the time of an investment, a later increase or
decrease in the percentage of assets resulting from a change in the values of
portfolio securities or in the amount of the Fund's assets will not constitute
a violation of such restriction.
MANAGEMENT OF THE TRUST
Board of Trustees
Overall responsibility for management and supervision of the Trust and
the Funds rests with the Board of Trustees. The Trustees approve all
significant agreements between the Trust and the persons and companies that
furnish services to the Trust or the Funds, including agreements with its
distributor, custodian, transfer agent, investment adviser and administrator.
The day-to-day operations of the Funds are delegated to their Adviser. The SAI
contains background information regarding each of the Trustees and executive
officers of the Trust.
Trustees and Officers
The names of the Trust's Trustees and executive officers, their
addresses, birthdates, principal occupations during the past five years and
other affiliations are set forth below.
<TABLE>
<S> <C> <C>
Harvey B. Kaplan* Trustee Controller (Chief Financial Officer),
80 Voice Road Easter Unlimited, Inc., May 1990 -
Carle Place, New York 11514 present (toy company).
Birthdate: 09/22/37
Robert S. Matthews Trustee Partner of Matthews & Co.
331 Madison Avenue (certified public accountants).
8th Floor
New York, New York 10017
Birthdate: 10/16/43
Gerard J.M. Vlak Trustee Retired
181 Turn of the River Road #7
Stamford, Connecticut 06905
Birthdate: 09/28/33
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C>
Martin Vogel** Trustee Director of Legal and Tax, Julius Baer
Julius Baer Investment Funds Services Investment Fund Services, Ltd., 1996 to
Freighutstrasse 40 present; Attorney, Schaufelberger & van
Postfach CH - 8010 Hoboken, 1994 - 1996; Attorney, Rohner
Zurich, Switzerland & Partner, 1993 - 1994; Director, The
Birthdate: 09/29/63 European Warrant Fund, Inc. 1997 -
present; Secretary of the Board of
Directors of the Luxembourg domiciled
investment companies
Peter Wolfram Trustee Partner in the law firm of Kelley Drye &
101 Park Avenue Warren.
New York, New York 10178
Birthdate: 04/02/53
Bernard Spilko Chairman General Manager & Senior Vice President
Bank Julius Baer & Co., Ltd. of Bank Julius Baer & Co., Ltd., New
330 Madison Avenue York Branch; Managing Director of Julius
New York, New York 10017 Baer Securities Inc.; Chairman of The
Birthdate: 08/11/41 European Warrant Fund, Inc.
Michael K. Quain President, Treasurer, Vice President of Bank Julius Baer &
Bank Julius Baer & Co., Ltd. Chief Financial Officer Co., Ltd., New York Branch; Julius Baer
330 Madison Avenue and Secretary Securities Inc.; President, Treasurer
New York, New York 10017 and Chief Financial Officer.
Birthdate: 05/06/57
Richard C. Pell Vice President First Vice President & Chief Investment
Bank Julius Baer & Co., Ltd. Officer of Bank Julius Baer & Co., Ltd.,
330 Madison Avenue New York Branch, 1995 - present; Vice
New York, New York 10017 President & Head Global Fixed-income,
Birthdate: 09/21/54 Bankers Trust Co., New York, prior to
1995.
Karen Arrese Vice President Vice President - Co-Manager for the
Bank Julius Baer & Co., Ltd. Julius Baer Global Income Fund and
330 Madison Avenue Global Fixed-income Specialist for Bank
New York, New York 10017 Julius Baer, 1998 - present; Proprietary
Birthdate: 10/10/70 Interest Rate and Currency Trader for
Chase Manhattan Bank; Global Portfolio
Manager at Standish, Ayer & Wood in
Boston and Bankers Trust Company in New
York, prior to 1998
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C>
Rudolph-Riad Younes Vice President Vice President of Bank Julius Baer &
Bank Julius Baer & Co., Ltd. Co., Ltd., New York Branch, 1993 -
330 Madison Avenue present.
New York, New York 10017
Birthdate: 09/25/61
Hector Santiago Vice President Vice President of Bank Julius Baer &
Bank Julius Baer & Co., Ltd. Co., Ltd., New York Branch and Julius
330 Madison Avenue Baer Securities, 1998 - present; Vice
New York, New York 10017 President, The European Warrant Fund,
Birthdate: 01/14/69 Inc., June 1998 - present; Assistant
Vice President- Accounting, Operations &
Trading Manager, 1996 - 1998, Assistant
Vice President- Trading
Manager/Treasurer, 1992-1996
Joachim Straehle Vice President Deputy Branch Manager-Senior Vice
Bank Julius Baer & Co., Ltd. President and Member of Management
330 Madison Avenue Committee of Bank Julius Baer & Co.,
New York, New York 10017 Ltd, New York Branch, 1991 - present;
Birthdate: 11/20/58 Vice President, The European Warrant
Fund, Inc., June 1998 - present; Head of
Credit Department of Bank Julius Baer &
Co., Ltd., New York Branch, 1994 present;
Vice President; Deputy Head of the Credit
Department at Bank Julius Baer & Co., Ltd.,
New York Branch, 1991 - 1994.
Pierre Beauport Assistant Vice President Assistant Vice President - Mutual Fund
Bank Julius Baer & Co., Ltd. Administration for Julius Baer
330 Madison Avenue Investment Funds, 1998 - present;
New York, New York 10017 Assistant Treasurer, The European
Birthdate: 08/2/69 Warrant Fund, Inc., June 1998 - present;
Senior Analyst - Mutual Fund
Administration at AMT Capital Services,
Inc. and Investment Accountant at Furman
Selz LLC, prior to 1998.
Paul J. Jasinski Assistant Treasurer Managing Director, Investors Bank &
Investors Bank & Trust Company Trust Company, 1990 - present.
200 Clarendon Street
Boston, MA 02116
Birthdate: 02/14/47
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C>
Boston, MA 02116
Jack Clark Assistant Treasurer Director, Investors Bank & Trust
Investors Bank & Trust Company Company, 1998 - present; (1996 -
200 Clarendon Street 1998 Custody Department); Price
Boston, MA 02116 Waterhouse LLP, 1990 - 1996.
Birthdate: 03/24/67
Andrew S. Josef Assistant Secretary Director, Investors Bank & Trust Company
Investors Bank & Trust Company May 1997 - present; Senior Associate,
200 Clarendon Street Sullivan & Worcester LLP, November 1995
Boston, MA 02116 - May 1997; Associate, Goodwin, Proctor
Birthdate: 02/25/64 & Hoar, January 1993 - November 1995.
Susan C. Mosher Assistant Secretary Director, Investors Bank & Trust
Investors Bank & Trust Company Company, 1995 - present; Associate
200 Clarendon Street Counsel, 440 Financial Group of
Boston, MA 02116 Worcester, Inc. 1993 - 1995.
Birthdate: 01/29/55
</TABLE>
* Trustee who has a discretionary account with Julius Baer Securities
(less than $100,000).
** Trustee who is an "interested person" of the Trust.
Messrs. Matthews, Vlak and Wolfram are members of the Audit Committee
of the Board of Trustees. The Audit Committee advises the Board with respect to
accounting, auditing and financial matters affecting the Funds. Messrs.
Matthews, Vlak and Wolfram are members of the Nominating Committee of the Board
of Trustees. The Nominating Committee selects and nominates candidates for
election to the Board as "non-interested" Trustees.
No director, officer or employee of the Adviser, the Servicing Agent,
the Distributor, the Administrator, or any parent or subsidiary thereof
receives any compensation from the Funds for serving as an officer or Trustee.
The Trust intends to pay each of its Trustees who is not a director, officer or
employee of the Adviser, the Servicing Agent, the Distributor or the
Administrator or any affiliate thereof an annual fee of $5,000 plus $250 for
each Board of Trustees meeting attended and reimburse them for travel and
out-of-pocket expenses. For the fiscal year ended October 31, 1998, such fees
and expenses totaled approximately $25,000 for the Trust.
The following table shows the compensation paid to each Trustee of the
Trust who was not an affiliated person of the Trust for the fiscal year ended
October 31, 1998.
Name and Position Compensation from Trust
----------------- -----------------------
Harvey B. Kaplan, $6,250
Trustee
Robert S. Matthews, $6,500
Trustee
29
<PAGE>
Gerard J.M. Vlak, $6,000
Trustee
Peter Wolfram, $6,250
Trustee
Investment Advisory and Other Services
Bank Julius Baer & Co., Ltd., New York Branch, serves as the
investment adviser to the Income Fund and the Equity Fund. [Ownership and
business history of BJB-NY]. Prior to July 1, 1998, Julius Baer Investment
Management, Inc. served as the investment adviser to the Income Fund.
Investors Bank & Trust Company ("Investors Bank" or the
"Administrator"), located at 200 Clarendon Street, Boston, Massachusetts 02116,
serves as administrator to each Fund. The Adviser and the Administrator each
serve pursuant to separate written agreements (the "Advisory Agreement" and the
"Administration Agreement," respectively).
The services provided by, and the fees payable to, the Adviser under
the Advisory Agreement and the Administrator under the Administration Agreement
are described in the Prospectus. For the last three fiscal years ended October
31, 1996, October 31, 1997 and October 31, 1998, the Funds have paid the
following amounts as investment advisory fees pursuant to each Advisory
Agreement:
<TABLE>
<CAPTION>
Global Income Fund Gross Waiver Net
<S> <C> <C> <C>
Year Ended 10/31/96 $101,220 $ $101,220
Year Ended 10/31/97 91,644 -- 91,644
Year Ended 10/31/98 78,432 7,780 70,652
International Equity Fund
Year Ended 10/31/96 $117,362 $ 58,681 $ 58,681
Year Ended 10/31/97 346,856 173,428 173,438
Year Ended 10/31/98 576,830 140,412 436,418
</TABLE>
For the last three fiscal years ended October 31, 1996, October 31,
1997 and October 31, 1998, the Funds have paid the following amounts as
administrative services fees pursuant to each Administration Agreement and
otherwise:
Global Income Fund
Year Ended 10/31/96 $ 91,541
Year Ended 10/31/97 57,505
Year Ended 10/31/98 35,537
30
<PAGE>
International Equity Fund
Year Ended 10/31/96 $ 93,311
Year Ended 10/31/97 206,947
Year Ended 10/31/98 234,668
Brokerage Allocation and Other Practices
The Funds' Adviser is responsible for establishing, reviewing and,
where necessary, modifying a Fund's investment program to achieve its
investment objective. Purchases and sales of newly-issued portfolio securities
are usually principal transactions without brokerage commissions effected
directly with the issuer or with an underwriter acting as principal. Other
purchases and sales may be effected on a securities exchange or
over-the-counter, depending on where it appears that the best price or
execution will be obtained. The purchase price paid by a Fund to underwriters
of newly issued securities usually includes a concession paid by the issuer to
the underwriter, and purchases of securities from dealers, acting as either
principals or agents in the after market, are normally executed at a price
between the bid and asked price, which includes a dealer's mark-up or
mark-down. Transactions on U.S. stock exchanges and some foreign stock
exchanges involve the payment of negotiated brokerage commissions. On exchanges
on which commissions are negotiated, the cost of transactions may vary among
different brokers. On most foreign exchanges, commissions are generally fixed.
There is generally no stated commission in the case of securities traded in
domestic or foreign over-the-counter markets, but the price of securities
traded in over-the-counter markets includes an undisclosed commission or
mark-up. U.S. government securities are generally purchased from underwriters
or dealers, although certain newly-issued U.S. government securities may be
purchased directly from the United States Treasury or from the issuing agency
or instrumentality.
The Funds' Adviser will select specific portfolio investments and
effect transactions for its Fund. An Adviser seeks to obtain the best net price
and the most favorable execution of orders. In evaluating prices and
executions, an Adviser will consider the factors it deems relevant, which may
include the breadth of the market in the security, the price of the security,
the financial condition and execution capability of a broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. In addition, to the extent that the execution and price
offered by more than one broker or dealer are comparable, an Adviser may, in
its discretion, effect transactions in portfolio securities with dealers who
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to a Fund and/or other accounts
over which an Adviser exercises investment discretion. Research and other
services received may be useful to an Adviser in serving both the Fund and its
other clients and, conversely, research or other services obtained by the
placement of business of other clients may be useful to the Adviser in carrying
out its obligations to a Fund. The fee to the Adviser under its advisory
agreement with the Funds is not reduced by reason of its receiving any
brokerage and research services.
Investment decisions for a Fund concerning specific portfolio
securities are made independently from those for other clients advised by its
Adviser. Such other investment clients may invest in the same securities as a
Fund. When purchases or sales of the same security are made at substantially
the same time on behalf of such other clients, transactions are averaged as to
price and available investments allocated as to amount, in a manner which a
Fund's Adviser believes to be equitable to each client, including the Fund. In
some instances, this investment procedure may adversely affect the price paid
or received by a Fund or the size of the position obtained or sold for a Fund.
To the extent permitted by
31
<PAGE>
law, the Funds' Adviser may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for such other
investment clients in order to obtain best execution.
Any portfolio transaction for a Fund may be executed through Unified
Management Corporation ("UMC"), the Funds' distributor (the "Distributor"), or
Julius Baer Securities Inc., or any of their affiliates if, in its Adviser's
judgment, the use of such entity is likely to result in price and execution at
least as favorable as those of other qualified brokers, and if, in the
transaction, such entity charges a Fund a commission rate consistent with those
charged by such entity to comparable unaffiliated customers in similar
transactions. For the last three fiscal years ended October 31, 1996, October
31, 1997 and October 31, 1998, the Equity Fund paid $2,445, $3,534 and $31,750,
respectively, in brokerage commissions to BJB-Frankfurt and BJB-Zurich,
affiliates of the Adviser or 3.7%, 1.8% and 10.1% of the total brokerage
commissions paid. BJB-Frankfurt and BJB-Zurich executed 7.3%, 3.5% and 12.6% of
the aggregate dollar amount of transactions involving commissions during the
last three fiscal years ended October 31, 1996, October 31, 1997 and October
31, 1998, respectively. For the last three fiscal years ended October 31, 1996,
October 31, 1997 and October 31, 1998, the Equity Fund paid total brokerage
commissions of $66,653, $200,701 and $313,361, respectively. For each of the
last three fiscal years ended October 31, 1996, October 31, 1997 and October
31, 1998, the Income Fund paid $0 in brokerage commissions.
In no instance will portfolio securities be purchased from or sold to
the Adviser, the Distributor or any affiliated person of such companies as
principal.
A Fund may participate, if and when practicable, in bidding for the
purchase of securities for its portfolio directly from an issuer in order to
take advantage of the lower purchase price available to members of such a
group. A Fund will engage in this practice, however, only when its Adviser, in
its sole discretion, believes such practice to be otherwise in such Fund's
interest.
Portfolio Turnover
Neither Fund intends to seek profits through short-term trading, but
the rate of turnover will not be a limiting factor when a Fund deems it
desirable to sell or purchase securities. A Fund's portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of its portfolio
securities for the year by the monthly average value of the portfolio
securities. Securities with remaining maturities of one year or less at the
date of acquisition are excluded from the calculation.
Certain practices that may be employed by a Fund could result in high
portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. For each of the two fiscal years ended
October 31, 1997 and October 31, 1998, the Income Fund's portfolio turnover
rate was 162% and 269%, respectively. For each of the two fiscal years ended
October 31, 1997 and October 31, 1998, the Equity Fund's portfolio turnover
rate was 94% and 134%, respectively.
Distributor
UMC, is a wholly-owned subsidiary of Unified Financial Services, Inc.
The principal executive offices of UMC are located at 431 North Pennsylvania
Street, Indianapolis, Indiana 46204-1806. The Distributor is registered with
the SEC as a broker-dealer under the Securities Exchange Act of 1934 and is a
member of the NASD.
32
<PAGE>
The Trust intends to enter into distribution agreements or shareholder
servicing agreements ("Agreements") with certain financial institutions
("Servicing Organizations") to perform certain distribution, shareholder
servicing, administrative and accounting services for their customers
("Customers") who are beneficial owners of shares of the Funds.
A Service Organization may charge a Customer one or more of the
following types of fees, as agreed upon by the Service Organization and the
Customer, with respect to the cash management or other services provided by the
Service Organization: (1) account fees (a fixed amount per month or per year);
(2) transaction fees (a fixed amount per transaction processed); (3)
compensating balance requirements (a minimum dollar amount a Customer must
maintain in order to obtain the services offered); or (4) account maintenance
fees (a periodic charge based upon the percentage of assets in the account or
of the dividend paid on those assets). A Customer of a Service Organization
should read the Prospectus and SAI in conjunction with the service agreement
and other literature describing the services and related fees that will be
provided by the Service Organization to its Customers prior to any purchase of
shares. No preference will be shown in the selection of Fund portfolio
investments for the instruments of Service Organizations.
There are currently unresolved issues with respect to existing laws
and regulations relating to the permissible activities of banks and trust
companies, including the extent to which certain Service Organizations may
perform shareholder and administrative services. A judicial or administrative
decision or interpretation with respect to those laws and regulations, as well
as future changes in such laws and regulations, could prevent certain Service
Organizations from performing these services or from receiving payments for
performing these services. In addition, state securities law on this issue may
differ from the interpretation of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law. If a Service Organization were prohibited from performing these services,
it is expected that all arrangements between the Trust and the Service
Organization would be terminated and that Customers of the Service Organization
who seek to invest in the Trust would have to purchase and redeem shares
directly through the Distributor or the Transfer Agent.
Distribution and Shareholder Servicing
The Agreements will be governed by a Distribution Plan or a
Shareholder Services Plan (the "Plans"). The Plans require that the Board of
Trustees receive, at least quarterly, written reports of amounts expended under
the Plans and the purpose for which such expenditures were made. A Plan will
continue in effect for so long as its continuance is specifically approved at
least annually by the Board of Trustees, including a majority of the Trustees
who are not interested persons of the Trust and who have no direct or indirect
financial interest in the operation of the Plan. Any material amendment of the
Plans would require the approval of the Trustees in the manner described above.
A Plan may be terminated at any time, without penalty, by vote of a majority of
the Trustees or by a vote of a majority of the outstanding voting shares of the
Trust that have invested pursuant to the Plan. For the fiscal year ended
October 31, 1998, the Income Fund paid $30,145 in distribution fees. For the
fiscal year ended October 31, 1998, the Equity Fund paid $144,207 in
distribution fees. All such distribution fees were used to compensate sales
personnel.
Custodian and Transfer Agent
33
<PAGE>
Investors Bank is custodian of each Fund's assets pursuant to a
custodian agreement (the "Custodian Agreement"). For its services under the
Custodian Agreement and for administrative, fund accounting and other services,
the Funds pay Investors Bank an annual fee equal to 0.12% of the Funds' average
daily net assets. Under the Custodian Agreement, Investors Bank (a) maintains a
separate account or accounts in the name of each Fund, (b) holds and transfers
portfolio securities on account of each Fund, (c) makes receipts and
disbursements of money on behalf of each Fund, (d) collects and receives all
income and other payments and distributions on account of each Fund's portfolio
securities and (e) makes periodic reports to the Board of Trustees concerning
each Fund's operations. Investors Bank is authorized to select one or more
foreign or domestic banks or trust companies to serve as sub-custodian on
behalf of a Fund, subject to the approval of the Board of Trustees. The assets
of the Trust are held under bank custodianship in accordance with the 1940 Act.
Rules adopted under the 1940 Act permit the Funds to maintain their
securities and cash in the custody of certain eligible foreign banks and
depositories. The Funds' portfolios of non-U.S. securities are held by
sub-custodians which are approved by the Trustees or a foreign custody manager
appointed by the Trustees in accordance with these rules. The Board has
appointed Investors Bank to be its foreign custody manager. The determination
to place assets in with a particular foreign sub-custodian is made pursuant to
these rules which require a consideration of a number of factors including, but
not limited to, the reliability and financial stability of the sub-custodian;
the sub-custodian's practices, procedures and internal controls; and the
reputation and standing of the sub-custodian I its national market.
Unified Fund Services, Inc. has agreed to serve as the Trust's
transfer and dividend disbursing agent pursuant to a Transfer Agency Agreement,
under which the Transfer Agent (a) issues and redeems shares of the Trust, (b)
addresses and mails all communications by the Trust to record owners of Trust
shares, including reports to shareholders, dividend and distribution notices
and proxy material for its meetings of shareholders, (c) maintains shareholder
accounts and, if requested, sub-accounts and (d) makes periodic reports to the
Board of Trustees concerning the Funds' operations.
CAPITAL STOCK
Under the Trust Agreement, the Trustees have authority to issue an
unlimited number of shares of beneficial interest, par value $.001 per share.
When matters are submitted for shareholder vote, each shareholder will have one
vote for each share owned and proportionate, fractional votes for fractional
shares held. There will normally be no meeting of shareholders for the purpose
of electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders. The Trustees will
call a meeting for any purpose upon the written request of shareholders holding
at least 10% of the Trust's outstanding shares.
Shares do not have cumulative voting rights, which means that holders
of more than 50% of the shares voting for the election of Trustees can elect
all Trustees. Shareholders generally vote by Fund, except with respect to the
election of Trustees and the selection of independent public accountants.
Shares are transferable but have no preemptive, conversion or subscription
rights.
Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust. The
Trust Agreement disclaims shareholder liability for acts or obligations of the
Trust, however, and requires that notice of the disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee. The Trust Agreement provides for indemnification from the Trust's
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust
34
<PAGE>
would be unable to meet its obligations, a possibility that the
Trust's management believes is remote. Upon payment of any liability incurred
by the Trust, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Trust. The Trustees intend to
conduct the operations of the Trust in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Trust.
Control Persons
As of December 4, 1998, Bank Julius Baer - New York was record owner of
52.5% and Bank Julis Baer - Zurich was record owner of 36.5% of the Equity Fund
and Bank Julius Baer - New York was record owner of 80.9% of the Income Fund on
behalf of their clients and as such, could be deemed to control the Equity Fund
and the Income Fund within the meaning of the 1940 Act. Control is defined by
the 1940 Act as the beneficial ownership, either directly or through one or more
controlled companies, of more than 25 percent of the voting securities of the
company.
35
<PAGE>
Principal Holders
As of December 4, 1998, the Trustees and officers of the Trust as a
group owned less than 1% of the Trust's total shares outstanding.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Information on how to purchase and redeem shares and how such shares
are priced is included in the Prospectus.
Portfolio Valuation
The Prospectus discusses the time at which the net asset value of the
Funds is determined for purposes of sales and redemptions. The following is a
description of the procedures used by the Funds in valuing their assets.
Because of the need to obtain prices as of the close of trading on
various exchanges throughout the world, the calculation of a Fund's net asset
value may not take place contemporaneously with the determination of the prices
of certain of its portfolio securities used in such calculation. A security
which is listed or traded on more than one exchange is valued at the quotation
on the exchange
36
<PAGE>
determined to be the primary market for such security. All assets and
liabilities initially expressed in foreign currency values will be converted
into U.S. dollar values at the mean between the bid and offered quotations of
such currencies against U.S. dollars as last quoted by any recognized dealer.
If such quotations are not available, the rate of exchange will be determined
in good faith by the Board of Trustees. In carrying out the Board's valuation
policies Investors Bank & Trust Company ("Investors Bank"), as each Fund's
accounting agent, may consult with an independent pricing service retained by
the Fund.
Securities listed on a U.S. securities exchange (including securities
traded through the National Market System) or on a foreign securities exchange
will be valued on the basis of the closing value on the date on which the
valuation is made or, in the absence of sales, at the mean between the closing
bid and asked prices. U.S. over-the-counter securities and securities listed or
traded on certain foreign stock exchanges whose operations are similar to the
U.S. over-the-counter market will be valued on the basis of the bid price at
the close of business on each day, or, if market quotations for those
securities are not readily available, at fair value, as determined by or under
the direction of the Board of Trustees. Securities listed on a national
securities exchange will be valued on the basis of the last sale on the date on
which the valuation is made or, in the absence of sales, at the mean between
the closing bid and asked prices. The valuation of fixed-income securities held
by a Fund (other than U.S. government securities and short-term investments) is
made by the Administrator after consultation with an independent pricing
service (the "Pricing Service") approved by the Board of Trustees. When, in the
judgment of the Pricing Service, quoted bid prices for investments are readily
available and are representative of the bid side of the market, these
investments are valued at the mean between the quoted bid prices and asked
prices. Investments for which, in the judgment of the Pricing Service, there is
no readily obtainable market quotation are carried at fair value as determined
by the Pricing Service. For the most part, such investments are liquid and may
be readily sold. Notwithstanding the above, the Pricing Service may employ
electronic data processing techniques and/or a matrix system to determine
valuations. The procedures of the Pricing Service are reviewed periodically by
the officers of a Fund under the general supervision and responsibility of the
Board of Trustees, which may replace any such Pricing Service at any time.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Board of
Trustees. Amortized cost involves valuing an instrument at its original cost to
the Fund and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. All other securities and other assets of a
Fund will be valued at their fair value as determined in good faith by the
Board of Trustees.
Limitations on Redemptions
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
New York Stock Exchange, Inc. (the "NYSE") is closed, other than customary
weekend and holiday closings, or during which trading on the NYSE is
restricted, or during which (as determined by the SEC) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit.
If the Board of Trustees determines that conditions exist which make
payment of redemption proceeds wholly in cash unwise or undesirable, the Funds
may make payment wholly or partly in securities or other property. If a
redemption is paid wholly or partly in securities or other property, a
shareholder would incur transaction costs in disposing of the redemption
proceeds.
37
<PAGE>
ADDITIONAL INFORMATION CONCERNING EXCHANGE PRIVILEGE
Shares of one Fund may be exchanged for Shares of the other Fund to
the extent such Shares are offered for sale in the shareholder's state of
residence. Shareholders may exchange their Shares on the basis of relative net
asset value at the time of exchange. No exchange fee is charged for this
privilege, provided that the registration remains identical.
The exchange privilege enables shareholders to acquire shares in a
Fund with different investment objectives when they believe that a shift
between Funds is an appropriate investment decision. This privilege is
available to all shareholders resident in any state in which Fund shares being
acquired may be legally sold. Prior to any exchange, the shareholder should
obtain and review a copy of the current Prospectus of the Funds.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current net
asset value; the proceeds are immediately invested, at the price as determined
above, in shares of the Fund being acquired. The Trust reserves the right to
reject any exchange request. The exchange privilege may be modified or
terminated at any time after notice to shareholders.
ADDITIONAL INFORMATION CONCERNING TAXES
Each Fund has qualified, and intends to qualify each year, as a
"regulated investment company" under the Code. Provided that a Fund (a) is a
regulated investment company and (b) distributes to its shareholders at least
90% of the sum of its investment company taxable income and net realized
short-term capital gains, the Fund will not be subject to federal income tax to
the extent its entire investment company taxable income and its entire net
realized long-term and short-term capital gains are distributed to its
shareholders.
Each Fund is subject to a 4% nondeductible excise tax to the extent
that it fails to distribute to its shareholders during each calendar year an
amount equal to at least the sum of (a) 98% of its taxable ordinary investment
income (excluding long-term and short-term capital gain income) for the
calendar year; plus (b) 98% of its capital gain net income for the one year
period ending on October 31 of such calendar year; plus (c) 100% of its
ordinary investment income or capital gain net income from the preceding
calendar year which was neither distributed to shareholders nor taxed to a Fund
during such year. Each Fund intends to distribute to shareholders each year an
amount sufficient to avoid the imposition of such excise tax.
A Fund's transactions in foreign currencies, forward contracts,
options and futures contracts (including options and futures contracts on
foreign currencies) will be subject to special provisions of the Code that,
among other things, may affect the character of gains and losses realized by a
Fund (i.e., may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to a Fund and defer Fund losses. These rules
could therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (a) will require a Fund to mark-to-market
certain types of the positions in its portfolio (i.e., treat them as if they
were closed out), and (b) may cause a Fund to recognize income without
receiving cash with which to pay dividends or make distributions in amounts
necessary to satisfy the 90% and 98% distribution requirements for avoiding
income and excise taxes, respectively. Each Fund will monitor its transactions,
will make the appropriate tax elections and will make the appropriate entries
in its books and records when it acquires any foreign currency, forward
contract, option, futures contract or hedged investment in order to mitigate
the effect of these rules and prevent disqualification of the Fund as a
regulated investment company.
38
<PAGE>
Net realized long-term capital gains will be distributed as described
in the Prospectus. Such distributions ("capital gain dividends"), if any, will
be taxable to a shareholder as long-term capital gains, regardless of how long
a shareholder has held shares. If, however, a shareholder receives a capital
gain dividend with respect to any share and if such share is held by the
shareholder for six months or less, then any loss on the sale or redemption of
such share that is less than or equal to the amount of the capital gain
dividend will be treated as a long-term capital loss.
If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income or fails to certify
that he or she has provided a correct taxpayer identification number and that
he or she is not subject to backup withholding, then the shareholder may be
subject to a 31% "backup withholding tax" with respect to (a) dividends and
distributions and (b) the proceeds of any redemptions of Fund shares. An
individual's taxpayer identification number is his or her social security
number. The 31% "backup withholding tax" is not an additional tax and may be
credited against a taxpayer's regular federal income tax liability.
The foregoing is only a summary of certain tax considerations
generally affecting the Funds and shareholders, and is not intended as a
substitute for careful tax planning. Shareholders are urged to consult their
tax advisers with specific reference to their own tax situations, including
their state and local tax liabilities.
CALCULATION OF PERFORMANCE DATA
From time to time, the Trust may quote a Fund's performance in
advertisements or in reports and other communications to shareholders.
Yield
From time to time, the Income Fund may advertise its yield over
various periods of time. The yield of the Fund refers to net investment income
generated by the Fund over a specified thirty-day period, which is then
annualized. That is, the amount of net investment income generated by the Fund
during that thirty-day period is assumed to be generated monthly over a
12-month period and is shown as a percentage of the investment.
The Income Fund's yield figure is calculated according to a formula
prescribed by the SEC. The formula can be expressed as follows:
Yield = 2[(a-b + 1)6-1]
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of
shares outstanding during the
period that were entitled to
receive dividends.
39
<PAGE>
d = the maximum offering price per share on
the last day of the period.
For the purpose of determining the interest earned (variable "a" in
the formula) on debt obligations that were purchased by the Income Fund at a
discount or premium, the formula generally calls for amortization of the
discount or premium; the amortization schedule will be adjusted monthly to
reflect changes in the market values of the debt obligations. The 30 day yield
for Shares of the Income Fund for the period ended October 31, 1998 was 2.51%.
Investors should recognize that in periods of declining interest
rates, the Income Fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates, the Fund's yield will
tend to be somewhat lower. In addition, when interest rates are falling, the
inflow of net new money to the Income Fund from the continuous sale of its
shares will likely be invested in portfolio instruments producing lower yields
than the balance of its portfolio of securities, thereby reducing the current
yield of the Fund. In periods of rising interest rates, the opposite can be
expected to occur.
Average Annual Total Return
From time to time, the Funds may advertise their average annual total
return. Average annual total return figures show the average percentage change
in value of an investment in a Fund from the beginning of the measuring period
to the end of the measuring period. The figures reflect changes in the price of
a Fund's Shares assuming that any income dividends and/or capital gain
distributions made by the Fund during the period were reinvested in Shares of
the Fund. Average annual total return will be shown for recent one-, five- and
ten-year periods, and may be shown for other periods as well (such as from
commencement of the Fund's operations or on a year-to-date or quarterly basis).
When considering average annual total return figures for periods longer than
one year, it is important to note that a Fund's average annual total return for
one year in the period might have been greater or less than the average for the
entire period. When considering average annual total return figures for periods
shorter than one year, investors should bear in mind that such return may not
be representative of a Fund's return over a longer market cycle. The Funds may
also advertise aggregate total return figures for various periods, representing
the cumulative change in value of an investment in the Funds for the specific
period (again reflecting changes in each Fund's Share prices and assuming
reinvestment of dividends and distributions). Aggregate and average annual
total returns may be shown by means of schedules, charts or graphs, and may
indicate various components of total return (i.e., change in value of initial
investment, income dividends and capital gain distributions).
Investors should note that yield and total return figures are based on
historical earnings and are not intended to indicate future performance.
Current yield and total return figures may be obtained by calling the Transfer
Agent at 1-800-435-4659.
In reports or other communications to investors or in advertising
material, the Funds may describe general economic and market conditions
affecting the Funds and may compare their performance with (1) that of other
mutual funds as listed in the rankings prepared by Lipper Analytical Services,
Inc. or similar investment services that monitor the performance of mutual
funds or (2) appropriate indices of investment securities. The Funds may also
include evaluations of the Funds published by nationally recognized ranking
services and by financial publications that are nationally recognized, such as
Barron's, Business Week, Changing Times, Financial Times, Forbes, Fortune,
Institutional Investor, The International Herald Tribune, Money, Inc.,
Morningstar, Inc., The New York Times, The Wall Street Journal and USA Today.
40
<PAGE>
"Average annual total return" figures are computed according to a
formula prescribed by the SEC. The formula can be expressed as follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a
hypothetical $1,000 investment made
at the beginning of a 1-, 5- or
10-year periods at the end of the
1-, 5- or 10-year period (or
fractional portion thereof),
assuming reinvestment of all
dividends and distributions.
The Income Fund's average annual total return for the one and five
year periods ended October 31, 1998 and for the period beginning July 1, 1992
(inception of the Fund) through October 31, 1998, was 9.43%, 6.08% and 6.87%,
respectively.
The Equity Fund's average annual total return for the one and five
year periods ended October 31, 1998 and for the period beginning October 4,
1993 (inception of the Fund) through October 31, 1998 was 16.10%, 3.61% and
5.36%, respectively.
Each Fund's performance will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio and its operating
expenses. As described above, total return is based on historical earnings and
is not intended to indicate future performance. Consequently, any given
performance quotation should not be considered as representative of a Fund's
performance for any specified period in the future. Performance information may
be useful as a basis for comparison with other investment alternatives.
However, a Fund's performance will fluctuate, unlike certain bank deposits or
other investments which pay a fixed yield for a stated period of time.
Aggregate Total Return
"Aggregate total return" figures represent the cumulative change in
the value of an investment for the specified period and are computed by the
following formula:
ERV-P
P
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a
hypothetical $10,000 investment
made at the beginning of a 1-, 5-
or 10-year period at the end of the
1-, 5- or 10-year period (or
fractional portion thereof),
assuming reinvestment of all
dividends and distributions.
41
<PAGE>
The Income Fund's aggregate total return for the one and five year
periods ended October 31, 1998 and for the period beginning July 1, 1992
(inception of the Fund) through October 31, 1998 was 9.43%, 34.33% and 52.39%,
respectively. The Equity Fund's aggregate total return for the one and five
year periods ended October 31, 1998 and for the period beginning October 4,
1993 (inception of the Fund) through October 31, 1998 was 16.10%, 19.40% and
30.37%, respectively.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, independent auditors, 99 High Street, Boston,
Massachusetts 02110, serve as auditors of the Trust and performed an annual
audit of the Funds' financial statements.
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel for the
Trust and from time to time provides advice to the Adviser.
FINANCIAL STATEMENTS
The Financial Statements contained in the Trust's Annual Report to
Shareholders for the fiscal year ended October 31, 1998 are incorporated by
reference into this SAI. Copies of the Trust's 1998 Annual Report may be
obtained by calling the Trust at the telephone number on the first page of the
SAI.
42
<PAGE>
APPENDIX -- DESCRIPTION OF RATINGS
Commercial Paper Ratings
Standard and Poor's Ratings Group Commercial Paper Ratings
A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest.
A-1 - This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
Moody's Investors Service's Commercial Paper Ratings
Prime-1 - Issuers (or related supporting institutions) rated "Prime-1"
have a superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2 - Issuers (or related supporting institutions) rated "Prime-2"
have a strong ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.
Corporate Bond Ratings
The following summarizes the ratings used by S&P for corporate bonds:
AAA -- This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay
principal.
AA -- Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay interest and repay principal is very strong and differs
from AAA issues only in small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic
43
<PAGE>
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this category
than for bonds in higher rated categories.
BB, B, CCC, CC and C -- Bonds rated "BB", "B" , "CCC", "CC" and "C"
are regarded, on balance, as predominantly speculative with respect to the
issuer's 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 bonds will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions
CI - Bonds rated "CI" are income bonds on which no interest is being
paid.
To provide more detailed indications of credit quality, the ratings set
forth above may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
The following summarizes the ratings used by Moody's for corporate bonds:
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality
and carry the smallest degree of investment risk. Interest payments are
protected by a large or 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 that 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 that 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 that are rated "Baa" are considered to be medium grade
obligations, that is, they are neither highly protected nor poorly
secured. Interest payment 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. These bonds
lack outstanding investment characteristics and may have speculative
characteristics as well.
Ba -- Bonds that 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 both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B -- Bonds that are rated "B" generally lack characteristics of
desirable investments. 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 that are rated "Caa" are of poor standing. These issues
may be in default or present elements of danger may exist with respect to
principal or interest.
44
<PAGE>
Ca -- Bonds that are rated "Ca" represent obligations that are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C -- Bonds that 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.
Moody's applies numerical modifiers (1, 2 and 3) with respect to the
bonds rated "Aa" through "B." The modifier 1 indicates that the bond being
rated 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
bond ranks in the lower end of its generic rating category.
45
<PAGE>
PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits
<S> <C>
(a) Registrant's Master Trust Agreement dated April 30, 1992, is
incorporated by reference to Post-Effective Amendment No. 6 as
filed with the SEC via EDGAR on December 29, 1995.
(a1) Amendment No. 1 to Master Trust Agreement dated June 22, 1992,
is incorporated by reference to Post-Effective Amendment No. 6
as filed with the SEC via EDGAR on December 29, 1995.
(a2) Amendment No. 2 to Master Trust Agreement dated September
16, 1993, is incorporated by reference to Post-Effective
Amendment No. 6 as filed with the SEC via EDGAR on December
29, 1995.
(a3) Amendment No. 3 to Master Trust Agreement dated January 26,
1995, is incorporated by reference to Post-Effective
Amendment No. 6 as filed with the SEC via EDGAR on December
29, 1995.
(a4) Amendment No. 4. to Master Trust Agreement dated July 1, 1998
(b) Registrant's By-Laws dated April 30, 1992, is incorporated
by reference to Post-Effective Amendment No. 6 as filed
with the SEC via EDGAR on December 29, 1995.
(b1) Amended and Restated By-Laws dated March 11, 1998.
(c) Not applicable.
(d) Investment Advisory Agreement between the Registrant and
Bank Julius Baer & Co., Ltd., New York Branch on behalf of
BJB International Equity Fund dated October 4, 1993,
is incorporated by reference to Post-Effective Amendment
No. 6 as filed with the SEC via EDGAR on December 29, 1995.
(d1) Advisory Agreement between the Registrant and Bank
Julius Baer & Co., Ltd., New York Branch on behalf of the
Julius Baer Global Income Fund dated July 1, 1998.
(e) Distribution Agreement between the Registrant and Unified
Management Corporation on behalf of the Julius Baer Global
Income Fund and the Julius Baer International Equity Fund
dated December 9, 1998.
(f) Not applicable.
(g) Custodian Agreement between the Registrant and Investors Bank
& Trust Company dated January 30, 1995, is incorporated by
reference to Post-Effective Amendment No. 6 as filed with
the SEC via EDGAR on December 29, 1995.
(h) Transfer Agent Agreement between the Registrant and Unified
Advisers, Inc. dated March 28, 1994, is incorporated by
reference to Post-Effective Amendment No. 10 as filed with
the SEC via EDGAR on July 10, 1998.
(h1) Administration Agreement between the Registrant and
Investors Bank & Trust Company dated January 30, 1995,
is incorporated by reference to Post-Effective Amendment
No. 6 as filed with the SEC via EDGAR on December 29, 1995.
(h2) New Account Application with Unified Advisers, Inc., is
incorporated by reference to Post-Effective Amendment No. 10
as filed with the SEC via EDGAR on July 10, 1998.
(h3) Automatic Investment Plan Application, is incorporated by
reference to Post-Effective Amendment No. 10 as filed with
the SEC via EDGAR on July 10, 1998.
(h4) Form of Dealer Agreement.
(i) Not applicable.
(j) To be filed by Amendment
(k) Not applicable.
(l) Purchase Agreement between the Registrant and Funds
Distributor, Inc. on behalf of BJB Global Income Fund dated
June 18, 1992, is incorporated by reference to Post-Effective
Amendment No. 10 as filed with the SEC via EDGAR on July 10,
1998.
(m) Distribution Plan on behalf of BJB Global Income Fund and BJB
International Equity Fund, dated October 4, 1993, is
incorporated by reference to Post-Effective Amendment No. 10
as filed with the SEC via EDGAR on July 10, 1998.
(m1) Shareholder Services Plan on behalf of BJB Global Income Fund
and BJB International Equity Fund, dated October 4, 1993, is
incorporated by reference to Post-Effective Amendment No. 10
as filed with the SEC via EDGAR on July 10, 1998.
(n) Financial Data Schedules.
(o) Multiclass Plan Pursuant to Rule 18f-3 under the Investment
Company Act of 1940 for BJB Investment Funds dated
December 14, 1995, is incorporated by reference to Post-
Effective Amendment No. 6 as filed with the SEC via EDGAR
on December 29, 1995.
Item 24. Persons Controlled by or Under Common Control with
Registrant
None
</TABLE>
Item 25. Indemnification
The response to this item is incorporated by reference to the Registration
Statement.
Item 26. Business and Other Connections of Investment Adviser and
Servicing Agent
Bank Julius Baer & Co., Ltd., New York Branch ("BJB-NY") serves
as the investment adviser to Julius Baer International Equity Fund and
Julius Baer Global Income Fund. BJB-NY also provides Julius Baer International
Equity Fund with certain administrative and shareholder services that are
not provided by the Administrator and also acts as servicing agent to Julius
Baer Global Income Fund. BJB-NY is a Swiss bank that has over 50 years
experience in international portfolio management. A list of officers and
directors of BJB-NY as of December 4, 1998 is set forth below. The address of
the following individuals is 330 Madison Avenue, New York, New York.
Officers of BJB-NY are Bernard Spilko (General Manager and Senior
Vice President), Joachim Straehle (Deputy Branch Manager and Senior Vice
President), Francoise M. Birnholz (Senior Vice President), Richard C. Pell
(First Vice President), Ashley Richards (First Vice President), Maria Lipton
(First Vice President), Gary Goldschmidt (First Vice President), Cono Gallo
(First Vice President), John H.S. Boys (First Vice President), Vasili Tsamis
(First Vice President), Oskar Weiss (First Vice President), Edward Clapp (First
Vice President), Josef A. Huber (First Vice President), Walter J. Simon (First
Vice President), Larry Millman (First Vice President), Manuel Reyes (First Vice
President), Hanson Liang (First Vice President), David Taylor (First Vice
President), Brian Ach (Vice President), Jeanette Attina (Vice President), David
Broder (Vice President), Sin Chiu (Vice President), Keith D. Christopher (Vice
President), Paula Ciriliano (Vice President), Michael DiLed (Vice President),
Denise Downey (Vice President), Peter Embiricos (Vice President), Marian Hayden
(Vice President), Rene Meyer (Vice President), Rudoph-Raid Younes (Vice
President), Michael K. Quain (Vice President), Nuri Benturk (Vice President),
Brenda Pimental (Vice President), Alphonse Pugliese (Vice President), Terence
Reynolds (Vice President), Sadakichi Robbins (Vice President), Michael Rosen
(Vice President), Tanya Rozina (Vice President), Susan Scarborough (Vice
President), Dominique Spillman (Vice President), Benjamin Strauss (Vice
President), Elaine Taranto (Vice President), Balz Eggimann (Management
Committee), E. Gary Lespinasse (Management Committee), Mark Linnan (Management
Committee), Urs G. Schwytter (Management Committee), Philip T. Ciriello
(Management Committee).
Item 27. Principal Underwriter.
(a) Unified Management Corporation (the "Distributor") acts as
principal underwriter for the following investment companies.
Labrador Mutual Fund
Milestone Funds
Saratoga Advantage Trust
Securities Management & Timing Funds
Sparrow Growth Fund
Star Select Funds
Unified Funds
Unified Management Corporation ("UMC") is registered with the Securities
and Exchange Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. UMC is located at 431 North Pennsylvania
Street, Indianapolis, Indiana 46204-1806 is an indirect wholly-owned subsidiary
of Unified Financial Services, Inc.
(b) The following is a list of the executive officers, directors and
partners Unified Management Corporation.
Chairman Timothy L. Ashburn
Director, President and Lynn E. Wood
Chief Executive Officer
Director, Executive Vice President Thomas G. Napurano
and Chief Financial Officer
Senior Vice President and Stephen D. Highsmith, Jr.
Chief Operating Officer
Vice President Allen W. Pence
(c) Not applicable
Item 28. Location of Accounts and Records
(1) Julius Baer Investment Funds
c/o Bank Julius Baer & Co. Ltd, New York Branch
330 Madison Avenue
New York, New York 10017
(2) Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
(records relating to its functions as
administrator and custodian)
(3) Unified Management Corporation
431 North Pennsylvania Street
Indianapolis, Indiana 46204-1806
(records relating to its functions as
distributor)
(4) Unified Fund Services, Inc.
431 North Pennsylvania Street
Indianapolis, Indiana 46204-1897
(records relating to its functions as transfer
agent)
(5) Bank Julius Baer & Co., Ltd., New York Branch
330 Madison Avenue
New York, New York 10017
(records relating to its functions as investment
adviser, and servicing agent)
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that it meets all of the requirements for effectiveness of this Post-Effective
Amendment to the Registration Statement pursuant to Rule 485(a) under the
Securities Act of 1933, as amended, and has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, and
State of New York, on the 29th day of December, 1998.
JULIUS BAER INVESTMENT FUNDS
(Registrant)
By: /s/ Michael K. Quain
--------------------------
Michael K. Quain
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment to the Registration Statement has been
signed below by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Michael K. Quain President, Treasurer, Chief December 29, 1998
- ---------------------- Financial Officer and
Michael K. Quain Secretary
/s/ Harvey B. Kaplan* December 29, 1998
- --------------------- Trustee
Harvey B. Kaplan
/s/ Robert S. Matthews* December 29, 1998
- ---------------------- Trustee
Robert S. Matthews
/s/ Gerard J.M. Vlak* December 29, 1998
- --------------------- Trustee
Gerard J.M. Vlak
/s/ Martin Vogel* December 29, 1998
- --------------------- Trustee
Martin Vogel
/s/ Peter Wolfram* December 29, 1998
- --------------------- Trustee
Peter Wolfram
</TABLE>
*By /s/ Paul J. Jasinski
------------------------
(As Attorney-in-Fact pursuant
to Powers of Attorney
filed herewith)
<PAGE>
EXHIBIT INDEX
-------------
(EX-99.A4) Amendment No. 4 to the Master Trust Agreement
(EX-99.B1) Amended and Restated By-Laws
(EX-99.D1) Advisory Agreement
(EX-99.E) Distribution Agreement
(EX-99.N1) Financial Data Schedule
(EX-99.N2) Financial Data Schedule
<PAGE>
BJB INVESTMENT FUNDS
AMENDMENT NO. 4 TO THE MASTER TRUST AGREEMENT
(Change of Name of the Trust and Change of Name of the Funds)
The undersigned, Assistant Secretary of BJB Investment Funds (the
"Trust"), does hereby certify that pursuant to Article I, Section 1.1 and
Article VII, Section 7.3 of the Master Trust Agreement dated April 30, 1992, the
following resolutions were duly adopted by the Board of Trustees at a Meeting of
the Board of Trustees held on March 21, 1998.
RESOLVED: That the name of the Trust previously established and
designated pursuant to the Trust's Master Trust Agreement be
modified and amended as set forth below:
Current Name Name as Amended
------------ ---------------
BJB Investment Funds Julius Baer Investment Funds
; and further
RESOLVED: That the name of the Funds previously established and
designated pursuant to the Trust's Master Trust Agreement be
modified and amended as set forth below:
Current Name Name as Amended
------------ ---------------
BJB International Equity Fund Julius Baer International
Equity Fund
BJB Global Income Fund Julius Baer Global Income
Fund
; and further
RESOLVED: That the appropriate officers of the Trust be, and each hereby
is, authorized to execute and file any notices required to be
filed reflecting the foregoing changes; to execute amendments
to the Trust's Master Trust Agreement and By-Laws reflecting
the foregoing changes; and to execute and file all requisite
certificates, documents and instruments and to take such other
actions required to cause said amendment to become effective
and to pay all requisite fees and expenses incident thereto.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 1st
day of July, 1998.
/s/ Andrew S. Josef
--------------------------
Andrew S. Josef
Assistant Secretary
1
<PAGE>
BY-LAWS
OF
BJB INVESTMENT FUNDS
(Formerly BJB Global Income Fund)
AMENDED AND RESTATED AS OF MARCH 11, 1998
ARTICLE 1
Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject
to the Master Trust Agreement, as from time to time in effect (the "Master Trust
Agreement"), of BJB Investment Funds (formerly BJB Global Income Fund), the
Massachusetts business trust established by the Master Trust Agreement (the
"Trust").
1.2 Principal Office of the Trust. The principal office of the Trust
shall be located at One Exchange Place, Boston, Massachusetts 02109.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the Chairman of the Trust, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Secretary
or an Assistant Secretary or by the officer of the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purpose of the meeting.
1
<PAGE>
2.4 Quorum. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 Participation by Telephone. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
Chairman of the Trust, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, if any, as the Trustees from time to time
may in their discretion elect. The Trust may also have such agents as the
Trustees from time to time in their discretion may appoint. The Chairman of the
Trust may but need not be a Trustee or a shareholder; and any other officer may
be but none need be a Trustee or shareholder. Any two or more offices may be
held by the same person.
3.2 Election. The Chairman of the Trust, the President, the Treasurer
and the Secretary shall be elected annually by the Trustees. Other officers, if
any, may be elected or appointed by the Trustees at any time. Vacancies in any
office may be filled at any time.
3.3 Tenure. The Chairman of the Trust, the President, the Treasurer and
the Secretary shall hold office until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed or
becomes disqualified. Each other officer shall hold office and each agent shall
retain authority at the pleasure of the Trustees.
3.4 Powers. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Master Trust Agreement set forth, such duties and powers as are commonly
incident to the office occupied by him or her as if the Trust were organized as
a Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 Chairman; President. Unless the Trustees otherwise provide, the
Chairman of the Trust, or, if there is none, or in the absence of a chairman,
the President, shall preside at all meetings of the shareholders and of the
Trustees. The President shall be the chief executive officer.
2
<PAGE>
3.6 Treasurer. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Master Trust Agreement and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and account
records of the Trust, and shall have such other duties and powers as may be
designated from time to time by the Trustees or by the President.
3.7 Secretary. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.8 Resignations and Removals. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the Chairman,
the President or the Secretary or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. The Trustees may remove any office elected by them with or without cause.
Except to the extent expressly provided in a written agreement with the Trust;
no Trustee or officer resigning and no officer removed shall have any right to
any compensation for any period following his or her resignation or removal.
ARTICLE 4
Committees
4.1 General. The Trustees, by vote of a majority of the Trustees then
in office, may elect from their number an Executive committee or other
committees and may delegate thereof some or all of their powers except those
which by law, by the Master Trust Agreement, or by these By-Laws may not be
delegated. Except as the trustees may otherwise determine, any such committee
may make rules for the conduct or in such rules, its business shall be conducted
so far as possible in the same manner as is provided by these By-Laws for the
Trustees themselves. All members of such committees shall hold such office at
the pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their power or duties
shall keep records of its meetings, and shall report its action to the Trustees.
The Trustees shall have power to rescind any action of any committee, but no
such rescission shall have retroactive effect.
3
<PAGE>
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the time
and in the manner required by the Master Trust Agreement or any applicable law.
Officers and Committees shall render such additional reports as they may deed
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
Seal
6.1 General. The seal of the Trust shall consist of a flat-faced die
with the word "Massachusetts", together with the name of the trust and the year
of its organization, cut or engraved thereon, but, unless otherwise required by
the Trustees, the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument or other paper
executed and delivered by or on behalf of the Trust.
ARTICLE 7
Execution of Papers
7.1 General. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President or the Treasurer and need not bear the seal of
the Trust.
ARTICLE 8
Issuance of Share Certificates
8.1 Share Certificates. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purpose hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled to a certificate
stating the number of shares owned by him or her, in such form as shall be
prescribed from time to time by the Trustees. Such certificate shall be signed
by the President or a Vice President and by the
4
<PAGE>
Treasurer or Assistant Treasurer. Such signatures may be facsimiles if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed or
whose facsimile signature has been placed on such certificate shall cease to be
such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he were such officer at the time of its issue.
8.2 Loss of Certificates. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
8.3 Issuance of New Certificate to Pledgee. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificate shall express on its face that it is
held as collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a shareholder, and entitled to vote
thereon.
8.4 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of shares certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 9
Custodian
9.1 General. The Trust shall at all times employ a bank or trust
company having a capital, surplus and undivided profits of at least Two Million
Dollars ($2,000,000) as Custodian of the capital assets of the Trust. The
Custodian shall be compensated for its services by the Trust and upon such basis
as shall be agreed upon from time to time between the Trust and the Custodian.
ARTICLE 10
Dealings with Trustees and Officers
Any Trustee, officer or other agent of the Trust may acquire, own and
dispose of shares of the Trust to the same extent as if he or she were not a
trustee, officer or agent; and the Trustees may accept subscriptions to share or
repurchase shares from any firm or company in which he or she is interested.
5
<PAGE>
ARTICLE 11
Shareholders
11.1 Meetings. A meeting of the shareholders of the Trust shall be held
whenever called by the Trustees and whenever election of a Trustee or Trustees
by shareholders is required by the provisions of section 16(a) of the Investment
Company Act of 1940 for that purpose. The Trustees shall promptly call and give
notice of a meeting of shareholders for the purpose of voting upon removal of
any Trustees of the Trust when requested to do so in writing by shareholders
holding not less than 10% of the shares then outstanding. Meetings of
shareholders for any other purpose shall also be called by the Trustees when
requested in writing by shareholders holding at least 10% of the shares then
outstanding, or if the Trustees shall fail to call or give notice of any meeting
of shareholders for a period of 30 days after such application, then
shareholders holding at least 10% of the shares then outstanding may call and
give notice of such meeting.
11.2 Record Dates. For the purpose of determining the shareholders who
are entitled to vote or act at a meeting or any adjournment thereof, or who are
entitled to receive payment of any dividend or of any other distribution, the
Trustees may from time to time fix a time, which shall be not more than 60 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or of any other distribution, as the record date for determining
the shareholders having the right to notice of and to vote at such meeting and
any adjournment thereof or the right to receive such dividend or distribution,
and in such case only shareholders of record on such record date shall have such
right, notwithstanding any transfer of shares on the books of the Trust after
the record date; or without fixing such record date the Trustees may for any
such purposes close the register or transfer books for all or any part of such
period.
ARTICLE 12
Amendments to the By-Laws
12.1 General. These By-laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
6
<PAGE>
ARTICLE 13
Declaration of a Trust
The Master Trust Agreement establishing BJB Investment Funds (formerly
BJB Global Income Fund), dated April 30, 1992, a copy of which, together with
all amendments thereto, is on file in the office of the Secretary of The
Commonwealth of Massachusetts, provides that the name BJB Investment Funds
refers to the Trustees under the Master Trust Agreement collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of BJB Investment Funds shall be held to any personal
liability, nor shall resort be had to their private property, for the
satisfaction of any obligation or claim or otherwise, in connection with the
future affairs of BJB Investment Funds, but the Trust Estate only shall be
liable.
7
<PAGE>
ADVISORY AGREEMENT
Julius Baer Investment Funds (the "Trust"), a business trust organized
under the law of The Commonwealth of Massachusetts, entered into an investment
advisory agreement with Bank Julius Baer & Co., Ltd., New York Branch (the
"Adviser"), a corporation organized under the laws of the state of Delaware, as
of July 1, 1998. The Trust herewith confirms its agreement with the Adviser to
amend and such agreement in its entirety regarding investment advisory services
to be provided by the Adviser in connection with the Trust's Julius Baer Global
Income Fund (the "Fund") as follows:
1. Investment Description; Appointment
The Trust desires to employ the Fund's capital by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in the Trust's Master Trust Agreement, as the same may from time to
time be amended, and in its Registration Statement as from time to time in
effect, and in such manner and to such extent as may from time to time be
approved by the Board of Trustees of the Trust. Copies of the Trust's
Registration Statement and Master Trust Agreement have been or will be submitted
to the Adviser. The Trust agrees to provide copies of all amendments to the
Trust's Registration Statement and Master Trust Agreement to the Adviser on an
on-going basis. The Trust desires to employ and hereby appoints the Adviser to
act as investment adviser to the Fund. The Adviser accepts the appointment and
agrees to furnish the services described herein for the compensation set forth
below.
2. Services as Investment Adviser
Subject to the supervision and direction of the Board of Trustees of
the Trust, the Adviser will act in accordance with the Trust's Master Trust
Agreement, the Investment Company Act of 1940 and the Investment Advisors Act of
1940, as the same from time to time be amended, manage the Fund's assets in
accordance with its investment objective and policies as stated in the Trust's
Registration Statement as from time to time in effect, make investment decisions
and exercise voting rights in respect of portfolio securities for the Fund and
place purchase and sale orders on behalf of the Fund. In providing these
services, the Adviser will provide investment research and supervision of the
Fund's investments and conduct a continual program of investment, evaluation
and, if appropriate, sale and reinvestment of the Fund's assets. In addition,
the Adviser will furnish the Fund with whatever statistical information the Fund
may reasonably request with respect to the securities that the Fund may hold or
contemplate purchasing.
In addition, Subject to the supervision and direction of the Board of
Trustees of the Trust, the Adviser undertakes to perform the following
administrative and shareholder services to the extent that no other party is
obligated to perform them on behalf of the Fund: (1) furnishing certain internal
executive and administrative services; responding to shareholder inquiries; and
providing stationery and office supplies in connection with the foregoing; (2)
providing the Fund with office space (which may be the Adviser's own offices);
(3) furnishing certain corporate secretarial services, including assisting in
the preparation of materials for meetings of the Board of
<PAGE>
Trustees; (4) coordinating and preparation of proxy statements and annual and
semi-annual reports to the Fund's shareholders; (5) assisting in the preparation
of the Fund's tax returns; (6) assisting in monitoring and developing compliance
procedures for the Fund which will include, among other matters, procedures for
monitoring compliance with the Fund's investment objective, policies,
restrictions, tax matters and applicable laws and regulations; (7) acting as
liaison between the Fund and the Fund's independent public accountants, counsel,
custodian or custodians, administrator and transfer and dividend-paying agent
and registrar, and taking all reasonable action in the performance of its
obligations under this Agreement to assure that all necessary information is
made available to each of them; and (8) furnishing to the Board of Trustees
quarterly written reports which set out the amounts expended under the
Distribution and Shareholder Services Plans and the purposes for which those
expenditures were made.
In performing all services under this Agreement, the Adviser shall act
in conformity with applicable law, the Trust's Master Trust Agreement and
By-Laws, and all amendments thereto, and the Trust's Registration Statement, as
amended from time to time.
3. Brokerage
In executing transactions for the Fund and selecting brokers
or dealers, the Adviser will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any Fund
transaction, the Adviser will consider all factors it deems relevant including,
but not limited to, breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer and the reasonableness of any commission for the specific transaction on
a continuing basis. In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, the Adviser may
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to the Trust
and/or other accounts over which the Adviser or an affiliate exercises
investment discretion.
4. Information Provided to the Trust
The Adviser will use its best efforts to keep the Trust informed of
developments materially affecting the Fund, and will, on its own initiative,
furnish the Trust from time to time whatever information the Adviser believes is
appropriate for this purpose.
<PAGE>
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
described in paragraphs 2, 3 and 4 above. The Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect the Adviser
against any liability to the Fund or its shareholders to which the Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties from reckless disregard
by it of its obligations and duties under this Agreement ("disabling conduct").
The Fund will indemnify the Adviser against, and hold it harmless from, any and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit not
resulting from disabling conduct by the Adviser. Indemnification shall be made
only following: (i) a final decision on the merits by a court or other body
before whom the proceeding was brought that the person to be indemnified was not
liable by reason of disabling conduct or (ii) in the absence of such a decision,
a reasonable determination, based upon a review of the facts, that the person to
be indemnified was not liable by reason of disabling conduct by (a) the vote of
a majority of a quorum of non-party trustees who are not "interested persons" of
the Trust or (b) an independent legal counsel in a written opinion.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Fund will pay the Adviser after the end of each calendar quarter a fee for
the previous quarter calculated at an annual rate of .65 of 1.00% of the Fund's
average daily net assets.
Upon any termination of this Agreement before the end of a quarter, the
fee for such part of that quarter shall be prorated according to the proportion
that such period bears to the full quarterly period and shall be payable upon
the date of termination of this Agreement. For the purpose of determining fees
payable to the Adviser, the value of the Fund's net assets shall be computed at
the times and in the manner specified in the Trust's Registration Statement as
from time to time in effect.
7. Expenses
The Adviser will bear all expenses in connection with the performance
of its services under this Agreement, including compensation of and office space
for its officers and employees connected with investment and economic research,
trading and investment management and administration of the Fund, as well as the
fees of all Trustees of the Trust who are affiliated with the Adviser or any of
its affiliates. The Fund will bear certain other expenses to be incurred in its
operation, including: organizational expenses; taxes, interest, brokerage costs
and commissions; fees of Trustees of the Trust who are not officers, directors,
or employees of the Adviser, the Fund's distributor or administrator or any of
their affiliates; Securities and Exchange Commission fees; state Blue Sky
qualification fees; charges of the custodian, any subcustodians, and transfer
and dividend-paying agents; insurance premiums; outside auditing, pricing and
legal expenses; costs of maintenance of the Trust's existence;
<PAGE>
costs attributable to investor services, including without limitation, telephone
and personnel expenses; costs of printing stock certificates; costs of preparing
and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meeting of the shareholders of the Fund and of the
officers or Board of Trustees of the Trust, membership fees in trade
associations; litigation and other extraordinary or non-recurring expenses. In
addition, the Fund will pay distribution fees pursuant to a Distribution Plan
adopted under Rule 12b-1 of the Investment Company Act of 1940, as amended, and
pursuant to a Shareholder Services Plan.
8. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund (including
fees pursuant to this Agreement and the Fund's sub-advisory agreement, but
excluding distribution fees, interest, taxes, brokerage and, if permitted by
state securities commissions, extraordinary expenses) exceed the expense
limitation of any state having jurisdiction over the Fund, the Adviser will
reimburse the Fund for such excess expenses in the same proportion as its fees
under this Agreement bear to the combined fees for investment advice and
sub-investment advice. The Adviser's expense reimbursement obligation will be
limited to the amount of its fees received pursuant to this Agreement. Such
expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.
9. Services to Other Companies or Accounts
The Trust understands that the Adviser now acts, will continue to act,
or may in the future act, as investment adviser to fiduciary and other managed
accounts or as investment adviser to one or more other investment companies, and
the Trust has no objection to the Adviser so acting, provided that whenever the
Fund and one or more other accounts or investment companies advised by the
Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with procedures believed to
be equitable to each entity. Similarly, opportunities to sell securities will be
allocated in an equitable manner. The Trust recognizes that in some cases this
procedure may adversely affect the size of the position that may be acquired or
disposed of for the Fund. In addition, the Trust understands that the persons
employed by the Adviser to assist in the performance of the Adviser's duties
hereunder will not devote their full time to such service and nothing contained
herein shall be deemed to limit or restrict the right of the Adviser or any
affiliate of the Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind of nature.
<PAGE>
10. Term of Agreement
This Agreement shall become effective as of the date first written
above and shall continue for an initial two-year term and shall continue
thereafter so long as such continuance is specifically approved at least
annually by (i) the Board of Trustees of the Trust or (ii) a vote of a
"majority" (as defined in the Investment Company Act of 1940, as amended) of the
Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in said Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on 60 days' written
notice, by the Board of Trustees of the Trust or by vote of holders of a
majority of the Fund's shares, or upon 60 days' written notice, by the Adviser.
This Agreement will also terminate automatically in the event of its assignment
(as defined in said Act).
11. Representation by the Trust
The Trust represents that copy of its Master Trust Agreement, dated
April 30, 1992 together with all amendments thereto, is on file in the office of
the Secretary of The Commonwealth of Massachusetts.
12. Limitation of Liability
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Fund, as provided in the Master Trust Agreement of the Trust. The
execution and delivery of this Agreement have been authorized by the Trustees
and the sole shareholder of Fund shares and signed by an authorized officer of
the Trust, acting as such, and neither such authorization by such Trustees and
shareholder nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Fund as provided
in its Master Trust Agreement. The obligations of this Agreement shall be
binding only upon the assets and property of the Fund and not upon the assets
and property of any other sub-trust of the Trust.
13. Miscellaneous
If both the Adviser and the Sub-Adviser and Servicing Agent cease to
act as investment advisers to the Fund, the Trust agrees that, at the request of
either of them, the Trust's license to use "BJB" or any variation thereof
indicating a connection to either of those entities will terminate and that the
Trust will take all necessary action to change the names of the Trust and the
Fund to names that do not include "BJB" or any such variation.
14. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
<PAGE>
15. Governing Law
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the state of New York without giving effect to the
conflicts of laws principles thereof.
* * * * *
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
JULIUS BAER INVESTMENT FUNDS
By:
-------------------------------------
Name:
Title:
Accepted:
BANK JULIUS BAER & CO., LTD., NEW YORK BRANCH
By:
-------------------------------------
Name:
Title:
<PAGE>
JULIUS BAER INVESTMENT FUNDS
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, dated as of December 9, 1998 between the Julius Baer
Investment Funds, a Massachusetts business trust (the "Trust"), and Unified
Management Corporation, an Indiana corporation (the "Distributor").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust desires to retain the Distributor as the principal
underwriter of the Trust's shares of beneficial interest (the "Shares"); and
WHEREAS, the Distributor is willing to render such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth
herein, the parties hereto agree as follows:
Section 1. Delivery of Documents. The Trust has delivered to the Distributor
copies of the following documents and will deliver to the Distributor all future
amendments and supplements thereto, if any:
(a) The Trust's Declaration of Trust and all amendments thereto (as currently in
effect and as from time to time amended, hereinafter referred to as the
"Declaration");
(b) The Trust's By-Laws (as currently in effect and as from time to time
amended, hereinafter referred to as the "By-Laws");
(c) Resolutions of the Board of Trustees authorizing the execution and delivery
of this Agreement;
(d) The Trust's Registration Statement under the Securities Act of 1933, as
amended (the "1933 Act"), and the 1940 Act on Form N-1A most recently filed with
the Securities and Exchange Commission (the "Commission") and all subsequent
amendments or supplements thereto (the "Registration Statement");
(e) The Trust's Notification of Registration under the 1940 Act on Form N-8A as
filed with the Commission; and
The Trust's current Prospectus and Statement of Additional Information (as
currently in effect and as from time to time amended and supplemented,
hereinafter collectively referred to as the "Prospectus").
Section 2. Distribution.
2.1 Appointment of Distributor. The Trust hereby appoints the Distributor as
principal underwriter of the Shares of each portfolio of the Trust that is set
forth on Exhibit A to this Agreement (each a "Fund") and the Distributor hereby
accepts such appointment and agrees to render the services and duties set forth
in this Agreement.
2.2 Services and Duties.
(a) The Trust agrees to sell through the Distributor, as agent, from
time to time during the term of this Agreement, Shares of each Fund upon the
terms and at the current offering prices as described in the Prospectus. The
Distributor will act only on its own behalf as principal in making agreements
with selected
<PAGE>
dealers or others for the sale and redemption of Shares, and shall sell Shares
only at the offering prices as set forth in the Prospectus. The Distributor
shall devote its best efforts to effect the sale of shares, but shall not be
obligated to sell any certain number of Shares.
(b) In all matters relating to the sale and redemption of Shares, the
Distributor and its designated agent(s) will act in conformity with the Trust's
Declaration, By-laws and Prospectus and with the instructions and directions of
the Board of Trustees and will conform and comply with the requirements of the
Securities Exchange Act of 1934, as amended, the 1933 Act, the 1940 Act, the
regulations of the National Association of Securities Dealers, Inc. and all
other applicable federal or state laws or regulations. In connection with the
sale of Shares, the Distributor acknowledges and agrees that it is not
authorized to provide any information or make any representation other than as
contained in the Trust's Registration Statement or Prospectus and any sales
literature approved by the Trust.
(c) The Trust will not bear any costs and expenses incurred with
respect to distribution of shares except to the extent the Trust is permitted to
do so by applicable law. It is understood that the Adviser will bear the costs
and expenses incurred for (i) printing and mailing to prospective investors
copies of the Prospectus (including supplements thereto) and annual and interim
reports of the Trust which are used in connection with the offering of Trust's
Shares; (ii) preparing, printing and mailing any other literature used by the
Distributor in connection with the sale of the Shares and (iii) reimbursement
for NASD advertising compliance expenses advanced by the Distributor.
(d) All Trust Shares offered for sale by the Distributor shall be
offered for sale to the public at a price per Share (the "offering price") equal
to their net asset value (determined in the manner set forth in the Trust's
then-current Prospectus).
2.3 Sales and Redemptions.
(a) The Trust shall pay all costs and expenses in connection with the
registration of the Shares under the 1933 Act, and all expenses in connection
with maintaining facilities for the issue and transfer of the Shares and for
supplying information, prices and other data to be furnished by the Trust
hereunder, . and all expenses in connection with preparing, printing and
distributing any Prospectus, except as set forth in Section 2.2(c) hereof.
(b) The Trust shall execute all documents, furnish all information and otherwise
take all actions which may be reasonably necessary in the discretion of the
Trust's officers in connection with the qualification of the Shares for sale in
such states as the Distributor may designate to the Trust and the Trust may
approve, and the Trust shall pay all fees which may be incurred in connection
with such qualification. The Distributor shall pay all expenses connected with
its qualification as a dealer under state or federal laws. It is understood that
certain advertising, marketing, shareholder servicing, administration and/or
distribution expenses to be incurred in connection with the Shares may be paid
as provided in any plan which may be adopted by the Trust in accordance with
Rule 12b-1 under the 1940 Act.
(c) The Trust shall have the right to suspend the sale of Shares at any time in
response to conditions in the securities markets or otherwise, and to suspend
the redemption of Shares at any time permitted by the 1940 Act or the rules of
the Commission
(d) The Trust reserves the right to reject any order for Shares.
(e) No Shares shall be offered by either the Trust or the Distributor under any
provisions of this Agreement and no orders for the purchase or sale of Shares
hereunder shall be accepted by the Trust if and so long as the effectiveness of
the Registration Statement shall be suspended under any of the provisions of the
1933 Act, or if and so long as a Prospectus as required by Section 10 of the
1933 Act is not on file with the Commission; provided, however, that nothing
contained in this subsection shall in any way restrict or have any application
to or bearing upon the Trust's obligation to repurchase any Shares from any
shareholder in accordance with the provisions of the Prospectus.
<PAGE>
2.4 Fees and Expenses.
For performing its services under this Agreement, Distributor will
receive from the Trust a minimum fee per year to be paid on a monthly basis. The
Trust shall promptly reimburse Distributor for any expenses which are to be paid
by the Trust in accordance with the following paragraph.
In the performance of its obligations under this Agreement, all other costs in
connection with the offering of the Shares will be paid by the Trust. These
costs include, but are not limited to, licensing fees, filing fees, sales
literature review fees, travel and such other expenses as may be incurred by
Distributor on behalf of the Trust. See Exhibit B for fees.
Section 3. Limitation of Liability. The Distributor shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the
Distributor's part in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Agreement. Any person, even
though also an officer, director, partner, employee or agent of the Distributor,
who may be or become an officer, trustee, employee or agent of the Trust, shall
be deemed, when rendering services to the Trust, or acting on any business of
the Trust (other than services or business in connection with the Distributors
duties as distributor hereunder), to be rendering such services to or acting
solely for the Trust and not as an officer, director, partner, employee or agent
of, or one under the control or direction of, the Distributor even though paid
by the Distributor.
Section 4. Indemnification.
4.1. Trust Representations. The Trust represents and warrants to the Distributor
that at all times the Registration Statement and Prospectus will in all material
respects conform to the applicable requirements of the 1933 Act and the rules
and regulations thereunder and will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation or warranty
is made herein with respect to any statements in the Registration Statement or
Prospectus made in reliance upon and in conformity with written information
furnished to the Trust by, or on behalf of' and with respect to, the Distributor
specifically for use in the Registration Statement or Prospectus.
4.2. Distributor's Representations. The Distributor represents and warrants to
the Trust that it is duly organized and validly existing as an Indiana
corporation and is and at all times will remain duly authorized and licensed to
carry out its services as contemplated herein.
4.3. Trust Indemnification. The Trust will indemnify, defend and hold harmless
the Distributor, its several officers and directors, and any person who controls
the Distributor within the meaning of Section 15 of the 1933 Act, from and
against any losses, claims, damages or liabilities, joint or several, to which
any of them may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectus or in any application or other document executed by or on behalf of
the Trust, or arise out of, or are based upon, information furnished by or on
behalf of the Trust filed in any state in order to qualify the Shares under the
securities or blue sky laws thereof ("Blue Sky Application"), or arise out of,
or are based upon, the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Distributor, its several officers and
directors, and any person who controls the Distributor within the meaning of
Section 15 of the 1933 Act, for any legal or other expenses reasonably incurred
by any of them in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that the Trust shall not be
liable in any case to the extent that such loss, claim, damage or liability
arises out of, or is based upon, any untrue statement, alleged untrue statement,
or omission or alleged omission made in the Registration Statement, the
Prospectus, any
<PAGE>
Blue Sky Application or any application or other document executed by or on
behalf of the Trust in reliance upon and in conformity with written information
furnished to the Trust by, or on behalf of, and with respect to, the Distributor
specifically for inclusion therein.
The Trust shall not indemnify any person pursuant to this Section 4.3 unless the
court or other body before which the proceeding was brought has rendered a final
decision on the merits that such person was not liable by reason of his willful
misfeasance, bad faith or gross negligence in the performance of his duties, or
his reckless disregard of obligations and duties, under this Agreement
("disabling conduct") or, in the absence of such a decision, a reasonable
determination (based upon a review of the facts) that such person was not liable
by reason of disabling conduct has been made by the vote of a majority of
Trustees who are neither "interested persons" of the Trust (as defined in the
1940 Act) nor parties to the proceeding, or by an independent legal counsel in a
written opinion.
The Trust shall advance attorneys' fees and other expenses incurred by any
person in defending any claim, demand, action or suit which is the subject of a
claim for indemnification pursuant to this Section 4.3, so long as such person
shall: (i) undertake to repay all such advances unless it is ultimately
determined that he is entitled to indemnification hereunder; and (ii) provide
security for such undertaking, or the Trust shall be insured against losses
arising by reason of any lawful advances, or a majority of a quorum of
disinterested non-party Trustees of the Trust (or an independent legal counsel
in a written opinion) shall determine based on a review of readily available
facts (as opposed to a full trial-type inquiry) that there is reason to believe
that such person ultimately will be found entitled to indemnification hereunder.
4.4. Distributor's Indemnification. The Distributor will indemnify, defend and
hold harmless the Trust, the Trust's several officers and Trustees and any
person who controls the Trust within the meaning of Section 15 of the 1933 Act,
from and against any losses, claims, damages or liabilities, joint or several,
to which any of them may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages, liabilities (or actions or proceedings in
respect hereof) arise out of, or are based upon, any breach of its
representations and warranties in Section 4.2 hereof, or which arise out of, or
are based upon, any true statement or alleged untrue statement of a material
fact contained in the Registration Statement, the Prospectus, any Blue Sky
Application or any application or other document executed by or on behalf of the
Trust, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, which statement or omission was made in reliance upon and in
conformity with written information furnished to the Trust or any of its several
officers and Trustees by, or on behalf of, and with respect to, the Distributor
specifically for inclusion therein, and will reimburse the Trust, the Trust's
several officers and Trustees, and any person who controls the Trust within the
meaning of Section 15 of the 1933 Act, for any legal or other expenses
reasonably incurred by any of them in investigating, defending or preparing to
defend any such action, proceeding or claim.
4.5. General Indemnity Provisions. No indemnifying party shall be liable under
its indemnity agreement contained in Section 4.3 or 4.4 hereof with respect to
any claim made against such indemnifying party unless the indemnified party
shall have notified the indemnifying party in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the indemnified party (or after the
indemnified party shall have received notice of such service on any designated
agent), but failure to notify the indemnifying party of any such claim shall not
relieve it from any liability which it may otherwise have to the indemnified
party. The indemnifying party will be entitled to participate at its own expense
in the defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, and if the indemnifying party elects to assume the
defense, such defense shall be conducted by counsel chosen by it and reasonably
satisfactory to the indemnified party. In the event the indemnifying party
elects to assume the defense of any such suit and retain such counsel, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by the indemnified party.
Section 5. Duration and Termination. The term of this Agreement shall begin on
the date of this Agreement for each Fund that has executed an Exhibit hereto on
the date of this Agreement and shall continue in effect with respect to each
such Fund (and any subsequent Funds added pursuant to an Exhibit executed during
the
<PAGE>
initial term of this Agreement) for two years thereafter, and shall continue in
effect from year to year thereafter, subject to termination as hereinafter
provided, if such continuance is approved at least annually by (a) a majority of
the outstanding voting securities (as defined in the 1940 Act) of such Fund or
by vote of the Trust's Board of Trustees, cast in person at a meeting called for
the purpose of voting on such approval, and (b) by vote of a majority of the
Trustees of the Trust who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval. If a Fund
is added pursuant to an Exhibit executed after the date of this Agreement as
described above, this Agreement shall become effective with respect to that Fund
upon execution of the applicable Exhibit and shall continue in effect until the
next annual continuance of this Agreement and from year to year thereafter,
subject to approval as described above. This Agreement may be terminated by the
Trust with respect to any Fund at any time, without the payment of any penalty,
by the Board of Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of such Fund, on 60 days' written notice
to the Distributor, or by the Distributor at any time, without the payment of
any penalty, on 90 days' written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its assignment (as
defined in the 1940 Act).
Section 6. Miscellaneous.
6.1. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
6.2. Construction. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Section 5 hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
6.3. Notices. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Trust shall be sufficiently given if
addressed to the Trust and mailed or delivered to it at its principal office set
forth in the Registration Statement, or at such other place as the Trust may
from time to time designate in writing. Any notice or other instrument in
writing, authorized or required by this Agreement to be given to the Distributor
shall be sufficiently given if addressed to the Distributor and mailed or
delivered to it at 431 North Pennsylvania Street, Indianapolis, Indiana 46204,
Attention: President, or at such other place as the Distributor may from time to
time designate in writing.
6.4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit to be executed
by their officers designated below as of the date and year first above written.
JULIUS BAER INVESTMENT FUNDS
By Michael K. Quain
Title President, Treasurer and Chief Financial Officer
Date: December 18, 1998
UNIFIED MANAGEMENT CORPORATION
By Lynn Wood
Title Director, President and Chief Executive Officer
Date: December 18, 1998
<PAGE>
EXHIBIT A
to
Distribution Agreement
List of Portfolios
Julius Baer International Equity Fund
Julius Baer Global Income Fund
EXHIBIT B
to
Distribution Agreement
Fee Schedule
Annual minimum fee: $6,000
Sales literature review and filing: $50 per hour, plus applicable NASD
advertising review fees
All other expenses in Section 2.4 are considered out-of-pocket.
<PAGE>
DEALER AGREEMENT
JULIUS BAER INVESTMENT FUNDS
draft
FROM ("Dealer"):
TO ("Unified" or "Distributor"):
Unified Management Corporation
431 North Pennsylvania Street
Indianapolis, Indiana 46204
Gentlemen:
Dealer desires to enter into an agreement with Distributor for the sale and
distribution of the shares of Julius Baer Investment Funds, an open-end
investment company in series form (hereinafter referred to as the "Trust" and
each series thereof as a "Portfolio") of which Unified is the Distributor and
whose shares are offered to the public at an offering price which will not
include a sales charge (hereinafter referred to as the "Shares"). Upon
acceptance of this Agreement by Distributor, Dealer understands that Dealer may
offer and sell Shares subject, however, to all of the terms and conditions
hereof and to Distributor's right, without notice, to suspend or terminate the
sale of the Shares of any one or more of the Portfolios.
1. Dealer understands that the Shares will be offered and sold at the public
offering price in effect at the time the order for such Shares is confirmed and
accepted by Distributor. All purchase requests and applications submitted by
Dealer are subject to acceptance or rejection in Distributor's sole discretion,
and, if accepted, each purchase will be deemed to have been consummated at the
office of the Trust's shareholder servicing agent.
2. Dealer herein certifies that Dealer is a either a member of the National
Association of Securities Dealers, Inc. ("NASD") and agrees to maintain its
membership in the NASD or in the alternative during the full force and effect of
this Agreement, or, that Dealer is a foreign dealer not eligible for membership
in the NASD. In either case, for as long as this Agreement is in full force and
effect, Dealer agrees to abide by all of the rules and regulations of the
Securities and Exchange Commission ("S.E.C.") and the NASD which are binding
upon underwriters and dealers in the distribution of the securities of open-end
investment companies, including without limitation, Section 2830 of the NASD
Conduct Rules, all of which are incorporated herein as if set forth in full.
Dealer agrees that it will not sell or offer sale Shares in any state or
jurisdiction where Shares have not been qualified for sale.
<PAGE>
3. Dealer will offer and sell Shares of any Portfolio only in accordance with
the terms and conditions of the Trust's then current Prospectus and Dealer will
not make representations which are not included in said Prospectus or in any
authorized supplemental material supplied by Distributor and/or the Trust or its
agents. Dealer will use its best effort in the development and promotion of
sales of Shares and agrees to be responsible for the proper instruction and
training of all sales personnel employed by Dealer, in order that the Shares
will be offered in accordance with the terms and conditions of this Agreement
and all applicable laws, rules and regulations. Dealer agrees to hold
Distributor harmless and indemnify Distributor in the event that Dealer, or any
of Dealer's sales representatives, should violate any law, rule or regulation,
or any provisions of this Agreement, which violation may result in liability to
Distributor, the Trust or any Portfolio. All expenses which Dealer may incur in
connection with Dealer's activities under this Agreement shall be borne by
Dealer.
4. Payments for purchases of Shares made by wire order from Dealer shall be
made to Distributor, or Distributor's designated agent, and received by
Distributor, or Distributor's designated agent, together with all necessary
applications and other documents required to establish an account within five
business days after the acceptance of Dealer's order or such shorter time as may
be required by law. If such timely payment is not received by Distributor, or
Distributor's designated agent, Dealer understands and agrees herein that
Distributor reserves the right, without notice, forthwith to cancel the sale,
or, at Distributor's option, to sell back to the Portfolio the Shares ordered by
Dealer, in which latter case, Dealer will be held responsible for any loss,
including loss of profit, suffered by Distributor or Distributor's designated
agent, resulting from Dealer's failure to make the aforesaid payment. Where
sales of Portfolio Shares are contingent upon the Portfolio's receipt of funds
in payment therefore, Dealer will forward promptly to Distributor, or
Distributor's designated agent, any purchase orders and/or payments received by
Dealer from investors.
5. Dealer agrees to purchase Shares only from Distributor or from Dealer's
customers. If Dealer purchases Shares from Distributor, Dealer agrees that all
such purchases shall be made only to cover orders received by Dealer from
Dealer's customers, or for Dealer's own bona fide investment. If Dealer
purchases Shares from Dealer's customers, Dealer agrees to pay such customers
not less than the applicable repurchase price as established by the then current
applicable Prospectus.
6. Distributor's obligations to Dealer under this Agreement are subject to all
the provisions of any distributorship agreement entered into between Distributor
and the Trust. Dealer understands and agrees herein that in Dealer's performing
of its services covered by this Agreement that Dealer is acting as a principal,
and Distributor is in no way responsible for the manner of Dealer's performance
or for any of Dealer's acts, employees or representatives as Distributor's
agent, partner or employee, or the agent or employee of the Trust.
7. Dealer may terminate this Agreement by notice in writing to Distributor,
which termination shall become effective thirty days after the date of receipt
by Distributor. Dealer agrees that Distributor has and reserves the right, in
Distributor's sole discretion, without notice, to suspend sales of Shares of any
of the Portfolios, or to withdraw entirely the offering of Shares of any of the
Portfolios, or, in Distributor's sole discretion, to modify, amend or cancel
this Agreement upon written notice to Dealer of such modification, amendment or
cancellation, which shall be effective immediately on the date stated in such
notice. Without limiting the foregoing, Distributor may terminate this
Agreement for cause on violation by Dealer of any of the provisions of this
2
<PAGE>
Agreement, said termination to become effective on the date of the mailing
notice to Dealer of such termination. Without limiting the foregoing, any
provision hereof to the contrary notwithstanding, Dealer's expulsion from the
NASD will automatically terminate this Agreement without notice; Dealer's
suspension from the NASD, the appointment of a trustee for all or substantially
all of Dealer's business assets, or violation of applicable State or Federal
laws or rules or regulations of authorized regulatory agencies will terminate
this Agreement effective upon the date of Distributor's mailing to Dealer of
such termination. Distributor's failure to terminate for any cause shall not
constitute a waiver of Distributor's right to terminate at a later date for any
such cause. All notices hereunder shall be to the respective parties at the
addresses listed herein, unless changed by written notice. Any dispute that may
arise in connection with this Agreement shall be submitted to arbitration by the
NASD, with the panel to be located in Indianapolis, Indiana.
8. This Agreement shall become effective upon Distributor's execution of this
Agreement, such date being the one appearing below. This Agreement and all the
rights and obligations of the parties hereunder shall be governed by and
construed under the laws of the State of Indiana. This Agreement is not
assignable by Dealer without the written permission of Distributor. Distributor
may assign or transfer this Agreement to any successor firm or corporation which
becomes Distributor or Sub-Distributor of the Trust.
Dealer: "Accepted" by Distributor:
Unified Management Corporation
By: By:
-------------------------------- ---------------------------------
(Authorized Signature)
Date: Date:
------------------------------ -------------------------------
By:
---------------------------------
Date:
-------------------------------
3
[ARTICLE] 6
[LEGEND]
This schedule contains summary financial information extracted from form N-SAR
for the period ended October 31,1998 and is qualified in its entirety by
reference to such financial statements.
[/LEGEND]
[SERIES]
[NUMBER] 1
[NAME] Julius Baer Global Income Fund
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1998
[PERIOD-END] OCT-31-1998
[INVESTMENTS-AT-COST] 14,481,126
[INVESTMENTS-AT-VALUE] 14,867,818
[RECEIVABLES] 384,197
[ASSETS-OTHER] 3,170
[OTHER-ITEMS-ASSETS] 52,956
[TOTAL-ASSETS] 15,308,141
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 53,787
[TOTAL-LIABILITIES] 53,787
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 15,485,622
[SHARES-COMMON-STOCK] 1,248,207
[SHARES-COMMON-PRIOR] 1,015,819
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (102,745)
[ACCUMULATED-NET-GAINS] (518,876)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 390,353
[NET-ASSETS] 15,254,354
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 688,867
[OTHER-INCOME] 0
[EXPENSES-NET] 213,793
[NET-INVESTMENT-INCOME] 475,074
[REALIZED-GAINS-CURRENT] 499,745
[APPREC-INCREASE-CURRENT] 149,604
[NET-CHANGE-FROM-OPS] 1,124,423
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (564,298)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 503,318
[NUMBER-OF-SHARES-REDEEMED] 309,148
[SHARES-REINVESTED] 38,218
[NET-CHANGE-IN-ASSETS] 3,364,999
[ACCUMULATED-NII-PRIOR] (26,275)
[ACCUMULATED-GAINS-PRIOR] (1,005,867)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 78,432
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 222,403
[AVERAGE-NET-ASSETS] 12,099,602
[PER-SHARE-NAV-BEGIN] 11.70
[PER-SHARE-NII] 0.48
[PER-SHARE-GAIN-APPREC] 0.59
[PER-SHARE-DIVIDEND] (0.55)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.22
[EXPENSE-RATIO] 1.77
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
[ARTICLE] 6
[LEGEND]
This schedule contains summary financial information extracted from form N-SAR
for the period ended October 31,1998 and is qualified in its entirety by
reference to such financial statements.
[/LEGEND]
[SERIES]
[NUMBER] 2
[NAME] Julius Baer International Equity Fund
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1998
[PERIOD-END] OCT-31-1998
[INVESTMENTS-AT-COST] 47,117,231
[INVESTMENTS-AT-VALUE] 54,093,175
[RECEIVABLES] 117,576
[ASSETS-OTHER] 105,412
[OTHER-ITEMS-ASSETS] 2,690,728
[TOTAL-ASSETS] 57,006,891
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 289,155
[TOTAL-LIABILITIES] 289,155
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 49,015,723
[SHARES-COMMON-STOCK] 3,685,359
[SHARES-COMMON-PRIOR] 3,302,528
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (640,399)
[ACCUMULATED-NET-GAINS] 1,289,815
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 7,052,597
[NET-ASSETS] 56,717,736
[DIVIDEND-INCOME] 823,927
[INTEREST-INCOME] 158,629
[OTHER-INCOME] 0
[EXPENSES-NET] 1,071,167
[NET-INVESTMENT-INCOME] (88,611)
[REALIZED-GAINS-CURRENT] 4,953,520
[APPREC-INCREASE-CURRENT] 2,362,835
[NET-CHANGE-FROM-OPS] 7,227,744
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (501,882)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,863,767
[NUMBER-OF-SHARES-REDEEMED] 1,517,046
[SHARES-REINVESTED] 36,110
[NET-CHANGE-IN-ASSETS] 12,415,999
[ACCUMULATED-NII-PRIOR] 533,978
[ACCUMULATED-GAINS-PRIOR] (4,247,589)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 576,830
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,227,105
[AVERAGE-NET-ASSETS] 57,986,654
[PER-SHARE-NAV-BEGIN] 13.41
[PER-SHARE-NII] (0.03)
[PER-SHARE-GAIN-APPREC] 2.16
[PER-SHARE-DIVIDEND] (0.15)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 15.39
[EXPENSE-RATIO] 1.85
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
